<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1995
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-9613
NUCLEAR RESEARCH CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 1343870
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
125 Titus Avenue
Warrington, Pennsylvania 18976
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 343-5900
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, stated value $5 per share
(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 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 Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
There is no trading market for the voting securities of the
Registrant. The Registrant had 28,175 common shares outstanding as of
June 30, 1995, of which 10,735 shares are held by persons who are not
officers or directors of the Registrant.
Documents incorporated by reference: None
<PAGE>
PART I
ITEM 1. BUSINESS.
(a) General. Nuclear Research Corporation (the "Company") was
incorporated on July 17, 1950 under the laws of the Commonwealth of
Pennsylvania. The Company is engaged in the business of designing,
manufacturing and servicing the detection, measurement and monitoring
devices and gauges described below.
(b) Products and Markets. The Company's products consist of:
portable radiation detection and health physics measuring instruments
("Health Physics Instruments"); environmental systems and equipment for
detecting, measuring and monitoring radiation in air, liquid and gases for
nuclear materials ("Environmental Monitoring Systems and Equipment"); and
nuclear gauges for industrial process control ("Nucleonic Gauges"). The
Company sells products to the United States Government (the "Government"),
to foreign governments, and to utilities and companies in the processing
industry, including mining, chemical, petroleum, steel, paper, glass and
food and beverage companies.
<PAGE>
Net sales contributed by these product categories and their
percentage of total sales are as follows:
<TABLE>
<CAPTION>
Product Categories Net Sales
------------------ ---------
(Dollars in Thousands)
For the Fiscal Year Ended June 30,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Health Physics Instruments $21,704 $16,547 $17,545
Environmental Monitoring Systems
and Equipment 5,143 4,136 4,541
Nucleonic Gauges 205 170 115
------- ------- -------
TOTAL $27,052 $20,853 $22,201
<CAPTION>
Product Categories Percentage of Net Sales
- - ------------------ -----------------------
For the Fiscal Year Ended June 30,
----------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Health Physics Instruments 80.2% 79.4% 79.0%
Environmental Monitoring Systems
and Equipment 19.0 19.8 20.0
Nucleonic Gauges .8 .8 1.0
------ ------ -------
TOTAL 100.0% 100.0% 100.0%
</TABLE>
During fiscal 1995, the Company expanded its business into two new
areas which the Company believes will increase its competitiveness and
lead to new opportunities for growth. First, as a vehicle for this
expansion, in July, 1995 the Company entered into an operating agreement
for the formation of a New Jersey limited liability company (the "LLC").
The purpose of the LLC is to develop, manufacture, produce and sell
temperature measurement devices and other related products or services.
Pursuant to a contribution agreement among the Company and the other
members of the LLC, the Company will contribute property, in the form of
cash, inventory and other business assets which will have a fair market
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value of $300,000, in exchange for a 42% membership interest in the LLC.
The Company will produce under a manufacturing agreement the temperature
measurement devices which will be sold by the LLC and will provide
administrative services to the LLC. Second, the Company has been
marketing Geiger Muller tubes for both military and commercial markets.
Although no material orders or sales occurred in fiscal 1995, the Company
believes that the discrete sale of such radiation detectors represents a
continuing diversification of its product line and an opportunity for
growth.
In 1986 the Company obtained two patents that are significant to its
business. One patent relates to a radiation measurement technique used in
certain of the Company's Health Physics and Environmental Monitoring
devices. The technique of operation, as described in the patent, permits
more extensive use of a stable inexpensive detector that prior to the
discovery was limited to a comparatively narrow scope of use. The
possession of this patent allows the Company, in a protected fashion, to
compete in a much broader market. The second patent relates to a computer
program which permits more accurate measurement of radiation in connection
with the technique utilized by the first patent. The second patent allows
the Company to address additional business opportunities in specialized
low level nuclear measurement. The Government has certain use rights with
respect to these patents. The Company has also obtained patents in
certain foreign countries with respect to these techniques. During 1991,
the Company obtained a United States patent relating to a radiation
measurement device used in connection with other products manufactured by
the Company.
(c) Distribution. The Company's products are marketed directly to its
customers through its own marketing staff and through a variety of
manufacturers' representatives acting as independent commissioned sales
agents and distributors. Commissions range from 3% to 15% depending upon
the amount of follow-up service provided. In certain instances where
opportunities for growth or expansion are unique, the Company has tailored
its agreements with such representatives with a view to enhance sales
efforts. Approximately 89% of all sales in the fiscal year ended June 30,
1995 ("fiscal 1995") were obtained through the Company's internal
marketing staff which currently consists of six persons.
(d) Backlog. At June 30, 1995, the Company's backlog of orders was
$20,010,000 compared to $33,564,000 at June 30, 1994. Substantially all
such orders are subject to cancellation. In the fiscal year ending June
30, 1996 ("fiscal 1996"), the Company expects to ship approximately
$16,000,000 of the June 30, 1995 backlog.
Domestic commercial orders for fiscal 1995 were $2,691,000 compared to
$3,686,000 for fiscal 1994. The Company believes that the decrease in
domestic commercial orders is primarily due to customer budgetary
constraints. The Company further believes that such customer budgetary
constraints are due to the de-regulation of nuclear power plants and the
increased emphasis among nuclear power plants on competitiveness and cost
reduction. In 1995 the Company concentrated its marketing efforts in
foreign commercial markets and the development of new product lines.
(e) Sources of Supply. The Company's products are manufactured from
widely distributed electronic components and fabricated parts made of
metal, plastics and rubber. Nuclear materials are used to calibrate the
products or to create a radiation source for checks or measurements, but
are not normally used in the manufacturing process. Required materials
and components are readily available from multiple sources at competitive
prices and the Company foresees no significant problem of availability.
(f) Competitive Conditions. The Company has a limited number of
competitors in each of its product categories. Certain of these companies
have greater capital and technical resources than the Company.
Competition in each of the Company's product categories is based primarily
upon price, technology and ability to deliver.
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<PAGE>
(g) Customers. Contracts with the Government, including the United
States Department of Defense, were virtually unchanged from 78% of
revenues in the fiscal year ended June 30, 1994 ("fiscal 1994") to 78.5%
of revenues in fiscal 1995. Some of the products manufactured for the
Government are proprietary and others are manufactured in accordance with
Government specifications and drawings. All of the Company's contracts
with the Government provide for termination at the discretion of the
Government for reasons of convenience and/or justifiable cause. Only four
Government contracts the Company has accepted in its 44-year history have
been terminated. The final negotiated settlements in three of these
instances did not result in a material loss of profits on completed
portions of the contracts because earned profits were paid up to the
points of termination. However, termination does cause a reduction in
backlog and in projected revenues and profits from the terminated portion
of the contract.
The Government is the only customer that accounted for at least 10% of
the Company's total revenues in fiscal 1995. The loss or significant
reduction of government contract work would be likely to have a material
adverse effect on the Company.
Total foreign shipments accounted for 12% of the Company's total
revenues in fiscal 1995 as compared to 4% in fiscal 1994 and 10% in the
year ended June 30, 1993 ("fiscal 1993").
Domestic commercial sales for fiscal 1995 decreased 27% to $2,685,000
compared to $3,663,000 for fiscal 1994. The decrease in domestic
commercial sales can be accounted for by customer budgetary constraints
combined with the Company's increased emphasis on foreign commercial sales
in fiscal 1995.
