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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
__X__Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (Fee Required)
for the fiscal year ended September 30, 1995
or
_____Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (No Fee Required)
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)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
6,000,000 SHARES OF COMMON STOCK ($.10 PAR VALUE)
(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes __X__ No _____
Indicate by check mark if the disclosure of delinquent filers pursuant to
item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in a definitive
proxy or information statement incorporated in Part III of this Form 10-K
or any amendments to this Form 10-K. _____
The aggregate market value of the Common Stock of the Registrant held by
non-affiliates was approximately $7,582,267 as of December 15, 1995.
As of December 15, 1995, there were issued and outstanding 2,387,964
shares of the Registrant's Common Stock, $.10 par value.
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DOCUMENTS INCORPORATED BY REFERENCE
(1) Registrant's Annual Report to Stockholders for the fiscal year ended
September 30, 1995 (Items 5,6,7,8 and 14)
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NUCLEAR METALS, INC.
Securities and Exchange Commission
ITEM NUMBERS AND DESCRIPTION PAGE
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PART I
ITEM 1. Business 2
ITEM 2. Properties 18
ITEM 3. Legal Proceedings 19
ITEM 4. Submission of Matters to a Vote of Security Holders 20
PART II
ITEM 5. Market for the Registrant's Common Equity 21
and Related Stockholder Matters
ITEM 6. Selected Financial Data 22
ITEM 7. Management's Discussion and Analysis of Financial 22
Condition and Results of Operations
ITEM 8. Financial Statements and Supplementary Data 22
ITEM 9. Changes in and Disagreements with Accountants 22
on Accounting and Financial Disclosure
PART III
ITEM 10. Directors and Executive Officers of the Registrant 23
ITEM 11. Executive Compensation 25
ITEM 12. Security Ownership of Certain Beneficial Owners 31
and Management
ITEM 13. Certain Relationships and Related Transactions 33
PART IV
ITEM 14. Exhibits, Financial Statement Schedule and Reports 34
on Form 8-K
SIGNATURES 38
INDEX TO AUDITORS REPORT AND FINANCIAL STATEMENT SCHEDULES 40
Inasmuch as the calculation of shares of the registrant's voting stock
held by non-affiliates requires a calculation of the number of shares held
by affiliates, such figure, as shown on the cover page hereof, represents
the registrant's best good faith estimate for purposes of this annual
report on Form 10-K, and the registrant disclaims that such figure is
binding for any other purpose. The aggregate market value of Common Stock
indicated is based upon the $11.00 average of the bid and asked prices of
the Common Stock as reported by NASDAQ for trading on December 15, 1995.
All outstanding shares beneficially owned by executive officers and
directors of the registrant or by any shareholder beneficially owning more
than 5% of registrant's common stock, as disclosed herein, were considered
solely for purposes of this disclosure to be held by affiliates.
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PART I
ITEM 1. BUSINESS
GENERAL
The Company is engaged in manufacturing a wide variety of specialty
metal products using sophisticated metallurgical technology and metalworking
processes. The Company operates in three industry segments: (1) uranium
services and recycling of low-level contaminated steel; (2) fabrication of a
large assortment of specialty metal products using foundry, extrusion, and
machining capabilities; including the manufacture of high-purity, spherically
shaped metal powders; and (3) manufacture of depleted uranium penetrators.
The Company participates in the uranium services and recycling industry
segment through its wholly-owned subsidiary, Carolina Metals, Inc. (CMI)
located in Barnwell, South Carolina. The uranium services and recycling
segment of the Company's market segments include: (1) the manufacture of
uranium tetrafluoride (UF(4)) and depleted uranium metal through chemical
conversion processes; and (2) the recycling of various metals from
decommissioned nuclear sites. (SEE INDUSTRY SEGMENT INFORMATION).
In 1995, the Company redefined its business to combine the former Metal
Powders and Fabricated Specialty Metal Products into Specialty Products. In
1995 the Company also added the new and growing business segment Uranium
Services and Recycling. The manufacture of depleted uranium products
(non-penetrator) and the recycle of low-level radioactive metal, which were
previously included in other business segments, have been classified as part
of this segment. Uranium Services and Recycle also includes additional new
business described further in the segment descriptions.
As of September 30, 1995 the Company had 200 employees.
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INDUSTRY SEGMENT FINANCIAL INFORMATION
The following table sets forth certain information regarding the
revenue, operating profit and identifiable assets attributable to the three
industry segments in which the Company operates. The change in industry
segments from prior years have been restated.
YEAR ENDED
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RECLASSIFIED
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SEPT. 30, SEPT. 30, SEPT. 30,
1995 1994 1993
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(IN THOUSANDS)
Net Sales and Contract Revenues:
Uranium Services & Recycle $ 4,969 $ 4,752 $ --
Specialty Products 12,102 7,284 10,258
Depleted Uranium Penetrators 1,713 6,968 6,761
Operating Profit(Loss):
Uranium Services & Recycle $ (996) $(5,409) $ --
Specialty Products (341) (162) (2,816)
Depleted Uranium Penetrators (237) (5,033) (7,330)
Identifiable Assets:
Uranium Services & Recycle $16,609 $16,772 $18,090
Specialty Products 5,140 5,646 7,297
Depleted Uranium Penetrators 12,158 9,862 11,697
See Note 14 of Notes to Consolidated Financial Statements.
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The Company does not have any foreign operations. The Company does have
export sales to EECU which accounted for 33% of net sales for the fiscal year
ended September 30, 1995. In the prior two fiscal years, 1994 and 1993, the
export sales to Common Market countries were 37% and less than 10%,
respectively.
The following is a general description of the Company's three business
segments. The business segments have been restated to properly reflect the
Company's changing product mix. For additional information concerning
developments in these business segments during fiscal 1995, reference is made
to pages 4 through 11 of the Company's
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1995 Annual Report, which is incorporated herein by reference and is included
as Exhibit 13.
URANIUM SERVICES & RECYCLE
The Company's Uranium Services and Recycle segment includes the
manufacture of depleted uranium and of uranium tetrafluoride, the recycle of
various low-level radioactive metals, and the supply of depleted uranium
alloy material for use in United States Enrichment Company's (USEC) Atomic
Vapor Laser Isotope Separation (AVLIS) program.
The Company currently is manufacturing depleted uranium from Uranium
Tetraflouride (UF(4)). A large-scale production contract from a foreign
customer for depleted uranium metal, produced at the CMI facility, will be
completed in 1996.
The Company has successfully completed a program with Westinghouse
Savannah River Company to demonstrate the beneficial reuse of contaminated
stainless steel from the Department of Energy (DOE). The program demonstrated
the technical feasibility and economic soundness of recycling radioactively
contaminated steel into storage drums and boxes for containment of various
radioactive wastes at DOE sites. This pilot program is significant due to the
large number of facilities within the DOE that were engaged in production of
nuclear materials for our national defense that have substantial quantities
of contaminated stainless steel that would benefit from the beneficial reuse
program.
These DOE facilities contain millions of tons of carbon steel and
stainless steel in the form of structural components and various types of
processing equipment. During production of nuclear materials, the carbon and
stainless steels became radioactively contaminated. In order to manage
decommissioning activities in a cost-effective and environmentally sound
manner, the DOE's Savannah River Site has initiated a program to demonstrate
the recycling of low-level radioactively contaminated stainless steel scrap.
Through beneficial reuse of contaminated steel scrap, the DOE will be able to
reduce the volume of low-level radioactive waste in a cost effective manner.
In addition to the DOE facilities, it is estimated that an additional several
million tons of low-level contaminated steel will be generated as a result of
decommissioning the more than 100 currently operating commercial nuclear
power plants over the next 30 years. Services currently are being offered to
remelt slightly contaminated steel at the Company's CMI location.
The Company supplies Depleted Uranium (DU) alloy material to the USEC
for use as AVLIS feed material. AVLIS is expected to replace the current
Gaseous Diffusion process for separating the fissionable isotope, U(235),
from natural uranium within the next ten years. The Company also supplies
conversion services to the USEC for converting Depleted Uranium Hexaflouride
(UF(6)) to Uranium Tetraflouride (UF(4)). This
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work is performed at the Company's CMI facility. The Company believes that
USEC has a need for conversion of approximately 15-20 million pounds annually.
Radioactively contaminated steel remelt services are offered at only
two other facilities in the United States. The Company continues to be the
primary supplier of AVLIS feed material, however, other companies are
attempting to compete for future business. The Company's South Carolina
facility is the Country's only active facility for converting UF(6) to UF(4).
SPECIALTY METAL PRODUCTS
The Company has several specialty metal products, including:
beryllium products; specialty, medical, and aerospace powders; and a
variety of advanced metal products and services for aerospace, energy, and
commercial applications.
The Company has completed major development activities to fully utilize
its patented Beralcast-Registered Trademark- investment cast beryllium
aluminum alloy for production applications. Beralcast-Registered Trademark-,
a registered trademark, is a new engineering material used in electronic and
secondary structural applications for advanced missiles, helicopters, and a
variety of other aerospace and avionics applications. Cost and weight
pressures on today's design engineers demand a transition to lightweight,
strong, and high stiffness materials such as NMI's patented
Beralcast-Registered Trademark-. The alloy offers 3 1/2 times the stiffness
of aluminum with 22% less weight and is investment castable to net and near
net shape. Lockheed Martin Corporation continues to view NMI's
Beralcast-Registered Trademark- hardware for the Electro Optic Sensor System
(EOSS) as the highest priority for provision of Comanche program funding.
High performance applications for Beralcast-Registered Trademark- where
cost premiums are permissible might include: Comanche (Advanced Attack
Helicopter), F-22 (Advanced Tactical Fighter), PAC-3 (the updated Patriot
missile), the French Rafael (Advanced Fighter Aircraft), and many others.
Design engineers at these and other aerospace, computer, and electronic firms,
are designing this new engineering material into their systems. Commercial uses
for Beralcast -Registered Trademark- will be introduced as production costs,
which include the current high cost of beryllium input metal, are reduced. The
Company also continues to produce seamless beryllium tubes for satellite
applications. Introduction of extruded Beralcast-Registered Trademark- tubing
for satellites is a unique opportunity to supplant expensive graphite
composites. The Company's extrusion technology has been successfully
demonstrated in the recent manufacture of tubing struts for the Comanche EOSS.
Highly reliable Bi-metallic tubes, manufactured by a proprietary NMI
process, are used by aerospace and nuclear companies to join dissimilar
metals. Extruded tubes, bars, castings, and shapes of a variety of metals and
alloys are used as finished products or for further processing in a variety
of industrial applications.
The Company uses its large capacity for fabrication of depleted uranium
components to produce shielding for cancer therapy units, Industrial
Radiography, and Commercial/Government Nuclear applications. The Company also
recycles DU armor scrap for remelt into rolling slabs for the Amy's M1A2 Main
Battle Tank Program.
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The Company manufactures metal powders by proprietary processes called
the Rotating Electrode Process-TM- (REP) and the Plasma Rotating Electrode
Process-TM- (PREP), which produce spherical metal particles within a
relatively controllable size range.
Management believes that the spherical metal particles produced by this
manufacturing process offer significant advantages for certain product
applications compared with metal powders produced by other processes. In
particular, the process produces inherently "cleaner" powders, more uniformly
spherical particles and a higher percentage of particles within the desired
size range from a given amount of raw material.
The Company holds three U.S. patents relating to developments in REP
production equipment, which provide patent rights through the year 2001.
These patents also are filed and effective in the principal industrialized
European countries, Canada, Israel and Japan. Management believes that,
although the original patent on the REP machine expired in July 1980, the
development patents continue to benefit the Company's competitive position in
the Metal Powders market. It is also the opinion of management that the
technical expertise which has evolved from the development and manufacture of
metal powders is of equal importance in maintaining the Company's competitive
position.
The metal powders produced by the Company include steel, titanium alloy
and several nickel and cobalt-base alloys generally known in the industry as
specialty powders.
Management believes that the markets for titanium alloy and specialty
powders represent significant business opportunities for the Company's powder
making capability, especially under the Government's Technology Reinvestment
Program. This program is designed to assist defense contractors with
transitioning their products for commercial use by funding fifty percent (50%)
of the cost of transition.
The principal markets for the Company's metal powders are medical
applications (titanium and cobalt-based alloy powders), which use the powder
as a porous coating on medical prostheses, and original equipment
manufacturers (steel, titanium alloy and specialty powders), which fabricate
metal parts from the powder through various processes. In addition, the
Company continues to produce steel powders for the photocopy industry, and as
a carrier for toner in copy machines and high-performance laser printers.
Key competitive factors in the metal powders market are price and the
ability to meet exact dimensional, metallurgical and other specifications.
The steel powder marketed by the Company for photocopy applications competes
with powders produced by larger manufacturers. The Company believes that the
quality of its
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powder in the photocopy processes in which it is used helps to offset any
price advantage that may exist for powders from other producers.
The principal raw material for the Company's steel powder is
cold-rolled steel bars, which are readily available. Other metal powders are
manufactured to customer specifications, and the metals for these powders are
generally available for purchase in job lots from specialty metal suppliers.
DEPLETED URANIUM PENETRATORS
The Company believes it is a technological leader in the manufacture of
depleted uranium (DU) penetrators. DU is a dense, heavy metal that is 68%
heavier than lead for a given volume. Because of its density and workability
DU is an effective low-cost material for anti-armor ammunition and is used in
numerous United States Government and foreign government weapons systems. DU
is a low-level radioactive material that is a by-product of the production of
enriched uranium for nuclear fuel and weapons.
The Company is one of two domestic manufacturers. Competition to
supply penetrators is price sensitive. The principal DU products manufactured
by the Company, referred to as penetrators, have application in various
military gun systems. The Company generally sells penetrators directly to
prime ammunition contractors. The U.S. Government has funded and owns a
portion of the manufacturing machinery and equipment used by the Company for
producing penetrators.
In fiscal 1995, the Company was awarded an M829A2 penetrator production
contract with options extending production to the year 1999. This contract is
subject to appropriations by the Government. Management strongly believes the
Government will exercise all options on the contract. The Company will
continue to pursue both domestic and foreign military depleted uranium
penetrator production requirements.
The Company believes that foreign military sales of the U.S. ABRAMS
tank could result in additional foreign military requirements for DU
penetrators in future fiscal years. Additionally, the Company expects
continuing orders for DU products from a foreign customer to support its
foreign based manufacture of tank ammunition containing DU penetrators.
SIGNIFICANT CUSTOMERS
Cogema, of France, is a significant customer of the Company's Uranium
Services & Recycle segment. In fiscal 1995, sales to Cogema accounted for 19%
of net sales. The Company currently is under contract to provide Cogema with
depleted uranium through December, 1996. The loss of Cogema as a customer
would have a material adverse effect of the Company's Uranium Services &
Recycle segment.
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Lockheed Martin Corporation (LMC) is a significant customer of the
Company's Specialty Products segment. In fiscal 1995, sales to LMC accounted
for 18% of sales. The Company is currently under several contracts with LMC
to provide Beralcast-Registered Trademark- hardware for the Comanche
Helicopter Program. The loss of LMC as a customer would have a material
adverse effect on the Company.
Olin Corporation is a significant customer of the Company's Depleted
Uranium Penetrator segment. In fiscal 1995, sales to Olin accounted for 8% of
net sales. The Company currently is under contract to provide Olin with 120MM
penetrators for the U.S. Army's ABRAMS Tank program with options extending
another four years. If Olin were lost as a customer, this would have a
material adverse effect on the Company.
Lockheed Idaho Technology Company (LITCO) is another significant
customer of the Company's Specialty Metals Products segment. In fiscal 1995,
sales to LITCO accounted for 9% of net sales (See Note 2 of Notes to
Consolidated Financial Statements). The Company currently is under contract
with Lockheed Idaho Technology Company to produce, from furnished DU recycle
metal, DU castings for the U.S. Army's heavy armor tank program. This
contract continues to have options for several additional years. The loss of
LITCO as a customer would have a material adverse effect on the Company.
MARKETING
The Company relies on a variety of marketing strategies including
advertising and direct sales. Technical papers given at industry symposia are
also used as a marketing vehicle for the Company's advanced metal products
and services. Strategic Partnerships are being developed with several key
customers to strengthen the Company's customer and product base into the
future. These Partnerships provide sharing in research and development costs
and marketing efforts.
Understanding the importance of Design-To-Cost principles, especially
those of LMC, is tantamount to Strategic Teaming with our
Beralcast-Registered Trademark- customers. Concentrated efforts on cost
reduction in the form of Concurrent Engineering, low cost Beryllium input
metal production, and many others, add value for future sales volumes. NMI
has introduced Nucast, our Beralcast-Registered Trademark- teammate, to these
cost reduction ideas which will form the basis for improved costs
competitiveness in the future. Direct marketing efforts are increasing.
Commitments by the Company to expanding the product and customer base
for our metal powders will pay both near and longer term dividends. Market
demands for clean metal powders, for re-consolidation or incorporation into
metal matrix composites, are on the rise and we are positioning ourselves to
exploit these opportunities. Novel product requirements for our advanced
metal products and
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services will continue to receive the utmost attention for expansion of our
product base. Efforts to enhance the Company's reputation as a supplier with
high value products are being strengthened through improved service, added
advertising and increased presence in the marketplace.
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BACKLOG
The following table sets forth certain information with respect to the
backlog of the Company's business segments at September 30, 1995 and
September 30, 1994 including the portions thereof represented by orders from
the Company's principal customers, COGEMA, Lockheed Martin, Lockheed Idaho
and Olin Corporation. The backlog for the Company is affected by the timing
of orders from these customers. The Company believes all orders in backlog
are firm. The Company expects to fill orders for approximately $19,193,000 in
fiscal year 1996.
1995 1994
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(In Thousands)
Uranium Services & Recycle
COGEMA $ 4,262 $ 7,097
Other 84 876
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Total 4,346 7,973
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Specialty Metal Product
Lockheed Martin $ 5,951 $ 941
Lockheed Idaho 1,053 632
Other 5,052 2,696
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Total 12,056 5,017
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Depleted Uranium Penetrators
Olin Corp. 14,299 1,282
Other 8 240
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Total 14,307 1,522
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Company Total $30,709 $14,512
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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. Payments 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, government 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 fluctuations in the
Company's operating results and cash flows.
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RESEARCH AND DEVELOPMENT ACTIVITIES
The Company engages in research and development activities for
departments and agencies of the U.S. Government and commercial customers.
During the last two fiscal years, such work has been performed for the
development and characterization of beryllium-aluminum alloys for investment
casting and extrusion, investigation of methods for producing net shape
titanium components from metal powder, improving techniques for making finer
metal powders for use in metal matrix composites, recycling processes for
radioactively contaminated steel scrap and uranium production of AVLIS
feedstock. A portion of the research and product development effort is
performed through funded contracts. The Company also funds research and
development activities, and funds other work through cost partnership
arrangements collaborated with selected customers where there is potential
for utilizing proprietary technology or specialized resources not directly
available to the Company. Internal research and development funding has the
objective of improving manufacturing techniques and developing new products.
The cost for Company-sponsored research and development activities was
$439,000 in fiscal 1995, $575,000 in fiscal 1994 and $1,031,000 in fiscal
1993. Total revenues from customer-funded research and development were
$557,000 in fiscal 1995, $792,000 in fiscal 1994 and $503,000 in fiscal 1993.
These revenues are included in the revenues of the industry segment to which
the research and development relates.
ENVIRONMENTAL, SAFETY AND REGULATORY MATTERS
IN GENERAL
Two of the materials regularly processed by the Company, depleted
uranium and beryllium, have characteristics considered to be health or safety
hazards by various federal, state or local regulatory agencies. Processing of
these materials requires a high level of safety consciousness, personnel
monitoring devices and special equipment. Depleted uranium is a low-level
radioactive material, and the Company is subject to regulation by the United
States Nuclear Regulatory Commission (NRC). Depleted uranium in the finely
divided state, such as grinding dust or machine turnings, is combustible at
room temperature and requires special handling for safe operations and
disposal of process wastes. Beryllium is known to cause lung disease
following significant exposure by inhalation of airborne particles.
Processing this material requires use of extensive ventilation and dust
collecting systems. Management believes that the experience gained in its
many years of working with these metals has resulted in capabilities for
dealing effectively with their special characteristics.
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The presence and use in the Company's operations of materials with
hazardous characteristics subjects the Company to regulation and scrutiny by
various governmental agencies. Management believes that the Company is
presently in compliance in all material respects with existing federal, state
and local regulations and has no knowledge of any threatened actions against
the Company for violations of any such laws, statutes or regulations, except
as described below under "Concord Site Remediation" and in Item 3 below.
However, the potential effects of evolving legislation and regulations
affecting the Company's business cannot be predicted.
In the process of manufacturing depleted uranium products, the Company
generates small amounts of low-level radioactive waste materials that must be
disposed of at sites licensed by federal, state, and local governments. With
the closing of the Barnwell, South Carolina, low-level radioactive waste
repository to out-of-region generators in July 1994, the Company began
storing waste on site in Concord. Interim storage is permitted under the
Company's NRC license. At present, the Barnwell repository remains available
for use by the Company's Carolina Metals, Inc. facility. The Company has made
provision to accommodate an extended period of interim storage of waste
within existing buildings in Concord as the state government works toward a
regional solution. At the same time, the Company has made significant
progress in developing and instituting alternatives to disposal of its waste.
The Company intends to continue the development of technologies and processes
aimed at eliminating the generation of waste materials associated with its
manufacturing process.
For a number of years, ending in 1985, the Company deposited spent acid and
associated depleted uranium waste and other residual materials by
neutralizing with lime and discharging the neutralized mixture to a holding
basin on its premises in Concord, Massachusetts. In 1986 the holding basin
was covered with Hypalon, an impervious material used to prevent rain and
surface run-off water from leaching through the holding basin. The Company
now uses a proprietary "closed loop" process that it developed to discontinue
such discharges. The Company believes that both practices were and are in
compliance with all applicable regulations.
CONCORD SITE REMEDIATION
The Commonwealth of Massachusetts, Department of Environmental
Protection ("DEP"), has designated the Concord site including the holding
basin as a "priority" remediation site. The DEP, in conjunction with the
Company and its consultants, are developing a comprehensive evaluation and
risk assessment. This risk assessment originally scheduled for completion
during calendar year 1995 has been delayed. Additional information needed for
the risk assessment has been collected and is currently being evaluated with
the current expectation that completion of the risk evaluation will occur in
1996. The Company continues to believe that the results of
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these studies will establish that the holding basin does not present an
environmental risk consistent with its designation as a "priority site".
The vast majority (approximately 96%) of the material in the holding
basin is the by-product of manufacturing processes conducted by the Company
under Government contracts using Government furnished material. Management
believes, based on advice from legal counsel and discussions with the Army,
that this material continues to be Government owned and that the Government
has a responsibility for any required remediation of the site. The Company
has no written commitment from the Government to fund any remediation costs,
however, existing contracts provide the basis for Government responsibility
for these costs. In September 1995, the Company submitted a request for
funding for the full remediation of the basin under Public Law 85-804. The
Army currently is reviewing the submittal and is expected to provide their
recommendations to the Company early in 1996. The Army has not denied the
Government's responsibility to pay the costs of removal of the material from
the holding basin. Management of the Company considers it unlikely that the
Army will not pay the appropriate costs for remediation. Also, the Government
has demonstrated a general practice of paying its portion of site remediation
costs by the funding of other remediation projects.
In fiscal 1992 the Company established a $1.3 million reserve against
any potential administrative, legal, research or other costs of remediating
the holding basin that are not paid by the Government. In fiscal 1994 this
reserve was increased by $1.5 million. The Company believes this amount to be
adequate for any residual costs that may be incurred beyond the Government's
portion of the holding basin.
The Company has developed a range of cost estimates based on differing
assumptions as to how much gravel should be removed and that all material
will be buried at licensed sites. Significant costs include excavation,
transportation and burial of the holding basin material as well as back fill
and grading at the Concord site. Under these assumptions, the estimated costs
of the burial option range from $4 million to $9 million on a pretax basis.
In developing these estimates, the uncertainty as to future burial rates that
will be charged at the licensed sites is the predominant reason for the wide
range of potential costs. These burial costs are affected by, among other
things, the various regulatory agencies, the regulations imposed by these
agencies and the volume of waste disposed at individual licensed sites.
In developing these estimates, the Company has not assumed any offset
based on Government funding or insurance claims. Further, the Company assumes
that the recommendations of the Company's outside experts as to how much
gravel should be removed will be accepted by the regulatory authorities and
that none of the material in the holding basin will be recycled.
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The Company believes its portion of the cost of such remediation will
not have a material impact on its results of operations or financial position.
DECOMMISSIONING PLANNING REQUIREMENTS
The Company is in the process of renewing certain licenses issued by
the NRC which are required by the Company in order to possess and process
depleted uranium materials. Under applicable licensing regulations, the
Company was required to submit and did submit a Decommissioning Funding Plan
(DFP) to provide for the possible future decommissioning of its Concord
facility. The Company is also required to provide financial assurance for
such decommissioning.
Approximately 96% of the depleted uranium materials which generated the
DFP requirements were processed for the United States Government.
Accordingly, the Company believes that its financial assurance is only for
the balance of the cost. The estimated cost of decommissioning NMI facilities
and the holding basin in 1995 was $13.7 million. On the basis of this
estimate the Company's share, approximately 4%, would be $550,000. The
Company has provided and maintains financial assurance in the form of a
letter of credit from its commercial bank in the amount of $750,000. With
declining depleted uranium penetrator production, the Company has removed
significant volumes of contaminated equipment from service in 1995. As
allowed under the NRCOs rules governing decommissioning cost estimating, the
Company is currently preparing a new estimate of the cost associated with
decommissioning its remaining facilities. Management believes that estimated
decommissioning costs will decline as the Company removes no longer needed or
obsolete equipment from its facilities. Company representatives met several
times with NRC staff members during the year to discuss meetings with the
Army and consultants on specific decommissioning issues.
The outcome of a December, 1994 NRC enforcement conference with respect
to what the NRC described as the Company's apparent lack of compliance with
the decommissioning financial assurance regulations has resulted in the
Company submitting a request to the NRC for exemption to certain aspects of
the decontamination and disposal (D&D) regulations. The exemption request
includes alternate financial funding mechanisms not specifically called out
in the regulations. These funding mechanisms when coupled with Government
contractual obligations will collectively satisfy the decommissioning funding
obligations of the Company. In filing the exemption, the Company reiterated
its long standing position that the United States Government is obligated, by
policy and by contract, to bear the balance of decommissioning costs at the
Concord site. As a practical matter, the Company is not able to provide
private financial assurance for the Government's costs of decommissioning.
The Company expects NRCOs response to the exemption request early in 1996.
14
<PAGE>
Management believes that based on progress made to date on the holding
basin remediation (as described above) along with the submission of a request
for partial exemption to the D&D rules, escalated enforcement action by NRC
regarding decommissioning funding compliance, although possible, will not
occur. Escalated enforcement action could take the form of a civil penalty,
license suspension or license revocation. A license action, such as a
suspension or revocation would have a material and adverse impact on results
of operations and financial position.
15
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are:
NAME AGE POSITION WITH THE COMPANY
George J. Matthews 65 Chairman of the Board of Directors,
CEO and Treasurer
Robert E. Quinn 42 President
Wilson B. Tuffin 64 Vice Chairman of the Board of Directors
Douglas F. Grotheer 37 Vice President, Engineering & Programs
William T. Nachtrab 42 Vice President, Technology
James M. Spiezio 47 Vice President, Finance & Administration
Frank J. Vumbaco 42 Vice President, Health/Safety
Bruce E. Zukauskas 45 Vice President, Operations
The term of office for each executive officer of the Company is one
year or until a successor is chosen and qualified. The Executive officers are
elected by the directors at their first meeting following the annual meeting
of stockholders. There are no family relationships among the directors and
executive officers.
GEORGE J. MATTHEWS has been Chairman of the Board of Directors since 1972. He
is employed by Matthews Associates Limited, a Massachusetts corporation.
Matthews Associates Limited is engaged in the business of investing in and
providing management consultation and assistance to small and medium sized
businesses. Mr. Matthews devotes approximately 75% of his time to the
Company's affairs. Mr. Matthews was elected CEO and Treasurer on November 30,
1994.
ROBERT E. QUINN was elected President of the Company on November 30, 1994.
Prior to November 30, 1994 he held the position of Vice President, Sales with
the Company for over five years.
WILSON B. TUFFIN has been Vice Chairman of the Board of Directors since
November 1994. From 1972 to November 1994, he held the positions of
President, Chief Executive Officer and Treasurer of the Company.
DOUGLAS F. GROTHEER has held the position of Vice President, Engineering and
Programs since July 1994. Prior to July 1994, he was Manager, Engineering and
Programs for two years, and Manager, Ordnance Programs for more than three
years.
WILLIAM T. NACHTRAB, Ph.D. has held the position of Vice President,
Technology with the Company since May 1993. Prior to May 1993 he was Manager,
Research & Development for the prior five years.
JAMES M. SPIEZIO has been the Vice President, Finance since October 1993.
Prior to October 1993, he was Controller, and prior to April 1989, he served as
Manager of Business Planning.
FRANK J. VUMBACO has held the position of Vice President, Health/Safety with
the Company since November 1993. Prior to November 1993, he was Manager of
Health/Safety for over five years.
16
<PAGE>
BRUCE E. ZUKAUSKAS has held the position of Vice President, Operations since
October 1994. Prior to October 1994, he was Quality Manager for over five
years.
17
<PAGE>
ITEM 2. PROPERTIES
The majority of the Company's activities are conducted at a Company-
owned site in Concord, Massachusetts. The site comprises approximately 46.4
acres and is improved by a steel and masonry building originally constructed
in 1958 and subsequently enlarged. The building contains approximately
180,000 square feet used for manufacturing activities, offices and
warehousing.
During fiscal 1995 the Company sold its 15,000 square feet office building
located in Acton, Massachusetts.
Carolina Metals, Inc., the Company's wholly-owned subsidiary, is
located on 321 acres of land in Barnwell, South Carolina. This 109,000 square
foot facility houses two manufacturing units. One unit provides the
capability of converting chemical gas (UF(6)) to chemical salt (UF(4)). The
second unit houses a reduction process to convert chemical salt (UF(4)) to
metallic depleted uranium. In December 1991, the Company completed a 70,000
square foot DU Recycle Technology Center adjacent to the manufacturing
facility in Barnwell, S.C. The Center provides the technology and facilities
required to provide recovery and recycle of depleted uranium and other useful
materials. In addition, Carolina Metals, Inc. maintains a full scale
analytical laboratory.
18
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is named as a Potentially Responsible Party (PRP) in regard to
the Maxey Flats, Kentucky, Superfund Site. This site was used until 1977 as a
licensed and approved low-level radioactive waste disposal site. A committee
of PRP's including the Company has submitted a remedial investigation and
feasibility study report to the Environmental Protection Agency. The current
expectation is that all parties will agree to site remediation with the
formal entering of the consent agreement by the Department of Justice early
in calendar year 1996. The agreement signed by the settling parties in July
1995, outlines the responsibilities of all parties and states that the PRP's
will undertake the initial remedial phase (IRP) of the site remediation at an
estimated cost of $60 million. The Company's liability is not expected to
exceed approximately $80,000 over 10 years. The cost to the Company in fiscal
1995 was $8,455.
The Company is in the process of renewing certain licenses issued by the
United States Regulatory Commission (NRC) which are required by the Company
in order to possess and process depleted uranium materials. Under applicable
licensing regulations, the Company was required to submit and did submit, on
July 1, 1993, a Decommissioning Funding Plan (DFP) to provide for the
possible future decommissioning of its Concord facility. The Company believes
that decommissioning would occur only in the future if the Company were to
cease functioning in the capacity of handling radioactive materials. The
Company has no short or long term plans or intention to cease this activity.
The Company is required to provide financial assurance for such potential
decommissioning costs and the Company believes it has satisfied this
requirement. Approximately 96% of the depleted uranium materials which
generated the DFP requirements were processed for the United States
Government, and a similar percentage of material which remains at the
facility is the property of the United States Government. Accordingly, the
Company believes that its decommissioning obligation and, therefore, its
obligation to provide financial assurance, is, only for the balance of the
costs. The total estimated cost of decommissioning the NMI facility is $13.7
million. The Company's share, approximately 4%, would be $550,000. The
Company has provided financial assurance in the form of a letter of credit in
the amount of $750,000.
In August 1995, the Company submitted a request to the NRC for partial
exemption to the decommissioning regulation. The NRC has not responded to
to the Company. A violation of the applicable regulations which the Company
believes is unlikely, could result in the revocation of the NRC licenses,
which would have a material and adverse affect on the Company's operations.
The Company responded to the NRC's Demand for Information, renewing
19
<PAGE>
its position that its total obligation with respect to the decommissioning is
not in excess of 4% of the total cost. In support of its position, the
Company indicated that the Government has demonstrated a practice of funding
actual remediation of sites contaminated with Government furnished materials
on a case-by-case basis, without prior written commitments.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
20
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The information required by this item is incorporated by reference to the
Section entitled "Common Stock Information" in the Registrant's 1995 Annual
Report to Stockholders, which is included in this Report as Exhibit 13.
21
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference to
the section entitled "Selected Financial Data", pages 12 and 13, in the
Registrant's 1995 Annual Report to Stockholders, which is included in this
Report as Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
The information required by this item is incorporated by reference to
the section entitled "Management's Discussion and Analysis of Operations",
pages 14 - 16, in the Registrant's 1995 Annual Report to Stockholders, which
is included in this Report as Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference to
the Consolidated Financial Statements at September 30, 1995 and notes thereto
in the Registrant's 1995 Annual Report to Stockholders, which is included in
this Report as Exhibit 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
22
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K and instruction 3 to
Item 401(b), the information required by this item concerning executive
officers is set forth in Part I, Item 1 under the heading "Executive Officers
of the Registrant".
The following table sets forth certain information concerning the directors
of the Company:
<TABLE>
<CAPTION>
Present Principal Employment
Name Age and Prior Business Experience Director Since
- ---- --- ----------------------------- --------------
<S> <C> <C> <C>
George J. Matthews 65 Chairman of the Board of Directors 1972
since 1972. Until July 1978 and since
December 1, 1994, also Treasurer of
the Company. Chairman of Matthews
Associates Limited, which is engaged
in the business of investing in and
providing management consulting and
assistance to small and medium sized
businesses, including the Company.
Robert E. Quinn 42 President of the Company since 1994
December 1, 1994. Prior to
becoming President, served as Vice
President, Sales for over five years.
Elected as a Director on
November 17, 1994 to fill a vacancy
created by the enlargement of the Board
of Directors by vote of the Directors.
Wilson B. Tuffin 64 Vice Chairman since November 1994. 1972
From 1972 to November 30, 1994, President,
Chief Executive Officer and Treasurer
of the Company.
Kenneth A. Smith 59 Professor of Chemical Engineering at 1985
Massachusetts Institute of Technology
since 1971.
Frank H. Brenton 70 Principal of Frank H. Brenton Associates 1986
a business consulting firm. From
1984 to 1986, Chairman of the Board of
Directors of Marshall's Incorporated,
an off-price retailer and division of Melville, Inc.
</TABLE>
INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors met six times during the fiscal year ended
September 30, 1995. There was no director who during the fiscal year attended
fewer than 75 percent of the aggregate of all board meetings and all meetings of
committees on which he served.
The Board of Directors has a three-member Audit Committee which is
reconstituted at the first meeting of the Board following the annual meeting
of stockholders. The Audit Committee, which met two times during fiscal
1995, meets with the Company's independent auditors and principal financial
personnel to review the scope and results of the annual audit and the
Company's financial reports. The Audit Committee also reviews the scope of
audit and non-audit services performed by the independent public accounts,
reviews the independence of the independent public accountants, and reviews
the adequacy and effectiveness of internal accounting controls. The present
members of the Audit Committee
23
<PAGE>
are Messrs. Brenton and Smith.
The "disinterested" directors, for purposes for Rule 16b-3 under the
Securities Exchange Act of 1934, Messrs. Brenton and Smith, acting as a Stock
Option Committee, have the authority, subject to the express provisions of the
Company's Employees' Stock Option Plan and Non-Qualified Stock Option Plan (the
"Plans"): to determine the employees of the Company to receive options, the
number of shares to be optioned, and the terms of the options granted; to
construe and interpret the Plans and outstanding options; and to make all other
determinations that they deem necessary and advisable for administering the
Plans. The Board of Directors as a whole has corresponding authority with
respect to options issued under the Directors' Stock Option Plan.
The Board of Directors does not have standing committees on compensation or
nominations.
DIRECTORS' COMPENSATION AND STOCK OPTION PLAN
Each outside director of the Company receives an annual fee of $15,000.
On November 20, 1995, the Board of Directors adopted a Director's Stock
Option Plan (the "Plan") in order to enhance the Company's ability to attract
and retain skilled and competent members of its Board of Directors. Only
outside (non-management) directors of the Company and its subsidiaries are
eligible to receive options under the Plan, and the maximum number of shares as
to which such directors' options may be granted is 35,000 shares (subject to
adjustments for stock splits, stock dividends and the like). Pursuant to the
Plan, each director eligible to participate in the Plan, upon first election to
office at the annual meeting of stockholders and for each subsequent period of
three years of service, receives an option to purchase 1,000 shares of Common
Stock of the Company at an exercise price equal to fair market value on the date
of grant. Options granted under the Plan are exercisable for a period of ten
years and vest over a three-year period. Options to purchase 4,000 shares
of Common Stock at an exercise price of $14.00 were granted to each of
Messrs. Brenton, Smith and Vokey on December 15, 1994 under the Directors
Stock Option Plan which preceded the Plan. No options were granted pursuant
to the Plan during fiscal 1995.
During fiscal year 1995, Matthews Associates Limited, of which Mr. Matthews
is sole owner, received compensation from the Company in connection with
consulting services provided to the Company pursuant to a management agreement
between the Company and Matthews Associates Limited. See "Executive
Compensation" and "Executive Agreements."
24
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table and notes present the compensation provided by the
Company during the last three fiscal years to its chief executive officer and
the four most highly compensated executive officers of the Company (other than
the chief executive officer) who were serving as executive officers at the
Company's fiscal year end of September 30, 1995.
<TABLE>
<CAPTION>
Long Term Compensation
---------------------------------
Annual Compensation Awards Payouts
--------------------------------- ----------------------- -------
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Compen- Award(s) Options/ Payouts Compen-
Principal Position Year(1) Salary ($) Bonus ($) sation($)(2) $ SARs (#) $ sation($)
------------------ ------- ---------- --------- ------------ ---------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert E. Quinn 1995 151,673 200 35,000 -- 30,000 -- --
President 1994 131,000 -- -- -- -- -- --
1993 131,000 -- -- -- -- -- --
George J. Matthews(3) 1995 350,000 -- -- -- -- -- --
Chairman of Board of Directors, 1994 350,000 -- -- -- -- -- --
CEO and Treasurer 1993 350,000 -- -- -- -- -- --
Wilson B. Tuffin(4) 1995 172,039 3,800 -- -- -- -- --
Vice Chairman of Board of 1994 210,000 -- -- -- -- -- --
Directors and Consultant 1993 210,000 -- -- -- -- -- --
James M. Spiezio 1995 113,270 10,830 -- -- 6,000 -- --
Vice President, Finance & 1994 105,987 -- -- -- 2,500 -- --
Administration 1993 89,780 -- -- -- -- -- --
William T. Nachtrab 1995 108,703 10,830 -- -- 6,000 -- --
Vice President, Technology 1994 103,558 -- -- -- 2,500 -- --
1993 103,558 -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company's fiscal year ends on September 30th of each year.
(2) Excludes perquisites in amounts less than the threshold level required
for reporting.
(3) Mr. Matthews is assigned as a consultant to the Company pursuant to a
management agreement between Matthews Associates Limited and the
Company. All compensation under the agreement is paid by the Company to
Matthews Associates Limited. See "Executive Agreements."
(4) Mr. Tuffin's compensation for the fiscal year ended September 30, 1995
was determined pursuant to his Employment and Consulting Agreement. See
"Executive Agreements."
25
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table shows all options granted to each of the named
executive officers of the Company during the fiscal year ended September 30,
1995 and the potential value at stock price appreciation rates, 5% and 10%,
over the ten year term of the options. The 5% and 10% rates of appreciation
are not intended to forecast possible future actual appreciation, if any, in
the Company's stock prices. The Company did not use an alternative present
value formula because the Company is not aware of any such formula that can
determine with reasonable accuracy the present value based on future unknown
or volatile factors.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
OPTION TERM (5)
--------------------
INDIVIDUAL GRANTS
-----------------
% OF TOTAL
NUMBER OF OPTION/SARs
SECURITIES GRANTED
UNDERLYING TO EM- EXERCISE
OPTION/SARs PLOYEES OR BASE
GRANTED IN FISCAL PRICE EXP.
NAME (#) YEAR ($/Sh)(4) DATE 5%($) 10%($)
---- ----------- ----------- --------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Quinn 10,000(1) 13.50 11/16/2004 84,900 215,155
20,000(2) 36% 12.25 08/01/2005 183,923 390,467
George J. Matthews 10,000(2) 12% 12.25 08/01/2005 77,040 195,233
Wilson B. Tuffin 5,000(2) 6% 12.25 08/01/2005 38,520 97,616
James M. Spiezio 1,000(3) 14.00 12/14/2004 9,805 22,313
5,000(2) 7% 12.25 08/01/2005 38,520 97,616
William T. Nachtrab 1,000(3) 14.00 12/14/2004 8,805 22,312
5,000(2) 7% 12.25 08/01/2005 38,520 97,616
- ----------
</TABLE>
(1) These options were first exercisable on November 16, 1995 at which time
the options were 33% vested with options vesting in additional 33%
increments in two annual installments commencing on November 16, 1996.
(2) These options are first exercisable on August 1, 1996 at which time the
options will be 33% vested with options vesting in additional 33%
increments in two annual installments commencing on August 1, 1997.
(3) These options were first exercisable on December 14, 1995 at which time
the options were 33% vested with options vesting in additional 33%
increments in two annual installments commencing on December 14, 1996.
(4) The exercise price per share is the market price of the underlying
Common Stock on the date of grant.
(5) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These
gains are based upon assumed rates of share price appreciation set by
the Securities and Exchange Commission of five percent and ten percent
compounded annually from the date the respective options were granted to
their expiration date. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, are dependent on the
performance of the Common Stock and the date on which the option is
exercised. There can be no assurance that the amounts reflected will be
achieved.
26
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the exercise
of options by the executive officers named in the Summary Compensation Table
during the last fiscal year and unexercised options held as of the end of the
fiscal year.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End (#) at FY-End(2)
---------------------- --------------------
Shares Acquired
Name on Exercise (#) Value Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ---------------- -------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Quinn 5,000 41,250 3,333 26,667 0 25,000
1,000 6,500
George J. Matthews 26,350 155,025 0 10,000 0 12,500
2,000 15,750
500 4,500
Wilson B. Tuffin 23,850 196,763 0 5,000 0 6,250
James M. Spiezio 1,000 6,250 2,000 6,500 11,452 11,973
William T. Nachtrab 1,000 6,250 2,000 6,500 11,452 11,993
</TABLE>
(1) Value realized equals fair market value on the date of exercise, less
the exercise price, times the number of shares acquired, without deducting
taxes or commissions paid by employee.
(2) Value of unexercised options equals fair market value of the shares
underlying in-the-money options at September 30, 1995 ($13.50 per
share), less the exercise price, times the number of options outstanding.
PENSION PLAN TABLE
The following table sets forth the aggregate annual benefit payable
upon retirement at normal retirement age for each level of remuneration
specified at the listed years of service.
<TABLE>
<CAPTION>
Years of Service
---------------------------------------
Remuneration 15 20 25 30 OR MORE
- ------------ -------- ------- ------- ----------
<S> <C> <C> <C> <C>
$100,000 23,520 31,360 39,220 47,040
150,000 38,520 51,360 64,200 77,040
200,000 53,520 71,360 89,200 107,040
300,000 83,520 111,360 139,200 167,040
400,000 113,520 151,360 189,200 227,040
500,000 143,520 191,360 239,200 287,040
</TABLE>
The Company has a defined benefit plan (the "Pension Plan") designed to
provide retirement benefits for employees and ancillary benefits to their
beneficiaries, joint annuitants and spouses. All employees of the Company
become participants in the Pension Plan after attaining the later of age 21 or a
year of service with the Company. The Pension Plan provides retirement benefits
based on years of service and compensation. An employee's benefits under the
Pension Plan generally become fully vested after five years of service. At
normal retirement (the later of age 65 and five years of Plan participation),
participants are entitled to a monthly benefit for the remainder of their life
in an amount equal to one-twelfth of the sum of their "Annual Credits" for their
last 30 years or lesser period of employment with the Company and its
predecessors. An employee's "Annual Credit" is 1.25% of the portion of his
annual compensation that is subject to Social Security tax and two percent (2%)
of the balance of his annual compensation. Participants with five
27
<PAGE>
years of service are entitled to retirement at age 55, but the monthly benefit
payable under the Pension Plan is reduced by 0.5% for each month that early
retirement precedes normal retirement but not to less than $100 per month if the
Participant has ten or more years of service. The surviving spouse of a retiree
under the Plan is entitled to receive benefits equal to one-half the amount the
retiree had been receiving. Alternative benefit payments that are equivalent to
the benefit described above are also available to participants. Benefits
payable under the plan are not reduced by Social Security payments to the
retiree. Amounts shown assume benefits commence at age 65. Benefit amounts
shown are straight-life annuities. The executive officers named in the Summary
Compensation Table have the following years of credited service for pension plan
purposes: Robert E. Quinn-20 years, Wilson B. Tuffin-22 years; James M.
Spiezio-10 years; and William Nachtrab-6 years. On February 1, 1995, Mr.
Tuffin began to receive benefit payments under the Plan. Mr. Matthews does
not participate in the Pension Plan.
EXECUTIVE AGREEMENTS
EMPLOYMENT AGREEMENT WITH MR. TUFFIN
In November 1994, the Company entered into an employment and consulting
agreement (the "Employment and Consulting Agreement") with Mr. Tuffin.
Pursuant to the Employment and Consulting Agreement, Mr. Tuffin received
initial compensation at the annual rate of $210,000 through January 1995, and
$105,000 as a consultant thereafter, subject to such annual increases as the
Board of Directors may from time to time determine. The Employment and
Consulting Agreement amends and supersedes the employment agreement which Mr.
Tuffin had previously entered into with the Company.
MANAGEMENT AGREEMENT WITH MATTHEWS ASSOCIATES LIMITED
The Company has entered into a management agreement with Matthews
Associates Limited, a Massachusetts corporation ("MAL"), of which Mr. George J.
Matthews, Director and Chairman of the Board of Directors of the Company, is
sole owner. The agreement expires on February 28, 1999, subject to renewal
thereafter from year to year. Pursuant to the agreement, Matthews Associates
Limited provides professional management services as a consultant to the Company
through a senior executive whose duties include (i) financial management, (ii)
serving, subject to election, as a director, as Chairman of the Board of
Directors and as an officer of the Company and (iii) marketing and other advice
to the Company including placement and modification of financing and contact
with major customers, suppliers and governmental agencies. Mr. Matthews is the
senior executive assigned to the Company under the agreement. Under the
management agreement, Mr. Matthews devotes approximately 30 hours per week to
the Company.
MAL was paid $350,000 by the Company in fiscal 1995 for services under the
management agreement and is to be paid a minimum of $350,000 in fiscal 1996 for
all services under the agreement. The management agreement provides that the
Company may terminate the agreement if a majority of the directors determines in
good faith that the MAL representative has willfully refused to perform any
services under the management agreement or has been convicted of a crime of
moral turpitude, and in such event or in the event of termination by MAL without
"good reason" as defined therein, the obligation of the Company to make future
payments to MAL shall cease. The management agreement may be terminated by MAL
for "good reason" as defined therein. In the event of termination by MAL for
"good reason" or in the event of termination by the Company for reasons other
than those described above, the Company is obligated to pay to MAL all of the
amounts due under the agreement for the remaining term. In the event of
termination by MAL without "good reason," the Company is obligated to continue
to make payment to MAL for one year from the date of such termination. In the
event of Mr. Matthews' death, the management agreement automatically terminates
and the Company is obligated to continue to make payments to the estate of Mr.
Matthews for the lesser of one year from such termination or the end of the
scheduled term of the agreement.
28
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended September 30, 1995, the Board of Directors of
the Company was responsible for establishing executive compensation (other than
stock option compensation). Messrs. Quinn and Matthews participated in the
deliberations of the Company's Board of Directors concerning executive officer
compensation. No executive officer of the Company served as a director or
member of a compensation committee, or its equivalent, of another entity, one of
whose executive officers served as director of the Company.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE
COMPANY'S FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE
FILINGS, IN WHOLE OR IN PART, THE FOLLOWING REPORT ON COMPENSATION AND THE
STOCK PERFORMANCE GRAPH CONTAINED ELSEWHERE HEREIN SHALL NOT BE INCORPORATED
BY REFERENCE INTO ANY SUCH FILINGS NOR SHALL THEY BE DEEMED TO BE SOLICITING
MATERIAL OR DEEMED FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED.
REPORT OF THE BOARD OF DIRECTORS AND STOCK OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
During the fiscal year ended September 30, 1995, the Board of Directors of
the Company was responsible for establishing and administering the policies
which govern annual compensation (other than stock option compensation) for the
Company's executive officers. The Stock Option Committee was responsible for
considering stock option compensation for the Company's executive officers.
OVERVIEW
The Board of Directors has historically established levels of executive
compensation that provide for a base salary intended to allow the Company to
hire, motivate and retain qualified executive officers. From time to time,
the Board has also, on occasion, approved annual cash incentive bonuses based
on the Company's performance or on the performance of the executive in
question. In fiscal 1995, the Board approved cash incentive bonuses to
certain executive officers based on their performance. From time to time, the
Stock Option Committee also grants stock options to executive officers and
key employees in order to bring the stockholders' interests more sharply into
the focus of such officers and employees.
The Board of Directors establishes the annual salary and bonus of each of
the executive officers other than the Chief Executive Officer, based on the
recommendations made by the Chief Executive Officer. In determining the
recommendations for salary and bonus for each of the other executive officers,
the Chief Executive Officer considers each officer's individual performance,
attainment of individual goals and the contribution to the overall attainment of
the Company's goals.
STOCK OPTIONS AND OTHER COMPENSATION
Long term incentive compensation for executive officers consists
exclusively of stock options granted under the Company's Stock Option Plans (the
"Plans"). Executive officers as well as other key employees of the Company
participate in the Plans. During fiscal 1995, the Stock Option Committee
granted options only to certain newly appointed executive officers and those
executive officers whose duties and responsibilities had increased since the
prior fiscal year as a result of promotions or departmental restructuring. The
Company also believes that its Pension Plan is an attractive feature for all
employees.
BASIS FOR THE COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation of Mr. Matthews, the Company's Chief Executive Officer
during fiscal 1995, was determined pursuant to a management agreement between
Matthews Associates Limited and the Company. All compensation under the
agreement is paid by the Company to Matthews Associates Limited.
THE BOARD OF DIRECTORS
George J. Matthews
Robert E. Quinn
Wilson B. Tuffin
Kenneth A. Smith
Frank H. Brenton
STOCK OPTION COMMITTEE
Kenneth A. Smith
Frank H. Brenton
29
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
Set forth below is a line graph comparing the five-year cumulative total
return of the Company's Common Stock against the cumulative total return of the
NASDAQ Stock Market (U.S.) Index and the Dow Jones Aerospace and Defense Index.
Cumulative total return is measured assuming an initial investment of $100 and
reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN *
AMONG NUCLEAR METALS, INC., THE NASDAQ STOCK MARKET-US INDEX
AND THE DOW JONES AEROSPACE & DEFENSE INDEX
D O L L A R S
Sep-90 Sep-91 Sep-92 Sep-93 Sep-94 Sep-95
"NUCLEAR METALS, INC" 100 90 85 93 296 171
NASDAQ STOCK MARKET-US 100 157 176 231 233 319
D J AEROSPACE & DEFENSE 100 134 124 170 200 321
* $100 INVESTED ON 09/30/90 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
30
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information as of December 30, 1995
with respect to the Common Stock of the Company owned or deemed beneficially
owned as determined under the rules of the Securities and Exchange Commission,
directly or indirectly, by each stockholder known to the Company to own
beneficially more than 5% of the Company's Common Stock, by each director, by
the executive officers named in the Summary Compensation Table elsewhere
herein, and by all directors and executive officers of the Company and its
subsidiaries as a group. In accordance with Rule 13d-3 under the Securities
Exchange Act of 1934, as amended, a person is deemed to be the beneficial owner,
for purposes of this table, of any shares of Common Stock of the Company if he
or she has or shares voting power or investment power with respect to such
security or has the right to acquire beneficial ownership at any time within 60
days of December 30, 1995. As used herein "voting power" is the power to vote
or direct the voting of shares, and "investment power" is the power to dispose
of or direct the disposition of shares. Except as indicated in the notes
following the table below, each person named has sole voting and investment
power with respect to the shares listed as being beneficially owned by such
person.
<TABLE>
<CAPTION>
No. Common
Shares and
Nature of
Name and Address Beneficial Percent of
of Beneficial Owner Ownership(1) Common Stock(1)
- ------------------- ------------ ---------------
<S> <C> <C>
WIAF Investors Co. 1,156,228(2) 48.4%
466 Arbuckle Avenue
Lawrence, NY 11516
and
Melvin B. Chrein, M.D.
Meryl J. Chrein
Marshall J. Chrein
Michael Chrein
21 Copper Beech Lane
Lawrence, NY 11559
Charles Alpert
Joseph Alpert
George J. Matthews 229,617(3) 9.6%
Chairman of the Board of Directors,
Director & Consultant
c/o Matthews Associates Limited
100 Corporate Place
Peabody, MA 01960
Wilson B. Tuffin 203,808 8.5%
Vice Chairman and Director
23 Arlington Street
Acton, MA 01720
Robert E. Quinn 14,406(4) *
President and Director
Kenneth A. Smith, Director 3,000 *
Frank H. Brenton, Director 3,000 *
James M. Spiezio 3,000(5) *
Vice President, Finance and Administration
William T. Nachtrab 3,000(6) *
Vice President, Technology
31
<PAGE>
All directors and executive officers 453,831 19.0%
as a group (7 persons)
___________________________
* Less than one percent
(1) Does not reflect the effect on voting rights of the Massachusetts Control
Share Acquisition Act.
(2) Derived from Schedules 13DA, dated October 3, 1994, submitted to the
Company. The five persons named are described as a group in such Schedules
13DA. The persons named reported ownership of the following shares: WIAF
Investors Co. (862,428); Melvin B. Chrein (88,400); Meryl J. Chrein
(128,100); Charles Alpert (25,000) and Marshall J. Chrein (18,200). Each
person reported sole voting and dispositive power with respect to the
shares owned by such person.
(3) Includes 25,445 shares owned by a trust established by his late wife of
which Mr. Matthews is a permitted beneficiary.
(4) Includes 3,333 shares which may be purchased upon the exercise of options.
(5) Includes 2,000 shares which may be purchased upon the exercise of options.
(6) Includes 2,000 shares which may be purchased upon the exercise of options.
(7) See notes (3), (4), (5) and (6) above.
</TABLE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Section 16(a) of the Securities Exchange Act of 1934 requires directors,
executive officers and stockholders who own more than 10% of the outstanding
common stock of the Company to file with the Securities and Exchange Commission
and NASDAQ reports of ownership and changes in ownership of voting securities of
the Company and to furnish copies of such reports to the Company. To the
Company's knowledge, based solely on review of the copies of such reports
furnished to the Company, during the fiscal year ended September 30, 1995 or
written representations in certain cases, all Section 16(a) filing requirements
were complied with except that two reports were not timely filed.
32
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1994, the Company entered into an employment and consulting
agreement (the "Employment and Consulting Agreement") with Mr. Wilson B.
Tuffin. Pursuant to the Employment and Consulting Agreement, Mr. Tuffin
received initial compensation at the annual rate of $210,000 through January
1995, and $105,000 as a consultant thereafter, subject to such annual
increases as the Board of Directors may from time to time determine. The
Employment and Consulting Agreement amends and supersedes the employment
agreement which Mr. Tuffin had previously entered into with the Company.
The Company has entered into a management agreement with Matthews
Associates Limited, a Massachusetts corporation ("MAL"), of which Mr. George
J. Matthews, Director and Chairman of the Board of Directors of the Company,
is sole owner. The agreement expires on February 28, 1999, subject to
renewal thereafter from year to year. Pursuant to the agreement, Matthews
Associates Limited provides professional management services as a consultant
to the Company through a senior executive whose duties include (i) financial
management, (ii) serving, subject to election, as a director, as Chairman of
the Board of Directors and as an officer of the Company and (iii) marketing
and other advice to the Company including placement and modification of
financing and contact with major customers, suppliers and governmental
agencies. Mr. Matthews is the senior executive assigned to the Company under
the agreement. Under the management agreement, Mr. Matthews devotes
approximately 30 hours per week to the Company.
MAL was paid $350,000 by the Company in fiscal 1995 for services under
the management agreement and is to be paid a minimum of $350,000 in fiscal
1996 for all services under the agreement. The management agreement provides
that the Company may terminate the agreement if a majority of the directors
determines in good faith that the MAL representative has willfully refused to
perform any services under the management agreement or has been convicted of
a crime of moral turpitude, and in such event or in the event of termination
by MAL without "good reason" as defined therein, the obligation of the
Company to make future payments to MAL shall cease. The management agreement
may be terminated by MAL for "good reason" as defined therein. In the event
of termination by MAL for "good reason" or in the event of termination by the
Company for reasons other than those described above, the Company is
obligated to pay to MAL all of the amounts due under the agreement for the
remaining term. In the event of termination by MAL without "good reason,"
the Company is obligated to continue to make payment to MAL for one year from
the date of such termination. In the event of Mr. Matthews' death, the
management agreement automatically terminates and the Company is obligated to
continue to make payments to the estate of Mr. Matthews for the lesser of one
year from such termination or the end of the scheduled term of the agreement.
33
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company,
included in the Company's 1995 Annual Report, are filed as part of this
report:
Auditors' Report
Consolidated Balance Sheets - September 30, 1995 and September
30, 1994.
Consolidated Statements of Income for the years ended September
30, 1995, September 30, 1994 and September 30, 1993.
Consolidated Statements of Stockholders' Equity for the years
ended September 30, 1995, September 30, 1994 and September 30,
1993.
Consolidated Statements of Cash Flows for the years ended
September 30, 1995, September 30, 1994 and September 30, 1993.
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULE FOR THE THREE YEARS ENDED SEPTEMBER
30, 1995
Auditors' Report on Schedule
II- Valuation and Qualifying Accounts
3. EXHIBITS:
ITEM NO.* DESCRIPTION
3(a) Articles of Organization, as amended, of the Registrant,
incorporated by reference to File No. 2-62266, Part II, Exhibit
3(a).
3(b) By-laws, as amended, of the Registrant, incorporated by
reference to File No. 2-62266, Part II, Exhibit 3(b).
4(a) Financing Agreement, dated May 11, 1982, among Barnwell
County, South Carolina, Registrant and Carolina Metals, Inc. (a
34
<PAGE>
ITEM NO. DESCRIPTION
wholly owned subsidiary) relating to Barnwell County, South
Carolina Industrial Development Revenue Bond (Nuclear Metals,
Inc. project) 1982, incorporated by reference to File No.
2-70044, Part II, Exhibit 4(d).
4(b) Financing Agreement, dated September 27, 1984 among Barnwell
County, South Carolina, Registrant and Carolina Metals, Inc. (a
wholly owned subsidiary) relating to Barnwell County, South
Carolina Industrial Development Revenue Bond (Nuclear Metals,
Inc. project) 1984, incorporated by reference to File No. 0-8836,
Part II, Exhibit 4(e).
4(c) Financing Agreement, dated June 1, 1985 among Massachusetts
Industrial Finance Agency and the Registrant relating to
Massachusetts Industrial Development Revenue Bond (NMI - 1985
Concord Issue) incorporated by reference to File No. 0-8836, Part
II, Exhibit 4(f)
4(d) Nuclear Metals, Inc. Non-Qualified Stock Option Plan as
amended. (1)
4(e) Nuclear Metals, Inc. Restated Employees' Stock Option Plan
as amended. (1)
4(f) Nuclear Metals, Inc. Directors' Stock Option Plan.**
4(h) Warrant to Purchase 25,000 shares of the Company's Common
Stock issued to State Street Bank and Trust Company.**
10(a) Agreement, effective March 1, 1993, between the Registrant
and Matthews Associates Limited. (2)
10(b) Agreement, effective March 1, 1993, between the Registrant
and Wilson B. Tuffin, as amended November 17, 1994. (2)
10(c) Agreement with Olin Corporation regarding large caliber
penetrators. (Confidential treatment has been granted for certain
portions of this Exhibit). (3)
10(d) Credit Agreement dated March 31, 1995 among the Company,
Carolina Metals, Inc. and State Street Bank and Trust Company.(4)
10(e) First Amendment to Credit Agreement dated as of June 30,
1995 among the Company, Carolina Metals, Inc. and State Street
Bank and Trust Company.**
35
<PAGE>
ITEM NO. DESCRIPTION
10(f) Revolving Credit Note dated March 31, 1995 of the Company
and Carolina Metals, Inc. (5)
10(g) Amendment to Revolving Credit Note dated as of June 30,
1995 among the Company, Carolina Metals, Inc. and State Street
Bank and Trust Company. **
10(h) Term Note dated March 31, 1995 of the Company and Carolina
Metals, Inc. payable to State Street Bank and Trust Company.(6)
10(i) Line of Credit Demand Note dated September 26, 1995 of the
Company and Carolina Metals, Inc. to State Street Bank and Trust
Company.**
10(j) Letter Agreement dated September 26, 1995 among State
Street Bank and Trust Company, Carolina Metals, Inc. and the
Company.**
10(k) Letter Agreement dated September 26, 1995 among State
Street Bank and Trust Company, Carolina Metals, Inc. and the
Company.**
10(l) Joint Security Agreement dated as of March 31, 1995 among
the Company, Carolina Metals, Inc. and State Street Bank and
Trust Company.**
10(m) First Amendment to Joint Security Agreement dated September
26, 1995 among the Company, Carolina Metals, Inc. and State Street
Bank and Trust Company.**
10(n) Patent Assignment of Security dated September 26, 1995
between the Company and State Street Bank and Trust Company.**
10(o) Trademark Assignment of Security dated September 26, 1995
between the Company and State Street Bank and Trust Company.**
10(p) Purchase order dated August 23, 1995 between the Company
and Olin Corporation. (Confidential treatment requested as to
certain portions)**
10(q) Forbearance and Amendment Agreement dated as of January 11,
1996 between the Company, Carolina Metals, Inc. and State Street
Bank and Trust Company.**
13 Nuclear Metals, Inc. 1995 Annual Report to Stockholders.**
21 Subsidiaries of the Registrant.**
23(a) Consent of Independent Public Accountants.**
23(b) Consent of Independent Public Accountants.**
27 Financial Data Schedule.**
(b) REPORTS ON FORM 8-K
36
<PAGE>
None
- ------------------------------------------------------------------------------
* Item numbers correspond to Exhibit Table, Item 601, Regulation S-K
** Indicates an exhibit filed herewith
(1) Incorporated by reference to the similarly numbered Exhibit filed with
the Registrant's Annual Report on Form 10-K for the fiscal year ended
September 30, 1992.
(2) Incorporated by reference to the similarly numbered Exhibit filed with
the Registrant's Quarterly Report on Form 10-Q for the quarter ended June
30, 1992.
(3) Incorporated by reference to Exhibit 10 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1993.
(4) Incorporated by reference to Exhibit 10A to the Registrant's Form 10-Q
for the Quarter ended March 31, 1995.
(5) Incorporated by reference to Exhibit 10B to the Registrant's Form 10-Q
for the Quarter ended March 31, 1995.
(6) Incorporated by reference to Exhibit 10C to the Registrant's Form 10-Q
for the Quarter ended March 31, 1995.
37
<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
Date January 16, 1996
-------------------------------------------------------------------------
By /s/ James M. Spiezio
-------------------------------------------------------------------------
James M. Spiezio, Vice President, Finance and Administration & Controller
Date January 16, 1996
-------------------------------------------------------------------------
By /s/ Rebecca L. Perry
------------------------------------------------------------------------
Rebecca L. Perry, Assistant Controller
Date January 16, 1996
-------------------------------------------------------------------------
38
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By /s/ George J. Matthews
-----------------------------------------------------------
George J. Matthews, Chairman of the Board of Directors, CEO
and Treasurer
Date January 16, 1996
-----------------------------------------------------------
By /s/ Frank H. Brenton
-----------------------------------------------------------
Frank H. Brenton, Director
Date January 16, 1996
-----------------------------------------------------------
By /s/ Kenneth A. Smith
-----------------------------------------------------------
Kenneth A. Smith, Director
Date January 16, 1996
-----------------------------------------------------------
By /s/ Wilson B. Tuffin
-----------------------------------------------------------
Wilson B. Tuffin, Vice Chairman
Date January 16, 1996
-----------------------------------------------------------
39
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
Independent Auditors' Report
Schedule II - Valuation and Qualifying Accounts
40
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Nuclear Metals, Inc.:
We have audited the accompanying consolidated balance sheets of Nuclear
Metals, Inc. (a Massachusetts Corporation) and subsidiaries as of September
30, 1995 and 1994, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended September 30, 1995. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Nuclear
Metals, Inc. and subsidiaries as of September 30, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years
in the period ended September 30, 1995, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Notes 1 and 6
to the financial statements, on January 11, 1996 the Company reached an
agreement with its lender to amend certain terms of its debt, including the
extension of certain maturity dates; the lender's waiver of past violations
of debt covenants and the revision of certain financial covenants. The
Company's ability to meet its revised debt service requirements in 1996 is
dependent upon the receipt of a specific order and the related proceeds from
a certain customer. As of January 11, 1996 the Company's customer has not
been able to obtain funding to complete the purchase. This matter raises
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to this matter are also described in Note 1.
These financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
the financial statements is presented for purposes of complying with the
Securities and Exchange Commissions rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in
41
<PAGE>
our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements as a whole.
Boston, Massachusetts Arthur Andersen LLP
November 22, 1995 (except for Notes 1 and 6
for which the date is January 11, 1996)
42
<PAGE>
NUCLEAR METALS, INC. AND SUBSIDIARIES
SCHEDULE II- VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1995
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END
CLASSIFICATION OF YEAR EXPENSES DEDUCTIONS OF YEAR
- -------------- ---------- ---------- ---------- ---------
YEAR ENDED SEPTEMBER
30, 1995:
Allowance for
doubtful accounts $1,290,000 $ 400,000 $807,000 $ 883,000
---------- ---------- -------- ----------
---------- ---------- -------- ----------
Inventory Reserves $1,522,000 $ -- $ -- $1,522,000
---------- ---------- -------- ----------
---------- ---------- -------- ----------
YEAR ENDED SEPTEMBER
30, 1994:
Allowance for
doubtful accounts $1,670,000 $ -- $380,000 $1,290,000
---------- ---------- -------- ----------
---------- ---------- -------- ----------
Inventory Reserves $2,000,000 $ -- $442,000 $1,522,000
---------- ---------- -------- ----------
---------- ---------- -------- ----------
YEAR ENDED SEPTEMBER
30, 1993:
Allowance for
doubtful accounts $ 300,000 $1,536,000 $166,000 $1,670,000
---------- ---------- -------- ----------
---------- ---------- -------- ----------
Inventory Reserves $ 570,000 $1,872,000 $442,000 $2,000,000
---------- ---------- -------- ----------
---------- ---------- -------- ----------
44
<PAGE>
EXHIBIT 4(f)
NUCLEAR METALS, INC.
DIRECTORS' STOCK OPTION PLAN
The Nuclear Metals, Inc. Directors' Stock Option Plan as adopted
November 20, 1995:
1. PURPOSE AND ELIGIBILITY
The purpose of this Plan is to enhance the ability of NUCLEAR METALS,
INC. (the "Corporation") to attract and retain skilled and competent members
of its Board of Directors. The class of persons eligible to receive options
under the Plan shall consist of all outside (non-management) directors of the
Corporation and its subsidiaries.
2. MAXIMUM NUMBER OF SHARES TO BE OPTIONED
The maximum number of shares of common stock which may be optioned and
sold under this Plan is 35,000 shares of common stock of the Corporation (the
"Common Stock"), except as such number of shares shall be adjusted in
accordance with provisions of Section 5 hereof. Such shares shall be shares
of the authorized but unissued common stock or shares of Common Stock
purchased as treasury stock as may from time to time be determined by the
Board of Directors of the Corporation. Any shares which are reserved for
issuance upon the exercise of an option and which for any reason are not so
issued may after the expiration of the option, again be optioned under this
Plan.
3. ADMINISTRATION OF THE PLAN
This Plan shall be administered by a Stock Option Committee (the
"Committee") selected from time to time by the Board of Directors and
initially consisting of the entire Board of Directors of the Corporation.
Subject to the express provisions of this Plan, the Committee shall supervise
and administer this Plan and grant all options hereunder. The Committee
shall have full authority, consistently with this Plan from time to time to
determine the directors of the Corporation to receive options under this
Plan, the number of shares to be subject to each option, and the time or
times when each option may be exercised in whole or in part; to determine the
provisions of options to be granted (which need not be identical); to
construe and interpret this Plan and such options; and to make all other
determinations which it may deem necessary and advisable for administering
this Plan. All such actions and determinations of the Committee shall be
final, conclusive and binding upon all parties interested.
No member of the Committee shall be liable for any action or
determination made by him in good faith.
<PAGE>
4. TERMS AND CONDITIONS OF OPTIONS
Options granted under this Plan shall be evidenced by written agreements
subject to the following terms and conditions and not inconsistent therewith
as the Committee shall from time to time determine.
(a) OPTION PRICE
The Committee shall determine the purchase price under each option,
provided that (i) the purchase price under each option shall not be less than
one hundred (100%) percent and not more than one hundred and twenty-five
(125%) percent of the fair market value of the common stock on the date the
option is granted, (ii) the fair market value shall be determined by the
Committee (provisions are made in Section 5 for adjustment of the price in
certain events).
(b) PERIOD OF OPTIONS
The period during which an option may be exercised shall be determined
by the Committee, but shall be for a period of not more than ten years from
the date such option is granted. Such period may be reduced only as
specifically provided in this Plan.
(c) EXERCISE OF OPTIONS
Each option may provide that it may not be exercised for a specific
period after the date of the granting of the option as the Stock Option
Committee in each case may determine. Shares which may be purchased in any
one year and are not purchased in full may be purchased in any subsequent
year during the period of the option.
(d) PAYMENT FOR AND DELIVERY OF STOCK
Payment for shares purchased upon exercise of an option shall be made in
full in cash, or in common stock of the Corporation, valued at fair market
value on the date of exercise. Certificates for fully paid shares shall be
issued in the name of the optionee as the Corporation from time to time
receives payment in full for the purpose price thereof.
The Corporation shall not be obligated to deliver any shares of stock
until there has been compliance with any federal or State laws or regulations
which the Corporation may deem applicable.
No holder of any option or his legal representatives, legatees or
distributees, as the case may be, will be, or will be deemed to be a holder
of any shares subject to an option unless and until certificates for such
shares are issued to him or them under the provisions of this Plan.
<PAGE>
(e) NON-TRANSFERABILITY OF OPTIONS
No option under the Plan shall be transferable, and except as otherwise
provided herein, options shall be exercisable only by the optionee. No
option shall be subject to execution, attachment or similar process.
(f) PURCHASE FOR INVESTMENT
At the time each option is exercised, the optionee shall represent in
writing to the Corporation that he is of full age and that stock purchased by
him under the option is to be and is being purchased for investment and not
with a view to the distribution thereof.
(h) EFFECT OF DEATH
If an optionee dies at a time when he is entitled to exercise an option,
then at any time or times within twelve months after his death, but in no
event after ten years from the date such option is granted, such option may
be exercised, as to all or any of the shares which the optionee was entitled
to purchase and had not purchased at the time of his death, by his executor
or administrator or the person or persons to whom the option is transferred
by will or the applicable laws of descent and distribution, and except as so
exercised such option shall expire at the end of such twelve months or at the
end of such ten years, whichever is earlier, provided however, any such
exercise of such an option shall be expressly subject to any restrictions on
transfer of stock of the Corporation found in the Articles of Organization
and the executor, administrator or person or persons so exercising said
option shall be required to comply with any restrictions on transfer of stock
of the Corporation in the same manner as if the optionee had died owning
stock of the Corporation.
5. ADJUSTMENT IN NUMBER OF SHARES AND PURCHASE PRICE
The aggregate number of shares of common stock on which options may be
granted hereunder, the number of shares of common stock covered by each such
option, shall all be appropriately and equitably adjusted by the Board of
Directors in it discretion to prevent dilution or any enlargement of rights
under such option, by reason of any increase or decrease in the number of
issued shares of common stock resulting from a subdivision or consolidation
of shares or capital readjustment, or the payment of a stock dividend or
other increase or decrease in such shares effected without receipt of
compensation by the Corporation. Any fractional shares resulting from any
such adjustment shall be eliminated from the option.
Subject to any required action by the stockholders, if the Corporation
shall be the surviving corporation in any merger or consolidation, any option
granted hereunder shall cover the securities to which a holder of the number
of shares of common stock covered by the option would have been entitled; but
a sale of substantially all the assets of the Corporation, or a dissolution
or liquidation of the Corporation, or a merger or consolidation in which the
Corporation is not the surviving corporation, shall cause (i) all outstanding
options hereunder to become exercisable in full effective as of the date of
such sale,
<PAGE>
dissolution, liquidation, merger or consolidation, and (ii) all outstanding
options hereunder immediately thereafter to terminate.
6. AMENDMENT AND TERMINATION
The Board of Directors may at any time amend, suspend or terminate this
Plan. No action by the Board of Directors may, except as provided in Section
5, without the consent of the holder of an existing option, materially and
adversely affect his rights under such option.
7. DURATION OF THE PLAN
This Plan became effective on November 20, 1995 and shall terminate on
November 20, 2000 unless sooner terminated by the Board of Directors.
Options may be granted under this Plan at any time and from time to time
prior to its termination. Any option outstanding under this Plan at the time
of the termination or a suspension of this Plan shall remain in effect until
such option shall have been exercised or shall have expired in accordance
with its terms and conditions.
DATED: November 20, 1995
<PAGE>
EXHIBIT 4(h)
RIGHT TO PURCHASE 25,000 SHARES OF
COMMON STOCK OF
NUCLEAR METALS, INC.
THIS WARRANT AND THE SECURITIES THAT MAY BE ACQUIRED UPON THE EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "FEDERAL ACT") OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE
SECURITIES LAWS. NEITHER THIS WARRANT NOR THE SECURITIES THAT MAY BE
ACQUIRED UPON THE EXERCISE OF THIS WARRANT MAY BE SOLD, PLEDGED, TRANSFERRED,
ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER PROVISIONS OF THE FEDERAL ACT AND ALL APPLICABLE
STATE SECURITIES LAWS; AND IN THE CASE OF ANY EXEMPTION, ONLY IF THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
TRANSACTION DOES NOT REQUIRE REGISTRATION OF THE WARRANT OR THE OTHER
SECURITIES. NEITHER THIS WARRANT NOR THE SECURITIES THAT MAY BE ACQUIRED
UPON THE EXERCISE OF THIS WARRANT MAY BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED
OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY LISTED IN SCHEDULE A TO THIS
WARRANT.