All of the Company's sales to unaffiliated customers are manufactured
in and shipped from the United States. Export sales information appears
below:
<TABLE>
<CAPTION>
For the Year Ended June 30,
--------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Export Sales:
Europe $ 469,000 $ 453,000 $ 1,147,000
Far East 2,299,000 417,000 660,000
Middle East 36,000 25,000 333,000
North America 313,000 - -
Other 15,000 23,000 67,000
----------- ----------- ----------
TOTAL $ 3,132,000 $ 918,000 $ 2,207,000
</TABLE>
(h) Regulation. The United States Nuclear Regulatory Commission
("USNRC") imposes controls on the handling of nuclear materials, including
disposal of material waste and toxic material discharge, as well as
security against loss or theft of nuclear material and the protection of
personnel in or near nuclear environments. The Company is subject to
these regulations and has a nuclear physicist on staff, who is the
Company's radiation safety officer supervising the Company's compliance.
He is responsible for the preparation, updating and implementation of the
Company Radiation Safety Handbook, a copy of which is on file with the
USNRC. The USNRC periodically conducts spot inspections to determine
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compliance with its regulations and license requirements.
The Company considers the maintenance and upgrading of these controls
as well as the maintenance of adequate storage facilities to be normal
costs of business. The Company believes its current facilities and
administrative procedures meet USNRC requirements.
The Company holds licenses granted by the USNRC for the receipt, use,
storage and distribution of various radioisotope source materials used in
its normal course of business. Each of the licenses is for a term of five
years. The expiration date of one license is October 31, 1999 and the
expiration date of another is April 30, 2000. The remaining licenses have
expiration dates of January 31, 1996 and November 30, 1997.
Radiac (radiation detection, identification and computation)
instruments for military use constitute a portion of the Company's foreign
sales. Approval by the Office of Munitions Control of the United States
State Department is required prior to the issuance of an export license
for such instruments. The Office of Munitions Control can impose certain
restrictions on the sale of these instruments.
(i) Research and Development. The Company has a six person staff
consisting of electronics engineers, nuclear physicists and computer
programmers who perform research and development activities for the
Company. This group spends from 80% to 85% of its time on a project basis
in development of special products for customers and new and improved
products for the Company's own product lines.
The Company expended $1,052,718 on research in fiscal 1995 compared to
$1,013,798 and $1,245,545 in fiscal years 1994 and 1993, respectively.
Customer-sponsored research accounted for $187,854 in fiscal 1995,
$244,940 in fiscal 1994 and $146,000 in the fiscal year ended June 30,
1993 ("fiscal 1993").
(j) Personnel. At September 1, 1995, the Company had a total of 217
full-time employees, 95 at its Warrington, Pennsylvania location and 122
at its Dover, New Jersey location. Of these employees, 130 are
engineering and production workers and the balance are officers, managers,
clerical personnel and indirect labor. None of the Company's employees is
represented by a labor union.
Item 2. Properties.
On March 23, 1981, the Company purchased a building at 125 Titus
Avenue, Warrington, Pennsylvania for use as the Company's headquarters and
as a manufacturing facility. The building contains approximately 29,000
square feet with approximately 8,000 square feet reserved for offices and
engineering laboratories and 21,000 square feet for manufacturing
facilities. The building is located on a three-acre site.
The Company is presently constructing a 20,000 square foot addition to
its Warrington facility to accommodate increased space requirements and to
provide space for anticipated growth. See Note 13 to the Consolidated
Financial Statements.
On January 15, 1982, the Company leased 38,000 square feet of space on
the second floor of a building on Richboynton Road in Dover, New Jersey,
to be used for offices, engineering laboratories and for manufacturing
facilities. The lease term was for a period of ten years with a five-year
renewal option. Effective March 1, 1992, the Company exercised the
renewal option. See Note 9 to the Consolidated Financial Statements.
The Company believes that its properties are currently adequate to meet
its requirements.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
There is no established public trading market for the common stock of
the Company.
As of June 30, 1995, the Company had approximately 1,725 shareholders
of record.
The Company did not pay any dividends in fiscal years 1995 and 1994 and
does not anticipate paying dividends in the foreseeable future.
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
For the Fiscal Year Ended June 30
---------------------------------
1995 1994 1993 1992
1991
----------- ----------- ---------- -----------
- - ------------
<S> <C> <C> <C> <C> <C>
Net Sales $27,051,737 $20,852,694 $22,201,291 $22,121,505
$15,064,358
Net Income $ 1,278,476 $ 622,353(1) $ 395,179 $ 775,764 $
252,762(2)
Net Income
Per Common
Share $ 38.25 $ 19.69 $ 12.84 $ 25.74 $
8.81(2)
Total
Assets $11,168,668 $11,024,694 $10,296,249 $ 9,157,826 $
9,383,701
Long-term
Debt $ 379,131 $ 738,870 $ 913,680 $ 799,301 $
1,121,592
Dividends
Declared,
Per Common
Share $ 0 $ 0 $ 0 $ 0 $
0
(1) During fiscal 1994, the final settlement of the Company's insurance
claim related to the partial roof collapse at the
Dover Division in March 1993 resulted in a recorded gain of $323,209. See Note
1 to the Consolidated Financial Statements.
(2) During the fiscal year ended June 30, 1991, labor-related legal expense
of $123,016 was charged against income.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- - -------------------------------
During fiscal 1995, reductions in inventory of $1,271,096 and an other
receivable of $695,335 combined with an increase in taxes payable on
income of $350,804 were the major factors which affected the cash provided
by operating activities. The Company was able to dramatically reduce
ending inventory due to increased sales volume. The days' sales in
inventory, which is a measure of the supply of inventory that the Company
maintains, decreased to 99 days in fiscal 1995 as compared to 162 days in
fiscal 1994. The decrease in the other receivable in fiscal 1995 was the
result of the final settlement of the Company's insurance claim related to
the partial roof collapse in the Dover Division facility. Increases in
costs and estimated earnings in excess of billings on uncompleted contract
of $1,733,552 and accounts receivable of $365,542 combined with a decrease
in accounts payable of $425,164 offset cash provided by operating
activities for the fiscal year ended June 30, 1995. The costs and
estimated earnings in excess of billings on uncompleted contract resulted
from the Company using the percentage-of-completion method for income
recognition of a multi-year contract.
The Company made capital expenditures of $343,427 in fiscal 1995 for
the purchase of manufacturing and computer equipment, building
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<PAGE>
improvements and certain expenditures associated with patents. Cash used
by financing activities for fiscal 1995 increased $864,980 as a result of
payments on the line of credit of $525,000 and payments on long term debt
of $339,980.
During fiscal 1995, the Company increased its working capital line of
credit to the maximum amount of $5,000,000 of which $1,850,000 was
outstanding at June 30, 1995. The Company's line of credit is with
CoreStates Bank (the "Bank"), successor to Bucks County Bank and Trust
Company with which the Company previously had its credit facility. The
interest rate on this line of credit is payable at the Bank's prime rate
(9% at June 30, 1995) plus 1/2%. The line of credit is secured by
accounts receivable, inventory, certain real property, assignment of a
letter of credit confirmed and negotiated by the Bank and a nonrecourse
surety agreement executed by Earl Pollock, the Company's Chairman and
President, and Dorothy Pollock, the Company's Secretary and a director,
for $1,000,000 secured by a pledge of 8,476 shares of their Company stock.