Nuclear Metals, Inc.
Common Stock Purchase Warrant
Nuclear Metals, Inc., a Massachusetts corporation (the "COMPANY"),
hereby certifies that, for value received, State Street Bank and Trust
Company ("SSB") or assigns (SSB, or such assigns who may be the registered
holder or holders hereof, are hereinafter referred to as the "HOLDER") is
entitled, subject to the terms set forth below, to purchase from the Company
at any time or from time to time prior to the Expiration Date, that number of
fully paid and non-assessable shares of Common Stock (as defined in Section
11 hereof), as shall be equal to the Initial Warrant Number (as hereinafter
defined) at a purchase price per share equal to the Initial Exercise Price
(as hereinafter defined) SUBJECT, HOWEVER, to adjustment both as to such
number of shares and as to such price as hereinafter set forth (such price
per share as so adjusted from time to time being herein called the "Exercise
Price").
This Warrant is issued pursuant to the Warrant Agreement (the
"AGREEMENT") dated September 26, 1995, between the Company and SSB, a copy of
which is on file at the principal office of the Company. The Holder of this
Warrant shall be entitled to all of the benefits of the Agreement as provided
therein and by acceptance of this Warrant the Holder agrees to comply with
the terms, conditions and obligations imposed by the Agreement.
<PAGE>
Section 1. DEFINITIONS. Terms defined in the Agreement and not otherwise
defined herein are used herein with the meanings so defined therein. Certain
terms are used in this Warrant as specifically defined in Section 11 hereof.
Section 2. EXERCISE OF WARRANT.
Section 2.1. EXERCISE. Subject to the limitations set forth in
Section 3, this Warrant may be exercised by the Holder hereof at any time
during the Warrant Exercise Period by surrender of this Warrant to the
Company at its principal office, together with (i) the form of subscription
at the end hereof duly executed by such Holder, (ii) such other documents,
statements, subscription agreements or other items as may be reasonably
requested by the Company in furtherance of its requirements pursuant to
Section 3 below, and (iii) payment, by certified or official bank check
payable to the order of the Company or by wire transfer to its account, in
the amount obtained by multiplying the number of shares of Common Stock for
which this Warrant is then being exercised by the Exercise Price then in
effect (such amount, the "EXERCISE PAYMENT"), except that the Holder may, at
its option, elect to pay the Exercise Payment by canceling a portion of this
Warrant that is equal to the number of shares determined by dividing the
Exercise Payment by (i) the Current Market Price as of the date of exercise
or (ii) if the Current Market Price cannot be determined because the Common
Stock is not listed or admitted to unlisted trading on the New York Stock
Exchange, another national securities exchange, or the National Market
System, the Estimated Current Market Price (as hereinafter defined) (such
manner of payment, a "NON-CASH EXERCISE PAYMENT"). The "ESTIMATED CURRENT
MARKET PRICE" means the amount most recently determined by the Company's
Board of Directors in its reasonable discretion to represent the fair market
value per share of the Common Stock (including without limitation a
determination for purpose of granting Common Stock options or issuing Common
Stock under an employee benefit plan of the Company). Upon request of the
Holder, the Company's Board of Directors (or a representative thereof) shall
promptly notify the Holder of the Estimated Current Market Price.
Notwithstanding the foregoing, if the Company's Board of Directors has not
made such a determination within the three-month period prior to an exercise
of the Warrant in which the Holder has elected to make a Non-Cash Exercise
Payment, then (A) the Estimated Current Market Price shall be the amount next
determined by the Company's Board of Directors in its reasonable discretion
to represent the fair market value per share of the Common Stock (including
without limitation a determination for purposes of granting Common Stock
options or issuing Common Stock under an employee benefit plan of the
Company), (B) the Company's Board of Directors shall make such a
determination within 15 days of a request by the Holder that it do so, and
(C) the exercise of this Warrant pursuant to this subsection shall be delayed
until such determination is made.
In the event the Warrant is not exercised in full, the Company, at its
expense, will forthwith issue and deliver to or upon the order of the Holder
hereof a new Warrant or Warrants of like tenor and dated September 26, 1995,
in the name of the Holder hereof or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may request, calling in the
aggregate on the face or faces thereof for the number of shares of Common
Stock equal (without giving effect to any adjustment therein) to the number
of such shares called for on the face of this Warrant minus the sum of the
number of such shares (without
<PAGE>
giving effect to any adjustment therein) for which this Warrant shall have
been exercised (including by way of a Non-Cash Exercise Payment).
Section 2.2. CLASS OF STOCK RECEIVABLE UPON EXERCISE. Any other
provisions hereof to the contrary notwithstanding, no Bank Affiliate shall be
entitled to exercise the right under this Warrant to purchase any share or
shares of Common Stock if, as a result of such purchase, such Bank Affiliate
would own, control or have power to vote a greater quantity of securities of
any kind than the Bank Affiliate shall be permitted to own, control or have
power to vote under any law or under any regulation, rule or other
requirement of any governmental authority at any time applicable to such Bank
Affiliate.
Section 3. RESTRICTIONS ON TRANSFER.
Section 3.1. COMPLIANCE WITH FEDERAL AND STATE SECURITIES LAWS.
Holder hereby acknowledges that neither this Warrant nor any of the
securities that may be acquired upon exercise of this Warrant have been
registered under the Securities Act of 1933, as amended, or under the
securities laws of any state. The Holder acknowledges that, upon exercise of
this Warrant, the securities to be issued upon such exercise may come under
applicable federal and state securities (or other) laws requiring
registration, qualification or approval of governmental authorities before
such securities may be validly issued or delivered upon notice of such
exercise. The Company's sole obligation to any Holder upon exercise hereof
shall be to use its best efforts to obtain exemptions from registration or
qualification for the issuance of such securities under applicable state and
federal securities laws, and the Holder further agrees that the issuance of
such securities shall be deferred until such exemptions shall have been
obtained; and it is further agreed that the Company shall have no other
obligation or liability to the Holder for non-issuance of such securities
except to return the Warrant surrendered and to refund to the Holder any
consideration tendered in respect of the Exercise Price. With respect to any
such securities, this Warrant may not be exercised by, and securities shall
not be issued to, any Holder in any state in which such exercise would be
unlawful. The Holder agrees that the Company may place such legend or
legends on certificates representing securities issued upon exercise of this
Warrant as the Company may reasonably deem necessary to comply with
applicable state and federal securities laws for the issuance of such
securities.
The provisions of this Section 3 shall apply to the transfer of this
Warrant and the shares of Common Stock purchasable upon exercise of this
Warrant, subject to adjustments from time to time pursuant to the provisions
contained in this Warrant (such securities, together with any shares of stock
or warrants or rights issued as, or resulting from the issuance of, a
dividend or other distribution upon such securities or any other shares of
stock or warrants or rights substituted therefor being herein in the
aggregate called "RESTRICTED SECURITIES"). Each such transfer of a
Restricted Security is herein called a "RESTRICTED ACTION." The holder of
any Restricted Security, by its acceptance thereof, agrees that it will not
take any Restricted Action for so long as the restrictions imposed by this
Section 3 are in effect. The restrictions imposed by this Section 3 upon the
transferability of Restricted Securities (i) shall cease and terminate as to
any particular Restricted Securities when such securities shall have been
effectively registered under the Securities Act and all applicable
<PAGE>
state securities laws and disposed of in accordance with the registration
statement covering such Restricted Securities, and (ii) shall cease and
terminate as to any particular Restricted Securities or with respect to any
particular Restricted Action when, in the opinion of counsel for the Holder
thereof, which counsel shall be Messrs. Goodwin, Procter & Hoar, or such
other counsel as shall be reasonably satisfactory to the Company, such
opinion to be concurred in by counsel to the Company (such concurrence not to
be unreasonably withheld), such restrictions are no longer required with
respect to such Restricted Securities or such Restricted Action, as the case
may be, in order to insure compliance with the Securities Act or under any
applicable state securities laws. Whenever such restrictions shall terminate
as to any Restricted Securities, the same shall no longer be deemed to be
Restricted Securities and the holder thereof shall be entitled to receive
from the Company, without expense (other than transfer taxes, if any), new
securities of like tenor not bearing the applicable legend set forth on such
securities.
Section 4. DELIVERY OF STOCK CERTIFICATES ON EXERCISE.
Section 4.1. DELIVERY. Subject to the complete terms and conditions
of this Agreement, including without limitation the limitations set forth in
Section 3 hereof, as soon as practicable after the exercise of this Warrant
in full or in part, and in any event within ten (10) days thereafter, the
Company at its expense (including the payment by it of any applicable issue
taxes) will cause to be issued in the name of and delivered to the Holder
hereof, or as such Holder (upon payment by such Holder of any applicable
transfer taxes) may direct, a certificate or certificates for the number of
fully paid and non-assessable shares of Common Stock to which such Holder
shall be entitled on such exercise, together with any other stock or other
securities and property (including cash, where applicable) to which such
Holder is entitled upon such exercise.
Section 4.2. FRACTIONAL SHARES. This Warrant may not be exercised as
to fractional shares of the Common Stock. In the event that the exercise of
this Warrant, in full or in part, results in the issuance of any fractional
share of Common Stock, then in such event the Holder of this Warrant shall be
entitled to cash equal to the fair market value of such fractional share as
determined in good faith and on a reasonable basis by the Company's Board of
Directors.
Section 5. ADJUSTMENT FOR DIVIDENDS, DISTRIBUTIONS AND RECLASSIFICATIONS.
In case at any time or from time to time, the holders of Common Stock
shall have received, or (on or after the record date fixed for the
determination of shareholders eligible to receive) shall have become entitled
to receive, without payment therefor:
(a) other or additional stock or other securities or property
(other than cash) by way of dividend; or
<PAGE>
(b) other or additional (or less) stock or other securities or
property (including cash) by way of spin-off, split-up,
reclassification, recapitalization, combination of shares or similar
corporate restructuring;
OTHER THAN additional shares of Common Stock issued as a stock dividend or in
a stock-split (adjustments in respect of which are provided for in Section 7
hereof), then and in each such case the Holder of this Warrant, on the
exercise hereof as provided in Section 2 hereof, shall be entitled to receive
the amount of stock and other securities and property (including cash in the
case referred to in subsection (b) of this Section 5) which such Holder would
have received prior to or would have held on the date of such exercise if on
the date hereof he had been the holder of record of the number of shares of
Common Stock called for on the face of this Warrant and had thereafter,
during the period from the date hereof to and including the date of such
exercise, retained such shares and all such other or additional stock and
other securities and property (including cash in the case referred to in
subsection (b) of this Section 5) receivable by such Holder as aforesaid
during such period, giving effect to all further adjustments called for
during such period by Sections 6 and 7 hereof.
Section 6. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
Section 6.1. CERTAIN ADJUSTMENTS. In case at any time or from time to
time, the Company shall (i) effect a capital reorganization, reclassification
or recapitalization, (ii) consolidate with or merge into any other person, or
(iii) transfer all or substantially all of its properties or assets to any
other person under any plan or arrangement contemplating the dissolution of
the Company, then in each such case, the Holder of this Warrant, on the
exercise hereof as provided in Section 2 hereof at any time after the
consummation of such reorganization, recapitalization, consolidation or
merger or the effective date of such dissolution, as the case may be, shall
receive, in lieu of the Common Stock (or Other Stock) issuable on such
exercise prior to such consummation or effective date, the stock and other
securities and property (including cash) to which such Holder would have been
entitled upon such consummation or in connection with such dissolution, as
the case may be, if such Holder had so exercised this Warrant immediately
prior thereto, all subject to further adjustment thereafter as provided in
Sections 5 and 7 hereof.
Section 6.2. APPOINTMENT OF TRUSTEE FOR WARRANT HOLDERS UPON
DISSOLUTION. In the event of any dissolution of the Company following the
transfer of all or substantially all of its properties or assets, the
Company, prior to such dissolution, shall, at its expense, deliver or cause
to be delivered the stock and other securities and property (including cash,
where applicable) receivable by the Holders of the Warrant after the
effective date of such dissolution pursuant to this Section 6 to a bank or
trust company having its principal office in Boston, Massachusetts, as
trustee for the Holder or Holders of the Warrant.
Section 6.3. CONTINUATION OF TERMS. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any
transfer) referred to in this Section 6 (any such event, a "Business
Combination"), this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities
and property receivable on the exercise of this Warrant after the
consummation of such Business
<PAGE>
Combination, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether
or not such person shall have expressly assumed the terms of this Warrant as
provided in Section 8 hereof.
Section 7. STOCK SPLITS, STOCK DIVIDENDS, REDUCTION IN WARRANT NUMBER;
PREEMPTIVE RIGHTS.
Section 7.1 STOCK EVENTS. If at any time there shall occur any stock
split, stock dividend, reverse stock split or other subdivision of the
Company's Common Stock ("STOCK EVENT"), then the number of shares of Common
Stock to be received by the Holder of this Warrant shall be appropriately
adjusted such that the proportion of the number of shares issuable hereunder
prior to such Stock Event to the total number of shares of the Company
outstanding (on a fully diluted basis, as such term is defined in Section
11.11) prior to such Stock Event is equal to the proportion of the number of
shares issuable hereunder after such Stock Event to the total number of
shares of the Company outstanding (on a fully diluted basis) after such Stock
Event. No adjustment to the Exercise Price shall be made in connection with
any adjustment of the number of shares of Common Stock receivable upon
exercise of this Warrant, except that the Exercise Price shall be
proportionately decreased or increased upon the occurrence of any stock split
or other subdivision of the Common Stock.
Section 7.2 OTHER ISSUANCES OF COMMON STOCK. Subject to Section 7.3
and unless the Holder of this Warrant shall otherwise agree, if at any time
there shall be any increase in the number of shares of Common Stock
outstanding or which the Company is obligated to issue, or covered by any
option, warrant or convertible security which is outstanding or which the
Company is obligated to issue, then the number of shares of Common Stock to
be received by the holder of this Warrant shall be adjusted to that number
determined by multiplying the number of shares of Common Stock purchasable
hereunder prior thereto by a fraction (i) the numerator of which shall be the
number of shares of Common Stock outstanding (on a fully diluted basis)
immediately after such increase, and (ii) the denominator of which shall be
the number of shares of Common Stock outstanding (on a fully diluted basis)
immediately prior to such increase. Thereupon, the Exercise Price shall be
correspondingly reduced so that the aggregate Exercise Price for all shares
of Common Stock covered hereby shall remain unchanged.
Section 8. CERTAIN OBLIGATIONS OF THE COMPANY. The Company will from time
to time, in accordance with the laws of The Commonwealth of Massachusetts,
take action to increase the authorized amount of its Common Stock if at any
time the number of shares of Common Stock authorized but remaining unissued
and unreserved for other purposes shall be insufficient to permit the
exercise of this Warrant.
The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock or out of shares of
its treasury stock, solely for the purpose of issue upon exercise of the
purchase rights evidenced by this Warrant, a number of shares of Common Stock
equal to the Warrant Number in effect from time to time.
<PAGE>
The Company will not, by amendment of its Articles of Organization,
including without limitation, amendment of the par value of its Common Stock,
or through reorganization, consolidation, merger, dissolution, issuance of
capital stock or sale of treasury stock (otherwise than upon exercise of this
Warrant) or sale of assets, or by any other voluntary act or deed, avoid or
seek to avoid the material performance or observance of any of the covenants,
stipulations or conditions in this Warrant to be observed or performed by the
Company. The Company will at all times in good faith assist, insofar as it
is able, in the carrying out of all of the provisions of this Warrant in a
reasonable manner and in the taking of all other action which may be
necessary in order to protect the rights of the holder of this Warrant
against dilution in the manner required by the provisions of this Warrant.
The Company will maintain an office where presentations and demands to
or upon the Company in respect of this Warrant may be made. The Company will
give notice in writing to the registered holder of this Warrant, at the
address of the registered holder of this Warrant appearing on the books of
the Company, of each change in the location of such office.
Section 9. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case of any
event that may require any adjustment or readjustment in the shares of Common
Stock issuable on the exercise of this Warrant, the Company at its expense
will promptly prepare a certificate setting forth such adjustment or
readjustment, or stating the reasons why no adjustment or readjustment is
being made, and showing, in detail, the facts upon which any such adjustment
or readjustment is based, including a statement of (i) the number of shares
of the Company's Common Stock then outstanding on a fully diluted basis, and
(ii) the number of shares of Common Stock to be received upon exercise of
this Warrant, in effect immediately prior to such adjustment or readjustment
and as adjusted and readjusted (if required by Section 7) on account thereof.
The Company will forthwith mail a copy of each such certificate to each
Holder of a Warrant, and will, on the written request at any time of any
Holder of a Warrant, furnish to such Holder a like certificate setting forth
the calculations used to determine such adjustment or readjustment. At its
option, the Holder of a Warrant may confirm the adjustment noted on the
certificate by causing such adjustment to be computed by an independent
certified public accountant at the expense of the Company.
Section 10. NOTICES OF RECORD DATE. In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities or property, or to receive
any other right; or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer
of all or substantially all the assets of the Company to or any
consolidation or merger of the Company with or into any other Person; or
<PAGE>
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such event, the Company will mail or cause to be mailed to
the Holder of this Warrant a notice specifying (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right, and (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation
or winding-up is to take place, and the time, if any is to be fixed, as of
which the holders of record of Common Stock shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable on
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up. Such notice
shall be mailed at least 30 days prior to the date specified in such notice
on which any such action is to be taken.
Section 11. DEFINITIONS. As used herein the following terms, unless the
context otherwise requires, have the following respective meanings:
Section 11.1. The term BANK AFFILIATE means any Person which is a bank
holding company or a subsidiary of a bank holding company as defined in the
Bank Holding Company Act of 1956, as amended, or other applicable banking
laws of the United States and the rules and regulations promulgated
thereunder.
Section 11.2. The term COMPANY shall include Nuclear Metals, Inc., a
Massachusetts corporation, and any corporation which shall succeed to or
assume the obligations of the Company hereunder.
Section 11.3. The term COMMON STOCK includes (i) the Company's Common
Stock, having $.10 par value, (ii) any other capital stock of any class or
classes (however designated) of the Company, the holders of which shall have
the right, without limitation as to amount, either to all or to a share of
the balance of current dividends and liquidating dividends after the payment
of dividends and distributions on any shares entitled to preference, and
(iii) any other securities into which or for which any of the securities
described in clauses (i) or (ii) above have been converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of
assets or otherwise.
Section 11.4. The term EXPIRATION DATE shall mean September 26, 2005.
Section 11.5. The term INITIAL EXERCISE PRICE shall mean $11.89.
Section 11.6. The term INITIAL WARRANT NUMBER shall mean 25,000.
Section 11.7. The term OTHER STOCK shall mean stock of the Company
other than the Company's Common Stock.
<PAGE>
Section 11.8. The term OUTSTANDING WARRANT shall mean the Initial
Warrant Number as adjusted herein minus the number of Warrants exercised
pursuant to Section 2.1 hereof.
Section 11.9. The term PERSON shall mean an individual, partnership,
corporation, association, trust, joint venture, unincorporated organization
or any government, governmental department or agency or political subdivision
thereof.
Section 11.10. The term WARRANT EXERCISE PERIOD shall mean the period
beginning on the date hereof and ending on the Expiration Date.
Section 11.11. The term "FULLY DILUTED" when used in connection with the
Common Stock of the Company shall mean, as of any given date, the shares of
Common Stock actually issued and outstanding or which the Company is
obligated to issue on such date together with all shares of such Common Stock
that would be issued on such date assuming conversion or exercise of all
warrants, options or other rights or securities (including shares of the
Company's Preferred Stock) which provide for the acquisition of shares of
Common Stock and which are then outstanding or which the Company is obligated
to issue.
Section 12. WARRANT AGENT. The Company may, by written notice to the holder
of this Warrant, appoint an agent having an office in Boston, Massachusetts
for the purpose of issuing Common Stock on the exercise of this Warrant
pursuant to Section 2 hereof, and exchanging or replacing this Warrant
pursuant to the Agreement, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.
Section 13. REMEDIES. The Company stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any
agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.
Section 14. NOTICES. All notices and other communications from the Company
to the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, or sent by telecopier, facsimile machine or
telex to such address as may have been furnished to the Company in writing by
such Holder or, until any such Holder furnishes to the Company an address,
then to, and at the address of, the last Holder of this Warrant who has so
furnished an address to the Company.
Section 15. TRANSFER. Subject to the provisions of this Agreement and the
Warrant Agreement, including without limitation the provisions of Section 3
hereof, this Warrant and all rights hereunder are transferable, in whole or
in part, at the office or agency of the Company by the registered Holder
thereof in person or by a duly authorized attorney, upon surrender of this
Warrant together with an assignment hereof properly endorsed. Until transfer
hereof on the registration books of the Company, the Company may treat the
registered Holder hereof as the owner hereof for all purposes. Any
transferee of this
<PAGE>
Warrant and any rights hereunder, by acceptance thereof, agrees to assume all
of the obligations of a Holder thereunder and to be bound by all of the terms
and provisions of the Agreement.
Section 16. MISCELLANEOUS. In case any provision of this Warrant shall be
invalid, illegal or unenforceable, or partially invalid, illegal or
unenforceable, the provision shall be enforced to the extent, if any, that it
may legally be enforced and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by a statement in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Warrant shall be governed by and construed in accordance with the domestic
substantive laws (and not the conflict of law rules) of The Commonwealth of
Massachusetts. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. This
Warrant shall take effect as an instrument under seal.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer and its corporate seal to be impressed hereon
and attested by its Secretary.
Dated: September 26, 1995 NUCLEAR METALS, INC.
(Corporate Seal) By. /S/ JAMES M. SPIEZIO
-----------------------
Name: James M. Spiezio
Title: V. P. Finance
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of
Common Stock Purchase Warrant)
TO: NUCLEAR METALS, INC.
The undersigned, the holder of the within Common Stock Purchase Warrant,
hereby irrevocably elects to exercise this Common Stock Purchase Warrant for,
and to purchase thereunder * shares of Common Stock of Nuclear
Metals, Inc. (the "Company") and herewith makes payment of $__________
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to _________________, whose address is
______________________. The undersigned agrees that this election is subject
to the complete terms and conditions of the Warrant Agreement dated
_________, 1995, and the undersigned agrees to deliver to the Company such
additional documentation as may be requested by the Company in accordance
with the Warrant Agreement.
Dated: __________________________________________
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrant)
__________________________________________
(Address)
_________________
*Insert here the number of shares (all or part of the number of shares
called for in the Common Stock Purchase Warrant) as to which the Common Stock
Purchase Warrant is being exercised without making any adjustment for any
other stock or other securities or property or cash which, pursuant to the
adjustment provisions of the Common Stock Purchase Warrant, may be
deliverable on exercise, it being understood that the exercise of the Common
Stock Purchase Warrant with respect to the number of shares set forth herein
is deemed also to be the exercise of the Common Stock Purchase Warrant with
respect to such other stock, securities, cash or property.
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of
Common Stock Purchase Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto ________ of _________ the right represented by the within Common Stock
Purchase Warrant to purchase _______ shares of Common Stock of Nuclear
Metals, Inc. to which the within Common Stock Purchase Warrant relates, and
appoints ____________ as Attorney to transfer such right on the books of
Nuclear Metals, Inc. with full power of substitution in the premises.
Dated: __________________________________________
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrant)
__________________________________________
(Address)
Signed in the presence of:
_____________________________
<PAGE>
EXHIBIT 10(e)
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT is made as of June 30, 1995
among 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"). Unless
otherwise defined herein, all capitalized terms used herein shall have the
meaning ascribed to them in the Credit Agreement, as defined below.
WHEREAS, the Borrowers and the Bank entered into a Credit Agreement
("Credit Agreement") dated as of March 31, 1995 pursuant to which the Bank
established a credit facility in favor of the Borrowers in the principal
amount of $4,650,000 comprised of (a) a revolving line of credit of
$2,250,000, and (b) a term credit of $2,400,000;
WHEREAS, the Borrowers have requested the Bank to, among other things,
increase the revolving line of credit by $1,000,000;
NOW, THEREFORE, the parties agree as follows:
1. Section 1.01 of the Credit Agreement is amended by (a) replacing
"$4,650,000" with "$5,650,000," and (b) replacing "$2,250,000" with
"$3,250,000".
2. Section 1.02(a) of the Credit Agreement is amended by replacing
"$2,250,000" with "$3,250,000".
3. Section 1.02(b) of the Credit Agreement is amended by replacing the
text thereof with the following:
<PAGE>
"The Borrowing Base shall consist of (i) the sum of 80% of Eligible
Accounts plus the Overadvance Amount, less (ii) 100% of the maximum
outstanding liability under any letter of credit issued by the 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%."
4. Section 1.02(b) of the Credit Agreement is further amended by
adding after the last paragraph thereof the following paragraph:
"'Overadvance Amount' means (a) for the period June 30, 1995 to
December 31, 1995, $1,000,000, and (b) at any time after December
31, 1995, $0."
5. Section 1.05 of the Credit Agreement is amended by replacing
"$1,250,000" with "$2,250,000."
6. Exhibit 1.02(b)(ii) of the Credit Agreement is amended by replacing
it with Exhibit A attached hereto.
7. The Borrowers (a) represent and warrant that (i) all
representations and warranties set forth in the Credit Agreement and Joint
Security Agreement ("Joint Security Agreement") between the Borrowers and the
Bank dated as of March 31, 1995 are true and accurate as of the date hereof
and (ii) no Event of Default exists, (b) agree that the term "Credit
Agreement," as defined in the Security Agreement ("Security Agreement") is
redefined to mean the Credit Agreement dated as of March 31, 1995 between the
Borrowers and the Bank, as amended, restated, modified or/or supplemented
from time to time, and (c) acknowledge and agree that the security interest
granted to the Bank pursuant to the Security Agreement secures any and all
obligations of either Borrower to the Bank, now existing or hereafter
arising, including without limitation, the obligations of the Borrowers to
the Bank in
<PAGE>
respect of the Revolving Credit, as increased hereby and the Revolving Credit
Note, as amended in connection herewith.
8. All terms and conditions of the Credit Agreement shall remain in
full force and effect and are hereby ratified and confirmed and the execution
and delivery and effectiveness of this First Amendment shall not operate as a
waiver of any right, power or remedy of the Bank under the Credit Agreement
or any agreement or instrument related to or executed in connection therewith
(including the Guaranty Agreement dated as of April 13, 1995 executed by CMI
in favor of the Bank), nor constitute a waiver of any provision of the Credit
Agreement or any such agreement or instrument.
9. This First Amendment shall be effective only upon the Bank's
receipt of (a) a duly executed amendment to the Revolving Credit Note in form
and substance satisfactory to the Bank, and (b) a legal opinion from counsel
to the Borrowers in form and substance satisfactory to the Bank.
10. This First Amendment may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument and
any other parties hereto may execute this First Amendment by signing any such
counterpart. This First Amendment shall be governed and construed in
accordance with the laws of The Commonwealth of Massachusetts.
<PAGE>
IN WITNESS WHEREOF, the parties have signed this First Amendment 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: Vice President Finance
STATE STREET BANK AND TRUST
COMPANY
By: /S/ WILLIAM R. DEWEY IV
------------------------------
Name: William R. Dewey IV
Title: Vice President
<PAGE>
EXHIBIT 10(g)
AMENDMENT TO REVOLVING CREDIT NOTE
THIS AMENDMENT dated as of June 30, 1995 by and among NUCLEAR
METALS, INC., a Massachusetts corporation, CAROLINA METALS, INC., a Delaware
corporation (collectively, "Makers"), and STATE STREET BANK AND TRUST
COMPANY, an FDIC insured Massachusetts chartered trust company ("Payee"),
amends that certain Revolving Credit Note dated March 31, 1995 made by the
Makers and payable to the order of Payee in the original amount of $2,250,000
("Note").
Makers and payee wish to amend certain provisions of the Note and agree
as follows:
1. In each place it appears in the Note, "$2,250,000" is replaced with
"$3,250,000".
2. In the first paragraph of the Note, "Two Million Two Hundred and
Fifty Thousand Dollars" is replaced with "Three Million Two Hundred and Fifty
Thousand Dollars".
3. Payee agrees to mark the original of the Note to refer to this
Amendment and to affix a copy of this Amendment to the original Note.
IN WITNESS WHEREOF, Makers and Payee have executed this Amendment, under
seal, as of the date first set forth above.
NUCLEAR METALS, INC.
By: /s/ James M. Spiezio
----------------------------
Name: James M. Spiezio
Title: Vice President Finance
<PAGE>
CAROLINA METALS, INC.
By: /s/ James M. Spiezio
----------------------------
Name: James M. Spiezio
Title: Vice President Finance
STATE STREET BANK AND TRUST
COMPANY
By: /s/ William R. Dewey IV
----------------------------
Name: William R. Dewey IV
Title: Vice President
<PAGE>
EXHIBIT 10(i)
LINE OF CREDIT DEMAND NOTE
$2,000,000 September 26, 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, on demand, the principal sum of TWO MILLION
DOLLARS ($2,000,000) or such lesser sum as may from time to time be
outstanding under the terms of that certain letter agreement between the
Borrowers and Bank of even date herewith, as amended, modified, supplemented
and/or restated from time to time (the "Letter Agreement"). Without limiting
the demand nature hereof, this Note is subject to the mandatory repayment
provisions set forth in the Letter Agreement.
The Borrowers promise to pay interest on the unpaid principal balance
hereof at the rates and at the times provided in the Letter Agreement.
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:
By: /S/ JAMES M. SPIEZIO
-------------------------------
/s/ Frank S. Hamblett Name: James M. Spiezio
----------------------- Title: V. P. Finance
CAROLINA METALS, INC.
WITNESS:
By: /S/ JAMES M. SPIEZIO
-------------------------------
/s/ Frank S. Hamblett Name: James M. Spiezio
----------------------- Title: President
<PAGE>
EXHIBIT 10(j)
NUCLEAR METALS, INC.
September 26, 1995
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02101
Attn:
Re: WARRANT AGREEMENT
Gentlemen:
The undersigned, Nuclear Metals, Inc., a Massachusetts corporation (the
"Company"), hereby agrees with you as follows:
Section 1. AUTHORIZATION OF ISSUE OF WARRANT. Pursuant to that
certain letter agreement of even date herewith among the Company, Carolina
Metals, Inc., a wholly-owned subsidiary of the Company and you (the "LETTER
AGREEMENT"), the Company will authorize the issue of a Warrant ("WARRANT")
evidencing the right to purchase, at any time on or before September 26,
2005, 25,000 shares of the Common Stock, having $.10 par value, of the
Company (the "COMMON STOCK"), constituting in the aggregate .010177023% of
the shares of the Common Stock on a fully diluted basis, at a purchase price
of $11.89 per share (as such figure may be adjusted pursuant to the Warrant,
the "EXERCISE PRICE"), with such number of shares and purchase price being
subject to adjustment as provided in the Warrant, and to be substantially in
the form of EXHIBIT A hereto. Whenever used in this Agreement and in the
Warrant, the term "fully diluted" when used in connection with the Common
Stock of the Company shall mean, as of any given date, the shares of Common
Stock actually issued and outstanding or which the Company is obligated to
issue on such date together with all shares of such Common Stock that would
be issued on such date assuming conversion or exercise of all warrants,
options or other rights or securities (including, if applicable, shares of
the Company's Preferred Stock)which provide for the acquisition of shares of
Common Stock and which are outstanding or which the Company is obligated to
issue.
Section 2. PURCHASE AND SALE OF WARRANT. Subject to the terms and
conditions herein set forth, the Company hereby agrees to sell to you and you
agree to purchase from the Company the Warrant for $10.00 in hand paid by you
to the Company and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by
<PAGE>
the Company. On the date hereof, the Company will deliver to you the
Warrant, registered in your name.
Section 3. REPRESENTATIONS AND COVENANTS.
Section 3.1 REPRESENTATION OF THE COMPANY. The Company represents that:
(a) The execution, delivery and performance of this Agreement and
the Warrant have been duly authorized by the Company's Board of
Directors and each of this Agreement and the Warrant constitutes the
legal, valid and binding obligation of the Company enforceable against
the Company in accordance with its terms. Neither the execution nor
delivery of this Agreement and the Warrant, nor fulfillment of nor
compliance with the terms and provisions of this Agreement and the
Warrant, nor the issuance of shares of Common Stock upon exercise of the
Warrant, will violate the terms of the charter or by-laws of the Company
or, to the best of the Company's knowledge, any agreement (including any
agreement with stockholders), instrument, judgment, decree or statute to
which the Company is subject.
(b) The authorized capital stock of the Company consists of Six
Million (6,000,000) shares of the Company's Common Stock, $.10 par
value, of which Two Million Three Hundred Eighty-Nine Thousand Fourteen
(2,389,014) shares are issued and outstanding. As of the date hereof
there are 2,456,514 shares of Common Stock on a fully diluted basis.
(c) Other than with respect to 42,500 shares of Common Stock
issuable upon the exercise of currently outstanding stock options, the
Company does not have outstanding any rights (either pre-emptive or
other) or options to subscribe for or purchase from the Company, or any
warrants or other agreements providing for or requiring the issuance by
the Company of, any capital stock or any securities convertible into or
exchangeable for its capital stock.
(d) Sufficient shares of authorized but unissued Common Stock of
the Company have been reserved by appropriate corporate action in
connection with the prospective exercise of the Warrant, or the Company
has made other binding appropriate arrangements under which sufficient
shares are and will be available for delivery upon exercise of the
Warrant, and the issuance of either the Warrant or the shares of Common
Stock upon exercise of the Warrant will not require any further
corporate action by the stockholders or directors of the Company, will
not be subject to pre-emptive rights (unless the exercise of the same
has been irrevocably waived) in any present or future stockholders of
the Company and will not conflict with any provision of any agreement to
which the Company is a party or by which it is bound, and such Common
Stock, when issued upon exercise of the Warrant in accordance with its
terms, will be duly authorized, fully paid and non-assessable.
<PAGE>
Section 3.2 YOUR REPRESENTATION. You represent and in making the
sale of the Warrant contemplated hereby to you it is specifically understood
and agreed that you are acquiring such Warrant and the shares acquired upon
exercise thereof for your own account for the purpose of investment and not
with a view to or for sale in connection with any distribution thereof. You
further represent and it is specifically understood and agreed that you are
acquiring such Warrant and the shares acquired upon exercise thereof for
investment for your own account with the intention of holding such Warrant or
securities for investment and without the intent of participating directly or
indirectly in a distribution thereof. You further represent that you are an
"accredited investor" as defined in Rule 501(a) of Regulation D under the
Securities Act, that you are able to bear the economic risk of the investment
represented by the Warrant and the Warrant Stock and have had the opportunity
to meet with and ask questions of representatives of the Company.
Section 4. RESTRICTIONS ON TRANSFER.
Section 4.1 APPLICABILITY. The provisions of this Section 4.1 shall
apply to the transfer of any Warrants issued to any Holder thereof and the
shares of Common Stock purchasable upon exercise of the Warrants, subject to
adjustments from time to time pursuant to the provisions contained in the
Warrant (such securities, together with any shares of stock or warrants or
rights issued as, or resulting from the issuance of, a dividend or other
distribution upon such securities or any other shares of stock or warrants or
rights substituted therefor being herein in the aggregate called "RESTRICTED
SECURITIES"). Each such transfer of a Restricted Security is herein called a
"RESTRICTED ACTION". The holder of any Restricted Security, by its
acceptance thereof, agrees that it will not take any Restricted Action for so
long as the restrictions imposed by this Section 4 are in effect. The
restrictions imposed by this Section 4 upon the transferability of Restricted
Securities (i) shall cease and terminate as to any particular Restricted
Securities when such securities shall have been effectively registered under
the Securities Act and all applicable state securities laws and disposed of
in accordance with the registration statement covering such Restricted
Securities, and (ii) shall cease and terminate as to any particular
Restricted Securities or with respect to any particular Restricted Action
when, in the opinion of counsel for the holder thereof, which counsel shall
be Messrs. Goodwin, Procter & Hoar, or such other counsel as shall be
reasonably satisfactory to the Company, such opinion to be concurred in by
counsel to the Company (such concurrence not to be unreasonably withheld),
such restrictions are no longer required with respect to such Restricted
Securities or such Restricted Action, as the case may be, in order to insure
compliance with the Securities Act or under any applicable state securities
laws. Whenever such restrictions shall terminate as to any Restricted
Securities, the same shall no longer be deemed to be Restricted Securities,
and the holder thereof shall be entitled to receive from the Company, without
expense (other than transfer taxes, if any), new securities of like tenor not
bearing the applicable legend set forth in Section 4.2 hereof.
Section 4.2 RESTRICTIVE LEGENDS. Each Warrant, while it is a
Restricted Security, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THIS WARRANT AND THE SECURITIES THAT MAY BE ACQUIRED UPON THE EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED
<PAGE>
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "FEDERAL ACT") OR
UNDER THE PROVISIONS OF ANY APPLICABLE STATE SECURITIES LAWS.
NEITHER THIS WARRANT NOR THE SECURITIES THAT MAY BE ACQUIRED UPON
THE EXERCISE OF THIS WARRANT MAY BE SOLD, PLEDGED, TRANSFERRED,
ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER PROVISIONS OF THE
FEDERAL ACT AND ALL APPLICABLE STATE SECURITIES LAWS; AND IN THE
CASE OF ANY EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSACTION DOES
NOT REQUIRE REGISTRATION OF THE WARRANT OR THE OTHER SECURITIES.
NEITHER THIS WARRANT NOR THE SECURITIES THAT MAY BE ACQUIRED UPON
THE EXERCISE OF THIS WARRANT MAY BE SOLD, PLEDGED, TRANSFERRED,
ASSIGNED OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY LISTED IN
SCHEDULE A TO THIS WARRANT.
Each certificate for Restricted Securities (unless at the time of
issuance such Restricted Securities are registered under the Securities Act)
other than a Warrant, and each certificate issued upon the transfer or
exchange of any such certificate for Restricted Securities (except as
otherwise permitted by this Section 4) shall be stamped or otherwise
imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"FEDERAL ACT"), OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE
SECURITIES LAWS. NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN
MAY BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER PROVISIONS OF THE FEDERAL ACT AND ALL APPLICABLE STATE
SECURITIES LAWS; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF
THESE SECURITIES.
Section 4.3 NOTICE OF PROPOSED TRANSFER; OPINION OF COUNSEL. Each
holder of any Restricted Securities agrees and acknowledges that he will not
take any Restricted Action except pursuant to an effective registration
statement under the Securities Act and under all applicable state securities
laws, unless the Holder shall have furnished the Company with an opinion of
counsel, which counsel shall be Messrs. Goodwin, Procter & Hoar, or such
other counsel as shall be reasonably satisfactory to the Company, and which
opinion shall be reasonably satisfactory to the Company, to the effect that
no such registration is required because of the availability of an exemption
from registration under the Securities Act and under all applicable state
securities laws. It shall be an additional condition to the transfer of the
Warrant that any transferee hereof deliver to the Company its written
agreement to accept and be bound by all of the terms and conditions of the
Warrant and the Agreement.
<PAGE>
Section 5. REGISTRATION RIGHTS.
Section 5.1 RIGHTS TO PIGGYBACK. Subject to Section 5.2, if the
Company at any time and from time to time shall determine to register any of
its securities under the Securities Act for itself or for any other person
(other than a registration on a form inappropriate for an underwritten public
offering or relating solely to securities to be issued in a merger,
acquisition of the stock or assets of another entity or in a similar
transaction), the Company will, at its expense:
(i) furnish prompt written notice thereof (which shall include a
list of the jurisdictions, if any, in which the Company intends to
register or qualify such securities under the applicable blue sky
or other state securities laws) to all Holders, and
(ii) include among the securities which it then registers or
qualifies all Registrable Securities specified in a written request
or requests, made within 30 days after receipt of such written
notice from the Company, by any Holder (a "Piggyback
Registration"); PROVIDED, HOWEVER, if the managing underwriters of
such registration shall give written advice to the Company of an
Underwriters' Maximum Number, then the Company may reduce the
number of Registrable Securities to be registered (any such
reduction to be allocated among all Persons other than the Company
holding securities which are to be included in such registration in
proportion, as nearly as practicable, to the number of shares of
such securities requested by such Persons other than the Company to
be included in such registration).
Section 5.2 LIMITATION OF REGISTRATION. If and to the extent that
any Holder or Holders shall have, at the time of delivery of the written
request referred to in Section 5.1(ii), no present intention of selling or
distribution, the Company shall be obligated to effect such registration,
qualification or compliance with respect to such Holder's or Holders'
Registrable Securities only if and to the extent, in each case, that such
registration, qualification and compliance are at the time permitted by the
applicable statutes or rules and regulations thereunder or the practices of
the governmental authority concerned.
Section 5.3 REGISTRATION PROCEDURES. In the case of each
registration, qualification or compliance pursuant to this Section 5, the
Company will keep the Holders advised in writing as to the initiation of
proceedings for such registration, qualification and compliance and as to the
completion thereof, and will advise any such Holder, upon request, of the
progress of such proceedings. At the expense of the Company, the Company will
(i) keep such registration, qualification and compliance current and
effective for a reasonable period of time by such action as may be necessary
or appropriate, including, without limitation, the filing of post-effective
amendments and supplements to any registration statement or prospectus, for
such period as is necessary to permit sale or distribution of Registrable
Securities not theretofore sold or distributed, and (ii) take all necessary
action under any applicable blue sky or other state securities laws to permit
such exercise, sale or distribution, all as requested by such Holders.
<PAGE>
Section 5.4 INDEMNIFICATION. The Company will furnish each Holder
such number of registration statements, prospectuses, supplements,
amendments, offering circulars and other documents incident to any
registration, qualification or compliance referred to in this Section 5, at
the expense of the Company, as such Holder from time to time may reasonably
request. The Company will indemnify, defend and hold harmless each such
Holder and each underwriter of Registrable Securities held by or issuable to
such Holder, and each Person, if any, who controls any thereof within the
meaning of the Securities Act, to the fullest extent that such agreement is
enforceable under applicable law against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained
therein (or in any related registration statement, notification or the like)
or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to the Company and relating
to action or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse each such
Holder and each such underwriter and each such Person, if any, for any legal
or any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action; PROVIDED,
HOWEVER, that the Company will not be liable in any such case to the extent
that any such claim, loss, damage or liability arises out of or is based on
any untrue statement or omission based upon written information furnished to
the Company by an instrument duly executed by such Holder and stated to be
specifically for use therein. Each Holder, if Registrable Securities held by
or issuable to such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, will indemnify,
defend and hold harmless the Company, each of its directors and officers who
signs such a registration statement, and each Person, if any, who controls
the Company within the meaning of the Securities Act, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out
of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus,
offering circular or other document or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse the Company
and such directors, officers or Persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) was made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder with knowledge that the information set forth in
such instrument was to be used therein.
Section 6. INTENTIONALLY OMITTED.
Section 7. SUBSEQUENT HOLDERS OF SECURITIES. Whether or not any
express assignment has been made in this Agreement, the provisions of this
Agreement that are for your benefit as the Holder of any Warrant or Warrant
Stock are also for the benefit of, and enforceable by, all permitted
subsequent Holders of Registrable Securities, except any Holder of the Warrant
<PAGE>
or Warrant Stock which have been sold pursuant to an effective registration
statement under the Securities Act or pursuant to Rule 144 (or similar
successor rule) under such Act, and except as otherwise expressly provided
herein.
Section 8. DEFINITIONS. For the purposes of this Agreement, the
following terms shall have the following respective meanings:
"AFFILIATE" shall have the meaning given to such term in Rule 405
promulgated under the Securities Act.
"COMMISSION" shall mean the Securities and Exchange Commission or any
other governmental authority at the time administering the Securities Act.
"COMMON STOCK" shall mean and include the Company's presently authorized
Common Stock, having $.10 par value, and any other securities constituting
"Common Stock" under Section 11.3 of the Warrant.
"FULLY DILUTED" See Section 1.
"HOLDER" means you and all Persons to whom any Registrable Securities
are transferred in accordance with the provisions hereof. A Holder shall,
for all purposes of this Agreement, unless the context shall otherwise
require, be deemed to hold, at any particular time, all shares of Warrant
Stock issuable upon exercise of the Warrant held of record by such Holder at
such time.
"LETTER AGREEMENT" See Section 1.
"PERSON" shall mean an individual, partnership, corporation,
association, trust, joint venture, unincorporated organization, and any
government, governmental department or agency or political subdivision
thereof.
"REGISTERED and REGISTRATION" refer to a registration effected by
preparing and filing a registration statement in compliance with the
Securities Act and the declaration or ordering by the Commission of
effectiveness of such registration statement.
"REGISTRABLE SECURITIES" means, at any particular time, all shares of
Warrant Stock issuable upon exercise of the Warrants at such time or issued
and outstanding at such time; provided, however, that the term "Registrable
Securities" shall not include any issued and outstanding shares of Warrant
Stock that (i) were previously included in a registration statement under the
Securities Act and sold in the public offering to which such registration
statement relates or (ii) are freely saleable under Rule 144(k) promulgated
under the Securities Act (or a successor provision) at a time when shares of
Common Stock are listed on a national securities exchange or on the National
Market System.
"RESTRICTED ACTION" See Section 4.1.
<PAGE>
"RESTRICTED SECURITIES" See Section 4.1.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and
any similar or successor Federal statute, and the rules and regulations of
the Commission thereunder, all as the same may be in effect at the time.
"SSB" means State Street Bank and Trust Company.
"UNDERWRITERS MAXIMUM NUMBER" Underwriters Maximum Number shall mean
for any Piggyback Registration that number of securities to which such
registration should, in the opinion of the managing underwriters of such
registration in the light of marketing factors, be limited.
"WARRANT" See Section 1.
"WARRANT STOCK" means the shares of Common Stock purchasable by the
Holders of the Warrants upon the exercise thereof.
Section 9. MISCELLANEOUS.
Section 9.1 The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction of
any provisions hereof.
Section 9.2 Except as otherwise expressly provided in this Agreement,
all notices and other communications made or required to be given pursuant to
this Agreement or the Warrant shall be in writing and shall be delivered by
hand, mailed by United States registered or certified first-class mail,
postage prepaid, or sent by telegraph, telecopier or telex and confirmed by
letter, addressed as follows:
(a) If to the Company, at 2229 Main Street, Concord, MA 01742
(telecopy: 508-371-0214), Attention: President, with copies to Peabody &
Arnold, 50 Rowes Wharf, Boston, Massachusetts 02110 (telecopy: 617-951-2125),
Attention: Thomas A. Wooters, Esq.; and
(b) If to SSB, at SSB's office at 225 Franklin Street, Boston,
Massachusetts 02101 (telecopy: 617-338-4417), Attention: William R. Dewey
IV, with copies to Goodwin, Procter & Hoar, Exchange Place, Boston,
Massachusetts 02109 (telecopy: 617-523-1231), Attn: Jon D. Schneider, P.C.,
or such other address for notice as SSB shall last have furnished in writing
to the person giving the notice;
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (a) if delivered by hand to a responsible
officer of the party to which it is directed, at the time of the receipt
thereof by such officer, (b) if sent by registered or certified first-class
mail, postage prepaid, three business days after the posting thereof, and (c)
if sent by telegraph, telecopier, or telex at the time of the dispatch
thereof, if in normal
<PAGE>
business hours in the country of receipt, or otherwise at the opening of
business on the following business day.
Section 9.3 The laws of The Commonwealth of Massachusetts shall
govern the interpretation, validity and performance of the terms of this
Agreement, regardless of the law that might be applied under applicable
principles of conflicts of laws.
Section 9.4 The invalidity or unenforceability of any provision of
this Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that provision, in
any other jurisdiction.
Section 9.5 Nothing contained in this Agreement shall be deemed to be
a waiver of, or release from, any obligations any party hereto may have
under, or any restrictions on the transfer of Common Stock imposed by any
other agreement.
Section 9.6 The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties hereto and their respective heirs,
successors and assigns.
Section 9.7 A default by any party to this Agreement in such party's
compliance with any of the conditions or covenants hereof or performance of
any of the obligations of such party hereunder shall not constitute a default
by any other party.
Section 9.8 This Agreement may not be amended, modified or
supplemented and no waivers of or consents to departures from the provisions
hereof may be given unless consented to in writing by the Company and the
Holders.
Section 9.9 This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same Agreement.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to
the undersigned, whereupon this letter shall become a binding agreement
between you and the undersigned.
Very truly yours,
NUCLEAR METALS, INC.
By /S/ JAMES M. SPIEZIO
---------------------------
Name: James M. Spiezio
Title: Vice President
The foregoing Agreement is
hereby accepted as of the
<PAGE>
date first above written.
STATE STREET BANK AND
TRUST COMPANY
By /S/ WILLIAM R. DEWEY IV
---------------------------
Name: William R. Dewey IV
Title: Vice President
<PAGE>
EXHIBIT A
Right to Purchase 25,000 Shares of
Common Stock of
NUCLEAR METALS, INC.
THIS WARRANT AND THE SECURITIES THAT MAY BE ACQUIRED UPON THE EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "FEDERAL ACT") OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE
SECURITIES LAWS. NEITHER THIS WARRANT NOR THE SECURITIES THAT MAY BE
ACQUIRED UPON THE EXERCISE OF THIS WARRANT MAY BE SOLD, PLEDGED, TRANSFERRED,
ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER PROVISIONS OF THE FEDERAL ACT AND ALL APPLICABLE
STATE SECURITIES LAWS; AND IN THE CASE OF ANY EXEMPTION, ONLY IF THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
TRANSACTION DOES NOT REQUIRE REGISTRATION OF THE WARRANT OR THE OTHER
SECURITIES. NEITHER THIS WARRANT NOR THE SECURITIES THAT MAY BE ACQUIRED
UPON THE EXERCISE OF THIS WARRANT MAY BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED
OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY LISTED IN SCHEDULE A TO THIS
WARRANT.
Nuclear Metals, Inc.
Common Stock Purchase Warrant
Nuclear Metals, Inc., a Massachusetts corporation (the "COMPANY"),
hereby certifies that, for value received, State Street Bank and Trust
Company ("SSB") or assigns (SSB, or such assigns who may be the registered
holder or holders hereof, are hereinafter referred to as the "HOLDER") is
entitled, subject to the terms set forth below, to purchase from the Company
at any time or from time to time prior to the Expiration Date, that number of
fully paid and non-assessable shares of Common Stock (as defined in Section
11 hereof), as shall be equal to the Initial Warrant Number (as hereinafter
defined) at a purchase price per share equal to the Initial Exercise Price
(as hereinafter defined) SUBJECT, HOWEVER, to adjustment both as to such
number of shares and as to such price as hereinafter set forth (such price
per share as so adjusted from time to time being herein called the "Exercise
Price").
This Warrant is issued pursuant to the Warrant Agreement (the
"AGREEMENT") dated September 26, 1995, between the Company and SSB, a copy of
which is on file at the principal office of the Company. The Holder of this
Warrant shall be entitled to all of the
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benefits of the Agreement as provided therein and by acceptance of this
Warrant the Holder agrees to comply with the terms, conditions and
obligations imposed by the Agreement.
Section 1. DEFINITIONS. Terms defined in the Agreement and not otherwise
defined herein are used herein with the meanings so defined therein. Certain
terms are used in this Warrant as specifically defined in Section 11 hereof.
Section 2. EXERCISE OF WARRANT.
Section 2.1. EXERCISE. Subject to the limitations set forth in
Section 3, this Warrant may be exercised by the Holder hereof at any time
during the Warrant Exercise Period by surrender of this Warrant to the
Company at its principal office, together with (i) the form of subscription
at the end hereof duly executed by such Holder, (ii) such other documents,
statements, subscription agreements or other items as may be reasonably
requested by the Company in furtherance of its requirements pursuant to
Section 3 below, and (iii) payment, by certified or official bank check
payable to the order of the Company or by wire transfer to its account, in
the amount obtained by multiplying the number of shares of Common Stock for
which this Warrant is then being exercised by the Exercise Price then in
effect (such amount, the "EXERCISE PAYMENT"), except that the Holder may, at
its option, elect to pay the Exercise Payment by canceling a portion of this
Warrant that is equal to the number of shares determined by dividing the
Exercise Payment by (i) the Current Market Price as of the date of exercise
or (ii) if the Current Market Price cannot be determined because the Common
Stock is not listed or admitted to unlisted trading on the New York Stock
Exchange, another national securities exchange, or the National Market
System, the Estimated Current Market Price (as hereinafter defined) (such
manner of payment, a "NON-CASH EXERCISE PAYMENT"). The "ESTIMATED CURRENT
MARKET PRICE" means the amount most recently determined by the Company's
Board of Directors in its reasonable discretion to represent the fair market
value per share of the Common Stock (including without limitation a
determination for purpose of granting Common Stock options or issuing Common
Stock under an employee benefit plan of the Company). Upon request of the
Holder, the Company's Board of Directors (or a representative thereof) shall
promptly notify the Holder of the Estimated Current Market Price.
Notwithstanding the foregoing, if the Company's Board of Directors has not
made such a determination within the three-month period prior to an exercise
of the Warrant in which the Holder has elected to make a Non-Cash Exercise
Payment, then (A) the Estimated Current Market Price shall be the amount next
determined by the Company's Board of Directors in its reasonable discretion
to represent the fair market value per share of the Common Stock (including
without limitation a determination for purposes of granting Common Stock
options or issuing Common Stock under an employee benefit plan of the
Company), (B) the Company's Board of Directors shall make such a
determination within 15 days of a request by the Holder that it do so, and
(C) the exercise of this Warrant pursuant to this subsection shall be delayed
until such determination is made.
In the event the Warrant is not exercised in full, the Company, at its
expense, will forthwith issue and deliver to or upon the order of the Holder
hereof a new Warrant or
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Warrants of like tenor and dated September 26, 1995, in the name of the
Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may request, calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock equal (without
giving effect to any adjustment therein) to the number of such shares called
for on the face of this Warrant minus the sum of the number of such shares
(without giving effect to any adjustment therein) for which this Warrant
shall have been exercised (including by way of a Non-Cash Exercise Payment).
Section 2.2. CLASS OF STOCK RECEIVABLE UPON EXERCISE. Any other
provisions hereof to the contrary notwithstanding, no Bank Affiliate shall be
entitled to exercise the right under this Warrant to purchase any share or
shares of Common Stock if, as a result of such purchase, such Bank Affiliate
would own, control or have power to vote a greater quantity of securities of
any kind than the Bank Affiliate shall be permitted to own, control or have
power to vote under any law or under any regulation, rule or other
requirement of any governmental authority at any time applicable to such Bank
Affiliate.
Section 3. RESTRICTIONS ON TRANSFER.
Section 3.1. COMPLIANCE WITH FEDERAL AND STATE SECURITIES LAWS.
Holder hereby acknowledges that neither this Warrant nor any of the
securities that may be acquired upon exercise of this Warrant have been
registered under the Securities Act of 1933, as amended, or under the
securities laws of any state. The Holder acknowledges that, upon exercise of
this Warrant, the securities to be issued upon such exercise may come under
applicable federal and state securities (or other) laws requiring
registration, qualification or approval of governmental authorities before
such securities may be validly issued or delivered upon notice of such
exercise. The Company's sole obligation to any Holder upon exercise hereof
shall be to use its best efforts to obtain exemptions from registration or
qualification for the issuance of such securities under applicable state and
federal securities laws, and the Holder further agrees that the issuance of
such securities shall be deferred until such exemptions shall have been
obtained; and it is further agreed that the Company shall have no other
obligation or liability to the Holder for non-issuance of such securities
except to return the Warrant surrendered and to refund to the Holder any
consideration tendered in respect of the Exercise Price. With respect to any
such securities, this Warrant may not be exercised by, and securities shall
not be issued to, any Holder in any state in which such exercise would be
unlawful. The Holder agrees that the Company may place such legend or
legends on certificates representing securities issued upon exercise of this
Warrant as the Company may reasonably deem necessary to comply with
applicable state and federal securities laws for the issuance of such
securities.
The provisions of this Section 3 shall apply to the transfer of this
Warrant and the shares of Common Stock purchasable upon exercise of this
Warrant, subject to adjustments from time to time pursuant to the provisions
contained in this Warrant (such securities, together with any shares of stock
or warrants or rights issued as, or resulting from the issuance of, a
dividend or other distribution upon such securities or any other shares of
stock
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or warrants or rights substituted therefor being herein in the aggregate
called "RESTRICTED SECURITIES"). Each such transfer of a Restricted Security
is herein called a "RESTRICTED ACTION." The holder of any Restricted
Security, by its acceptance thereof, agrees that it will not take any
Restricted Action for so long as the restrictions imposed by this Section 3
are in effect. The restrictions imposed by this Section 3 upon the
transferability of Restricted Securities (i) shall cease and terminate as to
any particular Restricted Securities when such securities shall have been
effectively registered under the Securities Act and all applicable state
securities laws and disposed of in accordance with the registration statement
covering such Restricted Securities, and (ii) shall cease and terminate as to
any particular Restricted Securities or with respect to any particular
Restricted Action when, in the opinion of counsel for the Holder thereof,
which counsel shall be Messrs. Goodwin, Procter & Hoar, or such other counsel
as shall be reasonably satisfactory to the Company, such opinion to be
concurred in by counsel to the Company (such concurrence not to be
unreasonably withheld), such restrictions are no longer required with respect
to such Restricted Securities or such Restricted Action, as the case may be,
in order to insure compliance with the Securities Act or under any applicable
state securities laws. Whenever such restrictions shall terminate as to any
Restricted Securities, the same shall no longer be deemed to be Restricted
Securities and the holder thereof shall be entitled to receive from the
Company, without expense (other than transfer taxes, if any), new securities
of like tenor not bearing the applicable legend set forth on such securities.
Section 4. DELIVERY OF STOCK CERTIFICATES ON EXERCISE.
Section 4.1. DELIVERY. Subject to the complete terms and conditions
of this Agreement, including without limitation the limitations set forth in
Section 3 hereof, as soon as practicable after the exercise of this Warrant
in full or in part, and in any event within ten (10) days thereafter, the
Company at its expense (including the payment by it of any applicable issue
taxes) will cause to be issued in the name of and delivered to the Holder
hereof, or as such Holder (upon payment by such Holder of any applicable
transfer taxes) may direct, a certificate or certificates for the number of
fully paid and non-assessable shares of Common Stock to which such Holder
shall be entitled on such exercise, together with any other stock or other
securities and property (including cash, where applicable) to which such
Holder is entitled upon such exercise.
Section 4.2. FRACTIONAL SHARES. This Warrant may not be exercised as
to fractional shares of the Common Stock. In the event that the exercise of
this Warrant, in full or in part, results in the issuance of any fractional
share of Common Stock, then in such event the Holder of this Warrant shall be
entitled to cash equal to the fair market value of such fractional share as
determined in good faith and on a reasonable basis by the Company's Board of
Directors.
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Section 5. ADJUSTMENT FOR DIVIDENDS, DISTRIBUTIONS AND RECLASSIFICATIONS.
In case at any time or from time to time, the holders of Common Stock
shall have received, or (on or after the record date fixed for the
determination of shareholders eligible to receive) shall have become entitled
to receive, without payment therefor:
(a) other or additional stock or other securities or property (other
than cash) by way of dividend; or
(b) other or additional (or less) stock or other securities or
property (including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate restructuring;
OTHER THAN additional shares of Common Stock issued as a stock dividend or in
a stock-split (adjustments in respect of which are provided for in Section 7
hereof), then and in each such case the Holder of this Warrant, on the
exercise hereof as provided in Section 2 hereof, shall be entitled to receive
the amount of stock and other securities and property (including cash in the
case referred to in subsection (b) of this Section 5) which such Holder would
have received prior to or would have held on the date of such exercise if on
the date hereof he had been the holder of record of the number of shares of
Common Stock called for on the face of this Warrant and had thereafter,
during the period from the date hereof to and including the date of such
exercise, retained such shares and all such other or additional stock and
other securities and property (including cash in the case referred to in
subsection (b) of this Section 5) receivable by such Holder as aforesaid
during such period, giving effect to all further adjustments called for
during such period by Sections 6 and 7 hereof.
Section 6. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
Section 6.1. CERTAIN ADJUSTMENTS. In case at any time or from time to
time, the Company shall (i) effect a capital reorganization, reclassification
or recapitalization, (ii) consolidate with or merge into any other person, or
(iii) transfer all or substantially all of its properties or assets to any
other person under any plan or arrangement contemplating the dissolution of
the Company, then in each such case, the Holder of this Warrant, on the
exercise hereof as provided in Section 2 hereof at any time after the
consummation of such reorganization, recapitalization, consolidation or
merger or the effective date of such dissolution, as the case may be, shall
receive, in lieu of the Common Stock (or Other Stock) issuable on such
exercise prior to such consummation or effective date, the stock and other
securities and property (including cash) to which such Holder would have been
entitled upon such consummation or in connection with such dissolution, as
the case may be, if such Holder had so exercised this Warrant immediately
prior thereto, all subject to further adjustment thereafter as provided in
Sections 5 and 7 hereof.
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Section 6.2. APPOINTMENT OF TRUSTEE FOR WARRANT HOLDERS UPON
DISSOLUTION. In the event of any dissolution of the Company following the
transfer of all or substantially all of its properties or assets, the
Company, prior to such dissolution, shall, at its expense, deliver or cause
to be delivered the stock and other securities and property (including cash,
where applicable) receivable by the Holders of the Warrant after the
effective date of such dissolution pursuant to this Section 6 to a bank or
trust company having its principal office in Boston, Massachusetts, as
trustee for the Holder or Holders of the Warrant.
Section 6.3. CONTINUATION OF TERMS. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any
transfer) referred to in this Section 6 (any such event, a "Business
Combination"), this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities
and property receivable on the exercise of this Warrant after the
consummation of such Business Combination, and shall be binding upon the
issuer of any such stock or other securities, including, in the case of any
such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 8 hereof.
Section 7. STOCK SPLITS, STOCK DIVIDENDS, REDUCTION IN WARRANT NUMBER;
PREEMPTIVE RIGHTS.
Section 7.1 STOCK EVENTS. If at any time there shall occur any stock
split, stock dividend, reverse stock split or other subdivision of the
Company's Common Stock ("STOCK EVENT"), then the number of shares of Common
Stock to be received by the Holder of this Warrant shall be appropriately
adjusted such that the proportion of the number of shares issuable hereunder
prior to such Stock Event to the total number of shares of the Company
outstanding (on a fully diluted basis, as such term is defined in Section
11.11) prior to such Stock Event is equal to the proportion of the number of
shares issuable hereunder after such Stock Event to the total number of
shares of the Company outstanding (on a fully diluted basis) after such Stock
Event. No adjustment to the Exercise Price shall be made in connection with
any adjustment of the number of shares of Common Stock receivable upon
exercise of this Warrant, except that the Exercise Price shall be
proportionately decreased or increased upon the occurrence of any stock split
or other subdivision of the Common Stock.
Section 7.2 OTHER ISSUANCES OF COMMON STOCK. Subject to Section 7.3
and unless the Holder of this Warrant shall otherwise agree, if at any time
there shall be any increase in the number of shares of Common Stock
outstanding or which the Company is obligated to issue, or covered by any
option, warrant or convertible security which is outstanding or which the
Company is obligated to issue, then the number of shares of Common Stock to
be received by the holder of this Warrant shall be adjusted to that number
determined by multiplying the number of shares of Common Stock purchasable
hereunder prior thereto by a fraction (i) the numerator of which shall be the
number of shares of Common Stock outstanding (on a fully diluted basis)
immediately after such increase, and (ii) the denominator of which shall be
the number of shares of Common Stock outstanding (on a fully diluted basis)
immediately prior
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to such increase. Thereupon, the Exercise Price shall be correspondingly
reduced so that the aggregate Exercise Price for all shares of Common Stock
covered hereby shall remain unchanged.
Section 8. CERTAIN OBLIGATIONS OF THE COMPANY. The Company will from
time to time, in accordance with the laws of The Commonwealth of
Massachusetts, take action to increase the authorized amount of its Common
Stock if at any time the number of shares of Common Stock authorized but
remaining unissued and unreserved for other purposes shall be insufficient to
permit the exercise of this Warrant.
The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock or out of shares of
its treasury stock, solely for the purpose of issue upon exercise of the
purchase rights evidenced by this Warrant, a number of shares of Common Stock
equal to the Warrant Number in effect from time to time.
The Company will not, by amendment of its Articles of Organization,
including without limitation, amendment of the par value of its Common Stock,
or through reorganization, consolidation, merger, dissolution, issuance of
capital stock or sale of treasury stock (otherwise than upon exercise of this
Warrant) or sale of assets, or by any other voluntary act or deed, avoid or
seek to avoid the material performance or observance of any of the covenants,
stipulations or conditions in this Warrant to be observed or performed by the
Company. The Company will at all times in good faith assist, insofar as it
is able, in the carrying out of all of the provisions of this Warrant in a
reasonable manner and in the taking of all other action which may be
necessary in order to protect the rights of the holder of this Warrant
against dilution in the manner required by the provisions of this Warrant.
The Company will maintain an office where presentations and demands to
or upon the Company in respect of this Warrant may be made. The Company will
give notice in writing to the registered holder of this Warrant, at the
address of the registered holder of this Warrant appearing on the books of
the Company, of each change in the location of such office.
Section 9. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case of
any event that may require any adjustment or readjustment in the shares of
Common Stock issuable on the exercise of this Warrant, the Company at its
expense will promptly prepare a certificate setting forth such adjustment or
readjustment, or stating the reasons why no adjustment or readjustment is
being made, and showing, in detail, the facts upon which any such adjustment
or readjustment is based, including a statement of (i) the number of shares
of the Company's Common Stock then outstanding on a fully diluted basis, and
(ii) the number of shares of Common Stock to be received upon exercise of
this Warrant, in effect immediately prior to such adjustment or readjustment
and as adjusted and readjusted (if required by Section 7) on account thereof.
The Company will forthwith mail a copy of each such certificate to each
Holder of a Warrant, and will, on the written request at any time of any
Holder of a Warrant, furnish to such Holder a like certificate setting forth
the
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calculations used to determine such adjustment or readjustment. At its
option, the Holder of a Warrant may confirm the adjustment noted on the
certificate by causing such adjustment to be computed by an independent
certified public accountant at the expense of the Company.
Section 10. NOTICES OF RECORD DATE. In the event of:
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right;
or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of
all or substantially all the assets of the Company to or any consolidation
or merger of the Company with or into any other Person; or
(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company,
then, and in each such event, the Company will mail or cause to be mailed to
the Holder of this Warrant a notice specifying (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right, and (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation
or winding-up is to take place, and the time, if any is to be fixed, as of
which the holders of record of Common Stock shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable on
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up. Such notice
shall be mailed at least 30 days prior to the date specified in such notice
on which any such action is to be taken.
Section 11. DEFINITIONS. As used herein the following terms, unless the
context otherwise requires, have the following respective meanings:
Section 11.1. The term BANK AFFILIATE means any Person which is a bank
holding company or a subsidiary of a bank holding company as defined in the
Bank Holding Company Act of 1956, as amended, or other applicable banking
laws of the United States and the rules and regulations promulgated
thereunder.
Section 11.2. The term COMPANY shall include Nuclear Metals, Inc., a
Massachusetts corporation, and any corporation which shall succeed to or
assume the obligations of the Company hereunder.
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Section 11.3. The term COMMON STOCK includes (i) the Company's Common
Stock, having $.10 par value, (ii) any other capital stock of any class or
classes (however designated) of the Company, the holders of which shall have
the right, without limitation as to amount, either to all or to a share of
the balance of current dividends and liquidating dividends after the payment
of dividends and distributions on any shares entitled to preference, and
(iii) any other securities into which or for which any of the securities
described in clauses (i) or (ii) above have been converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of
assets or otherwise.
Section 11.4. The term EXPIRATION DATE shall mean September 26, 2005.
Section 11.5. The term INITIAL EXERCISE PRICE shall mean $11.89.
Section 11.6. The term INITIAL WARRANT NUMBER shall mean 25,000.
Section 11.7. The term OTHER STOCK shall mean stock of the Company
other than the Company's Common Stock.
Section 11.8. The term OUTSTANDING WARRANT shall mean the Initial
Warrant Number as adjusted herein minus the number of Warrants exercised
pursuant to Section 2.1 hereof.
Section 11.9. The term PERSON shall mean an individual, partnership,
corporation, association, trust, joint venture, unincorporated organization
or any government, governmental department or agency or political subdivision
thereof.
Section 11.10. The term WARRANT EXERCISE PERIOD shall mean the period
beginning on the date hereof and ending on the Expiration Date.
Section 11.11. The term "FULLY DILUTED" when used in connection with
the Common Stock of the Company shall mean, as of any given date, the shares
of Common Stock actually issued and outstanding or which the Company is
obligated to issue on such date together with all shares of such Common Stock
that would be issued on such date assuming conversion or exercise of all
warrants, options or other rights or securities (including shares of the
Company's Preferred Stock) which provide for the acquisition of shares of
Common Stock and which are then outstanding or which the Company is obligated
to issue.
Section 12. WARRANT AGENT. The Company may, by written notice to the
holder of this Warrant, appoint an agent having an office in Boston,
Massachusetts for the purpose of issuing Common Stock on the exercise of this
Warrant pursuant to Section 2 hereof, and exchanging or replacing this
Warrant pursuant to the Agreement, or any of the foregoing, and thereafter
any such issuance, exchange or replacement, as the case may be, shall be made
at such office by such agent.
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Section 13. REMEDIES. The Company stipulates that the remedies at law of
the Holder of this Warrant in the event of any default or threatened default
by the Company in the performance of or compliance with any of the terms of
this Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any
agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.
Section 14. NOTICES. All notices and other communications from the
Company to the Holder of this Warrant shall be mailed by first class
registered or certified mail, postage prepaid, or sent by telecopier,
facsimile machine or telex to such address as may have been furnished to the
Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
Section 15. TRANSFER. Subject to the provisions of this Agreement and the
Warrant Agreement, including without limitation the provisions of Section 3
hereof, this Warrant and all rights hereunder are transferable, in whole or
in part, at the office or agency of the Company by the registered Holder
thereof in person or by a duly authorized attorney, upon surrender of this
Warrant together with an assignment hereof properly endorsed. Until transfer
hereof on the registration books of the Company, the Company may treat the
registered Holder hereof as the owner hereof for all purposes. Any
transferee of this Warrant and any rights hereunder, by acceptance thereof,
agrees to assume all of the obligations of a Holder thereunder and to be
bound by all of the terms and provisions of the Agreement.
Section 16. MISCELLANEOUS. In case any provision of this Warrant shall be
invalid, illegal or unenforceable, or partially invalid, illegal or
unenforceable, the provision shall be enforced to the extent, if any, that it
may legally be enforced and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by a statement in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Warrant shall be governed by and construed in accordance with the domestic
substantive laws (and not the conflict of law rules) of The Commonwealth of
Massachusetts. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. This
Warrant shall take effect as an instrument under seal.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer and its corporate seal to be impressed hereon
and attested by its Secretary.
Dated: September 26, 1995 NUCLEAR METALS, INC.
(Corporate Seal) By:
---------------------------------
Name:
Title:
Attest:
- -----------------------------
Secretary
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FORM OF SUBSCRIPTION
(To be signed only on exercise of
Common Stock Purchase Warrant)
TO: NUCLEAR METALS, INC.
The undersigned, the holder of the within Common Stock Purchase Warrant,
hereby irrevocably elects to exercise this Common Stock Purchase Warrant for,
and to purchase thereunder ____*____ shares of Common Stock of Nuclear Metals,
Inc. (the "Company") and herewith makes payment of $__________ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to _________________, whose address is ______________________. The
undersigned agrees that this election is subject to the complete terms and
conditions of the Warrant Agreement dated _________, 1995, and the undersigned
agrees to deliver to the Company such additional documentation as may be
requested by the Company in accordance with the Warrant Agreement.
Dated: ___________________________________________
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrant)
___________________________________________
(Address)
_________________
*Insert here the number of shares (all or part of the number of shares
called for in the Common Stock Purchase Warrant) as to which the Common Stock
Purchase Warrant is being exercised without making any adjustment for any
other stock or other securities or property or cash which, pursuant to the
adjustment provisions of the Common Stock Purchase Warrant, may be
deliverable on exercise, it being understood that the exercise of the Common
Stock Purchase Warrant with respect to the number of shares set forth herein
is deemed also to be the exercise of the Common Stock Purchase Warrant with
respect to such other stock, securities, cash or property.
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FORM OF ASSIGNMENT
(To be signed only on transfer of
Common Stock Purchase Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto ________ of _________ the right represented by the within Common Stock
Purchase Warrant to purchase _______ shares of Common Stock of Nuclear
Metals, Inc. to which the within Common Stock Purchase Warrant relates, and
appoints ____________ as Attorney to transfer such right on the books of
Nuclear Metals, Inc. with full power of substitution in the premises.
Dated: ___________________________________________
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrant)
___________________________________________
(Address)
Signed in the presence of:
_______________________________
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EXHIBIT 10(k)
September 26, 1995
Nuclear Metals, Inc.
Carolina Metals, Inc.
2229 Main Street
Concord, MA 01742
Re: LINE OF CREDIT
Gentlemen:
Reference is made to that certain (a) Credit Agreement dated as of March
31, 1995 between Nuclear Metals, Inc. ("Nuclear Metals"), Carolina Metals,
Inc. ("Carolina Metals;" together with Nuclear Metals, "Borrowers"), as
amended by First Amendment to Credit Agreement dated as of June 30, 1995
("Credit Agreement"), pursuant to which the Bank established a credit
facility in favor of the Borrowers in the aggregate principal amount of
$5,650,000, and (b) Joint Security Agreement between the Borrowers and the
Bank dated as of March 31, 1995 ("Security Agreement"). Unless otherwise
defined herein, capitalized terms used herein shall have the meanings
ascribed to them in the Credit Agreement.
As a result of the Borrower's unexpected lack of borrowing availability
under the Credit Agreement and their current working capital needs, the
Borrowers have requested that the Bank establish in their favor a short term
line of credit facility ("Line of Credit"). The Bank hereby agrees to
establish such facility on the following terms and conditions:
1. From time to time, at any time prior to the earlier of January 15,
1996 and the Mandatory Prepayment, the Bank may in its absolute and sole
discretion advance such funds ("Line of Credit Advances") as either Borrower
may request from time to time, by written notice to the Bank; provided that
for the following periods the aggregate
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of all outstanding Line of Credit Advances shall not exceed the respective
amounts set forth opposite each such period:
PERIOD AMOUNT
------ ------
9/26/94 through 10/1/95 $ 925,000
10/2/95 through 10/8/95 $1,300,000
10/9/95 through 10/15/95 $1,680,000
10/16/95 through 1/15/96 $2,000,000
The Bank shall have the absolute right to decline to make any Line of Credit
Advance at any time. Subject to the above limitations and the terms and
conditions hereof, the Borrowers shall have the right to repay outstanding
Line of Credit Advances and to request further Line of Credit Advances.
Proceeds from Line of Credit Advances only shall be used by the Borrowers for
working capital purposes.
2. Interest on the outstanding Line of Credit Advances shall be (a)
paid by the Borrowers at the Prime Rate plus one and one-half percent (1
1/2%), and (b) payable in arrears on the first day of each month, commencing
October 1, 1995 and continuing until all such Advances are repaid in full.
All Line of Credit Advances shall be payable by the Borrowers on demand.