The maximum amounts available for advances under this line of credit are
limited as follows:
$3,000,000 - July 1, 1994 through November 6, 1994
$3,500,000 - November 7, 1994 through December 31, 1995
$5,000,000 - January 1, 1996 through December 31, 1996
$3,500,000 - January 1, 1997 through June 30, 1997
$3,000,000 - July 1, 1997 through December 31, 1997
The Company also has a long-term note with the Bank at an interest rate
of 7.95%. The note is collateralized by the Company's accounts
receivable, inventory and property, plant and equipment. The principal
balance of this loan at June 30, 1995 was $631,299. See Note 6 to the
Consolidated Financial Statements.
Subsequent to June 30, 1995, the Company entered into a $300,000 term
loan agreement with the Bank. The note is payable in monthly installments
of $8,334 commencing one month after the first advance to the Company plus
interest at 8.25%. The note is collateralized by accounts receivable,
inventory, property, plant and equipment, assignment of a letter of credit
confirmed and negotiated by the Bank and the aforementioned nonrecourse
surety agreement for $1,000,000 executed by Earl and Dorothy Pollock
secured by a pledge of the aforementioned 8,476 shares of their Company
stock. The first advance is anticipated to occur during the second
quarter of the fiscal year ending June 30, 1996. The purpose of the loan
is to assist in financing the construction of the addition to the
Company's facility in Warrington, Pennsylvania.
The Company believes that funds from operations and amounts available
under its present credit facilities will be sufficient to satisfy the
Company's operating cash requirements.
Results of Operations
- - ---------------------
Fiscal 1995 Compared with Fiscal 1994
-------------------------------------
Sales for fiscal 1995 increased to a record $27,051,737 from
$20,852,694 in fiscal 1994. The increase in sales in fiscal 1995 was
primarily due to the resumption of the Company's ability to operate at
normal shipping levels for government contracts as compared to the prior
year when the partial roof collapse at the Company's Dover Division
facility prevented the Company from maintaining normal shipping levels.
Additionally, as a result of increased marketing efforts in foreign
markets, foreign sales increased 11.58% to $3,132,000 in fiscal 1995 as
compared to $918,000 in fiscal 1994.
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<PAGE>
Income from operations increased to a record $2,034,346 in fiscal 1995
from $672,754 in fiscal 1994. The increase in income from operations was
primarily due to an increase in gross profit which was partially offset by
an increase in selling and administrative expenses. Gross profit as a
percentage of sales increased to 20.07% for fiscal 1995 compared to 17.62%
for fiscal 1994. The increase in gross profit as a percentage of sales is
attributed to the Company's ability to operate at normal shipping levels
combined with increased shipments of products with higher gross margins.
Selling and administrative expenses increased $306,424 to $2,032,317 in
fiscal 1995. The increase was primarily due to increased marketing
expenses, commission expenses and costs related to negotiating an
enhancement of the Company's credit facility. As a percentage of sales,
selling and administrative expenses decreased to 7.51% for fiscal 1995 as
compared to 8.28% for fiscal 1994.
The Company has continued its effort of reinvesting part of its
earnings to develop new technologies and to develop applications of its
existing technologies for new business opportunities. Research and
development expenses increased $38,920 to $1,052,718 for fiscal year 1995.
$864,864 was internally funded from new product development in fiscal 1995
compared to $768,858 for fiscal 1994. As a percentage of sales, research
and development expenses decreased to 3.89% for fiscal 1995 as compared to
4.86% for fiscal 1994. The decrease was primarily due to the fact that
all programming costs were fully amortized as of June 30, 1994. See Note
4 to the Consolidated Financial Statements.
Interest expenses increased $46,147 to $308,746 for fiscal 1995 as a
result of higher interest rates and related costs associated with letters
of credit for a multi-year contract.
The effective tax rate of 38% remained unchanged from fiscal 1994 to
fiscal 1995.
FAS 106 - Post Retirement Benefits Other than Pensions and FAS 109 -
Accounting for Income Taxes have been issued and are effective for the
year beginning after December 15, 1992. In the opinion of the Company's
management, the adoption of these pronouncements has not had a material
effect on the Company's financial position or its results of operations.
Fiscal 1994 Compared with Fiscal 1993
- - -------------------------------------
Sales for fiscal 1994 decreased to $20,852,694 from $22,201,291 in
fiscal 1993. The partial roof collapse at the Company's Dover Division
facility in March 1993 prevented the Company from maintaining normal
shipping levels until the fourth quarter of fiscal 1994.
Income from operations increased to $672,754 in fiscal 1994 from
$557,409 in fiscal 1993 due to decreased selling and administrative
expenses and research and development expenses which were partially offset
by a decrease in gross profit. Gross profit as a percentage of sales
remained unchanged in fiscal 1994 from fiscal 1993.
Selling and administrative expenses decreased $107,971 to $1,725,893 in
fiscal 1994 compared to fiscal 1993. The decrease was primarily due to
decreased marketing and commission expenses.
Research and development expenses decreased $231,767 to $1,013,798 for
fiscal 1994, reflecting decreased design and engineering costs associated
with a decrease in sales. $768,858 was internally funded from new product
development in fiscal 1994 compared to $1,099,565 for fiscal 1993.
Interest expenses increased slightly from fiscal 1994 to fiscal 1993.
The effective tax rate increased to 38% from 31% in fiscal 1994
compared to fiscal 1993.
FAS 106 - Post Retirement Benefits Other than Pensions and FAS 109 -
Accounting for Income Taxes have been issued and are effective for the
year beginning after December 15, 1992. In the opinion of the Company's
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management, the adoption of these pronouncements has not had a material
effect on the Company's financial position or its results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements are listed under Item 14 in this Report on
Form 10-K.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Directors and officers of the Company are elected for a term of one
year and until their successors are elected and qualified. The Company's
directors and executive officers, and their business experience during the
past five years, are as follows.
Earl M. Pollock, age 76, has been Chairman, President and Chief
Executive Officer of the Company for more than five years.
Dorothy S. Pollock, age 66, is the wife of the President and has been a
Director and Secretary of the Company for more than five years. Mrs.
Pollock takes no active role in the operation of the business.
Charles H. Sulzberger, Jr., age 68, was elected a Director of the
Company on August 10, 1981. Mr. Sulzberger was employed by Lincoln Bank
(since merged with Continental Bank, Norristown, Pennsylvania) from 1973
to 1984, at which time he held the position of Vice President. He is
currently engaged in private investment counseling.
Mark S. Pollock, age 36, was appointed Treasurer and Chief Financial
Officer in May 1988. Mr. Pollock had been the Controller of the
Corporation since November 1987. Mr. Pollock is a Certified Public
Accountant. Mr. Pollock is the nephew of Earl and Dorothy Pollock.
Harold J. Cooley, age 61, was appointed Senior Vice President of
Operations in 1988. Mr. Cooley had been the Vice President of Technical
Support since November 1983.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
--------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 (the "Act"), and
the regulations thereunder, requires the Company's officers and directors
and persons who own more than 10% of the registered class of the Company's
equity securities (collectively, the "reporting persons") to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission and to furnish the Company with copies of these reports. Based
solely on the Company's review of the copies of these reports received by
it, and written representations received from reporting persons, the
Company believes that all filings required to be made by the reporting
persons for the period July 1, 1994 through June 30, 1995 were made on a
timely basis except for (a) one report of Earl M. Pollock, Chairman,
President and Chief Executive Officer, relating to one transaction, which
was filed subsequent to its due date, and (b) one report of Mark S.
Pollock, Treasurer and Chief Financial Officer, relating to three
transactions, which was filed subsequent to its due date.