Without limiting the demand nature of the Line of Credit, the Borrowers shall
repay all outstanding Line of Credit Advances, together with all accrued
interest thereon and fees and expenses associated therewith upon the payment
("Mandatory Prepayment") by British Aerospace, Royal Ordnance Division
("BAROD") of its obligations to Nuclear Metals with respect to the sale by
Nuclear Metals to BAROD of 7,500 CHARM III Ammunition Blanks ("Product").
Amounts owed to the Bank with respect to Line of Credit Advances shall be
evidenced by a Line of Credit Demand Note ("Demand Note") in the form of
EXHIBIT A attached hereto.
3. On the first day of each month, commencing October 1, 1995 and
continuing until all outstanding Line of Credit Advances are repaid in full,
the Borrowers shall pay to the Bank a facility fee equal to one percent (1%)
of the average of the daily outstanding Line of Credit Advances for the month
immediately preceding each such month.
4. Any contract between Nuclear Metals and BAROD with respect to the
Product shall name the Bank as payee thereunder and otherwise be in form and
substance satisfactory to the Bank. Upon receipt of the Mandatory
Prepayment, the Bank shall apply such payment first, to the outstanding Line
of Credit Advances, accrued interest thereon and fees and expenses associated
therewith and second, to obligations of the Borrowers to the Bank under
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<PAGE>
the Credit Agreement. Proceeds remaining after the foregoing application
shall be forthwith paid over by the Bank to Nuclear Metals.
5. On Tuesday of each week hereafter, the Borrowers shall deliver to
the Bank a cash flow report in form satisfactory to the Bank with respect to
the immediately preceding week. Additionally, on the second and fourth
Tuesday of each month hereafter, the Borrowers shall deliver to the Bank a
report in form satisfactory to the Bank regarding the sale of the Product to
BAROD.
6. The Bank waives the Borrowers' covenant default for the period
ending June 30, 1995 under Section 4.22 of the Credit Agreement.
7. The Borrowers agree that except as set forth on EXHIBIT B attached
hereto, the representations and warranties set forth in the Credit Agreement
are true and accurate as of the date hereof as if made as of the date hereof
(except as the same may relate to an earlier date). Further, the Borrowers
agree that the representations and warranties contained in Section 2.03 of
the Credit Agreement, as applied to this letter agreement and all documents
and instruments executed in connection herewith, are true and accurate as of
the date hereof.
8. Any default by the Borrowers in the performance of any covenant or
agreement contained herein shall constitute an "Event of Default" under the
Credit Agreement. Additionally, if any representation or warranty made by
the Borrowers herein shall prove to have been false or incorrect in any
material respect when made or furnished, the Borrowers agree that it shall
constitute an "Event of Default" under the Credit Agreement.
9. The Borrowers agree to indemnify and hold harmless the 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
herein except as a result of such indemnified parties' negligence or willful
misconduct.
10. The Borrowers will bear all reasonable expenses incurred by the Bank
in connection with the negotiation, preparation, execution, amendment,
interpretation, administration, termination or enforcement hereof and the
making and collection of the Line of Credit Advances, including without
limitation, the reasonable fees and disbursements of counsel.
11. Each Borrower (a) 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 claim arising
out of or relating hereto, or the Demand Note or any agreement executed in
connection herewith, and (b) waives trial by jury in any action or
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proceeding of any kind arising out of or relating hereto, or any such Note or
agreement. In any such litigation, each Borrower waives personal service and
agrees that service may be made in the manner specified for notices
hereunder. Notices hereunder shall be given in accordance with Section 6.05
of the Credit Agreement and shall be deemed effective as set forth therein.
12. The obligations of the Borrowers hereunder and under any agreement
or instrument executed in connection herewith, including the Demand Note,
shall be joint and several.
13. This letter agreement only shall be effective upon (a) the Borrowers
payment to the Bank of all fees and expenses of the Bank outstanding on the
date hereof, (b) the Bank's receipt of a legal opinion from Peabody and
Arnold, counsel to the Borrowers, in form and substance satisfactory to the
Bank, (c) the issuance by Nuclear Metals to the Bank of a duly executed
warrant to purchase 25,000 shares of Nuclear Metals common stock pursuant to
a warrant agreement in form and substance satisfactory to the Bank, (d) the
execution and delivery to the Bank by the Borrowers of patent and trademark
assignments in form and substance satisfactory to the Bank, (e) an amendment
to the Security Agreement in form and substance satisfactory to the Bank, and
(f) the filing of Uniform Commercial Code financing statements executed by
the Borrowers in the jurisdictions required by the Bank, which statements
shall be in form and substance satisfactory to the Bank.
14. No delay or omission on the part of the Bank in exercising any
rights hereunder or under any agreement or instrument executed in connection
herewith shall operate as a waiver of such right, nor shall any waiver on one
occasion be deemed an amendment or waiver of any such right with respect to
any future occasion. The Borrowers acknowledge and agree that all terms and
conditions of the Credit Agreement are in full force and effect and the
execution and delivery hereof, except as specifically set forth herein, (a)
shall not operate as a waiver of any right, power or remedy of the Bank under
the Credit Agreement or any agreement or instrument related to or in
connection therewith, nor (b) constitute a waiver of any provision of the
Credit Agreement or any such agreement or instrument.
15. This Agreement shall be governed by and construed in accordance with
the laws of The Commonwealth of Massachusetts.
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Kindly indicate your agreement to the above terms and conditions by
executing and returning to me an enclosed counterpart hereof, along with a
completed Exhibit B.
Very truly yours,
STATE STREET BANK AND
TRUST COMPANY
By: /S/ WILLIAM R. DEWEY IV
--------------------------
Vice President
AGREED TO:
Nuclear Metals, Inc.
By: /S/ JAMES M. SPIEZIO
-----------------------
Vice President of Finance
Carolina Metals, Inc.
By: /S/ JAMES M. SPIEZIO
-----------------------
President
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<PAGE>
EXHIBIT A
LINE OF CREDIT DEMAND NOTE
$2,000,000 September __, 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, on demand, the principal sum of TWO MILLION
DOLLARS ($2,000,000) or such lesser sum as may from time to time be
outstanding under the terms of that certain letter agreement between the
Borrowers and Bank of even date herewith, as amended, modified, supplemented
and/or restated from time to time (the "Letter Agreement"). Without limiting
the demand nature hereof, this Note is subject to the mandatory repayment
provisions set forth in the Letter Agreement.
The Borrowers promise to pay interest on the unpaid principal balance
hereof at the rates and at the times provided in the Letter Agreement.
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:
By:
---------------------------------
- ----------------------------- Name:
Title:
CAROLINA METALS, INC.
WITNESS:
By:
---------------------------------
- ----------------------------- Name:
Title:
<PAGE>
EXHIBIT B
None
<PAGE>
Exhibit 10(l)
JOINT SECURITY AGREEMENT
AGREEMENT made as of this 31st day, of March, 1995, by and among
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, a Massachusetts
chartered trust company ""Bank-").
W I T N E S S E T H:
WHEREAS, the Borrowers have entered into a Credit Agreement with Bank of
even date herewith (the "Credit Agreement") providing for the establishment by
Bank of a credit facility in favor of the Company in the aggregate principal
amount of $4,650,000;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed as follows:
1. SECURITY INTEREST. The Borrowers grant Ban a security interest
("Security Interest") in all accounts, inventory and general intangibles (as
such terms are defined by the Uniform Commercial Code), in which either Borrower
now has or hereafter acquires any rights and the proceeds therefrom (including,
without limitation, proceeds of insurance and proceeds in deposit accounts) and
accessions thereto, all as more particularly defined in EXHIBIT A (the
"Collateral").
2. OBLIGATIONS. The Security Interest shall secure the following
obligations (herein the "Obligations"):
(a) The prompt and complete payment when due (whether by acceleration
or otherwise) of the Revolving Credit (as defined in the Credit Agreement);
<PAGE>
(b) The prompt and complete payment when due (whether by acceleration
or otherwise) of the Term Credit (as defined in the Credit Agreement);
(c) The prompt and complete payment when due of all obligations of
the Borrowers with respect to L/C's (as defined in the Credit Agreement);
(d) Any and all other obligations of the Borrowers under the Credit
Agreement or under and other document, agreement or instrument executed in
connection with the Credit Agreement;
(e) Any and all obligations of either Borrower in connection with,
related to or arising from the Bonds (as defined in the Credit Agreement); and
(f) Any and all other liabilities and obligations of every name and
nature whatsoever of either Borrower to Bank whether such liabilities and
obligations be direct or indirect, absolute or contingent, secured or unsecured,
now existing or hereafter arising or acquired, due or to become due including,
without limitation and without regard as to whether or not contemplated at the
time of this Agreement, any extensions of credit hereinafter made by Bank to
either Borrower (including any such extension pursuant to a foreign exchange
line of credit or any liability or obligation of either Borrower to Bank arising
from any foreign exchange transaction), any obligations of either Borrower
acquired by Bank, and any guaranties by either Borrower of obligations owed by
others to Bank.
3. FINANCING, STATEMENTS AND OTHER ACTION. The Borrowers agree to do all
acts which Bank deems necessary or desirable to protect and enforce the Security
Interest including, but not limited to, the execution of financing,
continuation, amendment and termination statements and similar instruments.
Each Borrower hereby irrevocably appoints
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Bank as its attorney-in-fact (which power is coupled with an interest) to
execute financing, continuation, amendment and termination statements and
similar instruments; provided, that Bank shall exercise this power only after
Bank has requested that such Borrower execute such statements and instruments
and such Borrower does not so execute and deliver to Bank the subject statements
and instruments within two days of such request.
4. BORROWERS PLACES OF BUSINESS. The Borrowers jointly and severally
represent and warrant that their respective places of business, chief executive
office, the location where the records concerning their respective accounts and
contract rights are located and the record owners of any real estate on which
any of the Collateral is located are as set forth on EXHIBIT B attached hereto.
The Borrowers agree to notify Bank of the addition or discontinuance of any
place of business, chief executive office or an, change in the information
contained on EXHIBIT B. None of the Collateral shall be removed from the
locations specified on EXHIBIT B other than sales in the ordinary course of
business unless Bank is given thirty (30) days prior written notice of such
removal, which notice shall state the location or locations to which the
Collateral will be removed. The Borrowers jointly represent and warrant that
all of the Collateral presently is located at the locations set forth on
EXHIBIT B and agrees that the Collateral will remain at such locations and at
such other locations of which Bank receives notice in accordance with this
Paragraph 4.
5. NAME. The Borrowers Jointly represent and warrant that their precise
legal names are set forth in the introduction to this Agreement and agree to
notify Bank immediately of any change in such legal names.
6. ENCUMBRANCES. Each Borrower represents and warrants that it has title
to the
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<PAGE>
Collateral in which it has rights and that there are no sums owed or claims,
liens, security interests or other encumbrances against the Collateral other
than those permitted by the Credit Agreement. The Borrowers agree to notify
Bank of any lien (except inchoate liens arising by the operation of law),
security interest or other encumbrance securing an obligation in excess of
$50,000 against the Collateral (even though permitted by the Credit Agreement).
Borrowers shall defend the Collateral against any claim, lien, security interest
or other encumbrance adverse to Bank, except for liens permitted by the Credit
Agreement.
7. MAINTENANCE OF COLLATERAL. The Borrowers shall preserve the
Collateral for the benefit of Bank. Without limiting the generality of the
foregoing, the Borrowers shall:
(a) sell inventory only in the ordinary course of business;
(b) preserve all beneficial contract rights to the extent
commercially reasonable;
(c) take commercially reasonable steps to collect all accounts; and
(d) pay all taxes, assessments or other charges on the Collateral
when due, except to the extent otherwise permitted by the Credit Agreement.
8. COLLECTION. Bank may communicate with account debtors in order to
verify the existence, amount and terms of any accounts or contract rights. The
Borrowers will maintain such lockbox or blocked accounts as Bank shall specify.
All proceeds of Collateral in the possession of the officers, employees or
agents of the Borrowers shall be held in trust for the benefit of Bank. All
proceeds of Collateral including, without limitation, collections from accounts
and proceeds from cash sales of Collateral shall be deposited into such lockbox
or blocked accounts or remitted directly to Bank.
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<PAGE>
At any time after the occurrence and during the continuance of an Event of
Default, Bank (a) may notify account debtors of the Security Interest and
require that payments on accounts and returns of goods be made directly to Bank;
(b) may require the Borrowers to notify their respective account debtors and
indicate on all billings that payments and returns are to be made directly to
Bank; and (c) may collect, compromise, endorse, sell or otherwise deal with the
accounts or proceeds thereof in its own name or in the name of either Borrower.
If any of the Borrowers' accounts or contract rights arise out of contracts
with a governmental body subject to the Federal Assignment of Claims Act or a
similar statute, upon request of Bank, the Borrowers shall execute any
instruments and take any action required by law to ensure that all monies due
and to become due under such contract shall be paid directly to Bank.
9. INSURANCE. The Borrowers shall maintain insurance covering the
Collateral as provided in the Credit Agreement. All such insurance policies
with respect to Collateral shall be written so as to be payable in the event of
loss directly to Bank, shall provide for thirty (30) days prior written notice
to Bank of cancellation or modification, and shall contain an endorsement
providing that the insurer cannot withhold payment to Bank on account of any
action by the Borrowers. Bank is hereby irrevocably appointed as attorney-in-
fact (which power is coupled with an interest) to collect the proceeds of such
insurance, to settle any claims with the insurers in the event of loss or
damage, to endorse settlement drafts, to cancel, assign or surrender any
insurance policies; provided, however, that Bank will not
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<PAGE>
exercise the foregoing power of attorney except after the occurrence and during
the continuance of an Event of Default.
10. ADDITIONAL PROVISIONS CONCERNING THE COLLATERAL.
(a) Each Borrower hereby irrevocably appoints Bank its attorney-in-
fact (which such power of attorney is coupled with an interest) with full
authority in the place and stead of such Borrower and in the name thereof, from
time to time after the occurrence and during the continuation of an Event of
Default, to take any of the following actions or execute any of the following
instruments which Bank may deem necessary or advisable to accomplish the
purposes of this Agreement: (i) to ask, demand, collect, sue for, recover,
compound, receive, and give acquittance and receipts for moneys due and to
become due under or in respect of any of the Collateral; (ii) to receive,
endorse, and collect any checks, drafts, letters of credit, or other
instruments, documents, and chattel paper in connection with clause (i) above;
(iii) to sign each such Borrower's name on any invoice or bill of lading
relating to any account, on drafts against customers, on schedules and
assignments of accounts, on notices of assignment, financing statements and
other public records, on verification of accounts and on notices to customers
(including notices directing make payment directly to Bank); (iv) to notify the
post office authorities to change the address for delivery of its mail to an
address designated by Bank; (v) to receive, open and process all mail addressed
to either Borrower; (vi) to send requests for verification of accounts to
customers; and (vii) to file any claims or take any action or institute any
proceedings which Bank may deem necessary or desirable for the collection of any
of the Collateral or otherwise to enforce the rights of Bank with respect to any
of the Collateral. Bank agrees that it will
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<PAGE>
exercise the foregoing power of attorney in a commercially reasonable manner.
(b) If either Borrower fails to perform any agreement contained
herein, Bank may itself perform, or cause performance of, such agreement or
obligation, and the reasonable costs and expenses of Bank incurred in connection
therewith shall be payable by the Borrowers on demand and shall be secured by
the Collateral. All such expenditures shall bear interest at the Prime Rate (as
defined in the Credit Agreement) plus five percent (5%).
(c) The powers conferred on Bank under this Agreement are solely to
protect its interest in the Collateral and shall not impose any duty upon Bank
to exercise any such powers. Except for the safe custody of any Collateral in
its possession and the accounting for moneys actually received by it hereunder,
Bank shall have no duty as to any Collateral or as to the taking, of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
(d) Anything herein to the contrary notwithstanding, (1) the
Borrowers shall remain liable under any contracts and agreements relating to the
Collateral to the extent set forth therein to perform all of its obligations
thereunder to the same extent as if this Agreement had not been executed; (ii)
the exercise by Bank of any of its rights hereunder shall not release the
Borrowers from any of its obligations under the contracts and agreements
relating to the Collateral; and (iii) Bank shall not have any obligation or
liability by reason of this Agreement under any contracts and agreements
relating to the Collateral, nor shall Bank be obligated to perform any of the
obligations or duties of either Borrower thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
11. INTENTIONALLY OMITTED.
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<PAGE>
12. DEFAULT. If any one or more of the following events (herein referred
to as "Events of Default") shall occur:
(a) Either Borrower shall fall to perform or observe any provision of
this Agreement and such default shall continue for a period of seven (7) days
after written notice from Bank; or
(b) An Event of Default shall have occurred under Article V of the
Agreement;
then, Bank shall have (a) the right to accelerate any or all of the
Obligations, and (b) all of the rights and remedies set forth in Section 13
below.
13. REMEDIES. Bank shall have all of the rights and remedies of a secured
party under the Uniform Commercial Code and shall have full power and authority
to sell or otherwise dispose of the Collateral or any part thereof. Any such
sale or other disposition, subject to the provisions of applicable law, may be
by public or private proceedings and may be made by one or more contracts, as a
unit or in parcels, at such time and place, by such method, in such manner and
on such terms as Bank may determine. Except as required by law, such sale or
other disposition may be made without advertisement or notice of any kind or to
any person. Where reasonable notification of the time or place of such sale or
other disposition is required by law, such requirement shall have been met if
such notice is delivered as provided in the Agreement, at least ten (10) days
before the time of such sale or other disposition. Upon notice from Bank, the
Borrowers shall assemble the Collateral at a time and place specified by Bank.
To the extent permitted by law, Bank or any other holder of the Obligations may
buy any or all of the Collateral upon any sale thereof. To the extent
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<PAGE>
permitted by law, upon any such sale or sales, the Collateral so purchased shall
be held by the purchaser absolutely free from any claims or rights of whatsoever
kind or nature, including any equity of redemption or any similar rights, all
such equity of redemption and any similar rights being hereby expressly waived
and released by the Borrowers. In the event any consent, approval or
authorization of any governmental agency shall be necessary to effectuate any
such sale or sales, the Borrowers shall execute, as necessary, all applications
or other instruments as may be required.
At any time after the occurrence of an Event of Default, Bank may commence
proceedings in any court of competent jurisdiction for the appointment of a
receiver (which term shall include a receiver-manager) of the Collateral or of
any part thereof. At any time after the occurrence of an Event of Default, Bank
may, if permitted without the commencement of a proceeding, appoint any person
to be a receiver of the Collateral or any part thereof and may remove any
receiver so appointed and appoint another in his stead. Any such receiver
appointed by Bank, or a court at the request of Bank, shall have power (i) to
take possession of the Collateral or any part thereof; (ii) to carry on the
business of the Borrowers; (iii) to borrow money on the security of the
Collateral for the maintenance, preservation or protection of the Collateral or
any part thereof or for the carrying on of the business of the Borrowers; and
(iv) to sell, lease or otherwise dispose of the whole or any part of the
Collateral at public auction, by public tender or by private sale, either for
cash or upon credit, at such time and upon such terms and conditions as the
receiver may determine; provided that Bank shall not be in an, way responsible
for any misconduct or negligence of any such receiver.
-9-
<PAGE>
Upon written notice to the Borrowers, the Borrowers shall execute and
deliver to Bank a written assignment or assignments of all of their respective
rights under any lease of Collateral. If the consent of the lessor is required
with respect to any assignment or hereunder, such assignment shall not be
effective until such consent is obtained. Each Borrower hereby irrevocably
appoints Bank its attorney-in-fact (which power is coupled with an interest) to
execute assignments and subleases in favor of Bank, provided that Bank shall
exercise this power only after Bank has requested that such Borrower execute
such assignment and it does not so execute and deliver to Bank the subject
assignment within two days of such request.
14. PROCEEDS. After deducting all reasonable costs and expenses of
collection, custody, sale or other disposition or delivery (including legal
costs and reasonable attorneys' fees) and all other charges due against the
Collateral, the residue of the proceeds of any such sale or other disposition
shall be applied to the payment of the Obligations and any surplus shall be
returned to the Borrowers, except as otherwise provided by law. The Borrowers
shall be liable for any deficiency in payment of the Obligations, including all
reasonable costs and expenses of collection, custody, sale or other disposition
or delivery and all other charges due against the Collateral, as hereinbefore
enumerated.
15. WAIVERS. To the extent permitted by law, the Borrowers and any third
party providing credit enhancement with respect to the Obligations ("Secondary
Party") hereby waive demand for payment, notice of dishonor or protest, rights
of redemption, prior notice of the appointment of a receiver and all other
notices of any kind except notices specifically required hereby or by the Credit
Agreement. Bank may modify the liability of any
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<PAGE>
Secondary Party and release any Collateral provided by such Secondary Party
without giving notice to the Borrowers or any other Secondary Party. Such
modifications, changes, renewals, releases or other actions shall in no way
affect the obligations of the Borrowers or any Secondary Party hereunder.
16. EXPENSE. The Borrowers agree to pay, indemnify and hold harmless Bank
and the nominees of Bank from and against all costs and expenses (including
taxes, if any) arising out of or incurred in connection with the administration
and sale of Collateral and all reasonable costs and expenses (including
reasonable legal fees) incurred by Bank in connection with the negotiation,
preparation, execution, amendment, interpretation, termination or enforcement of
this Agreement.
17. INTENTIONALLY OMITTED.
18. SETOFF. Any sums due from Bank to either Borrower or any property of
either Borrower in the possession of Bank may be held and treated as Collateral
and, after the occurrence of an Event of Default, may be applied to the payment
of the Obligations regardless of the adequacy of the Collateral.
19. MODIFICATION. This Agreement may be modified or amended only in
writing signed by each of the parties hereto.
20. NOTICES. All notices and other communications hereunder shall be
deemed to have been sufficiently given if delivered as provided in the Credit
Agreement.
21. WAIVERS. No course of dealing between the Borrowers and Bank, nor any
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
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<PAGE>
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privileges. The rights and remedies
hereunder are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law.
22. GOVERNING LAW; BINDING EFFECT; COUNTERPARTS. This Agreement shall be
construed in accordance with and governed by the laws of the Commonwealth of
Massachusetts. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, including any
other holder or holders of any Obligations and may be executed in two or more
counterparts, each of which shall together constitute one and the same
agreement.
23. SEVERABILITY. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date first above written.
NUCLEAR METALS, INC.
By: /s/ James M. Spiezio
------------------------------------
Name: James M. Spiezio
Title: V.P. 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
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<PAGE>
EXHIBIT A
A continuing security interest in:
(a) accounts including without limitation all accounts receivable, sums
due from factors, contracts, contract rights, notes, bills, drafts, acceptances,
instruments, documents, chattel paper, chooses in action, and all other debts,
obligations and liabilities in whatever form, owing to either Borrower from any
person, firm or corporation or any other legal entity, whether now existing or
hereafter arising, now or hereafter received by or belonging or owing to either
Borrower, for goods sold by it or for services rendered by it, or however
otherwise same may have been established or created, all guaranties and
securities therefor, all right, title and interest of either Borrower in the
merchandise or services which gave rise thereto, including the rights of
reclamation and stoppage in transit and all rights of an unpaid seller of
merchandise or services;
(b) inventory including, without limitation, all goods, merchandise, raw
materials, goods and work in process, finished goods, and other tangible
personal property now owned or hereafter acquired and held for sale or lease or
furnished or to be furnished under contracts of service or consumed in the
Borrowers' businesses;
(c) general intangibles including without limitation, tax refunds and all
proceeds of insurance; and
(d) all products and proceeds from any of the foregoing including without
limitation all proceeds of credit, fire or other insurance and deposit accounts.
<PAGE>
EXHIBIT B
List of Locations of Places of Business and Collateral of
Nuclear Metals, Inc.
The Borrowers represent and warrant that with respect to Nuclear Metals, Inc.:
(a) its principal place of business is:
Concord, Massachusetts
(b) its chief executive office is:
Concord, Massachusetts
(c) its records concerning accounts located at:
Concord, Massachusetts
(d) its only other places of business are:
Barnwell, South Carolina
Arlington, Virginia
(e) all of the Tangible Collateral is located at its places of business.
The Borrowers represent and warrant that with respect to Carolina Metals, Inc.:
(a) its principal place of business is:
Barnwell, South Carolina
(b) its chief executive office is:
Concord, Massachusetts
(c) its records concerning accounts are located at:
Concord, Massachusetts
(d) its only other places of business are:
None
(e) all of the Tangible Collateral is located at its places of business.
<PAGE>
EXHIBIT 10(m)
FIRST AMENDMENT TO JOINT SECURITY AGREEMENT
THIS FIRST AMENDMENT is made September 26, 1995, by and among NUCLEAR METALS,
INC. ("Nuclear Metals"), CAROLINA METALS, INC. ("Carolina Metals";
together with Nuclear Metals, "Borrowers"), and STATE STREET BANK AND
TRUST COMPANY ("Bank").
WHEREAS, the Borrowers and Bank entered into (a) a Credit Agreement dated as
of March 31, 1995, as amended by a First Amendment to Credit Agreement
("First Credit Agreement Amendment") dated as of June 30, 1995 (as
further amended, modified, supplemented and/or restated from time to
time, "Credit Agreement"), and (b) a Joint Security Agreement dated as
of March 31, 1995, as amended by the First Credit Agreement Amendment
and hereby (as further amended, modified, supplemented and/or restated
from time to time, "Security Agreement");
WHEREAS, pursuant to the Credit Agreement, the Bank established a credit
facility in favor of the Borrowers in the aggregate principal amount of
$5,650,000;
WHEREAS, the Borrowers have requested that the Bank establish in their favor
an additional credit facility in the principal amount of $2,000,000
("Line of Credit");
WHEREAS, on the date hereof, the Borrowers and Bank have entered into a
letter agreement (as amended, modified, supplemented and/or restated
from time to time, "Letter Agreement") by which the Bank has agreed to
establish the Line of Credit;
WHEREAS, a condition to the effectiveness of the Letter Agreement is the
execution and delivery by the Borrowers to the Bank of this First
Amendment;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrowers and Bank agree as follows:
1. Unless otherwise defined herein,
capitalized terms used herein shall have the meanings ascribed to them
in the Security Agreement;
2. Section 1 of the Security Agreement is
amended by including in the definition of the term "Collateral," all
equipment (as such term is defined by the Uniform Commercial Code as
adopted in Massachusetts) in which either Borrower now has or hereafter
acquires any rights and the proceeds therefrom (including, without
limitation, proceeds of insurance) and accessions thereto.
3. The Borrowers agree and acknowledge that
the defined term "Obligations" set forth in Section 2 of the Security
Agreement includes the obligations of the Borrowers to the Bank now
existing or hereafter arising under, relating to or in connection with
the Letter Agreement, including, without limitation, all obligations of
the Borrowers under the Demand Note, as defined in the Letter Agreement.
4. As of September 25, 1995, the obligations
of the Borrowers to the Bank under the Credit Agreement equaled
$2,750,188.89, comprised of (a) $1,733,333.35 and $10,688.88, in
principal and interest respectively under the Term Note (as defined in
the Credit Agreement), and (b) $1,000,000 and $6,166.66 in principal and
interest respectively under the Revolving Credit Note (as defined in the
Credit Agreement), as amended, plus attorneys' fees, charges and
expenses.
-2-
<PAGE>
5. The Company acknowledges and agrees that
(a) the amounts set forth in paragraph 4 above are due and owing to the
Bank without any counterclaim or setoff, and (b) the Obligations are
secured by a first priority perfected security interest in all of the
personal property of the Borrowers granted to the Bank pursuant to the
Security Agreement, as amended by the First Credit Agreement Amendment
and hereby, including without limitation, all accounts, inventory,
equipment and general intangibles (including (a) the patents and patent
applications ("Patents") owned by Nuclear Metals and listed on SCHEDULE
I attached hereto, together with all proceeds thereof, all rights
corresponding thereto and all reissues, divisions, continuations,
renewals, extensions and continuations-in-part thereof, and the
recordings and applications therefor, and (b) the trademarks and
trademark ("Trademarks") applications owned by Nuclear Metals and listed
on SCHEDULE II attached hereto, all proceeds thereof, all rights
corresponding thereto and the recordings and applications therefor and
all goodwill of the business to which each such trademark and
application relates.
6. Carolina Metals acknowledges and agrees
that the Guaranty Agreement dated as of April 13, 1995 executed by it in
favor of the Bank is a valid and enforceable guaranty of all of the
obligations of Nuclear Metals to the Bank, whether now existing or
hereafter arising.
7. The Borrowers represent and warrant that
(a) each of the Patents is valid and enforceable and Nuclear Metals is
the sole and exclusive owner of the entire and unencumbered right, title
and interest in and to each of the Patents, free and clear of any liens,
charges, licenses, collateral assignments, mortgages or other
encumbrances other than in favor of the Bank, (b) each of the Trademarks
is valid and enforceable and Nuclear
-3-
<PAGE>
Metals is the sole and exclusive owner of the entire and unencumbered
right, title and interest in and to each of the Trademarks, free and
clear of any liens, charges, licenses, collateral assignments,
mortgages or other encumbrances other than in favor of the Bank, and
(c) the representations and warranties in the Security Agreement are
true and accurate as of the date hereof, including without limitation,
the representation and warranty pertaining to the locations of
Collateral, as the same pertains to equipment in which either Borrower
has any rights.
8. The Borrowers jointly and severally release,
remise and forever discharge the Bank and each of its past, present and
future officers, directors, stockholders, agents, employees,
affiliates, attorneys, successors and assigns of and from any and all
claims, obligations, demands, causes of action, counterclaims and
defenses of any kind or nature whatsoever (including any claims,
counterclaims or defenses based on so-called lender liability), which
either or both of the Borrowers now has against the Bank and/or any of
its past, present and future officers, directors, stockholders, agents,
employees, affiliates, attorneys, successors and assigns, or ever had
from the beginning of the world to this date.
9. This First Amendment, which shall be
governed by the laws of The Commonwealth of Massachusetts, may be
executed in any number of counterparts, all of which taken together
shall constitute one and the same instrument.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment on
the date first above written.
NUCLEAR METALS, INC.
/S/ JAMES M. SPIEZIO
- ----------------------
Name: James M. Spiezio
Title: Vice President
CAROLINA METALS, INC.
/S/ JAMES M. SPIEZIO
- ----------------------
Name: James M. Spiezio
Title: President
STATE STREET BANK AND TRUST
COMPANY
/S/ WILLIAM R. DEWEY IV
- -------------------------
Name: William R. Dewey IV
Title: Vice President
-5-
<PAGE>
SCHEDULE I
PATENT NO. DATE OF PATENT
---------- --------------
4,488,031 12/11/84
4,501,073 02/26/85
4,699,769 10/13/87
4,701,310 10/20/87
4,735,252 04/05/88
4,793,978 12/27/88
4,813,965 03/21/89
4,824,478 04/25/89
4,837,375 06/06/89
4,938,400 07/03/90
5,084,253 01/28/92
5,147,448 09/15/92
5,273,711 12/28/93
5,276,335 01/04/94
5,349,908 09/27/94
5,354,358 10/11/94
5,417,778 05/23/95
5,421,916 06/06/94
<PAGE>
SCHEDULE II
TRADEMARK REGISTRATION NUMBER REGISTRATION DATE
--------- ------------------- -----------------
REP-R- 945061 10/17/72
PREP-R- 1,683,587 4/21/92
BERALCAST-TM- Application Serial No. 74- N/A
620,903
<PAGE>
EXHIBIT 10(n)
Dated: September 26, 1995
PATENT ASSIGNMENT OF SECURITY
WHEREAS, Nuclear Metals, Inc., a Massachusetts corporation ("Borrower"),
owns the patent and patent applications shown on the attached SCHEDULE I (the
"Patents"), for which there are recordings or applications in the United
States Patent and Trademark Office under the numbers shown on SCHEDULE I; and
WHEREAS, pursuant to (i) a Credit Agreement dated as of March 3l, 1995
by and among the Borrower, State Street Bank and Trust Company ("Bank") and
Carolina Metals, Inc. ("CMI"), a wholly-owned subsidiary of the Borrower, as
amended by First Amendment to Credit Agreement dated as of June 30, 1995
("Amendment"); (ii) a certain letter agreement dated the date hereof by and
among the Borrower, the Bank and CMI; and (iii) a Joint Security Agreement
dated as of March 31, 1995 by and among the Borrower, the Bank and CMI, as
amended by the Amendment and the First Amendment to Joint Security Agreement
dated the date hereof (as further amended, modified, supplemented and/or
restated from time to time, the "Security Agreement"), the Borrower is
obligated to the Bank; and
WHEREAS, pursuant to the Security Agreement, the Borrower has granted to
the Bank a security interest in the Patents, all proceeds thereof, all rights
corresponding thereto and all reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, and the recordings and
applications therefor and applications therefor and all goodwill of the
business to which each of the Trademarks relates.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
acknowledged, the Borrower does hereby assign unto the Bank and grant to the
Bank a security interest in and to the Patents and recordings and
applications therefor, which assignment and security interest shall secure
all of the "Obligations" as defined in the Security Agreement in accordance
with terms and provisions thereof.
The Borrower expressly acknowledges and affirms that the rights and
remedies of the Bank with respect to the assignment and security interest
granted hereby are more fully set forth in the Security Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Patent
Assignment under seal as of on the date first above written.
Dated: Boston, Massachusetts NUCLEAR METALS, INC.
September 26, 1995
Witness: By: /S/ JAMES M. SPIEZIO
-------------------------------
Name: James M. Spiezio
Title: V.P. Finance
/S/ FRANK S. HAMBLETT
- ------------------------------
Witness: STATE STREET BANK AND TRUST
COMPANY
By: /S/ WILLIAM R. DEWEY IV
- ------------------------- ------------------------------
Name: William R. Dewey IV
Title: Vice President
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. September 26, 1995
Then personally appeared, before me, the above-named James M. Spiezio
the V. P. Finance of Nuclear Metals, Inc. and acknowledged the foregoing
instrument to be the free act and deed of said corporation.
/S/ TONI-ANN PEPPE
---------------------------------------
Notary Public
My Commission Expires: May 24, 2002
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. September 26, 1995
Then personally appeared, before me, the above-named William R. Dewey IV
the Vice President of State Street Bank and Trust Company and acknowledged
the foregoing instrument to be the free act and deed of said corporation.
/S/ TONI-ANN PEPPE
---------------------------------------
Notary Public
My Commission Expires: May 24, 2002
<PAGE>
SCHEDULE I
PATENT NO. DATE OF PATENT
4,824,478 04/25/89
4,837,375 06/06/89
5,417,778 05/23/95
5,421,916 06/06/95
<PAGE>
EXHIBIT 10(o)
Dated: September 26, 1995
TRADEMARK ASSIGNMENT OF SECURITY
WHEREAS, Nuclear Metals, Inc., a Massachusetts corporation ("Borrower"),
owns the trademarks and trademark applications shown on the attached SCHEDULE
I (the "Trademarks"), for which there are recordings or applications in the
United States Patent and Trademark Office under the numbers shown on SCHEDULE
I; and
WHEREAS, pursuant to (i) a Credit Agreement dated as of March 3l, 1995
by and among the Borrower, State Street Bank and Trust Company ("Bank") and
Carolina Metals, Inc. ("CMI"), a wholly-owned subsidiary of the Borrower, as
amended by First Amendment to Credit Agreement dated as of June 30, 1995
("Amendment"); (ii) a certain letter agreement dated the date hereof by and
among the Borrower, the Bank and CMI; and (iii) a Joint Security Agreement
dated as of March 31, 1995 by and among the Borrower, the Bank and CMI, as
amended by the Amendment and the First Amendment to Joint Security Agreement
dated the date hereof (as further amended, modified, supplemented and/or
restated from time to time, the "Security Agreement"), the Borrower is
obligated to the Bank; and
WHEREAS, pursuant to the Security Agreement, the Borrower has granted to
the Bank a security interest in the Trademarks, all proceeds thereof, all
rights corresponding thereto and the recordings and applications therefor and
all goodwill of the business to which each of the Trademarks relates.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
acknowledged, the Borrower does hereby assign unto the Bank and grant to the
Bank a security interest in and to the Trademarks, and proceeds thereof, all
rights corresponding thereto, the recordings and applications therefor and
the goodwill of the business to which each of the Trademarks relates, which
assignment and security interest shall secure all of the "Obligations" as
defined in the Security Agreement in accordance with terms and provisions
thereof.
The Borrower expressly acknowledges and affirms that the rights and
remedies of the Bank with respect to the assignment and security interest
granted hereby are more fully set forth in the Security Agreement.
<PAGE>
In WITNESS WHEREOF, the parties hereto have executed this Trademark
Assignment under seal as of on the date first above written.
Dated: Boston, Massachusetts NUCLEAR METALS, INC.
September 26, 1995
Witness: By: /S/ JAMES M. SPIEZIO
-----------------------------------
Name: James M. Spiezio
Title: V. P. Finance
/S/ FRANK S. HAMBLETT
- --------------------------------
Witness: STATE STREET BANK AND TRUST
COMPANY
By: /S/ WILLIAM R. DEWEY IV
- -------------------------------- -----------------------------------
Name: William R. Dewey IV
Title: Vice President
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. September 26, 1995
Then personally appeared, before me, the above-named James M. Spiezio
the Vice President Finance of Nuclear Metals, Inc. and acknowledged the
foregoing instrument to be the free act and deed of said corporation.
/S/ TONI-ANN PEPPE
-----------------------------------
Notary Public
My Commission Expires: May 24, 2002
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. September 26, 1995
Then personally appeared, before me, the above-named William R. Dewey IV
the Vice President of State Street Bank and Trust Company and acknowledged
the foregoing instrument to be the free act and deed of said corporation.
/S/ TONI-ANN PEPPE
-----------------------------------
Notary Public
My Commission Expires: May 24, 2002
<PAGE>
SCHEDULE I
TRADEMARK REGISTRATION NUMBER REGISTRATION DATE
BERALCAST-TM- TBD N/A
(application serial
number 74-620,903)
PABOS:AM:222782_1
<PAGE>
PURCHASE ORDER
OLIN ORDNANCE
FLINCHBAUGH OPERATIONS
P.O. BOX 127 RED LION, PENNSYLVANIA 17356
PHONE: 717-244-4551 FAX: 717-2440893
To: Ship To:
03644 Olin Corporation
Nuclear Metals Inc. Flinchbaugh Operations
2229 Main St. 200 East High St
Concord Ma 01742 Red Lion PA 17356
Confirmation of contract entered into between Ed Shue
> Letter to Don King on 5/22/95
ITEM NUMBER 001, **** pcs, part number 12944264 penetrator for ****
projectile in accordance with requirements of drawing 12944264, rev B,
purchase specification A34124, rev none and QAP 12944264, rev D. Total price
****.
ITEM NUMBER 002, 1 piece, U/M-lot, part number/description-subcontract data
items (see note #4). Total price- n/c.
NOTES:
1. DELIVERY SCHEDULE:
Lot #1
1665 pcs - 01/02/96 (includes 15 pcs ballistics)
-2 penetrators from the FAS lot and 13 from the balance of lots.
1650 pcs - 01/22/96
1593 pcs - 02/09/96
Lot #2
1560 pcs - 04f/30/96 (includes 10 pcs ballistics)
1550 pcs - 05/17/96
2. ORDER QUANTITY OPTIONS: This purchase order 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
**** Confidential Treatment Requested
<PAGE>
for PY3, PY4, 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.
3. Ship via: call olin/flinchbaugh traffic coordinator (717-246-8255)
prior to shipment for carrier designation.
4. Subcontract data requirements (sdrl): subcontractor shall provide,
with unlimited rights under this subcontract, all data set FORTH IN SDRL FOR
M829A2 PENETRATOR, REV B, DTD 05 JULY 1995, ITEMS A008, A010, A013, A015,
A018, A019, A022, A030, B001, B003, C005 AND CO14.
5. GOVERNMENT FURNISHED MATERIAL: THE GOVERNMENT WILL FURNISH ****
POUNDS OF UNALLOYED DEPLETED URANIUM ARMOR SCRAP PER PENETRATOR ORDERED
(TOTAL APPROX. 197,160 LBS) FOB SUBCONTRACTORS
S PLACE OF PERFORMANCE. 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. DELIVERY OF ARMOR SCRAP TO
NMI TO BE:
24,000 LBS EACH ON 07/17/95, 07/31/95, 08/15/95, 08/31/95,
;09/15/95, 10/02/95, 10/19/95, 11/15/95, AND 5,160 LBS ON
12/13/95.
6. FIRST ARTICLE SAMPLE (FAS):
A FIRST ARTICLE PER QAP 12944264 WILL BE REQUIRED DUE TO THE NEW
PROCESS THAT UTILIZES 100% RECYCLED MATERIAL. THE FAS WILL
CONSIST OF 47 PENETRATORS. THE FAS LESS THE TWO (2) HISTORICAL
SAMPLES SHALL BE INCLUDED AS PART OF THE FIRST LOT. A BALLISTIC
SAMPLE FOR THE FIRST LOT AND THE FAS WILL BE SELECTED ACROSS BOTH
THE FAS PIECES AS WELL AS 100% OF THE FIRST LOT. GOVERNMENT
SOURCE INSPECTION (GSI) WILL BE REQUIRED FOR FAS.
7. 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 AND
SCHEDULE ACCORDINGLY.
8. TECHNICAL DATA PACKAGE LIST (TDPL): THE APPLICABLE TDPL
IS #12944257, REV R02, DTD 05 JULY 1995, PROJECTILE, 120MM,
APFSDS-T, M829A2.
9. SECURITY CLASSIFICATION: THE APPLICABLE DOCUMENT IS THE
SECURITY CLASSIFICATION GUIDE, CARTRIDGE, 120MM, APFSDS-T,
M829A2, 30 MAY 1995.
**** Confidential Treatment Requested
<PAGE>
10. SCHEDULING CONTROLS: NMI WILL NOT PERFORM WORK IN
ADVANCE OF THAT REQUIRED TO MEET THE 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.
11. 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.
12. PROGRESS BILLINGS: PROGRESS BILLINGS ARE ACCEPTABLE, BUT
MUST BE CONSISTENT WITH THE ACTUAL PERFORMANCE. 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.
13. DEMILITARIZATION: DEMILITARIZATION MUST RESULT IN COMPLETE
DESTRUCTION OF THE ITEM. DISPOSITION WILL BE VIA SCRAP ONLY.
14. GOVERNMENT FURNISHED PROPERTY: THE FOLLOWING ITEMS OF
PROPERTY ARE ACCOUNTABLE TO NUCLEAR METALS UNDER THIS PURCHASE
ORDER AND PRIME CONTRACT IN ACCORDANCE WITH THE TERMS OF FAR
52.245-2 (ALT 1) AND OLIN OSP - 801/132.
DESCRIPTION SERIAL NO. QTY UNIT PRICE YR MFR
PROBE HOLDER 6672 1 $228.00 1989
SET MASTER 6483 1 $210.00 1990
SET MASTER 6484 1 $210.00 1990
SET MASTER 6485 1 $210.00 1990
SET MASTER 6486 1 $210.00 1990
ULTRASONIC STD SDU1005 1 $2300.00 1990
THE ABOVE PRICE IS A FIRM FIXED PRICE FOR THE DURATION OF THIS
PURCHASE ORDER AND IT CONFIRMS NMI QUOTATION 10/14/94, BEST &
FINAL OFFER LETTER 01/10/95 AND LETTER SUBCONTRACT DATED 05/22/95.
<PAGE>
SUPPLIER QUALITY REQUIREMENTS LIST (SQRL): THE FOLLOWING
PARAGRAPHS FROM SQRL REV A DTD 07/13/95 SHALL APPLY:
(1 - 17, 19, 21 - 28)
TERMS AND CONDITIONS: THE ATTACHED "SPECIAL TERMS AND
CONDITIONS APPLICABLE TO GOVERNMENT CONTRACTS", FORM FP-03 SHALL
APPLY TO THIS PURCHASE ORDER.
FAR CLAUSES: IN ADDITION TO THOSE REGULATIONS SHOWN ON FP-03,
THE FEDERAL ACQUISITION REGULATIONS (FAR) SHOWN ON FLYSHEET FAR
13 SHALL APPLY TO THIS PURCHASE ORDER.
SMALL BUSINESS AND SMALL DISADVANTAGED BUSINESS CONCERNS: THE
ATTACHED CLAUSE ENTITLED "UTILIZATION OF SMALL BUSINESS AND SMALL
DISADVANTAGED BUSINESS CONCERNS" APPLIES TO THIS PURCHASE ORDER.
PALLET SIZES: ITEMS SHIPPED ON PALLETS SHALL HAVE A MAXIMUM
DIMENSION OF 42" WIDE X 42" HIGH. (DIMENSION INCLUDES SKID)
TRUCKLOAD SHIPMENTS: FULL TRUCKLOAD SHIPMENTS MUST BE
SCHEDULED FOR UNLOADING BY CALLING 717-246-8256 AT LEAST FOUR
HOURS PRIOR TO ANTICIPATED DELIVERY.
ATTACHMENTS:
PURCHASE SPECIFICATION A34124, REV NONE
DRAWING 12944264, REV B
QAP 12944264, REV D
SDRL FOR M829A2 PENETRATOR, REV B DTD 05 JULY 1995
DATA ITEM DESCRIPTION (ITEMS)
TDPL 12944257, R02, 05 JULY 1995
UTILIZATION OF SMALL BUSINESS AND SMALL DISADVANTAGED BUSINESS
CONCERNS
SUPPLIER QUALITY REQUIREMENTS LIST (SQRL) REV. A DTD. 07/13/95
FP-03
FLYSHEET FAR 13
IN ADDITION TO THE TERMS AND CONDITIONS OF PURCHASE PRINTED ON THE
REVERSE OF THIS PURCHASE ORDER, THE STANDARD NOTES APPLICABLE
TO FLINCHBAUGH PURCHASE ORDERS FOUND ON FLYSHEET #790-9 DATED
<PAGE>
JANUARY 24, 1995, (ATTACHED) ARE HEREBY INCORPORATED INTO THIS
PURCHASE ORDER.
<PAGE>
FORBEARANCE AND AMENDMENT AGREEMENT
THIS AGREEMENT is made as of January 11, 1996 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").
RECITALS
A. The Bank and Barnwell County, South Carolina ("Issuer") entered into
a certain Indenture ("1982 Indenture") dated as of May 11, 1982 in connection
with which the Issuer executed and delivered to the Bank a certain
Industrial Development Revenue Note ("1982 Revenue Note") dated May 11, 1982
in the original principal amount of $5,000,000. Pursuant to a Financing
Agreement ("1982 Financing Agreement") between the Issuer and the Borrowers
dated as of May 11, 1982, among other things, the Borrowers are obligated to
pay to the Issuer the amounts required to be paid by the Issuer to the Bank
under the 1982 Revenue Note. To secure the obligations of the Borrowers to
the Issuer under the 1982 Financing Agreement, the Borrowers granted to the
Issuer a mortgage on and a security interest in the "Mortgaged Property," as
defined in the 1982 Financing Agreement, including a first mortgage ("First
Mortgage") on the real property and buildings thereon owned by Carolina
Metals and located at Highway 80, Barnwell, South Carolina ("South Carolina
Real Property").
B. Pursuant to the 1982 Indenture, the Issuer assigned to the Bank,
among other things, the First Mortgage and the obligation of the Borrowers to
pay the amounts required to be paid by the Issuer under the 1982 Revenue Note.
<PAGE>
C. In connection with the 1982 Financing Agreement and 1982 Indenture,
Nuclear Metals executed and delivered to the Bank a Guaranty ("1982
Guaranty") by which, among other things, it irrevocably and unconditionally
guarantees to the Bank the full and prompt payment of the principal and
interest due under the 1982 Revenue Note and any other sums due and payable
by the Issuer thereunder or under the 1982 Indenture.
D. The Bank and the Issuer entered into a certain Indenture ("1984
Indenture") dated as of September 27, 1984 in connection with which the
Issuer executed and delivered to the Bank a certain Industrial Development
Revenue Note ("1984 Revenue Note"; together with the 1982 Revenue Note,
"Revenue Notes") dated September 27, 1984 in the original principal amount of
$3,200,000. Pursuant to a Financing Agreement ("1984 Financing Agreement")
between the Issuer and Carolina Metals dated as of September 27, 1984, among
other things, Carolina Metals is obligated to pay to the Issuer the amounts
required to be paid by the Issuer to the Bank under the 1984 Revenue Note.
To secure the obligations of Carolina Metals to the Issuer under the 1984
Financing Agreement, Carolina Metals granted to the Issuer a mortgage on and
a security interest in the "Mortgaged Property," as defined in the 1984
Financing Agreement, including a second mortgage ("Second Mortgage") on the
South Carolina Real Property.
E. Pursuant to the 1984 Indenture, the Issuer assigned to the Bank,
among other things, the Second Mortgage and the obligation of Carolina Metals
to pay the amounts required to be paid by the Issuer under the 1984 Revenue
Note.
F. In connection with the 1984 Financing Agreement and 1984 Indenture,
the Borrowers executed and delivered to the Bank a Guaranty ("1984 Guaranty")
by which,
2
<PAGE>
among other things, they irrevocably and unconditionally guarantee to the
Bank the full and prompt payment of the principal and interest due under the
1984 Revenue Note and any other sums due and payable by the Issuer thereunder
or under the 1984 Indenture. The 1982 Indenture, 1982 Financing Agreement,
1982 Guaranty, 1984 Indenture, 1984 Financing Agreement, 1984 Guaranty and
the Revenue Notes are hereinafter collectively referred to as the "Bond
Documents."
G. The Borrowers and the Bank entered into a Credit Agreement ("Credit
Agreement") dated as of March 31, 1995, as amended by First Amendment to
Credit Agreement ("First Amendment") dated as of June 30, 1995. Pursuant to
the Credit Agreement, the Bank established a credit facility in favor of the
Borrowers in the aggregate amount of $5,650,000 evidenced by, among other
things (a) a Revolving Credit Note ("Revolving Note") dated March 31, 1995,
as amended by Amendment to Revolving Credit Note dated as of June 30, 1995 in
the principal amount of $3,250,000, and (b) a Term Note ("Term Note") dated
March 31, 1995 in the original principal amount of $2,400,000.
H. On September 26, 1995, the Bank and the Borrowers entered into a
certain letter agreement ("Line of Credit Agreement") by which the Bank
established a demand line of credit facility in favor of the Borrowers in the
amount of $2,000,000. Such facility is evidenced by, among other things, a
Line of Credit Demand Note ("Demand Note") dated September 26, 1995 in the
principal amount of $2,000,000. The Revolving Note, Term Note and Demand
Note are hereinafter collectively referred to as the "1995 Notes".
I. In connection with the Line of Credit Agreement, (a) Nuclear Metals
and the Bank entered into a Warrant Agreement ("Warrant Agreement") dated
September 26, 1995,
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and (b) Nuclear Metals issued to the Bank a certain warrant ("Warrant")
evidencing the Bank's right to purchase at any time on or before September
26, 2005, 25,000 shares of Nuclear Metals common stock, $.10 par value, at a
purchase price of $11.89 per share (as such number of shares and such price
per share may be adjusted pursuant to the Warrant). The Credit Agreement,
Line of Credit Agreement, 1995 Notes, the Warrant Agreement, Warrant, the
"Security Agreement" and the "1995 Guaranty" (each as defined below) and all
other agreements and instruments executed in connection with any of the
foregoing other than this Agreement, are hereinafter collectively as the
"Loan Documents." The obligations to the Bank of the Borrowers under the
Loan Documents (other than the Warrant, Warrant Agreement and 1995 Guaranty)
are joint and several.
J. To secure the obligations of the Borrowers to the Bank under the
Loan Documents and the Bond Documents, the Borrowers pursuant to a Joint
Security Agreement ("Security Agreement") dated as of March 31, 1995, as
amended by the First Amendment and First Amendment to Joint Security
Agreement dated as of September 26, 1995, granted the Bank a security
interest in all accounts, inventory, equipment and general intangibles
(including all tax refunds, patents, patent applications, trademarks and
trademark applications) in which either Borrower then had or thereafter
acquired any rights and the proceeds therefrom and accessions thereto
(collectively, "Collateral"). The Bank perfected such security interest by
the filing of UCC-1 Financing Statements with the Massachusetts Secretary of
State's Office, the Town Clerk of Concord, Massachusetts and the South
Carolina Secretary of State's Office. Additionally, the Bank filed with the
United States Patent and Trademark Office a Trademark Assignment of Security
between Nuclear Metals and the Bank dated
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September 26, 1995 and a Patent Assignment of Security between Nuclear Metals
and the Bank dated September 26, 1995 relating to the trademarks and patents
respectively described therein.
K. Subsequent to the closing of the transactions contemplated by the
Credit Agreement, Carolina Metals executed and delivered to the Bank a
Guaranty Agreement ("1995 Guaranty") dated as of April 13, 1995 by which,
among other things, Carolina Metals unconditionally guarantees to the Bank
the prompt payment and performance of all obligations of Nuclear Metals to
the Bank, including without limitation, any obligation and liability of
Nuclear Metals related to or in connection with any foreign exchange
transaction between Nuclear Metals and the Bank.
L. The Borrowers are in default of their obligations to the Bank under
the Loan Documents and the Bond Documents.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. CAPITALIZED TERMS. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to them in the Credit
Agreement.
2. CURRENT INDEBTEDNESS.
(a) As of the date hereof, the total indebtedness of the Borrowers
due and owing to the Bank under, arising from or in connection with the
Loan Documents is $3,890,200.04, comprised of (i) $1,000,000 in
principal and $2,500.00 in interest under the Revolving Note,
(ii) $1,680,000 in principal and $4,666.67 in interest under
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the Demand Note, and (iii) $1,200,000.03 in principal and $3,033.34 in
interest under the Term Note, plus fees and charges and costs of
collection, including the unpaid arrears in the amount of $42,261.67
for the 1% facility fee ("Facility Fee Arrears") under the Line of
Credit Agreement for the months of September, October, November and
December of 1995 and reasonable attorneys' fees (collectively, together
with any and all reimbursement obligations of the Borrowers under, in
connection with or related to any letter of credit issued by the Bank
for the account of either Borrower (collectively, (L/C's), "Credit
Agreement Obligations"). The Credit Agreement Obligations are joint
and several obligations of the Borrowers to the Bank.
(b) As of the date hereof, the total indebtedness of the Borrowers
due and owing to the Bank under, arising from or in connection with the
Bond Documents is $658,204.12, comprised of (i) $357,142.78 in
principal and $590.30 in interest under the 1982 Revenue Note, and
(ii) $300,000.00 in principal and $471.04 in interest under the 1984
Revenue Note, plus fees, charges, costs of collection, including
reasonable attorneys' fees (collectively, "Bond Obligations"). The
Credit Agreement Obligations and the Bond Obligations are hereinafter
collectively referred to as the "Obligations." The Obligations are due
and owing to the Bank without setoff, counterclaim or defense.
3. VALIDITY AND PRIORITY OF SECURITY INTEREST; MORTGAGE.
(a) The security interest granted to the Bank by the Borrowers
pursuant to the Security Agreement, as amended hereby, (i) constitutes a
first priority perfected valid, binding and enforceable security
interest in the Collateral, together with all other personal property of
the Borrowers which may be perfected by the filing of UCC-1
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Financing Statements, and (ii) such security interest secures the
Obligations, together with any and all other obligations of the
Borrowers to the Bank now existing or hereafter arising, including all
other obligations of the Borrowers to the Bank under, related to or in
connection with this Agreement, as may be amended from time to time, and
the Loan Documents and Bond Documents, as amended hereby and as may be
further amended from time to time.
(b) Pursuant to the First Mortgage, Second Mortgage, 1982 Indenture
and 1984 Indenture, the Bank has a duly recorded, valid and binding and
enforceable first mortgage and second mortgage on the South Carolina Real
Property, each of which secures the Bond Obligations.
4. DEFAULTS. The Borrowers are in default of (a) Section 1.02(a),
Section 1.02(c), Section 4.08, Section 4.12, Section 4.13, Section 4.22 and
clause (k) of Article V of the Credit Agreement, (b) paragraph numbered 3 of
the Line of Credit Agreement, and (c) Section 3.3 of the 1984 Guaranty. The
above defaults (other than the default relating to Sections 4.12 and 4.13 of
the Credit Agreement) shall be deemed to be waived until the Maturity Date;
upon which such limited waiver shall be void and of no effect and the Bank
shall have, without limitation, rights available to it under this Agreement,
the Loan Documents, the Bond Documents and applicable law. In the event that
any other or additional Event of Default occurs or any other or additional
default occurs under the Bond Documents subsequent to the date hereof, this
limited waiver shall be deemed void and of no effect, at the election of the
Bank. The defaults with regard to Sections 4.12 and 4.13 of the Credit
Agreement shall be deemed waived, provided, however, such waiver shall be
void and of no effect if on or before
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April 1, 1996, (a) the Borrowers and Palmetto Federal Savings Bank of South
Carolina ("Palmetto") have not executed and delivered to the Bank a
subordination and intercreditor agreement regarding Palmetto's secured
$500,000 loan ("Palmetto Loan") to CMI, which agreement shall be in form and
substance satisfactory to the Bank, or (b) if the Borrowers have not
requested any funding of the Palmetto Loan, (i) the borrowing facility
thereunder has been terminated, (ii) the Borrowers have obtained a release
from Palmetto of all obligations and liabilities relating to the Palmetto
Loan in form and substance satisfactory to the Bank and any notes issued in
connection therewith have been marked "canceled" and returned to the
Borrowers and (iii) the Borrowers have obtained from Palmetto discharges and
releases of all liens and encumbrances in favor of Palmetto on any real or
personal property of either Borrower, which discharges and/or releases shall
be in form and substance satisfactory to the Bank.
5. VALIDITY AND ENFORCEABILITY OF DOCUMENTS.
(a) The Loan Documents and the Bond Documents, as amended hereby,
are valid, binding and enforceable against the parties thereto in
accordance with their respective terms.
(b) The 1995 Guaranty is a valid, binding and enforceable absolute
and unconditional guaranty by which Carolina Metals guarantees to the
Bank the payment of the Obligations, together with the payment and
performance of all other obligations to the Bank of Nuclear Metals now
existing or hereafter arising.
(c) The 1984 Guaranty, as amended hereby, is a valid, binding
enforceable absolute and unconditional guaranty by which the Borrowers
guarantee to the Bank the
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full and prompt payment of the principal and interest due under the
1984 Revenue Note and any other sums due and payable by the Issuer
thereunder or under the 1984 Indenture.
(d) The 1982 Guaranty, as amended hereby, is a valid, binding
enforceable absolute and unconditional guaranty by which Nuclear Metals
guarantees to the Bank the full and prompt payment of the principal and
interest due under the 1982 Revenue Note and any other sums due and
payable by the Issuer thereunder or under the 1982 Indenture.
(e) The Warrant is a valid, binding and enforceable warrant pursuant
to which the Bank has the right to purchase on or before September 26,
2005, 25,000 shares of Nuclear Metals common stock, $.10 par value, at
a purchase price of $11.89 per share (as such number of shares and such
price per share may be adjusted pursuant to the Warrant).
6. REPRESENTATIONS AND WARRANTIES. The Borrowers represent and warrant
to the Bank that:
(a) INTENTIONALLY DELETED.
(b) Attached hereto as SCHEDULE B is a true and accurate copy of
the Public Law 85-804 contract adjustment request ("U.S. Request")
submitted on September 22, 1995, to the United States Army.
(c) Attached hereto as SCHEDULE C is a true and correct copy of the
contract and any amendments thereto between Nuclear Metals and British
Aerospace Limited Royal Ordnance Division ("BAROD") relating to the sale
("BAROD Sale") by Nuclear
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<PAGE>
Metals to BAROD of 7,500 CHARM III Ammunition Blanks. The Bank has been
named as payee under such contract.
(d) Attached hereto as SCHEDULE D is a true and accurate list of
all respective account debtors of the Borrowers, together with their
respective addresses.
(e) Other than with respect to the Events of Default and defaults
described in Section 4 hereof, all of the representations and warranties
made to the Bank in the Bond Documents and the Loan Documents are true
and accurate as of the date hereof as if made as of the date hereof
(except as the same may relate to an earlier date).
(f) Set forth on SCHEDULE F attached hereto is a true and accurate
list of all patents, patent applications, trademarks and trademark
applications owned by either Borrower and each such patent and trademark
is valid and enforceable and Nuclear Metals or Carolina Metals (as the
case may be) is the sole and exclusive owner of the entire and
unencumbered right, title and interest therein and thereto (as the case
may be), free and clear of any liens, charges, licenses, collateral
assignments, mortgages or other encumbrances other than in favor of the
Bank.
(g) Each Borrower has the full power and authority and has taken all
required corporate and other action necessary to permit it to execute and
deliver and perform all of its obligations contained in this Agreement
and in the Loan Documents and Bond Documents, as amended hereby, and all
documents, agreements or instruments required hereby or incident or
collateral hereto and none of such actions will violate any provision of
law applicable to its charter documents, or result in the
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breach of or constitute its default under any agreement or instrument
to which either Borrower is bound.
(h) No Subsidiary of either Borrower (other than CMI) has assets
with a fair market value greater than $10,000.
7. AMENDMENTS TO CREDIT AGREEMENT.
(a) Section 1.02(a) of the Credit Agreement is amended by replacing
"February 29, 1996" with "December 31, 1996".
(b) The first paragraph of Section 1.02(b) of the Credit Agreement is
amended by replacing the text thereof with the following:
"The Borrowing Base shall consist of (i) the sum of 70% of
Eligible Accounts plus the Overadvance Amount, less (ii) the
aggregate dollar amount of L/C's permitted to be outstanding
pursuant to Section 1.05(e) hereof, plus (iii) the aggregate
amount of certificates of deposit issued by the Bank in favor of
either Borrower in which the Bank has a first priority protected
security interest.".
(c) Pursuant to paragraph numbered 3 of the First Amendment, the Bank
and the Borrowers acknowledge and agree that only the text of the first
paragraph of Section 1.02(b) of the Credit Agreement was replaced with
new text.
(d) Section 1.02(b) of the Credit Agreement is further amended by
replacing the last paragraph thereof with the following:
"'Overadvance Amount' means (a) for the period January 11,
1996 to March 15, 1996, $2,000,000, (b) for the period March
16, 1996 to May 15, 1996, $1,500,000, (c) for the period May
16, 1996 to October 31, 1996, $1,000,000, and (d) at any time
after October 31, 1996, $0.".
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<PAGE>
(e) Section 4.22 of the Credit Agreement is revised by replacing
the text thereof with the following:
"The Net Income of the Borrowers on the dates set forth below
shall not be less than the amounts set forth opposite such dates:
Date Net Income
---- -----------
March 31, 1996 $250,000
June 30, 1996 $ 25,000
September 30, 1996 $175,000
December 31, 1996 and on the
last day of each consecutive three-
month period thereafter $175,000
"Net Income" shall mean all net income of the Borrowers before
interest and taxes.".
(f) New Section 4.31 shall be added to the Credit Agreement as
follows:
"SECTION 4.31. WORKING CAPITAL. The Working Capital of the
Borrowers on the dates set forth below shall not be less than the
amounts set forth opposite such dates:
Dates Working Capital
----- ---------------
January 11, 1996 $14,250,000
March 31, 1996 $14,750,000
June 30, 1996 $14,900,000
September 30, 1996
December 31, 1996 and on the
last day of each consecutive three
month period thereafter $13,850,000
'Working Capital' means the current assets (excluding intangible
assets such as goodwill, patents, trademarks, research and
development costs and similar items deemed to be intangible by
the Bank) of the Borrowers less their current liabilities.".
(g) Article V of the Credit Agreement is revised by replacing
"4.30" in clause (i) thereof with "4.31".
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<PAGE>
(h) Notwithstanding anything to the contrary contained in the Credit
Agreement, the Borrowers shall furnish to the Bank a Borrowing Base
Certificate on the second and fourth Tuesday of each month.
(i) Section 6.05 of the Credit Agreement is amended by replacing
"William R. Dewey IV" with "Kenneth J. Mooney".
(j) The Credit Agreement is amended by replacing Exhibit 1.02(b)(ii)
thereof with SCHEDULE G attached hereto.
(k) The Credit Agreement is amended by replacing Exhibit 1.02(f)
thereof with SCHEDULE H attached hereto.
8. AMENDMENTS TO LINE OF CREDIT AGREEMENT.
(a) Paragraph numbered 1 of the Line of Credit Agreement is amended
by replacing the text thereof with the following:
"From time to time, at any time prior to December 31, 1995, the
Bank may in its absolute and sole discretion advance such funds
("Line of Credit Advances") as either Borrower may request
from time to time, by written notice to the Bank. Without
limiting the demand nature of the Line of Credit, the Borrowers
shall make principal payments to the Bank to reduce the Line of
Credit Advances on or before the dates set forth below to the
respective amounts set forth opposite each such date:
Principal Balance of
Date Line of Credit Advances
---- -----------------------
January 12, 1996 $1,180,000
January 31, 1996 $1,080,000
February 29, 1996 $ 880,000
March 31, 1996 $ 580,000
April 15, 1996 $ 0
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After December 31, 1995, the Borrowers shall not be entitled to
request, and the Bank shall not be obligated to make, any further
Line of Credit Advances.".
(b) Paragraph numbered 2 of the Line of Credit Agreement is amended
by deleting the second sentence thereof.
(c) Paragraph numbered 4 of the Line of Credit Agreement is amended
by replacing the text thereof with "DELETED".
(d) Paragraph numbered 5 of the Line of Credit Agreement is amended
by replacing the text thereof with "DELETED".
9. Amendments to 1982 Guaranty and 1994 Guaranty.
(a) The 1982 Guaranty is amended by replacing the text of
Sections 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8 and 3.9 with "DELETED".
(b) The 1984 Guaranty is amended by replacing the text of
Sections 3.2, 3.3, 3.4, 3.5, 3.6 and 3.7 with "Deleted".
(c) The occurrence of any Event of Default shall constitute a
default under the 1982 Guaranty and 1984 Guaranty.
10. AMENDMENTS TO SECURITY AGREEMENT.
(a) Section 1 of the Security Agreement is amended by including in
the definition of the term "Collateral" fixtures, documents,
instruments, chattel paper (each as defined by the Uniform Commercial
Code as adopted in Massachusetts) and all other personal property to the
extent not previously included in such definition, in which either
Borrower now has or hereafter acquires any rights and the proceeds
therefrom (including without limitation, proceeds of insurance) and
accessions thereto.
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(b) The term "Credit Agreement," as defined in the Security
Agreement is redefined to mean the Credit Agreement dated as of March 31,
1995 between the Borrowers and the Bank, as amended, restated,
modified and/or supplemented from time to time.
11. MANDATORY REPAYMENT UNDER LINE OF CREDIT AGREEMENT, CREDIT
AGREEMENT AND COLLATERALIZATION. Notwithstanding anything to the contrary
contained in the Line of Credit Agreement, as amended hereby, and without
limiting the demand nature of the "Line of Credit" (as defined therein), upon
the earlier to occur of (a) any payment by BAROD in respect of the BAROD
Sale, and (b) any payment in respect of the U.S. Request, Nuclear Metals
shall repay all outstanding Line of Credit Advances (as defined in the Line
of Credit Agreement, as amended hereby), together with all accrued interest
thereon and all fees and expenses associated therewith. Additionally, upon
the earlier to occur of (a) and (b) above, Nuclear Metals shall (i) purchase
from the Bank a certificate or certificates of deposit in the aggregate
amount of $1,000,000, (ii) pledge to the Bank a first priority security
interest therein to secure the Obligations, together with any and all other
obligations of the Borrowers to the Bank now existing or hereafter arising,
(iii) evidence such pledge by dating, executing and delivering to the Bank
the Security and Pledge Agreement in the form attached to Schedule I hereto
or such other agreement as the Bank requires, (iv) take all other actions
requested by the Bank in connection with such pledge, including the delivery
to the Bank of a legal opinion from Borrowers' counsel covering, among other
things, the perfection of such pledge, which opinion shall be in form and
substance satisfactory to the Bank, and (v) repay all outstanding Advances
under the Credit Agreement, together with accrued interest thereon and all
fees and
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<PAGE>
expenses associated therewith. Subsequent to the repayment of such Advances,
the Borrowers shall be permitted to request further Advances in accordance
with the terms of the Credit Agreement, as amended hereby.
12. FORBEARANCE AND RESTRUCTURING FEE AND FACILITY FEE ARREARS. On the
date hereof, the Bank shall have earned a forbearance and restructuring fee
in the amount of $150,000, which the Borrowers shall pay to the Bank in
immediately available funds upon the earlier to occur of (a) any Event of
Default, (b) December 31, 1996, (c) any payment by BAROD in respect of the
BAROD Sale, and (d) any payment in respect of the U.S. Request. Upon the
earlier of (a), (b), (c) and (d) above, the Borrowers also shall pay the
Facility Fee Arrears. Nothing contained herein shall modify the Borrowers'
prospective monthly obligations to pay the 1% facility fee pursuant to the
Line of Credit Agreement.
13. APPOINTMENT OF RECEIVER. Effective upon the occurrence of an Event
of Default subsequent to the date hereof, in connection with any action
brought by the Bank in a court of competent jurisdiction, the Borrowers
irrevocably consent to the appointment of a receiver for each or both of them
and their respective assets and businesses and the Borrowers agree to execute
any and all documents requested by the Bank relating to the appointment of
such receiver or receivers.
14. ADDITIONAL REMEDIES. In any bankruptcy proceeding involving either
Borrower, the Borrowers consent to the granting of relief from the automatic
stay of Section 362 of the Bankruptcy Code in favor of the Bank to permit it
to exercise its rights and remedies under the Loan Documents, Bond Documents,
this Agreement and applicable law, including its rights and remedies as a
secured creditor and mortgagee.
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<PAGE>
15. WAIVER OF DEFENSES AND RELEASE OF BANK. The Borrowers jointly and
severally release, remise and forever discharge the Bank in each of its past,
present and future officers, directors, stockholders, agents, employees,
affiliates, attorneys, successors and assigns of and from any and all claims,
obligations, demands, causes of action, counterclaims and defenses of any
kind or nature whatsoever (including any claims, counterclaims or defenses
based on so-called lender liability), which either or both of the Borrowers
now has against the Bank and/or any of its past, present and future officers,
directors, stockholders, agents, employees, affiliates, attorneys, successors
and assigns, or ever had from the beginning of the world to the date hereof.
16. ADDITIONAL INFORMATION. In addition to the information required by
Section 4.08 of the Credit Agreement, the Borrowers shall furnish the Bank
with the following:
(a) within 30 days of the end of each monthly accounting period,
(i) an accounts receivable aging, (ii) an accounts payable aging, and
(iii) a detailed inventory breakdown, each of which shall be in a form
satisfactory to the Bank.
(b) on the second and fourth Tuesday of each month, a status report
in form satisfactory to the Bank, regarding the BAROD Sale, the U.S.
Request, the joint venture with Lockheed-Martin, the privatization of
United States Enrichment Corporation and the memorandum of understanding
between such Corporation, Nuclear Metals and/or Carolina Metals regarding
the conversion of Uranium Hexafluoride to Uranium Tetrafluoride and the
status of the Borrowers' efforts to raise additional funds through
equity or debt investments or the sale of assets.
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17. FINANCIAL ADVISOR. On or before February 15, 1996, the Borrowers
shall engage a financial advisor, selected by the Borrowers but acceptable to
the Bank, to review the operations and assets of the Borrowers, assist the
Borrowers in the preparation of their business plan and in raising additional
funds through equity or debt investments or the sale of assets.
18. ADDITIONAL CAPITAL. On or before July 1, 1996, the Borrowers shall
provide to the Bank written evidence in a form satisfactory to the Bank that
the Borrowers have raised additional funds sufficient to on or before October
31, 1996 (a) satisfy in full the Obligations (other than contingent
obligations under L/C's), and (b) collateralize all contingent obligations of
the Borrowers relating to L/C's.
19. SUBSIDIARIES. If the assets of any Subsidiary (other than CMI) have
a fair market value greater than $100,000, such Subsidiary shall (a) execute
and deliver to the Bank a guaranty in form and substance satisfactory to the
Bank by which it guarantees all obligations of the Borrowers to the Bank, (b)
pledge and grant to the Bank a first priority security interest in its assets
to secure its guaranty obligations, (c) execute and deliver to the Bank a
security agreement in form and substance satisfactory to the Bank effecting
the foregoing, (d) execute and deliver to the Bank Uniform Commercial Code
Financing Statements required by the Bank, and (e) cause to be delivered to
the Bank an opinion from such Subsidiary's counsel in form and substance
satisfactory to the Bank.
20. GOVERNMENT CONTRACTS. In connection with any account due from any
municipal, state, federal or foreign governmental unit, the Borrowers shall
take all actions required by the Bank to more completely vest in and assure
to the Bank its rights as a secured
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<PAGE>
creditor and/or assignee of each such account, including without limitation,
all actions required by the Bank in connection with the Federal Assignment of
Claims Act.
21. LOCKBOXES. Unless otherwise agreed to in writing by the Bank, on
or before January 31, 1996, the Borrowers shall (a) instruct all of their
account debtors to mail remittances directly to "lockboxes" maintained with
the Bank, which instructions shall not be rescinded or modified, and (b)
enter into lockbox agreements with the Bank in form and substance
satisfactory to the Bank. If either Borrower thereafter shall nonetheless
receive any collections of accounts and other proceeds of collateral, such
Borrower shall hold all such collections and proceeds in trust for the Bank
without commingling the same with other funds of such Borrower and such
Borrower shall promptly, not later than two days after receipt thereof,
transmit such collections and proceeds to its lockbox in the identical form
in which they were received by the Borrower. Collections in the lockboxes
shall be deposited by the Bank into the respective general accounts of the
Borrowers maintained at the Bank, except that the Bank reserves the right in
its sole discretion to require collections of accounts and other proceeds of
collateral to be deposited into a trust account or trust accounts at the Bank
and thereafter to be applied when they become collected funds to reduce the
amount outstanding under the Credit Agreement, Line of Credit Agreement
and/or Bond Documents.
22. SUBORDINATED DEBT. The Borrowers shall not amend or modify any
agreement or instrument evidencing any Subordinated Debt or any indebtedness
due to Palmetto. Any defaults under any Subordinated Debt or under any
agreement or instrument evidencing the indebtedness to Palmetto shall
constitute an Event of Default under the Credit Agreement.
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23. DEFAULT AND RIGHTS AND REMEDIES OF THE BANK. The failure of either
Borrower to perform any of its obligations hereunder or any obligations
relating to or in connection with the Bond Documents, shall constitute an
Event of Default under the Credit Agreement. Additionally, if any
representation or warranty made hereunder or in connection herewith shall
prove to have been false or incorrect in any material respect when made, it
shall constitute an Event of Default under the Credit Agreement. Upon the
occurrence of an Event of Default subsequent to the date hereof, the Bank in
its discretion may exercise any or all of the rights and remedies under this
Agreement, the Loan Documents, the Bond Documents, and/or applicable law, it
being understood that no such right or remedy is intended to be exclusive of
any other right or remedy, but each and every right and remedy shall be
cumulative and shall be in addition to every right and remedy given in this
Agreement, the Loan Documents, the Bond Documents now or hereafter existing
at law or in equity or by statute, and may be exercised from time to time as
often as may be deemed expedient by the Bank.