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<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
- - --------------------------
The following table provides certain summary information concerning
compensation paid or accrued by the Company, for its fiscal year ended
June 30, 1995, to or on behalf of the Company's Chief Executive Officer
and the other most highly compensated executive officers of the Company
(the Company had only three executive officers during fiscal 1995).
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
- - ---------------------------------------------
Annual Compensation
Awards Payouts
-------------------
- - -------------------------------------
(a) (b) (c) (d) (e)
(f) (g) (h) (i)
Other Annual
Restricted LTIP All Other
Name and Compensation
Stock Options Payouts Compensa-
Principal Position Year Salary($) Bonus($) ($)
Award(s) ($) SARs (#) ($) tion ($)
- - ----------------- ---- --------- -------- ------------
- - ----------------------------------------------
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Earl M. Pollock 1995 $229,546 -0- -0-
-0- -0- -0- $-0-
Chairman of the 1994 $217,317 -0- -0-
-0- -0- -0- $-0-
Board, President 1993 $219,717 -0- -0-
-0- -0- -0- $-0-
and Chief
Executive Officer
Harold J. Cooley 1995 $280,198 -0- -0-
-0- -0- -0- $-0-
Senior Vice 1994 $260,881 $15,000 -0-
-0- -0- -0- $-0-
President, 1993 $256,137 -0- -0-
-0- -0- -0- $-0-
Operations
Mark S. Pollock 1995 $ 96,065 -0- -0-
-0- -0- -0- $-0-
Treasurer and 1994 $ 79,615 $25,000 -0-
-0- -0- -0- $-0-
Chief Financial 1993 $ 76,000 -0- -0-
-0- -0- -0- $-0-
Officer
</TABLE>
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Option Holdings
- - ---------------
The following table provides information with respect to the named
executive officers regarding Company options held at the end of the
Company's most recent fiscal year (such officers did not exercise any
options during the most recent fiscal year).
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SAR Options/SARs
at Fiscal at Fiscal
Shares Value Year-End (#) Year-End ($)(1)
Acquired on Realized (#) Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
- - --------------- ------------ -------- ---------------- -------------
<S> <C> <C> <C> <C>
Earl M. Pollock - - -0- -
Harold J. Cooley - - 2,000/750 275,940/34,028
Mark S. Pollock - - 400/600 46,260/34,250
(1) There is no trading market for the Company's securities. The fair
market value of the Company's Common Stock is determined by the book value
of the Company's Common Stock. On June 30, 1995, the book value of the
Company's Common Stock was $205.65 per share.
</TABLE>
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Employment Contracts and Change-in-Control Arrangements
- - -------------------------------------------------------
On July 1, 1995, the Company entered into a seven-year employment
agreement with Mr. Cooley. Pursuant to the employment agreement, Mr.
Cooley is presently entitled to receive base compensation at the annual
rate of $221,000. In addition, at the end of each fiscal year Mr. Cooley
is eligible for a bonus based on certain performance-based criteria. In
the event that the Company terminates Mr. Cooley's employment without
cause, the Company is required to continue to pay Mr. Cooley's base
compensation, determined in accordance with the agreement, for the full
term of the agreement. In the event that Mr. Cooley's employment is
terminated due to death, the Company is required to continue to make all
payments otherwise payable pursuant to the agreement to Mr. Cooley or his
beneficiary, as applicable, for a period of one year following such death.
If Mr. Cooley's employment is terminated due to disability, the Company's
sole obligation is to pay Mr. Cooley's last full year's base compensation
for one year following termination due to disability.
If the Company merges or consolidates with a company that controls over
50% of the voting control of the Company or is acquired by any party not
an affiliate of the Company, the Company may terminate the employment
agreement and Mr. Cooley's employment. In the event of such termination,
the Company is required to pay Mr. Cooley his accrued base compensation
plus a sum equal to his most recent two full years' base compensation.
One half of such sum must be paid within thirty days of termination and
the balance must be paid within thirteen months of termination.
Compensation of Directors
- - -------------------------
Charles H. Sulzberger receives a fee of $500 per meeting of the Board
of Directors that he attends. During the fiscal year ended June 30, 1995,
the Company paid fees of $1,000 to Mr. Sulzberger.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth as of June 30, 1995, the number of
shares of common stock owned beneficially by all persons known to the
Company who are the beneficial owners of more than 5% of the Company's
Common Stock, by all directors of the Company and by all directors and
officers of the Company as a group.
-13-
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of Percent
Beneficial Owner(1) Beneficial Ownership (2) of Class
- - ------------------- ------------------------ --------
<S> <C> <C>
Earl M. Pollock 15,751(3) 40.5%
Dorothy Pollock 7,751(4) 19.9%
Harold J. Cooley 2,177(5) 5.6%
Charles H. Sulzberger, Jr. 1,896 4.8%
Directors and officers as
a group (5 persons) 28,200(3)(5) 72.4%
- - -----------------------
(1) The address of each of the persons listed above is 125 Titus
Avenue, Warrington, Pennsylvania 18976.
(2) Based on information furnished to the Company by the directors and
officers of the Company, these persons hold sole voting and dispositive
power with respect to the shares of stock owned by them as of June 30,
1995.
(3) Includes 8,000 shares issuable upon exercise of warrants. Does
not include shares owned by his wife, Dorothy Pollock, as to which Mr.
Pollock disclaims beneficial ownership.
(4) Does not include shares owned by her husband, Earl M. Pollock, as
to which Mrs. Pollock disclaims beneficial ownership.
(5) Includes 2,150 shares which Mr. Cooley has the option to purchase,
2,000 of which are currently exercisable and 150 of which will become
exercisable on November 8, 1995. Excludes an aggregate of 600 shares
issuable upon exercise of options held by Mr. Cooley which are not
exercisable within 60 days. Also includes an aggregate of 600 shares
issuable upon the exercise of options granted to Mark Pollock, 400 of
which are currently exercisable, 100 of which become exercisable on
October 29, 1995 and 100 of which become exercisable on November 8, 1995.
Excludes an aggregate of 400 shares issuable upon exercise of options held
by Mark Pollock which are not exercisable within 60 days.
PART IV
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In connection with and as partial consideration for a loan from the
Company's President, Earl M. Pollock, which loan was repaid in fiscal
1993, the Company issued to Earl M. Pollock in March 1989 warrants for the
purchase of 5,000 shares of the Company's common stock exercisable in
1,000 share increments at $100 per share. The warrants initially were to
expire on March 31, 1994 but, as a result of an amendment in July 1991,
now expire on March 31, 2004. In November 1994, in connection with and as
partial consideration for a nonrecourse surety agreement executed by Earl
M. Pollock as security for the Company's credit facilities, the Company
issued Mr. Pollock warrants for the purchase of 3,000 shares of the
Company's common stock exercisable in 1,000 share multiples at $160.28 per
-14-
<PAGE>
share. The warrants expire on November 8, 2004. None of the warrants
issued to Earl M. Pollock have yet been exercised. See Note 12 to the
Consolidated Financial Statements.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
(a) The following documents are filed as part of this Report.
1. Consolidated Financial Statements:
Report of Independent Public Accountants.
Consolidated Balance Sheets.
Consolidated Statements of Operations.
Consolidated Statements of Stockholders'
Equity.
Consolidated Statements of Cash Flows.
Notes to Consolidated Financial Statements.
2. Consolidated Financial Statement Schedules:
Schedule V - Property, Plant and Equipment.
Schedule VI - Accumulated Depreciation,
Depletion, and Amortization of
Property, Plant and Equipment.