24. EXPENSES. The Borrowers shall reimburse the Bank on demand for all
reasonable costs, expenses and charges incurred by the Bank in connection
with the preparation, administration and enforcement of this Agreement, any
and all agreements, instruments and releases executed in connection herewith,
the Loan Documents, the Bond Documents and the exercise of the Bank's rights
and remedies under any of the foregoing and/or applicable law.
25. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed one original, but all of which
together constituting one and the same instrument.
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<PAGE>
26. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts.
27. CLOSING. The consummation of the transactions contemplated by this
Agreement shall take place at a closing to be held on or before January 11,
1996 at the offices of Goodwin, Procter & Hoar, Exchange Place, Boston,
Massachusetts, or at such place or time as the parties hereto otherwise may
agree.
28. SUCCESSORS, ETC. This Agreement shall be binding upon and shall
inure to the benefits of any successors to or assigns of the parties hereto,
and this Agreement and all documents and instruments related hereto may not
be amended, waived or modified in any manner without the written consent of
the parties hereto.
29. FURTHER ASSURANCES. The Borrowers shall execute and deliver to the
Bank any and all other agreements, documents and instruments as the Bank
deems necessary or appropriate to effect fully the purposes of this
Agreement. The foregoing provision in no way limits or modifies any of the
other obligations of the Borrowers under any other provision in this
Agreement.
30. SETOFF. Any sums due from the Bank to either Borrower, any property
in the possession of the Bank and any balance in the Borrowers' accounts with
the Bank may be held and treated as collateral security for the payment of
the obligations of the Borrowers to the Bank and, before or after the
occurrence of an Event of Default, may be applied to the payment of such
obligations regardless of the adequacy of other collateral.
31. CONSENT TO JURISDICTION AND WAIVER OF JURY TRIAL. THE BORROWERS
IRREVOCABLY (A) CONSENT AND SUBMIT TO THE JURISDICTION OF THE
21
<PAGE>
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS, AND THE
COURTS OF THE COMMONWEALTH OF MASSACHUSETTS IN CONNECTION WITH ANY ACTION,
PROCEEDING OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE LOAN
DOCUMENTS, THE BOND DOCUMENTS AND/OR ANY INSTRUMENT OR DOCUMENT REQUIRED
HEREBY OR INCIDENT OR COLLATERAL HERETO, AND (B) WAIVE ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING INVOLVING THE BANK.
32. EFFECTIVENESS OF AGREEMENT. This Agreement shall not be effective
unless on or before January 12, 1996, the Borrowers shall have made to the
Bank a $500,000 principal payment in immediately available funds to reduce
Line of Credit Advances (as defined in the Line of Credit Agreement).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as a
sealed instrument as of the first date 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
22
<PAGE>
STATE STREET BANK AND TRUST
COMPANY
By: /s/ Kenneth J. Mooney
-----------------------------------
Name: Kenneth J. Mooney
Title: Vice President
23
<PAGE>
[LOGO]
ANNUAL REPORT
1995
<PAGE>
OUR BUSINESS
Nuclear Metals, Inc. develops and manufactures a variety of
advanced metal products serving a diverse customer base which includes
the aerospace, environmental, defense, medical and energy industries.
CONTENTS
President's Letter 2
Market Profile 4
Selected Financial Data 12
Management's Discussion and Analysis of Operations 14
Consolidated Balance Sheets 16
Consolidated Statements of Operations 17
Consolidated Statements of Stockholders' Equity 18
Consolidated Statements of Cash Flows 19
Notes to Consolidated Financial Statements 20
Report of Independent Public Accountants 32
Corporate Directory
FINANCIAL HIGHLIGHTS 1995 1994
Net Sales $ 18,784,000 $ 19,004,000
Net Income (loss) $ 510,000 $(10,196,000)
Earnings (loss) per Share $ .22 $ (4.43)
Weighted Average Number of Shares of
Common Stock Outstanding 2,352,756 2,300,131
Number of Employees at Year-end 200 189
Total Assets $ 40,886,000 $ 40,542,000
Working Capital $ 15,866,000 $ 17,477,000
Stockholders' Equity $ 27,245,000 $ 26,252,000
<PAGE>
NMI will continue to strengthen our product and customer base into the
21st century. The entire organization is committed to providing superior
metallurgical technology, products, and services to our customers by
continuously striving for excellence in all we do. The foundation of
NMI's success in the marketplace is technological excellence and
innovation. These qualities are evidenced by the introduction of our
patented Beralcast-TM-, a beryllium aluminum alloy, in several new and
expanding aerospace systems during 1995. Making an accelerated
transition from development to production of a new engineering material
can only occur when a team of individuals, which includes our customers,
solves technical, cost, and scheduling issues in a cooperative manner.
Our involvement in the Comanche Helicopter Team has solidified the notion
that Customer Partnerships, with a focus on cost as a design requirement,
are key to continued success and expansion in today's aerospace market.
NMI is increasing its capability to accommodate the tremendous growth
that is occurring in the Beralcast-TM- product area.
Several new domestic and international customers incorporated
Beralcast-TM- into their systems during 1995 to take advantage of its
light weight, high stiffness and strength, and thermal characteristics.
In the upcoming years, NMI expects to introduce low cost manufacturing
techniques for expanded use of Beralcast-TM- in the commercial
marketplace.
<PAGE>
Through the fifty years that NMI has created new products and solved
customer's metallurgical problems, we have steadily built a profitable
base of niche metal products and services that is the foundation for
continued creativity and product innovation. The production of high
purity Cobalt Chrome alloy powders for the medical prosthetic device
industry is but one mature product where NMI's unmatched technical and
quality standards are required by customers in the medical industry.
The stringent quality and reliability needs of the satellite and
spacecraft industry mean continued reliance on NMI for seamless Beryllium
tubing and Bi-metallic transition joints. Commercial applications for our
Depleted Uranium(DU) sheilding products have been strengthened by the
expanding international marketplace which is being utilized by our
existing customers. DU is still the most effective gamma radiation
shield available at competitive prices.
Offering extrusion services to customers in the Superconducting wire
area, for precision navigational systems, and educational fields for a
variety of other alloy systems, ensures that NMI is abreast of new
materials as they are developed.
We are working diligently to improve the quality and lower the
manufacturing costs associated with all of our niche products to offer
increasing value to our customers.
<PAGE>
Carolina Metals, Inc. (CMI) has the buildings, permits, and talented
workforce to accept the challenge of converting radioactive scrap metal
into useful products. This capability was successfully demonstrated
during 1995 under Westinghouse Savannah River Company's Beneficial Reuse
Program for recycling slightly contaminated Stainless Steel into useful
products. NMI's competitive proposal for a full scale recycling facility
to manage all of the DoE's steel scrap was selected by Westinghouse and
recommended for implementation. This facility will utilize
State-of-the-Art technology to be competitive with the commercial
marketplace while ensuring that contaminated materials are recycled
rather than buried as a waste. The same facility would use its excess
capacity in an environmentally sound manner to recycle contaminated steel
from the commercial nuclear industry.
As a Strategic Team member, ARMCO Inc., the nations premiere specialty
steel producer, will participate with NMI in the construction and
production operations associated with the large scale recycling facility.
There are several DoE initiatives underway to advance the likelihood of
a major recycling program in the near future. CMI will continue to offer
melting and recycling services to the DoE, DoD, and commercial industry
with existing equipment while production opportunities solidify.
<PAGE>
The United States Enrichment Corporation (USEC) has committed to the
commercialization of the Atomic Vapor Laser Isotope Separation Process
(AVLIS) which will replace Gaseous Diffusion as the means for separating
fissionable U-235 from natural uranium. This transition will occur over
the next ten years. The annual AVLIS feed requirements, which CMI is
ideally suited to produce with available floor space, permits, and
trained personnel, will be 10,000 metric tons per year. NMI has supplied
the AVLIS feed stock for the development work performed at the Lawrence
Livermore National Laboratory.
USEC is scheduled to privatize from the Department of Energy (DoE) during
1996. Once this occurs, USEC will be required by the Nuclear Regulatory
Commission to convert the byproduct stream of Uranium Hexafluoride gas
(UF(6)), created during the gaseous diffusion process, into a stable
product such as Uranium Tetrafluoride (UF(4)). With the only installed
domestic capacity, and ability to ramp up to significantly higher rates,
CMI offers USEC a Strategic Partnership opportunity that is unmatched in
the uranium industry. As the DoE's UF(6) stockpile of over 1 billion
pounds is addressed, opportunities to increase conversion revenues will
materialize.
<PAGE>
PRESIDENT'S LETTER
DEAR STOCKHOLDER:
Fiscal 1995 was a successful transition year for NMI. While sales
revenues were flat, we achieved net income of $522,000 compared to a loss
of $10.2 million in fiscal 1994. Our year ending backlog more than
doubled to $30.7 million which was the highest in eight years and the
second highest in Company history. NMI has transitioned from being a
Depleted Uranium (DU) penetrator company to a diversified company with
four new markets each having potential annual sales revenue which could exceed
our existing revenue. In effect we view ourselves as a high growth
start-up company in these new markets.
FINANCIAL HIGHLIGHTS
Fiscal 1995 sales of $18.8 million and net income of $522,000 or
$0.22/share compared favorably to fiscal 1994 sales of $19 million and a
loss of $10.2 million or $4.43/share. Year-end backlog more than
doubled to $30.7 million from $14.5 million the prior year. Capital
expenditures for the year were $0.8 million.
LIQUIDITY
Our balance sheet remains stable even after replacing, at a discount,
long term debt with short term borrowing. Year-end cash and marketable
securities were $1.25 million. Inventories of $17.5 million were $3.1
million higher than the prior year. This inventory increase relates to DU
penetrator blanks made for a foreign customer under a purchase order
option that has not yet been funded. Funding delays on this option have
caused serious liquidity concerns since September 1995. We expect
funding and full payment in the second quarter of Fiscal 1996 which will
relieve the ongoing liquidity concerns. We are most grateful to State
Street Bank & Trust Company which has increased and extended our line of
credit to cover this delayed payment.
BERALCAST-TM- INVESTMENT CASTINGS
Fiscal 1995 sales of our Beralcast-TM- products jumped 800% over the
prior year along with a corresponding increase in year-end backlog.
Lockheed Martin has become our largest customer replacing Olin
Corporation (a DU penetrator customer). Our patented alloys have been
chosen by Lockheed Martin for 52 different components in the
Electro-Optic system of the Army's new Comanche helicopter. Prototype
hardware for the Comanche will be delivered in fiscal 1996 and 1997 with
production beginning in 2002. NMI's lightweight, high-strength alloys
were also selected by Rockwell International for use on the Army's new
Patriot missile, and for upgraded missile guidance systems. Major
Aerospace companies including Boeing, Loral, Honeywell, Hughes Aircraft
Co., United Technologies, and others have recently purchased Beralcast-TM-
prototype hardware for future use in production of systems. Aircraft
engine manufacturers have expressed interest in evaluating Beralcast-TM- for
several components. Once production begins, NMI anticipates dramatic
sales revenue increases.
UNITED STATES ENRICHMENT CORPORATION (USEC)
The United States Government is in the process of privatizing uranium
enrichment services in 1996. The new company called USEC has committed
to commercializing a new uranium enrichment process developed by Lawrence
Livermore National Laboratory (LLNL). This new process is called
Advanced Vapor Laser Isotope Separation (AVLIS). NMI has supplied
virtually all the DU feed stock to LLNL since 1980. The Company has
proposed a partnership with USEC to transfer the feed stock process
technology from LLNL to Carolina Metals, Inc. (CMI) our wholly owned
subsidiary in Barnwell SC. A pilot plant would be constructed over the
next three years with a full size commercial facility scheduled for
production commencing in 2002. CMI is ideally suited for this major new
initiative, with a trained workforce, ample remote property, licenses and
strong community acceptance. Once in production we anticipate
substantial sales revenue for AVLIS feed stock.
Once USEC is privatized it will be required by the Nuclear Regulatory
Commission to dispose of the depleted UF(6) tails from the existing
gaseous diffusion plants. NMI has submitted a partnership proposal to
USEC to perform this work at CMI which is the only operational and
licensed depleted UF(6) conversion plant in North America. Acceptance of
this proposal would result in a major expansion at CMI to handle the
large volumes of depleted UF(6) generated each day by USEC. The
Department of Energy (DoE) has its own inventory of over one billion
pounds of depleted UF(6) that one day will need to be converted to a more
stable and useful form. This marketplace should provide a substantial
contribution to our future sales and earnings.
<PAGE>
RECYCLING CONTAMINATED METAL
During fiscal 1995 the Company installed new metal melting equipment and
received the appropriate license modifications at CMI to demonstrate the
recycling of contaminated stainless steel into useful products for the
Department of Energy. The Company has undertaken an expansion project to
double existing metal melting capabilities at CMI to better service DoE
and commercial nuclear power customers. The Company entered into a
teaming agreement with Alaron Corporation of Columbia, SC to provide
metal recycling services to the commercial nuclear power industry.
The Company's offer to commercialize advanced steelmaking technology in
partnership with ARMCO Inc. was recommended for approval to DoE by
Westinghouse, Savannah River Co. The DoE is evaluating our proposal to
install a steel micromill at CMI.
PRODUCT SEGMENTS
[PIE CHARTS]
PERSONNEL/DIRECTORS
During fiscal 1995 the Company hired highly skilled technical people to
support increasing Beralcast-TM- business at NMI and expanded by 50% the
workforce at CMI supporting the new metal recycling business.
Our commitment to Research and Development was enhanced by the addition
of a Ph.D. powder metallurgist to develop new applications for our
Specialty Powders, and a Ph.D. chemist to develop recycling processes
primarily for USEC. The Company now has five Ph.D.'s developing
technology to expand our product mix.
It is with deep sadness and regret we report that NMI Director Richard S.
Vokey pased away in July 1995. Mr. Vokey served on the Board of
Directors for 13 years. His sage advice, intelligence, and friendship
will be greatly missed.
ISO 9002 CERTIFICATION
During fiscal 1995 the Company initiated a company-wide effort to receive
ISO 9002 certificate of registration during calendar 1996. We have
joined the US Army's Contractor Performance Certification Program(CP)(2)
that recognizes companies who demonstrate a total commitment to producing
quality products. To become certified we must satisfy rigorous
certification requirements, that include aggressive utilization of
Statistical Process Control (SPC), demonstrate continuous product and
process improvements, and a demonstrated commitment to customer
satisfaction. This program will result in a stronger, more profitable
Company committed to customer satisfaction.
THE FUTURE
We believe NMI's sales and earnings will increase substantially in
fiscal 1996. Never before has the Company seen four new market areas
ideally suited to its technology, licenses, and site locations; each able
to sustain record sales and earnings for the foreseeable future. We have
a tremendous group of talented and dedicated employees, new partnerships
with customers and suppliers all of which translates into an exciting
opportunity for growth in our business. We are committed to achieving
financial results that will enhance shareholder value.
Thank you for your continued support and confidence.
/s/ ROBERT E. QUINN /s/ GEORGE J. MATTHEWS
Robert E. Quinn George J. Matthews [LOGO]
President Chairman of the Board
<PAGE>
SELECTED FINANCIAL DATA
(NOT COVERED BY REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND NUMBER OF EMPLOYEES)
<TABLE>
<CAPTION>
OPERATING RESULTS FOR THE YEAR 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales and Contract Revenues $18,784 $ 19,004 $ 17,019 $42,083 $48,250 $47,662 $49,760 $45,714 $42,395 $41,770
Costs and Expenses 20,708 29,958 27,515 39,791 44,930 44,734 45,350 42,378 45,143 35,810
Operating Income (loss) (1,924) (10,954) (10,496) 2,292 3,320 2,928 4,410 3,336 (2,748) 5,960
Other Income (expense), Net (118) (430) (557) (745) (1,029) (1,706) (1,191) (1,182) (271) (343)
Income (loss) Before Taxes (2,042) (11,384) (11,053) 1,547 2,291 1,222 3,219 2,154 (3,019) 5,617
Provision (benefit) for Income Taxes (1,967) (1,188) (3,746) 626 871 489 972 506 (1,452) 2,835
Extraordinary Gain 585 -- -- -- -- -- -- -- -- --
Cummulative Change in Accounting Principle -- -- 1,100 -- -- -- -- -- -- --
Net Income (loss) 510 (10,196) (6,207) 921 1,420 733 2,247 1,648 (1,567) 2,782
Earnings (loss) per Share .22 (4.43) (2.70) .40 .60 .30 .86 .62 (.58) 1.03
Capital Expenditures, Net 777 709 1,265 1,015 1,349 2,270 3,306 2,812 3,040 2,028
Research and Development 439 575 1,031 1,233 1,357 685 1,007 1,186 679 727
FINANCIAL POSITION AT YEAR-END
Stockholders' Equity 27,245 26,252 36,371 43,037 42,614 41,756 43,135 41,592 40,632 42,198
Shares Outstanding 2,388 2,307 2,295 2,295 2,335 2,384 2,596 2,632 2,701 2,701
Net Book Value per Common Share Outstanding 11.41 11.38 15.85 18.76 18.25 17.52 16.62 15.80 15.04 15.62
Dividends Paid -- -- 459 276 238 251 263 -- -- --
Dividend per Share -- -- .20 .12 .10 .10 .10 -- -- --
Total Assets 40,886 40,542 57,223 66,391 70,810 73,603 76,520 75,461 66,189 71,990
Working Capital 15,866 17,477 24,532 32,571 33,034 32,772 35,578 36,231 27,095 28,605
Long-term Debt (including current installments) 4,480 4,859 8,986 11,372 13,759 16,040 18,405 19,756 11,163 12,624
OTHER DATA
Weighted Average Number of Shares
of Common Stock Outstanding 2,353 2,300 2,295 2,302 2,369 2,447 2,622 2,677 2,701 2,701
Backlog (at Year-end) 30,709 14,512 8,285 10,729 10,398 14,758 19,352 16,016 31,947 18,544
Number of Employees (at Year-end) 200 189 169 231 456 455 574 585 569 529
</TABLE>
THIS SUMMARY SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND
ACCOMPANYING NOTES WHICH APPEAR LATER IN THIS REPORT.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
(NOT COVERED BY REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS)
FISCAL 1995 COMPARED WITH FISCAL 1994
Net sales decreased by $220,000 or 1% in fiscal 1995. Sales in the
Uranium Services and Recycle industry segment increased by $217,000 or 5%.
Sales in the Specialty Metal Products industry segment increased by
$4,818,000 or 66%. Sales in the Depleted Uranium Penetrator industry segment
decreased by $5,255,000 or 75%.
The increase in the Uranium Services and Recycle industry segment was
mainly due to increases in remelt services. The increase in the Specialty
Metal Products industry segment was a result of increased sales of beryllium
products and commercial depleted uranium. The decrease in the Depleted
Uranium Penetrator industry segment was primarily due to lower large caliber
penetrator production sales.
Gross income (net sales and contract revenues less cost of sales)
increased by $5,918,000 to $3,332,000 or 18% of sales as compared to
$(2,586,000) or (14)% of sales for fiscal 1994. This increase in gross income
is primarily due to increased reserves taken in fiscal 1994 and the absence
in fiscal 1995 of losses on certain contracts which occurred during fiscal
1994.
Selling, general and administrative expenses increased by $608,000 to
$4,817,000. This increase was attributable to higher legal and audit costs
which were primarily associated with debt restructuring and a property sale.
As a percentage of sales, these expenses increased to 26% as compared to 22%
for the prior year.
Company-sponsored research and development expenses decreased by $136,000
to $439,000 for fiscal 1995. As a percentage of sales, these expenses were 2%
as compared to 3% in fiscal 1994.
Interest and other income, net, increased to $232,000 for the fiscal year
as compared to $120,000 for the prior year. This increase was mainly due to
a gain recognized during the second quarter of fiscal 1995 on the sale of an
office building.
Interest expense decreased by $200,000 to $350,000 as compared to fiscal
1994. This decrease was primarily the result of reductions in debt during
1995.
The Company realized a $585,000 extraordinary gain, net of taxes of
$10,000, on the early extinguishment of debt.
INCOME TAXES
Income taxes benefited during 1995 and 1994 were at an effective rate
of 96% and 10%, respectively. During fiscal 1995 the Company received
$978,000 in tax refunds from carryback losses and reduced tax reserves by
$989,000 as a result of successful completion of a federal tax audit.
INFLATION
Inflation has not had a material impact on the Company's cost of doing
business. Management attempts to protect the Company by adjusting prices
where market conditions permit and by reviewing and improving production
processes where possible. Price escalation clauses also are negotiated into
long-term contracts when possible.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1995, working capital decreased to $14,366,000 from
$17,477,000 in fiscal 1994. This decrease is primarily due to debt
reduction and restructuring costs.
The Company was profitable in fiscal 1995 for the first time since fiscal
1992, inclusive of a tax benefit of $1,967,000 and a $585,000 gain on early
extinguishment of debt. As a result of cumulative losses in prior years, due
primarily to a downturn in the Company's defense contracting business and
related downsizing, as well as to the costs of investing in new lines of
business, the Company has experienced cash flow difficulties and has funded
its operating and cash flow deficits primarily from borrowings.
The Company's cash flow projections for fiscal 1996 indicate that there is
sufficient cash to sustain operations. The report of the Company's
independent auditors included with the Company's financial statements for the
fiscal year ended September 30, 1995, expresses concern about the Company's
ability to continue as a going concern in light of the current status of its
indebtedness and potential delays in receiving a critical sales order and
payment from a foreign customer for penetrator blanks. During fiscal 1995,
the Company manufactured penetrator blanks in accordance with a contract
option with a foreign customer without funding in order to preserve critical
skills within the Company, while the U.S. Army's multi-year 120mm
requirements were finalized. (This strategy was successful in obtaining a
multi-year U.S. Army 120mm contract.) The Company expected a payment of
$3,030,000 in September, 1995 for work performed on the penetrator blanks for
the foreign customer. As of January 10, 1996, the Company had not received
such sales order and payment and the exact timing of payment to the Company
is uncertain. The customer has documented its intention to fund the option
in the near future by providing the Company with a letter of intention.
Therefore, the Company expects it
<PAGE>
will receive the payment, and that upon receipt of such payment, the Company
will be able to continue as a going concern, addressing the matter raised in
the auditor's report. While management is confident that this payment will
be received, the Company simultaneously is pursuing several potential
alternate sources of cash to attempt to insure that the Company has adequate
cash to sustain operations.
Since restrictive covenants in the Company's agreements with lenders limit
borrowing by the Company other than under the existing credit facilities, the
Company may seek to raise cash through the sale of its common stock (or
securities convertible into common stock). The issuance of additional equity
securities could have a dilutive effect on the Company's outstanding common
stock. There can be no assurance that the Company would be able to raise
additional funds through a sale of its equity securities on favorable terms,
if at all.
On January 11, 1996, the Company and its commercial bank extended the
maturity dates of the credit facilities (See Notes 1 and 6 of the Notes to
Consolidated Financial Statements) pursuant to the terms contained in a
certain Forbearance and Amendment Agreement dated as of January 11, 1996
between the Company, its wholly-owned subsidiary, Carolina Metals, Inc. and
State Street Bank and Trust Company (the "Forbearance Agreement"). As
required by the bank prior to the execution of the Forbearance Agreement, on
January 11, 1996 the Company sold an aggregate of $510,500 in 10% convertible
subordinated debentures to certain investors. (See Note 1 of the Notes to
Consolidated Financial Statements.)
The Company also has outstanding approximately $800,000 in principal
amount on industrial revenue bond indebtedness.
The Company did not declare any dividends during its last two fiscal
years. Given the Company's current cash flow situation, the Company does not
expect to pay dividends in the next year. Future cash dividends if any,
would be paid on an annual basis, the amount of which is subject to the
determination and approval of the Company's Board of Directors. The
Company's loan agreement with a bank prohibits the declaration or payments of
dividends without the bank's consent.
ENVIRONMENTAL REMEDIATION
The Company has been working with various regulatory bodies to formulate a
plan for the removal of materials contained in a holding basin at its site in
Concord, Massachusetts. To date, a final plan for remediation has not been
established. The Company believes the cost of remediation will not have a
material impact on its results of operations or financial position. (See
Note 11 of the Notes to Consolidated Financial Statements for further
discussion.)
FISCAL 1994 COMPARED WITH FISCAL 1993
Net sales increased by $1,985,000 or 12% in fiscal 1994. Sales in Uranium
Services and Recycle industry increased by $4,752,000. Sales in Specialty
Metal Products industry segment decreased by $2,974,000 or 29%. Sales in the
Depleted Uranium Penetrator industry segment increased by $207,000 or 3%.
The increase in Uranium Services and Recycle industry is the result of the
production contract of commercial DU that began at Carolina Metals, Inc. The
decrease in the Specialty Metal Products industry segment was due primarily
to decreased volumes of commercial DU and Medical Powders. The increase in
the Depleted Uranium Penetrator industry segment was primarily due to higher
large caliber penetrator production sales.
The timing, volumes and possible downselect decisions regarding future
large caliber penetrator business, in general, are uncertain in the current
environment of reduced U.S. defense spending. The Company will continue
to pursue both domestic and foreign military depleted uranium penetrator
production requirements.
Gross loss (net sales and contract revenues less cost of sales) decreased
by $256,000 to $(2,586,000) or (14)% of sales as compared to $(2,842,000) or
(17)% of sales for fiscal 1993. This reduction in gross loss is primarily due
to higher sales volume and reduced cost structure.
Selling, general and administrative expenses decreased by $2,414,000 to
$4,209,000. This decrease was attributable to workforce reductions and
decreased discretionary spending partially offset by increases in reserves.
As a percentage of sales, these expenses decreased to 22% as compared to 39%
for the prior year.
Company-sponsored research and development expenses decreased by $456,000
to $575,000 for fiscal 1994. As a percentage of sales, these expenses were 3%
as compared to 6% in fiscal 1993.
Interest and other income, net, decreased to $120,000 for the fiscal year
as compared to $396,000 for the prior year. This decrease was mainly due to
lower levels of cash throughout most of 1994.
Interest expense decreased by $403,000 to $550,000 as compared to fiscal
1993. This decrease was primarily the result of reductions in debt during
1994.
The Company realized a $3,584,000 loss from a write-off of Depleted
Uranium Penetrators industry segment fixed assets. The reduction in fixed
assets was part of a realignment of the Company's asset base due to declining
defense industry spending.
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS 1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,076,000 $ 1,213,000
Marketable securities 170,000 497,000
Accounts receivable, net of allowances for doubtful accounts
of $883,000 in 1995 and $1,290,000 in 1994 4,730,000 5,455,000
Inventories 17,468,000 14,486,000
Deferred income tax benefit -- 675,000
Other current assets 343,000 371,000
------------ -----------
Total Current Assets 23,787,000 22,697,000
------------ -----------
PROPERTY, PLANT AND EQUIPMENT:
Land 1,356,000 1,356,000
Buildings 19,072,000 19,827,000
Machinery, equipment, and fixtures 25,296,000 24,287,000
Construction-in-progress 42,000 397,000
------------ -----------
Total Property, Plant and Equipment 45,766,000 45,867,000
Less: Accumulated depreciation 30,479,000 29,706,000
------------ -----------
Net property, plant, and equipment 15,287,000 16,161,000
OTHER ASSETS 1,812,000 1,684,000
------------ -----------
$40,886,000 $40,542,000
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations $ 2,405,000 $ 1,091,000
Accounts payable 4,192,000 2,667,000
Accrued payroll and related costs 682,000 763,000
Other accrued expenses 642,000 699,000
------------ -----------
Total Current Liabilities 7,921,000 5,220,000
------------ -----------
DEFERRED FEDERAL AND STATE INCOME TAXES -- 676,000
------------ -----------
LONG-TERM OBLIGATIONS 2,075,000 3,768,000
------------ -----------
OTHER LONG-TERM LIABILITIES 3,645,000 4,626,000
------------ -----------
COMMITMENTS & CONTINGENCIES (Note 11)
STOCKHOLDERS' EQUITY:
Common stock, par value $.10; authorized - 6,000,000 shares;
issued and outstanding for 1995 and 1994;
2,387,964 shares and 2,307,464 shares, respectively 239,000 230,000
Additional paid-in capital 14,226,000 13,752,000
Retained earnings 12,780,000 12,270,000
------------ -----------
Total Stockholders' Equity 27,245,000 26,252,000
------------ -----------
$40,886,000 $40,542,000
------------ -----------
------------ -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
NET SALES AND CONTRACT REVENUES $18,784,000 $ 19,004,000 $ 17,019,000
------------ ------------ ------------
COST AND EXPENSES:
Cost of sales 15,452,000 21,590,000 19,861,000
Selling, general, and administrative expenses 4,817,000 4,209,000 6,623,000
Research and development expenses 439,000 575,000 1,031,000
Loss on fixed asset writedown -- 3,584,000 --
------------ ----------- -------------
20,708,000 29,958,000 27,515,000
------------ ----------- -------------
OPERATING LOSS (1,924,000) (10,954,000) (10,496,000)
INTEREST AND OTHER INCOME, NET 232,000 120,000 396,000
INTEREST EXPENSE (350,000) (550,000) (953,000)
------------ ----------- -------------
LOSS BEFORE INCOME TAXES, EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT OF ACCOUNT CHANGE (2,042,000) (11,384,000) (11,053,000)
PROVISION (BENEFIT) FOR INCOME TAXES (1,967,000) (1,188,000) (3,746,000)
------------ ----------- -------------
LOSS BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (75,000) (10,196,000) (7,307,000)
EXTRAORDINARY GAIN ON EXTINGUISHMENT OF DEBT NET OF TAXES OF $10,000 585,000 -- --
CUMULATIVE EFFECT OF ACCOUNTING CHANGE -- -- 1,100,000
------------ ----------- -------------
NET INCOME (LOSS) $ 510,000 $(10,196,000) $ (6,207,000)
------------ ----------- -------------
------------ ----------- -------------
PER SHARE INFORMATION
LOSS BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (0.03) (4.43) (3.18)
EXTRAORDINARY GAIN ON EXTINGUISHMENT OF DEBT NET OF TAXES OF $10,000 0.25 -- --
CUMULATIVE EFFECT OF ACCOUNTING CHANGE -- -- 0.48
------------ ----------- -------------
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE $ 0.22 $ (4.43) $ (2.70)
------------ ----------- -------------
------------ ----------- -------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 2,352,756 2,300,131 2,294,664
------------ ----------- -------------
------------ ----------- -------------
DIVIDENDS PER SHARE $ -- $ -- $ .20
------------ ----------- -------------
------------ ----------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
----------------- ADDITIONAL
NUMBER PAR PAID-IN RETAINED
OF SHARES VALUE CAPITAL EARNINGS
<S> <C> <C> <C> <C>
Balance at September 30, 1992 2,294,664 $229,000 $13,676,000 $ 29,132,000
--------- -------- ------------ ------------
Common Stock Cash Dividend -- -- -- (459,000)
Net Loss for the Year -- -- -- (6,207,000)
--------- -------- ------------ ------------
Balance at September 30, 1993 2,294,664 $229,000 $13,676,000 $ 22,466,000
--------- -------- ------------ ------------
Stock Options Exercised 12,800 1,000 76,000 --
Net Loss for the Year -- -- -- (10,196,000)
--------- -------- ------------ ------------
Balance at September 30, 1994 2,307,464 $230,000 $13,752,000 $ 12,270,000
--------- -------- ------------ ------------
--------- -------- ------------ ------------
Stock Options Exercised 80,500 9,000 474,000 --
Net Income for the Year -- -- -- 510,000
--------- -------- ------------ ------------
Balance at September 30, 1995 2,387,964 $239,000 $14,226,000 $ 12,780,000
--------- -------- ------------ ------------
--------- -------- ------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 510,000 $(10,196,000) $ (6,207,000)
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization 1,339,000 2,874,000 3,056,000
Loss on fixed asset writedown -- 3,584,000 --
Changes in assets and liabilities, net-
Decrease (increase) in accounts receivable 725,000 (2,205,000) 8,160,000
Decrease (increase) in income tax receivables -- 2,394,000 (2,394,000)
Decrease (increase) in inventories (2,982,000) 1,150,000 (2,016,000)
(Decrease) increase in accounts
payable and accrued expenses 1,387,000 (993,000) 303,000
Gain on sale of building (175,000) -- --
Changes in accrued and deferred taxes (1,000) (1,286,000) (3,689,000)
Changes in other long-term liabilities (981,000) 2,439,000 --
Other (100,000) 253,000 37,000
----------- ------------ -----------
Net cash used by operating activities (278,000) (1,986,000) (2,750,000)
----------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (777,000) (709,000) (1,265,000)
(Purchases) Sales of marketable securities, net 326,000 94,000 (19,000)
Proceeds from sale of Property, Plant & Equipment 487,000 -- --
----------- ------------ -----------
Net cash (used) provided by investing activities 36,000 (615,000) (1,284,000)
----------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under long-term obligations (4,103,000) (4,127,000) (2,386,000)
Proceeds from bank debt 3,725,000 -- --
Proceeds from Stock issuance 483,000 77,000 --
Cash dividends -- -- (459,000)
----------- ------------ -----------
Net cash (used) provided by financing activities 105,000 (4,050,000) (2,845,000)
----------- ------------ -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS: (137,000) (6,651,000) (6,879,000)
Cash and cash equivalents at beginning of year 1,213,000 7,864,000 14,743,000
----------- ------------ -----------
Cash and cash equivalents at end of year $ 1,076,000 $ 1,213,000 $ 7,864,000
----------- ------------ -----------
----------- ------------ -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest, net of amounts capitalized $ 280,000 $ 680,000 $ 824,000
Income taxes $ (978,000) $ -- $ 1,236,000
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. LIQUIDITY
As of September 30, 1995, Nuclear Metals and subsidiaries (the Company)
was not in compliance with certain financial covenants of its debt
agreements. These events of non-compliance permitted the lender to declare
all amounts due and payable upon notice to the Company.
The Company's Demand Line of Credit Note ($925,000 outstanding at
September 30, 1995, and $1,680,000 at January 11, 1996) was due by January
15, 1996. This note, which was negotiated in September 1995, was intended to
provide the Company working capital until the receipt of a specific order and
the related proceeds from the sale of penetrator blanks to a certain
customer, which management expected to occur prior to the due date of the
note. In addition, under the Company's Revolving Line of Credit $1,000,000
was due in February 1996. The proceeds from the sale of penetrator blanks
discussed above were to be used to pay this amount. As of January 11, 1996,
the Company's customer has not been able to obtain funding to complete the
purchase.
On January 11, 1996, the Company reached an agreement with its lender to
amend certain terms of its debt, including the waiver of past violations of
debt covenants, extension of certain debt maturity dates and the revision of
certain financial covenants. The agreement requires the Company to make a
payment of $500,000 of the Demand Line of Credit Note on January 12, 1996,
the proceeds of which were received from certain shareholders in exchange for
a note payable of $500,000 due June 1997. The note payable to the
shareholders is payable interest only semi-annually until its maturity date
at a rate of 10%, convertible into shares of the Company's common stock at
$11.89 per share and subordinate to the debt of the Company. The agreement
also revised the repayment terms for the remaining balance of the Demand Line
of Credit Note (balance of $1,680,000 as of January 11, 1996) as follows:
$500,000 on January 12, 1996, and monthly installments of $100,000, $200,000,
$300,000 and $580,000 beginning January 31, 1996, and ending April 15, 1996,
and revised the due date for the Line of Credit ($1,000,000 outstanding at
September 30, 1995, and January 11, 1996) to December 31, 1996. In addition,
the agreement requires the Company to use any proceeds received from the sale
of penetrator blanks to the customer, discussed above, to prepay the amounts
outstanding under the Demand Line of Credit Note and purchase certificates of
deposit in aggregate of $1,000,000 from the lender and pledge those as
security for the Company's remaining obligations to lender.
Management believes that the order and the related proceeds from the
customer will be received by the Company to enable it to meet its debt
service requirements. The customer has documented its expectations that it
will receive its funding (from the primary contractor and government source)
by March 1996, and remit payment to the Company by April 1996. In the event
that the customer is not able to complete this purchase, the Company will not
have the available funds to meet the debt service requirements, in which case
the Company will pursue alternative financing sources to meet these
requirements. This matter raises substantial doubt about the Company's
ability to continue as a going concern. These financial statements do not
incluse any adjustments that might result from the outcome of this
uncertainty.
2. OPERATIONS
The Company is a manufacturer of specialized metal products which are
fabricated by a variety of metalworking processes. Export sales to foreign
unaffiliated customers are 33% of total net sales and contract revenues in
fiscal 1995, 37% in fiscal 1994, and less than 10% in fiscal 1993. A
significant portion of the Company's sales revenue has been derived from
major customers as follows:
LOCKHEED LOCKHEED OLIN ROYAL
COGEMA MARTIN IDAHO FALLS CORP ORDNANCE
1995 19% 18% 9% 8% --%
1994 20 -- 6 21 12
1993 -- -- 11 35 3
3. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Nuclear Metals, Inc. and its wholly owned subsidiaries: NMI Foreign Sales
Corporation, NMI Holdings, Inc., a Massachusetts securities corporation, and
Carolina Metals, Inc. All material intercompany transactions and balances
have been eliminated in consolidation.
FISCAL YEARS
References in these financial statements to 1995, 1994, and 1993 are for
the fiscal years ended September 30, 1995, September 30, 1994, and September
30, 1993, respectively.
REVENUE RECOGNITION
Revenues are recorded when products are shipped, except for revenues on
long-term contracts which are recorded on the percentage-of-completion
method. The percentage-of-completion method is used for research and
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
development contracts and for production contracts which require significant
amounts of initial engineering and development costs. The
percentage-of-completion is determined by relating the actual number of
contract units completed to date to the total units to be completed under the
respective contract. When the estimated total cost on a contract indicates a
loss, the Company's policy is to record the entire loss currently.