Schedule IX - Short-term Borrowings.
Schedules not listed above are not applicable.
3. Reports on Form 8-K.
During the fiscal year ended June 30, 1995, the Company has
not filed any Reports on Form 8-K.
4. Exhibits:
Exhibit
Number Description of Exhibits.
- - ------- ------------------------
3(a) Articles of Incorporation (incorporated herein by
reference to Exhibit 1 to the Company's Form 10 filed on
April 15, 1981).
3(b) By-laws, as amended (incorporated herein by reference to
the Company's Form 10-K for the fiscal year ended June
30, 1987).
4 Specimen stock certificate (incorporated herein by
reference to Exhibit 3 to the Company's Form 10 filed on
April 15, 1981).
10(a) Articles of Agreement between Bucks County Industrial
Development Corporation and the Company (relating to
Warrington, Pennsylvania building) (incorporated herein
by reference to Exhibit 5(ii) to the Company's Form 10
filed on April 15, 1981).
-15-
<PAGE>
10(b) Lease dated January 15, 1982 between Dayco Corporation
and the Company (relating to Dover, New Jersey building)
(incorporated herein by reference to Exhibit 3 to the
Company's Report on Form 10-K for the fiscal year ended
June 30, 1981).
10(c) Agreement for Merger and Plan of Reorganization dated
August 5, 1986 among NRC Acquisition Corp., RIL
Electronics, Inc. and the Company (incorporated herein
by reference to Exhibit 2 to the Company's Report on
Form 8-K filed on August 29, 1986).
10(d)* Stock option issued to Harold J. Cooley dated March 30,
1989 (incorporated herein by reference to Exhibit 10-e
to the Company's Report on Form 10-K for the fiscal year
ended June 30, 1989).
10(e)* Warrants issued to Earl Pollock dated March 30, 1989
(incorporated herein by reference to Exhibit 10-f to the
Company's Report on Form 10-K for the fiscal year ended
June 30, 1989).
10(f) $150,000 note issued to Earl Pollock dated March 2, 1989
(incorporated herein by reference to Exhibit 10-g to the
Company's Report on Form 10-K for the fiscal year ended
June 30, 1989).
10(g)* 1990 Incentive Stock Option and Non-Qualified Option
Plan (incorporated herein by reference to Exhibit 10(h)
to the Company's Report on Form 10-K for the fiscal year
ended June 30, 1991).
10(h)* Amendment No. 1 to stock option issued to Harold J.
Cooley (incorporated herein by reference to Exhibit
10(i) to the Company's Report on Form 10-K for the
fiscal year ended June 30, 1991).
10(i)* Amendment No. 1 to warrant issued to Earl Pollock
(incorporated herein by reference to Exhibit 10(j) to
the Company's Report on Form 10-K for the fiscal year
ended June 30, 1991).
10(j) Amended note issued to Earl Pollock (incorporated herein
by reference to Exhibit 10(k) to the Company's Report on
Form 10-K for the fiscal year ended June 30, 1991).
10(k) Line of Credit Agreement between Bucks County Bank and
Trust Company and the Company, dated November 7, 1994.
10(l) Demand Note, dated November 7, 1994, of the Company in
favor of Bucks County Bank and Trust Company.
10(m) Open-End Mortgage dated November 7, 1994 by the Company
in favor of Bucks County bank and Trust Company.
10(n)* Warrant issued to Earl M. Pollock dated November 8,
1994.
10(o)* Employment Agreement, dated June 27, 1995, by and
between the Company and Harold J. Cooley.
-16-
<PAGE>
10(p) Operating Agreement of Measurement Dynamics LLC, a New
Jersey limited liability company, dated July 12, 1995,
by and between the Company, Mark Sitcoske and Ernest W.
DeLany.
Exhibit
Number Description of Exhibits.
- - ------- ------------------------
11 Computation of earnings per share.
21 The Company's three subsidiaries are NRC Acquisition
Corp., a Pennsylvania corporation; Northeast Nuclear,
Ltd., a Virgin Islands corporation; and Measurement
Dynamics LLC, a New Jersey limited liability company.
- - -----------------------------
* Constitutes management contract or compensatory plan or arrangement
required to be filed as an exhibit to this form.
-17-
<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 on
October 13, 1995.
NUCLEAR RESEARCH CORPORATION
By: /s/ Earl M. Pollock
--------------------------
Earl M. Pollock, President
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 indicated on October 13, 1995.
/s/ Earl M. Pollock
- - ---------------------------------
Earl M. Pollock, Chairman of the
Board and President (Principal
Executive Officer)
/s/ Mark S. Pollock
- - ----------------------------------
Mark S. Pollock, Treasurer and
Chief Financial Officer (Principal
Financial and Accounting Officer)
/s/ Dorothy S. Pollock
- - ---------------------------------
Dorothy S. Pollock, Director
/s/ Charles H. Sulzberger, Jr.
- - ---------------------------------
Charles H. Sulzberger, Jr., Director
<PAGE>
INDEX
-----
PAGE
----
Independent Auditors' Report F-2
Consolidated Financial Statements F-3
Consolidated Statements of Operations F-3
Consolidated Balance Sheets F-4
Consolidated Statements of Cash Flows F-5
Consolidated Statements of Stockholders' Equity F-6
Notes to Consolidated Statements F-8
F-1
<PAGE>
To the Board of Directors
Nuclear Research Corporation
Warrington, Pennsylvania
Independent Auditors' Report
----------------------------
We have audited the accompanying consolidated balance sheets of Nuclear
Research Corporation and Subsidiaries as of June 30, 1995 and 1994 and the
related consolidated statements of operations, stockholders' equity and
cash flows for each of the years in the three-year period ended June 30,
1995. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these consolidated 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 consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated 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 Research Corporation and Subsidiaries as of June 30, 1995 and 1994
and the results of their operations and their cash flows for each of the
three years in the period ended June 30, 1995 in conformity with generally
accepted accounting principles.
SCHMELTZER, MASTER & GORSKY, P. C.
/s/ Schmeltzer, Master & Gorsky
----------------------------------
Certified Public Accountants
Wyncote, Pennsylvania
September 14, 1995
F-2
<PAGE>
</TABLE>
<TABLE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
- - -------------------------------------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES (Note 10) $27,051,737 $20,852,694 $22,201,291
COST OF SALES 21,623,610 17,177,650 18,305,256
----------- ----------- -----------
GROSS PROFIT 5,428,127 3,675,044 3,896,035
SELLING AND ADMINISTRATIVE
EXPENSES 2,032,317 1,725,893 1,833,864
RESEARCH AND DEVELOPMENT
EXPENSES (Note 1) 1,052,718 1,013,798 1,245,565
INTEREST EXPENSE 308,746 262,599 259,197
----------- ----------- -----------
INCOME FROM OPERATIONS 2,034,346 672,754 557,409
OTHER INCOME
Insurance settlement
(Notes 1 and 11) - 323,206 -
Miscellaneous 12,252 6,615 13,450
Interest 5,778 1,132 1,617
----------- ----------- -----------
Other income 18,030 330,953 15,067
----------- ----------- -----------
INCOME - before income taxes 2,052,376 1,003,707 572,476
Less: taxes on income
(Note 11) 773,900 381,354 177,297
----------- ----------- -----------
NET INCOME $ 1,278,476 $ 622,353 $ 395,179
=========== =========== ===========
<PAGE>
PRIMARY EARNINGS PER SHARE
(Note 1) $ 38.25 $ 19.69 $ 12.84
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE>
<TABLE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND 1994
- - --------------------------------------------------------------------------
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash (Note 1) $ 66,905 $ 163,273
Accounts receivable (Notes 1, 5, 6 and 13) 4,126,320 3,760,778
Other receivable (Note 1) - 695,335
Inventory (Notes 1, 2, 5, 6 and 13) 3,509,290 4,780,386
Prepaid expenses and other current assets 165,715 26,113
Costs and estimated earnings in excess of
billings on uncompleted contract (Note 1) 1,733,552 -
----------- -----------
Total current assets 9,601,782 9,425,885
PROPERTY, PLANT AND EQUIPMENT - Net
(Notes 1, 3, 5, 6 and 13) 1,405,459 1,456,620
OTHER ASSETS
Patents, net (Note 1) 136,476 127,483
Other 24,951 14,706
----------- -----------
Total other assets 161,427 142,189
----------- -----------
TOTAL ASSETS $11,168,668 $11,024,694
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings (Note 5) $ 1,850,000 $ 2,375,000
Current portion of long-term debt (Note 6) 364,041 344,282
Accounts payable 1,554,882 1,980,046
Accrued expenses 466,015 510,640
Accrued payroll and payroll taxes 274,803 424,570
Taxes payable - on income (Note 11) 457,055 106,251
----------- -----------
Total current liabilities 4,966,796 5,740,789
LONG-TERM DEBT (Note 6) 379,131 738,870
DEFERRED INCOME TAXES (Note 11) 28,504 29,274
COMMITMENTS AND CONTINGENCY (Note 9)
<PAGE>
STOCKHOLDERS' EQUITY
Common stock
Stated value $5 per share, with 60,000
shares authorized, 31,873 shares issued,
and 28,175 shares outstanding 159,365 159,365
Additional paid-in capital 517,010 517,010
Retained earnings 5,180,215 3,901,739
Less: treasury stock, 3,698 shares at cost (62,353) (62,353)
----------- -----------
Total stockholders' equity 5,794,237 4,515,761
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,168,668 $11,024,694
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
<TABLE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
- - --------------------------------------------------------------------------
1995 1994
1993
----------- ------------
- - -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,278,476 $ 622,353 $
395,179
Adjustments to reconcile net income to
net cash provided by (used by) operating
activities:
Deferred income taxes (770) 29,274
-
Depreciation and amortization 388,699 468,712
448,335
Gain on disposition of property and
equipment - (74,241)
(3,395)
(Increase) decrease in:
Accounts receivable (365,542) (778,545)
(623,119)
Other receivable 695,335 (283,515)
(411,820)
Inventory 1,271,096 135,125
228,198
Prepaid taxes - on income - 249,427
(249,427)
Prepaid expenses and other assets (144,235) (16,736)
(6,350)
Costs and estimated earnings in
excess of billings on uncompleted
contract (1,733,552) -
-
Increase (decrease) in:
Accounts payable (425,164) 378,420
(592,679)
Accrued expenses and payroll taxes (194,392) 134,527
12,023
Taxes payable - on income 350,804 106,251
(295,900)
----------- -----------
- - -----------
NET CASH PROVIDED BY (USED BY) OPERATING
ACTIVITIES 1,120,755 971,052
(1,098,955)
----------- -----------
- - -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (343,427) (149,737)
(572,614)
Proceeds from sale of equipment - -
6,750
Increase in other assets (8,716) (6,726)
-
----------- -----------
- - -----------
NET CASH USED BY INVESTING ACTIVITIES (352,143) (156,463)
(565,864)
----------- -----------
- - -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds (payments) on line of credit (525,000) (425,000)
1,525,000
Proceeds of long-term debt - -
1,179,676
Payments of long-term debt (339,980) (300,273)
(984,876)
Payment of note payable - officer - -
(100,000)
----------- -----------
- - -----------
CASH PROVIDED BY (USED BY) FINANCING
ACTIVITIES (864,980) (725,273)
1,619,800
----------- -----------
- - -----------
NET INCREASE (DECREASE) IN CASH (96,368) 89,316
(45,019)
<PAGE>
CASH - beginning 163,273 73,957
118,976
----------- -----------
- - -----------
CASH - ending $ 66,905 $ 163,273 $
73,957
=========== ===========
===========
SUPPLEMENTARY DISCLOSURES:
Interest paid $ 307,195 $ 286,644 $
286,325
=========== ===========
===========
Income taxes paid (refunded) $ 434,171 $ (24,763) $
714,722
=========== ===========
===========
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
<TABLE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
- - -------------------------------------------------------------------------
Common Stock
-------------------------
Number
of Shares Amount
---------- ----------
<S> <C> <C>
Balance at July 1, 1992 28,175 $ 159,365
Net income for the year
ended June 30, 1993 - -
--------- ----------
Balance at June 30, 1993 28,175 159,365
Net income for the year
ended June 30, 1994 - -
--------- ----------
Balance at June 30, 1994 28,175 $ 159,365
Net income for the year
ended June 30, 1995 - -
--------- ----------
Balance at June 30, 1995 28,175 $ 159,365
========= ==========
</TABLE>
F-6
<PAGE>
<TABLE>
- - -------------------------------------------------------------------------
Additional Total
Paid-in Retained Treasury Stockholders'
Capital Earnings Stock Equity
----------- ---------- ----------- -------------
<C> <C> <C> <C>
$ 517,010 2,884,207 $ (62,353) $ 3,498,229
- 395,179 - 395,179
---------- ---------- ---------- -------------
517,010 3,279,386 (62,353) 3,893,408
- 622,353 - 622,353
---------- ---------- ---------- -------------
517,010 3,901,739 (62,353) 4,515,761
- 1,278,476 - 1,278,476
---------- ---------- ---------- -------------
$ 517,010 $5,180,215 $ (62,353) $ 5,794,237
========== ========== ========== =============
</TABLE>
See Notes to Consolidated Financial Statements
F-7
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
- - -------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
Nuclear Research Corporation (the Company) was incorporated on July
17, 1950 under the laws of the Commonwealth of Pennsylvania. The
Company is engaged in the business of designing, manufacturing and
servicing detection, measurement and monitoring devices and gauges
for customers throughout the world, with a majority of its revenue
derived from products primarily manufactured for use by the United
States Department of Defense.
Management uses estimates and assumptions in preparing these
financial statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent
assets and liabilities and the reported revenues and expenses.
Actual results could vary from estimates that were used.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of Nuclear
Research Corporation, NRC Acquisition Corporation and Northeast
Nuclear, Ltd., wholly-owned subsidiaries hereafter referred to
collectively as the "Company". All significant intercompany accounts
and transactions have been eliminated in consolidation. Northeast
Nuclear, Ltd. is a foreign sales corporation (FSC) and as such files
its own corporate tax return (see Note 11).
Accounting for Contracts
------------------------
Substantially all of the Company's contracts are firm-fixed price.
The units of delivery method (a modification of the percentage-of
-completion method) recognizes as revenue the contract price of units
delivered during a period and recognizes the costs allocable to the
delivered units. Estimates of cost to complete are reviewed and
revised periodically throughout the lives of the contracts, and
adjustments to profit resulting from such revisions are recorded in
the accounting period in which the revisions are made. Losses on
specific contracts are recorded by charging any amounts in excess of
estimated realizable value to cost of sales as they are identified.
The Company has a cost-plus-fixed-fee contract with the United States
Government. The Company recognizes revenue on the contract on the
basis of partial performance where the circumstances are such that
total profit can be estimated with reasonable accuracy and ultimate
realization is reasonably assured.