Performance incentives incorporated in certain government contracts are
recognized when incentives are earned or awarded or when penalties are
incurred or assessed. Contract revenues include fees resulting from
facilitization contracts with the U. S. Army (contracts to establish
production capacity through the purchase and installation of equipment to be
owned by the U.S. Army). Costs associated with these contracts, exclusive of
the costs to purchase the equipment ($0 in 1995, $380,000 in 1994 and
$1,285,000 in 1993) are included in cost of sales. The consolidated balance
sheets do not include the cost of this U.S. Army-owned equipment.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are recorded at cost which approximates market
value. Cash equivalents include certificates of deposit with a maturity of
three months or less.
MARKETABLE SECURITIES
Marketable securities are recorded at cost which approximates market
value. Marketable securities include certificates of deposit purchased with a
maturity greater than three months.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market and include materials, labor, and manufacturing and engineering
overhead.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are recorded at the lower of cost or net
realizable value. For financial reporting purposes, the Company provides
depreciation on the straight-line method over the estimated useful lives of
the assets, which are as follows:
Buildings 20 - 30 years
Machinery, equipment, and fixtures 3 - 10 years
Maintenance and repairs are charged to operations as incurred; renewals
and betterment's are capitalized. When property, plant, and equipment are
sold, retired or entirely written down, the asset cost and accumulated
depreciation are removed from the accounts, and the resulting gain or loss is
included in operations.
In March 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." This statement requires a reveiw for
impairment for long-lived assets and certain identifiable intangibles to be
held and used by an entity whether events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable. An
impairment loss would be recognized if the sum of the expected future cash
flows to result from the use and eventual disposition of the asset is less
than the carrying amount of the asset. The amount by which the carrying
amount of the asset exceeds the fair value less costs to sell, is an
impairment loss to be recognized. This statement would apply to fiscal years
beginning after December 15, 1995. The effects on the Company's financial
condition and results of operations are not expected to be material.
During the fourth quarter of 1994, the Company recorded a loss on fixed
asset writedown in the Depleted Uranium Segment of $3,584,000 consisting
principally of a provision to adjust the carrying values of idle and
underperforming fixed assets to estimated net realizable values. The
provision was based on a periodic review of fixed assets and a determination
that there has been a permanent decline in the value of assets due to
declines in defense spending and the pricing necessary to compete effectively
for such contracts.
INCOME TAXES
The Company provides for income taxes in each year's consolidated
statements of operations regardless of the year in which the transactions are
reported for tax purposes to recognize the tax effects of all events.
The deferred federal and state income taxes result primarily from using
accelerated depreciation on property, plant, and equipment for income tax
reporting purposes and from establishing reserves which are not currently
deductible for income tax purposes, respectively.
The Company adopted Statement of Financial Accounting Standards No. 109 in
the first quarter of fiscal 1993 via a cumulative catch-up adjustment. The
catch-up adjustment resulted in a one time gain of $1,100,000.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are related only to Company-sponsored
research and development and include direct costs and an allocation of
overhead.
RECLASSIFICATIONS
Certain amounts previously reported in the consolidated financial
statements have been reclassified to conform with the 1995 presentation.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. ACCOUNTS RECEIVABLE
The following is an analysis of accounts receivable (net of allowances for
doubtful accounts):
1995 1994
Accounts receivable $4,449,000 $3,676,000
Unbilled Receivables and Retainages due
upon completion of contracts 281,000 1,779,000
---------- ----------
$4,730,000 $5,455,000
---------- ----------
---------- ----------
5. INVENTORIES
Inventories (net of reserves) at September 30, 1995, and September 30,
1994, were as follows:
1995 1994
Work-in-process $13,942,000 $10,021,000
Raw materials 2,794,000 3,721,000
Spare parts 732,000 744,000
----------- -----------
$17,468,000 $14,486,000
----------- -----------
----------- -----------
As of September 30, 1995, approximately $11.8 million of the Company's
inventory consists of Depleted Uranium (DU) in various stages of production.
This amount consists of both value-added costs to government owned material,
($6.6 million), which is used for U.S. Military contracts and for material
which the Company has acquired from other sources, ($5.2 million). During
fiscal 1995 the U.S. Army notified the Company that the Army would provide
the DU for production for the most recent penetrator contract. Management
strongly believes that the Army is responsible to compensate the Company for
the value-added costs of this material and that at a minimum the Army would
allow the Company to use this material for non U.S. military contracts at no
additional cost to the Company. Management is pursuing several Department of
Energy programs that would require more DU over the next several years than
the Company currently has on hand. Management believes that the carrying cost
of the inventory on hand will be fully realizable through these possible
programs or from its ongoing usage for U.S. and foreign military
procurements, however it is uncertain how much of the inventory balance will
be utilized in fiscal 1996.
6. LONG-TERM OBLIGATIONS AND NOTES PAYABLE
Long-term obligations and notes payable of the Company at September 30,
1995, and September 30, 1994, areas follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
10.05% Note, annual principal payments
of $1,176,000 to maturity in 1997
(paid off in 1995) $ -- $3,532,000
Term Credit, interest rate of prime plus 0.5%
due in monthly principal payments through 1996 1,733,000 --
Line of Credit, interest rate of prime plus 0.5% 1,000,000 --
Demand Line of Credit, interest rate of prime plus 1.5% 925,000 --
Industrial Development Revenue Notes, variable
interest rates (5.8% - 6.1% at September 30, 1995)
due in quarterly principal payments through 2000 822,000 1,302,000
Capital Leases -- 25,000
---------- ----------
$4,480,000 $4,859,000
Less Current portion of long-term obligations 2,405,000 1,091,000
---------- ----------
$2,075,000 $3,768,000
---------- ----------
---------- ----------
</TABLE>
Based on the amended debt agreement date January 11, 1996 as discussed
below maturities of long-term obligations subsequent to September 30, 1995,
are: 1996 - $2,405,000; 1997 - $1,895,000; 1998 - $80,000; 1999 - $80,000;
$20,000 thereafter.
During fiscal 1995, the Company restructured its long-term debt, the
principal balance of $3,532,000 outstanding on the 10.05% note was settled at
a discount. Accordingly, the Company recorded an extraordinary gain on
extinguishment of debt of $585,000 net of taxes of $10,000 in the
accompanying statement of operations as a result of this transaction.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Simultaneously, the Company entered into a credit facility of $5,650,000
with a bank. As of September 30, 1995, this facility consisted of a revolving
line of credit of $3,250,000 and a term credit of $2,400,000. The revolving
line of credit has $2,250,000 in letters of credit outstanding and $1,000,000
in credit line advance. This credit facility is secured by accounts
receivable and inventory of the Company.
The Company's Line of Credit Demand Note (the note) (Balance of $925,000
as of September 30, 1995, and $1,680,000 at January 11, 1996) was due by
January 15, 1996. This Note, which was negotiated in September 1995, was
intended to provide the Company working capital until the receipt of proceeds
from the sale of specific penetrators blanks to a certain customer. This
Note is secured by a number of patents currently held by the Company. In
consideration for providing this facility, the Company issued the lender a
warrant to purchase 25,000 shares of the Company's common stock at $11.89 per
share which was the approximate market value of the Company's common stock at
the time the warrants were issued. These warrants expire in 2005. The holder
of the warrant has the option to exercise a portion of the warrant in a
cashless transaction by surrendering the remaining portion of the warrant as
defined.
On January 11, 1996, the Company reached an agreement with its lender to
amend certain terms of its debt, including the waiver of past violations of
debt covenants, extension of certain debt maturity dates and the revision of
certain financial covenants. The agreement required the Company to make a
payment of $500,000 of the Demand Line of Credit Note on January 12, 1996,
the proceeds of which were received from certain shareholders in exchange for
a note payable of $500,000 due June 1997. The note payable to the
shareholders is payable interest only (in cash or common stock) semi-annually
until its maturity date at a rate of 10%, convertible into shares of the
Company's common stock at $11.89 per share and subordinate to the debt of the
Company. The agreement also revised the repayment terms for the remaining
balance of the Demand Line of Credit Note (balance of $1,680,000 as of
January 11, 1996) as follows: $500,000 on January 12, 1996, and monthly
installments of $100,000, $200,000, $300,000 and $580,000 beginning January
31, 1996, and ending April 15, 1996, and revised the due date for the Line of
Credit ($1,000,000 outstanding at September 30, 1995, and January 11, 1996)
to December 31, 1996. This agreement also adjusts the value of the eligible
loan collateral determined under the borrowing base formula. In addition,
the agreement requires the Company to use any proceeds received from the sale
of penetrator blanks to the customer, discussed above, to prepay the amounts
outstanding under the Demand Line of Credit Note and purchase certificates of
deposit in aggregate of $1,000,000 from the lender and pledge those as
security for the Company's remaining obligations to lender. The revisions to
the financial covenants includes general working capital requirements, and
net income before interest and taxes not less than the amounts for the
quarter ending dates as follows: March 31, 1996 - $250,000, June 30, 1996 -
$25,000, September 30, 1996 - $175,000, December 31, 1996 - $175,000, and
$175,000 thereafter. On or before July 1, 1996, the Company will be
required to provide the bank documentation that the Company will have
sufficient funds to fulfill all obligations to the bank. In consideration
for providing this amendment, the Company will pay the Bank a fee in the
amount of $150,000 upon the earlier of the receipt of funds from sale of
penetrator blanks or at December 31, 1996.
The Industrial Development Revenue Notes consist of four note issues.
The interest rates on these notes range from 66.5% to 70% of the lender
bank's prime interest rate. The notes are secured by all property, plant,
and equipment.
7. INCOME TAXES
Effective the beginning of fiscal 1993 the Company adopted Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes." Under SFAS 109, the Company must compute the impact upon its future
income tax payments, using current tax rates, of temporary differences
resulting from the different periods in which events are recognized in the
financial statements and in the tax returns. SFAS 109 requires deferred tax
assets and liabilities to be adjusted when the tax rates or other provisions
of the income tax law change.
The Company elected to adopt this new standard by recording a cumulative
catch-up adjustment. Net income increased by $1,100,000 as a result of
adopting the new standard. Adopting SFAS 109 has not caused a significant
change in the Company's provision (benefit) for income taxes, reconciliation
of the effective tax rate with the statutory rate or significant components
of the income tax benefit.
The provision (benefit) for income taxes differs from the amount computed
by applying the statutory federal income tax rate due to the following:
1995 1994 1993
Statutory rate (34.0)% (34.0)% (34.0)%
Increase (reduction) in taxes resulting from:
State taxes, net of federal effect (6.0) (6.3) (6.3)
Valuation allowance (2.0) 29.6 6.4
Tax reserves no longer required (48.0) -- --
Other (6.0) -- --
----- ----- -----
(96.0)% (10.4)% (33.9)%
----- ----- -----
----- ----- -----
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
As of September 1995, the Company has a federal net operating loss
carryforward of approximately $5.4 million of which $3.1 million expires in
2009 and $2.3 million expires in 2010 and State net operating loss
carryforwards of approximately $14.4 million which expire between 1998
through 2008. These net operating loss carryforwards are fully reserved by
valuation allowances.
The components of the provision (benefit) for income taxes are as follows:
1995 1994 1993
Current benefit:
Federal $ (766,000) $(1,757,000) $(2,336,000)
State (135,000) (543,000) (435,000)
Valuation allowance 901,000 2,300,000 435,000
----------- ----------- -----------
Total current benefit $ -- $ -- $(2,336,000)
----------- ----------- -----------
----------- ----------- -----------
Deferred benefit
Federal $(1,819,000) $(1,738,000) $(1,410,000)
State (148,000) (537,000) (261,000)
Valuation allowance -- 1,087,000 261,000
Total deferred benefit (1,967,000) (1,188,000) (1,410,000)
----------- ----------- -----------
Total benefit $(1,967,000) $(1,188,000) $(3,746,000)
----------- ----------- -----------
----------- ----------- -----------
During 1995 the Company received $978,000 of Federal income tax refunds.
As of September 30, 1994, the Company had established a full valuation
allowance for this amount. Accordingly, the Company reduced it's valuation
allowance by $978,000 upon receipt of this amount.
The Company has provided a full valuation allowance on the net deferred
tax assets as of September 30, 1995, and 1994. The Company's alternative
minimum tax credit has an unlimited life. The tax effects of significant
items making up the deferred tax liabilities and deferred tax assets, as of
the end of the 1995 and 1994 fiscal years are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Assets:
Reserves not currently deductible for tax purpose $2,331,000 $2,518,000
Accrued employee health benefits 382,000 422,000
Federal operating loss carryforward 1,843,000 1,757,000
State operating loss carryforwards and other assets 1,374,000 1,239,000
Other 345,000 445,000
Valuation allowance (3,738,000) (3,905,000)
---------- ----------
Total deferred tax assets 2,537,000 2,476,000
Alternative minimum tax credit 407,000 407,000
---------- ----------
$2,944,000 $2,883,000
---------- ----------
---------- ----------
Liabilities:
Fixed asset basis difference $2,229,000 $2,033,000
Employee benefits 715,000 715,000
Other -- 136,000
---------- ----------
$2,944,000 $2,884,000
---------- ----------
---------- ----------
</TABLE>
8. STOCK OPTIONS AND EMPLOYMENT AGREEMENTS
A total of 247,900 shares of common stock have been reserved for issuance
upon exercise of options issued or issuable pursuant to the Company's stock
option plans for employees and directors. The exercise price of options
issued or issuable under such plans may not be less than 100% of the fair
market value of the shares purchasable on the date of grant of the options.
Information concerning options which have been granted under the plans and
the exercise prices thereof is set forth below. Those options with an
indicated exercise price of $6.63 expire in 2003, those with an exercise
price of $13.50, $14.00, or $16.00 expire in 2004, in each case on the
anniversary of the date of grant.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Common shares under option are presented:
<TABLE>
<CAPTION>
Number Option Price
of Shares per Share
<S> <C> <C>
Options outstanding as of September 30, 1993 105,700 $6-6.50
Exercised (12,800) 6.00
Granted 13,500 6.63-16.00
Canceled (7,500) 6.00
Options outstanding as of September 30, 1994 98,900 6.00-16.00
Exercised (80,500) 6.00
Granted 25,300 13.50-14.00
Canceled (5,200) 6.00-6.50
------ -----------
Options outstanding as of September 30, 1995 38,500 $6.63-16.00
------ -----------
------ -----------
</TABLE>
In consideration of entering into a credit agreement with its lender the
Company issued the lender a warrant to purchase 25,000 shares of the
Company's common stock for $11.89 per share, which was the approximate
market value of the Company's common stock at the date of the transaction.
These warrants expire in 2005. The holder of the warrant has the option to
exercise a portion of the warrant in a cashless transaction by surrendering
the remaining portion of the warrant as defined.
9. PENSION PLAN
The Company has a defined benefit pension plan designed to provide
retirement benefits to all employees. This plan provides pension benefits
that are based on the employee's salary and years of service. The Company's
policy is to fund the plan at a level within the range required by applicable
regulations.
The Company's net pension cost for 1995, 1994, and 1993 was $165,000,
$269,000 and $90,000, respectively. During 1995, the Company used the
weighted average discount rate of 8.0%. Net pension cost for the Company's
defined benefit plan included the following components:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Service cost - benefits earned during the period $155,000 $206,000 $198,000
Interest cost on projected benefit obligation 954,000 936,000 869,000
Actual return on plan assets (985,000) (414,000) (524,000)
Net amortization and deferral 41,000 (459,000) (453,000)
-------- -------- --------
Net pension cost $165,000 $269,000 $90,000
-------- -------- --------
-------- -------- --------
</TABLE>
Assumptions used in determining the plan's funded status:
Discount rate 8.0% 8.0% 7.0%
Expected rate of increase in
compensation levels 5.5% 5.5% 5.5%
Expected long-term rate of return
on assets 8.5% 8.5% 8.5%
The following table sets forth the plan's funded status as of
September 30, 1995, September 30, 1994, and September 30, 1993.
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Vested benefit obligation $(11,245,000) $(11,013,000) $(11,826,000)
------------ ------------ ------------
Accumulated benefit obligation $(11,249,000) $(11,061,000) $(11,878,000)
------------ ------------ ------------
Projected benefit obligation $(12,661,000) $(12,364,000) $(14,155,000)
Plan assets at fair value 12,274,000 11,981,000 12,093,000
Funded status (387,000) (383,000) (2,062,000)
Unrecognized prior service costs 121,000 125,000 129,000
Unrecognized net loss 1,885,000 2,042,000 3,986,000
------------ ------------ ------------
Prepaid pension cost $1,619,000 $1,784,000 $2,053,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Plan assets are invested under the provision of a trust agreement with a
bank in common trust funds.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
10. POSTRETIREMENT BENEFITS
Effective the beginning of fiscal 1994 the Company adopted Statement of
Financial Accounting Standards No. 106 ("SFAS 106"), "Employers' Accounting
for Postretirement Benefits Other Than Pensions". The statement requires
companies to accrue the cost of postretirement health care and life insurance
benefits within the employees' active service periods. The Company had been
recognizing these costs on the cash basis prior to adoption of SFAS 106. In
fiscal 1993, the Company expensed $23,400 of these benefits.
The Company provides employees who retired from the Company prior to
January 1, 1993, with at least ten years of service and are under the age of
65, with Group Health Insurance on a cost-sharing basis. Coverage for an
employee's spouse or dependents will also continue under this plan until the
employee has reached age 65 at which time, the coverage ceases. In addition,
the Company provides the same employees who are at least 62 years of age with
life insurance equal to their ending annual salary up to a maximum of $50,000.
For employees who retire after January 1, 1993, the postretirement
benefits do not include health insurance. In addition, the life insurance
benefit, up to a maximum of $50,000, is provided for one year after
retirement.
The accumulated benefit obligation of these benefits as of October 1,
1995, is approximately $751,000 ($36,000 for medical insurance and $715,000
for life insurance). Plan assets of $344,000 in cash reserves are on hand
with an insurance company to partially cover the cost of the life insurance
benefits. The Company adopted the new standard prospectively as of October 1,
1993, and is amortizing the transition obligation of $456,000, over three
years for the medical insurance benefits and fifteen years for the life
insurance benefits.
Postretirement benefit expense for fiscal 1995 is $96,000. The components
of the expense are as follows:
Service cost of benefits earned $1,000
Interest cost on liability 57,000
Return on plan assets (10,000)
Amortization of transition obligation 48,000
--------
Net postretirement benefit cost $96,000
--------
--------
The following table sets forth the Benefit Plan's funded status as of
October 1, 1995:
Accumulated Post Retirement Benefit obligation $(751,000)
Plan Asset at Fair Value 344,000
---------
Funded Status $(407,000)
Transition obligation 344,000
---------
Accrued Post-Retirement Benefit Cost $(63,000)
---------
---------
The following actuarial assumptions were used:
Salary increase 5.5%
Discount rate 7.0%
Return on Assets 3.0%
Medical Inflation 10.0%
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
11. COMMITMENTS AND CONTINGENCIES
EXPANSION
The Company is expanding its facilities by adding new equipment. The
Company anticipates that this will require capital expenditures totaling
approximately $1,000,000 during fiscal 1996.
WASTE DISPOSAL
In the process of manufacturing depleted uranium products, the Company
generates low-level radioactive waste (LLRW) that must be disposed of at
sites licensed by federal, state, and local governments. At present, there
is one licensed commercial repository in the United States available for use
by the Company. For LLRW originating in Concord, no site currently exists
and provisions have been made to accommodate interim storage. State
government has the responsibility to implement the provisions of the federal
Low-Level Waste Policy Amendments Act and provide a state solution for
Massachusetts companies that generate this type of waste. Management is of
the opinion that an extended period of storage can be accommodated within
existing buildings and in an environmentally safe manner acceptable to all
regulatory agencies until such time as an acceptable site is identified.
HOLDING BASIN FACILITY
For a number of years, ending in 1985, the Company disposed of
manufacturing-related depleted uranium waste and the associated spent acid
and other residual materials by neutralizing with lime and discharging the
neutralized mixture to a holding basin on its premises in Concord,
Massachusetts. In 1986 the holding basin was covered with hypalon, an
impervious material used to prevent rain and surface run-off water from
leaching through the holding basin. The Company now uses a proprietary
"closed loop" process that it developed to discontinue such discharges. The
Company believes that both practices were and are in compliance with all
applicable regulations.
The Commonwealth of Massachusetts, Department of Environmental Protection
("DEP"), has designated the Concord site, including the holding basin, as a
"priority" remediation site. The DEP, in conjunction with the Company and its
consultants, are developing a comprehensive evaluation and risk assessment.
The risk assessment originally scheduled for completion during calendar year
1995 has been delayed. Additional information needed for the risk assessment
has been collected and is currently being evaluated with the current
expectation that completetion of the risk evauation will occur in 1996. The
Company continues to believe that the results of these studies will establish
that the holding basin does not present an environmental risk consistent with
its designation as a "priority" site.
The vast majority (approximately 96%) of the material in the holding basin
is the byproduct of manufacturing processes conducted by the Company under
Government contracts using Government furnished material. Management
believes, based on advice from legal counsel and discussions with the Army,
that this material continues to be Government owned and that the Government
has a responsibility for any required remediation of the site. The Company
has no written commitment from the Government to fund any remediation costs,
however, existing contracts provide the basis for Government responsibility
to pay the costs of removal of the material from the holding basin. In
September 1995, the Company submitted a request for funding for the full
remediation under Public Law 85-804. The Army is currently reviewing the
submittal and is expected to provide their recommendations to the Company
early in 1996. The Army has not denied the Government's responsibility to pay
the costs of removal of the material from the holding basin. Management of
the Company considers it unlikely that the Army will not pay the appropriate
costs for remediation. Also, the Government has demonstrated a general
practice of paying its portion of site remediation costs by the funding of
other remediation projects.
Included in the accompanying balance sheet as of September 30, 1995, is a
$2.8 million reserve against any potential administrative, legal, research or
other costs of remediating the holding basin that are not paid by the
Government. The Company believes this reserve to be adequate for any residual
costs that may be incurred beyond the Government's portion of the holding
basin.
The planned decommissioning of the holding basin has involved discussions
with several agencies including the NRC, DEP and the Army. The Company has
developed a range of cost estimates for remediation of the holding basin
based on assumptions as to the amount of gravel to be removed and that all
material will be buried at licensed sites. Significant costs include
excavation, transportation and burial of the holding basin material as well
as back fill and grading at the Concord site. Under these assumptions, the
estimated costs of burial range from $4 million to $9 million. In developing
these estimates, the future burial rates that will be charged at the licensed
sites are uncertain and are the predominant reason for the wide range of
potential costs. These burial costs are affected by, among other things, the
various regulatory agencies, the regulations imposed by these agencies and
the volume of waste processed at individual licensed sites. In developing
these estimates for burial, the Company has not assumed any offset based
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
on Government funding or insurance claims. Further, the Company assumes that
the recommendations of the Company's outside experts as to how much gravel
should be removed will be accepted by the regulatory authorities and that
none of the material in the holding basin will be recycled. The Company
believes that its cost of remediation will not have a material impact on its
results of operations or financial position.
DECOMMISSIONING PLANNING REQUIREMENTS
The Company is in the process of renewing certain licenses by the NRC
which the Company is required to hold in order to possess and process
depleted uranium materials. Under applicable licensing regulations, the
Company was required to submit and did submit a Decommissioning Funding Plan
("DFP") to provide for the possible future decommissioning of its Concord
facility. The Company is also required to provide financial assurance for
such decommissioning.
Approximately 96% of the depleted uranium materials which generated the
DFP requirements were processed for the United States Government.
Accordingly, the Company believes that its financial assurance, is only for
the balance of the cost. The total estimated cost of decommissioning the NMI
facility is $13.7 million. The Company's share, approximately 4%, would be
$550,000 for which a reserve is included in the accompanying balance sheet as
of September 30, 1995. The Company has provided financial assurance in the
form of a letter of credit in the amount of $750,000.
The outcome of a December 1994, NRC enforcement conference with respect to
what the NRC described as the Company's apparent lack of compliance with the
decommissioning financial assurance regulations has resulted in the Company
submitting a request to the NRC for exemption to certain aspects of the
Decommissioning and Disposal(D&D) regulations. The exemption request includes
alternate financial funding mechanisms not specifically called out in the
regulations. Management believes that these funding mechanisms when coupled
with Government contractual obligations will collectively satisfy the
decommissioning funding obligations of the Company. In filing the exemption,
the Company reiterated its long standing position that the United States
Government is obligated, by policy and by contract, to bear the balance of
decommissioning costs at the Concord site. The Company expects NRC's response
to the exemption request, early in 1996.
Management believes that based on progress made to date on the holding
basin remediation, along with the submission of a request for partial
exemption to the D&D rules, escalated enforcement action by NRC regarding
decommissioning funding compliance, although possible, will not occur.
Escalated enforcement action could take form of civil penalty, license
suspension or license revocation. A license action, such as a suspension or
revocation would have a material and adverse impact on results of operations
and financial position.
LEGAL PROCEEDINGS
The Company is involved with various legal actions. Management believes
that the final disposition of these actions will not have a material effect
on the Company's results of operations or financial position.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
12. TRANSACTIONS WITH RELATED PARTIES
Under the terms of a management agreement, Matthews Associates Limited is
entitled to an annual management fee. George J. Matthews, Chairman of the
Board of Directors, is sole owner of Matthews Associates Limited. These
fees, as well as certain expenses of Matthews Associates Limited that were
reimbursed by the Company, have been included in selling, general, and
administrative expenses. Management fees were $350,000 in 1995, 1994, and
1993. Mr. Matthews does not receive any other salary or fee for services as
Chairman of the Board of Directors.
13. MAINTENANCE AND REPAIRS
Maintenance and repair expenditures, which are charged to cost and expense
as incurred, amounted to $854,000 in 1995, $1,029,000 in 1994 and $1,002,000
in 1993.
14. INDUSTRY SEGMENT INFORMATION
The Company is engaged in the manufacture and sale of various specialty
metal products. The Company operates in three industry segments: Uranium
Services and Recycle, Specialty Metal Products, and Depleted Uranium
Penetrators. The Company has changed its segments for financial purposes.
All prior year amounts have been restated. Information relating to the
Company's operations for the industry segments described above for each of
the three years in the period ended September 30 is as follows:
1995 1994 1993
Net Sales and Contract Revenues:
Uranium Services & Recycle $ 4,969,000 $ 4,752,000 $ -
Specialty Metal Products 12,102,000 7,284,000 10,258,000
Depleted Uranium Penetrators 1,713,000 6,968,000 6,761,000
------------ ------------- -------------
Total $18,784,000 $ 19,004,000 $ 17,019,000
------------ ------------- -------------
------------ ------------- -------------
Operating Loss:
Uranium Services & Recycle $ (996,000) $ (5,409,000) $ -
Specialty Metal Products (341,000) (162,000) (2,816,000)
Depleted Uranium Penetrators (237,000) (5,033,000) (7,330,000)
------------ ------------- -------------
Subtotal (1,574,000) (10,604,000) (10,146,000)
General Corporate Expenses 350,000 350,000 350,000
------------ ------------- -------------
Net Operating Loss (1,924,000) (10,954,000) (10,496,000)
------------ ------------- -------------
Other Expense, Net 118,000 430,000 557,000
------------ ------------- -------------
Loss Before Taxes $(2,042,000) $(11,384,000) $(11,053,000)
------------ ------------- -------------
------------ ------------- -------------
Identifiable Assets:
Uranium Services & Recycle $16,609,000 $ 16,772,000 $ 18,090,000
Specialty Metal Products 5,140,000 5,646,000 7,297,000
Depleted Uranium Penetrators 12,158,000 9,863,000 11,697,000
Corporate 6,979,000 8,261,000 20,139,000
------------ ------------- -------------
Total $40,886,000 $ 40,542,000 $ 57,223,000
------------ ------------- -------------
------------ ------------- -------------
Depreciation and Amortization Expenses:
Uranium Services & Recycle $ 404,000 $ 843,000 $ 864,000
Specialty Metal Products 251,000 421,000 450,000
Depleted Uranium Penetrators 443,000 1,252,000 1,351,000
Corporate 241,000 358,000 391,000
------------ ------------- -------------
Total $ 1,339,000 $ 2,874,000 $ 3,056,000
------------ ------------- -------------
------------ ------------- -------------
Capital Expenditures:
Uranium Services & Recycle $ 325,000 $ 68,000 $ 184,000
Specialty Metal Products 85,000 315,000 827,000
Depleted Uranium Penetrators 6,000 65,000 96,000
Corporate 361,000 261,000 158,000
------------ ------------- -------------
Total $ 777,000 $ 709,000 $ 1,265,000
------------ ------------- -------------
------------ ------------- -------------
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The Uranium Services and Recycle segment includes the manufacture of
depleted uranium products (non-penetrator) and the recycle of low level
radioactive metal. The Specialty Metal Products segment includes a large
assortment of metal products fabricated using foundry, extrusion, and
machining capabilities and involves the production and sale of various metal
powders manufactured by the Company's patented Rotating Electrode Process.
Operations in the Depleted Uranium Penetrator industry segment include the
production of various penetrators (a component of armor-piercing ammunition
used in certain U.S. military gun systems) which are sold to a department of
the U.S. Department of Defense (DOD), to prime contractors manufacturing such
ammunition for the DOD or to foreign military operations. Revenues derived
from contract research and development activities have been included in the
above segments based on the nature of the product.
Net sales and contract revenues by industry segment include sales to
unaffiliated customers (intersegment sales are not significant). A
significant portion of the Company's revenues has been derived from three
major customers (see Note 2) sales to Cogema are included in the Uranium
Services & Recycle industry segment. Sales to Lockheed Martin and Lockheed
Idaho Falls are included in the Specialty Metal Products industry segment.
Due to the utilization among segments of common production facilities and
equipment and the involvement of a single management organization in all
phases of the Company's operations, necessary allocations have been made
based on estimates which management believes to be reasonable.
Operating loss includes net sales and contract revenues less operating
expenses allocated to the individual segments. General corporate expenses
represent expenses which are not of an operating nature and, therefore, are
not allocable to industry segments.
Identifiable assets shown include accounts receivable, inventory, and
plant and equipment that have been allocated to each of the Company's
industry segments. Corporate assets consist primarily of cash, certificates
of deposit, and other assets.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
15. QUARTERLY RESULTS (UNAUDITED)
Financial results by quarter for 1995, 1994, and 1993 are summarized below:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
1995
Net Sales $ 5,626 $ 4,213 $ 3,753 $ 5,191
Operating Income (Loss) 220 (1,355) 45 (834)
Income (loss) before
extraordinary item 121 (300) 39 65
Extra gain on extinguishment of debt -- 585 -- --
Net Income 121 285 39 65
Per share amounts:
Income (loss) before
extraordinary item 0.05 (0.13) 0.02 0.03
Extra gain on extinguishment of debt -- 0.25 -- --
Net income per share 0.05 0.12 0.02 0.03
1994
Net Sales $ 4,300 $ 4,506 $ 5,527 $ 4,671
Operating Income (Loss) (1,118) 142 (2,183) (7,795)
Net Income (loss) (808) 24 (2,031) (7,381)
Net Income (loss) per share (0.35) 0.01 (0.88) (3.21)
1993
Net Sales $ 5,872 $ 4,719 $ 3,858 $ 2,570
Operating Income (Loss) 377 197 (5,879) (5,191)
Income (loss) before
cumulative effect of accounting change 156 74 (4,000) (3,537)
Cumulative effect of accounting change (1,100) -- -- --
Net Income (loss) 1,256 74 (4,000) (3,537)
Per share amounts:
Income (loss) before
cumulative effect of accounting change 0.07 0.03 (1.74) (1.54)
Cumulative effect of accounting change 0.48 -- -- --
Net Income (loss) per share 0.55 0.03 (1.74) (1.54)
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Nuclear Metals, Inc.:
We have audited the accompanying consolidated balance sheets of NUCLEAR
METALS, INC. (a Massachusetts corporation) and subsidiaries as of September
30, 1995, and 1994 and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended September 30, 1995. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects the financial position of Nuclear Metals,
Inc. and subsidiaries as of September 30, 1995 and 1994, and the results of
their operations and their cash flows for the three years in the period ended
September 30, 1995, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Notes 1 and 6
to the financial statements, on January 11, 1996, the Company reached an
agreement with its lender to amend certain terms of its debt, including the
extension of certain debt maturity dates; the lender's waiver of past
violations of debt covenants and the revision of certain financial covenants.
The Company's ability to meet its revised debt service requirements in 1996
is dependent upon the receipt of a specific order and the related proceeds
from a certain customer. As of January 11, 1996, the Company's customer has
not been able to obtain funding to complete the purchase. This matter raises
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to this matter are also described in Note 1.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Arthur Andersen LLP
Boston, Massachusetts
November 22, 1995 (except for Notes 1 and 6
for which the date is January 11, 1996)
<PAGE>
CORPORATE DIRECTORY
BOARD OF DIRECTORS
George J. Matthews
Chairman
Wilson B. Tuffin
Vice Chairman
Robert E. Quinn
President
Frank H. Brenton
Chairman, Marshall's Incorporated, Retired
Kenneth A. Smith
Edwin R. Gilliland Professor of Chemical Engineering
Massachusetts Institute of Technology
Photo of
Richard
Vokey
Richard S. Vokey
President and Vice Chairman
Boston Private Bank & Trust Company
1928-1995
EXECUTIVE OFFICERS AND CORPORATE STAFF
George J. Matthews
Chairman of the Board of Directors
Wilson B. Tuffin
Vice Chairman of the Board of Directors
Robert E. Quinn
President
Douglas F. Grotheer
Vice President, Engineering
William T. Nachtrab
Vice President, Technology
James M. Spiezio
Vice President, Finance and Administration
Frank J. Vumbaco
Vice President, Health/Safety and
Corporate Communications
Bruce E. Zukauskas
Vice President, Operations
Thomas A. Wooters
Clerk
COMMON STOCK INFORMATION
The Company's common stock is traded on the NASDAQ Market under the symbol
NUCM. As reported by a principal market maker for the stock, the high and low
bid prices for the three years ended September 30 are reflected in the
following table. This information reflects inter-dealer prices, without
retail mark-up, mark-down or commissions and may not represent actual
transactions.
1995 HIGH LOW
1st Quarter 18 13 1/4
2nd Quarter 16 3/4 11 1/2
3rd Quarter 14 1/2 11 1/2
4th Quarter 14 1/4 11
1994 HIGH LOW
1st Quarter 10 3/4 6 1/8
2nd Quarter 13 10 1/8
3rd Quarter 20 11 3/4
4th Quarter 21 14
1993 HIGH LOW
1st Quarter 7 5 1/2
2nd Quarter 10 6 1/4
3rd Quarter 11 1/4 7 1/2
4th Quarter 9 5 3/4
As of September 30, 1995, there were approximately 298 holders of record of
the Company's Common Stock. The Company believes the actual number of
beneficial owners of the Company's Common Stock is greater because a large
number of shares are held in custodial or nominee accounts.
The Company did not declare any dividends during its last two fiscal years.
Given the Company's current cash flow situation, the Company does not expect
to pay dividends in the next year. Future cash dividends, if any, would be
paid on an annual basis, the amount of which is subject to the determination
and approval of the Company's Board of Directors. The Company's loan
agreement with a bank prohibits the declaration or payment of dividends
without the bank's consent.
HEADQUARTERS
2229 Main Street, Concord, Massachusetts 01742
CAROLINA METALS, INC.
Highway 80, Barnwell, South Carolina 29812
TRANSFER AGENT AND REGISTRAR
State Street Bank & Trust Co.
225 Franklin Street, Boston, Massachusetts 02101
AUDITORS
Arthur Andersen LLP
One International Place, Boston, Massachusetts 02110
ANNUAL MEETING
The annual meeting of stockholders will be held on May 1, 1996 at 10:00
A.M. at the offices of State Street Bank & Trust Company, 225 Franklin
Street, Boston, Massachusetts 02101.
FORM 10-K
The Form 10-K Annual Report to the Securities and Exchange Commission will be
provided without charge to shareholders on written request. Requests should
be directed to the Vice President, Finance, Nuclear Metals, Inc. 2229 Main
Street, Concord, Massachusetts 01742.
<PAGE>
[LOGO]
NUCLEAR METALS, INC.
2229 MAIN ST, CONCORD, MASSACHUSETTS 01742
PHONE (508) 369-5410 - FAX (508) 369-4045
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
The following are the subsidiaries of the registrant, each of which is wholly
owned by the registrant.
NAME STATE OF INCORPORATION
---- ----------------------
Carolina Metals, Inc. Delaware
NMI Foreign Sales
Corporation U.S. Virgin Islands
NMI Holdings, Inc. Massachusetts
<PAGE>
Exhibit 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation in this Form 10-K of our report dated November 22, 1995 (except
for Notes 1 and 6 for which the date is January 11, 1996).
Arthur Andersen LLP
Boston, Massachusetts
January 11, 1996
<PAGE>
Exhibit 23(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report dated November 22, 1995 (except for Notes 1 and 6
for which the date is January 11, 1996) included in this Form 10-K into the
Company's previously filed Registration Statement File No. 33-36812 on Form
S-8.
Arthur Andersen LLP
Boston, Massachusetts
January 11, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,076,000
<SECURITIES> 170,000
<RECEIVABLES> 4,730,000
<ALLOWANCES> 883,000
<INVENTORY> 17,468,000
<CURRENT-ASSETS> 23,787,000
<PP&E> 45,766,000
<DEPRECIATION> 30,479,000
<TOTAL-ASSETS> 40,886,000
<CURRENT-LIABILITIES> 7,921,000
<BONDS> 0
0
0
<COMMON> 239,000
<OTHER-SE> 27,006,000
<TOTAL-LIABILITY-AND-EQUITY> 40,886,000
<SALES> 18,784,000
<TOTAL-REVENUES> 18,784,000
<CGS> 15,452,000
<TOTAL-COSTS> 20,708,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 350,000
<INCOME-PRETAX> (2,042,000)
<INCOME-TAX> (1,967,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 585,000
<CHANGES> 0
<NET-INCOME> 510,000
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