F-8
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
- - -------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
The Company recognizes revenues on a fixed-price contract using the
percentage-of-completion method, measured by the percentage of cost
incurred to date compared to the estimated total cost for the
contract. That method is used because management considers total
cost to be the best available measure of progress on the contract.
Because of inherent uncertainties in estimating costs, it is at least
reasonably possible that the estimates used will change within the
near term.
Contract costs include all direct material, direct labor and indirect
costs related to contract performance. Provisions for estimated
losses on the uncompleted contract are made in the period in which
such losses are determined. Changes in estimated job profitability
resulting from job performance, job conditions, claims, change
orders, and settlements, are accounted for in the period in which the
changes occur.
The asset, "Costs and estimated earnings in excess of billings on
uncompleted contract," represents revenues recognized in excess of
amounts billed.
Costs, estimated earnings, and billings on the uncompleted contract
are summarized as follows:
Costs incurred and estimated earnings
on uncompleted contract $ 1,733,532
Billings to date -
-----------
$ 1,733,552
===========
Included in accompanying balance sheet under the following
caption:
Costs and estimated earnings in excess
of billings on uncompleted contract $ 1,733,552
===========
Cash
----
The Company maintains cash at a financial institution headquartered
in Philadelphia, Pennsylvania which may exceed federally insured
amounts at times and which may at times significantly exceed balance
sheet amounts due to outstanding checks.
F-9
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
- - -------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Accounts Receivable
-------------------
Accounts receivable at June 30, consists of:
1995 1994
---------- ----------
United States Government $3,505,277 $2,935,672
Commercial contracts 418,733 529,779
Foreign contracts 185,622 278,639
Unbilled receivables -
U. S. Government 16,688 16,688
---------- ----------
Total $4,126,320 $3,760,778
========== ==========
The Company does not provide an allowance for doubtful accounts
because of the composition of its customer base, the use of
irrevocable letters of credit for export sales and the lack of any
significant uncollectible amounts in prior years.
Other Receivable and Insurance Settlement
-----------------------------------------
On March 15, 1993, a portion of the roof collapsed at the Company's
Dover, New Jersey division resulting in the disruption of production
at this facility. The property, inventory and business interruption
losses resulting from the partial roof collapse were insured.
The other receivable represents the final settlement as of June 30,
1994 for reimbursable expenses due from an insurance company for the
claim which resulted from the partial roof collapse. The Company
recorded a gain on the final settlement of the claim of $323,206 in
1994.
Inventory
---------
Inventories, other than inventoried costs relating to long-term
contracts, are stated at the lower of cost (principally last-in,
first-out-LIFO) or market and include material, labor and factory
overhead. Market represents the lower of replacement cost or
estimated net realizable value (see Note 2). Inventoried costs
relating to long-term contracts are stated at the actual production
cost including factory overhead incurred to date, reduced by amounts
identified with revenue recognized on delivered units. The costs
attributed to delivered units under long-term contracts are based on
the estimated average cost of all manufactured units.
<PAGE>
Property, Plant and Equipment
-----------------------------
Property, plant and equipment are stated at cost. Expenditures for
maintenance and repairs are charged against operations. Renewals and
betterments that materially extend the life of the assets are
capitalized (see Note 3). Depreciation and amortization are computed
using straight-line and accelerated methods over the estimated useful
lives of the related assets.
F-10
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
- - -------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Patents
-------
The Company has several domestic and international patents. The cost
of these patents is being amortized using the straight line method
over their remaining useful lives, not to exceed seventeen years.
Accumulated amortization was $60,987 at June 30, 1995 and $48,726 at
June 30, 1994. Amortization expense amounted to $12,261, $10,978 and
$9,881 in 1995, 1994 and 1993, respectively.
Income Taxes
------------
Deferred taxes are recorded based upon differences between the
financial statement and the tax basis of assets and liabilities. The
primary temporary difference is the depreciation from the involuntary
conversion of property related to the partial roof collapse at the
Company's Dover, New Jersey facility in March, 1993.
Research and Development
------------------------
Research and development costs related to both present and future
products are charged to operations as incurred. These costs amounted
to $1,052,718, $1,013,798 and $1,245,565 in 1995, 1994 and 1993,
respectively. Customer-sponsored research accounted for $187,854,
$244,940 and $146,000 in 1995, 1994 and 1993, respectively.
Earnings Per Share
------------------
Primary earnings per share amounts are based upon the weighted
average number of common shares outstanding during the periods,
including the common stock equivalents associated with stock options
and warrants (see Note 12).
The weighted average number of shares outstanding and stock
equivalents amounted to 33,422 shares, 31,605 shares and 30,786
shares for the years ended June 30, 1995, 1994, and 1993,
respectively.
<PAGE>
NOTE 2 - INVENTORY
Inventory at June 30, consists of:
1995 1994
----------- -----------
Work-In-Process
United States Government
contracts $ 4,748,683 $ 5,955,568
Commercial contracts 496,603 722,299
Purchased and manufactured parts 637,739 923,972
----------- -----------
5,883,025 7,601,839
Less: Progress payments on United
States Government contracts 2,373,735 2,821,453
----------- -----------
Total $ 3,509,290 $ 4,780,386
=========== ===========
F-11
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
- - -------------------------------------------------------------------------
NOTE 2 - INVENTORY (CONTINUED)
The Company uses the last-in, first-out (LIFO) method to determine
its material inventory costs. The following information will
facilitate comparison with operating results of companies using the
FIFO method. If the Company's inventory had been determined using
the FIFO method at June 30, 1995 and 1994, reported inventories would
have been higher by $1,028,873 and $873,758, respectively. Reported
net income for the years ended June 30, 1995, 1994 and 1993 would
have increased by $92,119 ($2.76 per share), $80,012 ($2.53 per
share) and $106,143 ($3.45 per share), respectively. The proforma
effect relating to the use of the FIFO method would have resulted in
the following balances for the consolidated statements of operations
presentation for the years ended June 30, 1995, 1994 and 1993:
1995 1994 1993
----------- ----------- -----------
Gross profit $ 5,583,242 $ 3,810,223 $ 4,074,308
=========== =========== ===========
Income from operations $ 2,189,461 $ 807,933 $ 735,682
=========== =========== ===========
Net income $ 1,370,595 $ 702,365 $ 501,322
=========== =========== ===========
In the year ended June 30, 1995, a reduction in inventory resulted
in a liquidation of LIFO inventory carried at lower costs in prior
years as compared with the cost of 1995 purchases. The effect of
this liquidation was to increase net income by $37,261 ($1.11 per
share).
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at June 30, consists of:
1995 1994
------------ -----------
Land and land improvements $ 79,207 $ 77,702
Building and improvements 740,804 719,033
Equipment and furniture 2,664,410 2,395,290
Leasehold improvements 114,923 97,914
Equipment held under capital leases 246,176 246,176
---------- ---------
3,845,520 3,536,115
Less: accumulated depreciation
and amortization 2,440,061 2,079,495
---------- ----------
Total $1,405,459 $1,456,620
========== ==========
Depreciation and amortization expense amounted to $373,334, $353,305
and $346,582 in 1995, 1994 and 1993, respectively.
<PAGE>
NOTE 4 - PROGRAMMING COSTS
Programming costs represented software production costs. These costs
were being amortized using the straight line method over a period of
five years and were fully amortized in the year ended June 30, 1994.
Accumulated amortization was $459,349 at June 30, 1994.
Amortization expense amounted to $0, $101,525 and $91,872 in 1995,
1994 and 1993, respectively.
F-12
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
- - -------------------------------------------------------------------------
NOTE 5 - SHORT-TERM BORROWINGS
The Company maintains a working capital line of credit in the
maximum amount of $5,000,000, payable on demand of which
$1,850,000 and $2,375,000 was outstanding at June 30, 1995 and
1994, respectively. Interest is payable at the bank's prime rate
(9% and 7.25% at June 30, 1995 and 1994, respectively) plus .5%
and 1% at June 30, 1995 and 1994, respectively. The line is
secured by accounts receivable, inventory, certain real property,
assignment of a letter of credit confirmed and negotiated by the
bank and a nonrecourse surety agreement executed by the President
and a director for $1,000,000 secured by a pledge of 8,476 shares
of the Company's stock (see Notes 1, 2, and 3).
Notwithstanding the availability under this line of credit of
$5,000,000, the actual availability for advances under this line
of credit are limited as follows:
$3,000,000 - July 1, 1994 - November 6, 1994
$3,500,000 - November 7, 1994 - December 31, 1995
$5,000,000 - January 1, 1996 - December 31, 1996
$3,500,000 - January 1, 1997 - June 30, 1997
$3,000,000 - July 1, 1997 - December 31, 1997
The Company also maintained a temporary demand note with an
original balance of $750,000. As of June 30, 1994, the note was
satisfied and no longer available for future borrowings.
Interest was payable at the bank's prime rate (7.25% at June 30,
1994) plus 1%. The note was used to fund cash requirements
pending settlement of insurance claims involving a partial roof
collapse at the Company's New Jersey facility (see Note 1).
NOTE 6 - LONG-TERM DEBT
Long-term debt consists of the following:
1995 1994
Note payable - bank - payable in
monthly installments of $28,292,
including interest at 7.95%,
collateralized by accounts
receivable, inventory and property,
plant and equipment, (see Notes
1, 2, and 3). Payments extend
through June, 1997. $ 631,299 $ 906,893
Note payable - township - payable
in monthly installments of $888 plus
interest at 7.25%. The note was
satisfied in 1995. - 3,173
F-13
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
- - -------------------------------------------------------------------------
NOTE 6 - LONG-TERM DEBT (CONTINUED)
1995 1994
---------- -----------
Note payable - vehicle - payable in
monthly installments of $890 with
interest at 8%, collateralized
by certain equipment. The note
was satisfied in 1995. - 6,217
Capital lease obligations - payable
in monthly installments of $5,334 and
$1,021, including interest at rates
from 7.2% to 11.5%, collateralized by
certain equipment (see Note 9). Pay-
ments extend through April, 1997. 111,873 166,869
---------- ----------
743,172
1,083,152
Less: current portion (364,041) (344,282)
---------- ----------
Total long-term debt $ 379,131 $ 738,870
========== ==========
The following schedule represents the annual obligations on long-
term debt outstanding at June 30, 1995:
Year Amount
---- ----------
1996 $ 364,041
1997 379,131
----------
Total $ 743,172
==========
NOTE 7 - STATEMENT OF CASH FLOWS
Supplementary information regarding non-
cash investing and financing activities:
1995 1994 1993
-------- -------- --------
Disposition of fully
depreciated property and
equipment $ 12,721 $ - $ -
======== ======== ========
Non-cash acquisition of
property and equipment $ - $257,133 $ -
======== ======== ========
Non-cash financing of
property and equipment $ - $182,892 $ -
======== ======== ========
<PAGE>
NOTE 8 - RETIREMENT PLAN
The Company sponsors a 401(k) retirement plan which is funded
entirely by employee contributions and covers substantially all
full-time eligible employees.
F-14
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
- - -------------------------------------------------------------------------
NOTE 9 - COMMITMENTS AND CONTINGENCY
Lease Obligations
-----------------
The Company leases certain equipment under capital leases
and administrative and manufacturing facilities under an
operating lease which expires February, 1997. The leases
generally provide that the Company pays the taxes,
insurance and maintenance expenses related to the leased
property.
The following is a summary of equipment held under capital
leases at June 30:
1995 1994
-------- --------
Machinery and equipment - cost $246,176 $246,176
Less: accumulated amortization (116,382) (63,224)
-------- --------
$129,794 $182,952
======== ========
The minimum future rentals and lease payments under these
leases as of June 30, 1995 are as follows:
Operating Capital
Years ending June 30, Lease Leases
--------------------- --------- ---------
1996 $ 59,022 $ 64,008
1997 $ 39,344 53,340
--------
Total minimum lease payments 117,348
Less: amount representing interest (5,475)
-------
Present value of net minimum lease
payments $111,873
========
Rent expense associated with operating leases amounted to
$59,022, $57,680 and $53,940 in 1995, 1994 and 1993,
respectively.
<PAGE>
Employment Agreements
---------------------
The Company has employment agreements with two officers
which call for future minimum payments for each of the
next five years and thereafter as follows:
Years ending June 30, Amount
--------------------- --------
1996 $316,000
1997 $268,500
1998 $221,000
1999 $221,000
2000 $221,000
Thereafter $442,000
Standby Letters of Credit
-------------------------
The Company is contingently liable for standby letters of
credit aggregating $782,878 as of June 30, 1995, as
collateral for performance on long-term contracts and
bids.
F-15
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
- - -------------------------------------------------------------------------
NOTE 10 - MAJOR CUSTOMERS AND EXPORT SALES
Total sales in fiscal 1995 included 78.5% to various
branches of the United States Department of Defense
excluding sales to private contractors who in turn sell to
the United States Government. Sales to the United States
Department of Defense in 1994 and 1993 accounted for 78%
and 73% of total sales, respectively.
Export sales in U. S. dollars were as follows:
1995 1994 1993
---------- ---------- ----------
Europe $469,000 $ 453,000 $1,147,000
Far East 2,299,000 417,000 660,000
Middle East 36,000 25,000 333,000
North America 313,000 - -
Other 15,000 23,000 67,000
---------- ---------- ----------
Total $3,132,000 $ 918,000 $2,207,000
========== ========== ==========
The majority of export sales are secured by irrevocable
letters of credit.
NOTE 11 - INCOME TAXES
Provision for income taxes consisted of the
following:
1995 1994 1993
---------- ---------- ----------
Federal:
Current $ 589,581 $ 265,727 $ 111,962
Deferred provision
(benefit) (708) 26,897 -
State:
Current 185,089 86,353 65,335
Deferred provision
(benefit) (62) 2,377 -
---------- ---------- ----------
Total $ 773,900 $ 381,354 $ 177,297
========== ========== ==========
<PAGE>
The following is a reconciliation of income
taxes at the Federal statutory rate with income
taxes recorded by the Company:
1995 1994 1993
-------- -------- --------
Federal tax at statutory
rate from continuing
operations $697,808 $341,260 $186,113
State income taxes, net
of Federal benefit 122,159 88,730 65,335
Other 8,291 14,967 10,155
Research and development
credits (27,848) (63,603) (84,306)
Federal tax savings
attributable to foreign
sales corporation (26,510) - -
-------- -------- --------
Provision for taxes
on income $773,900 $381,354 $177,297
======== ======== ========
F-16
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
- - -------------------------------------------------------------------------
NOTE 11 - INCOME TAXES (CONTINUED)
The tax effect of the following temporary difference gives
rise to the deferred tax liability at June 30, 1995:
Depreciation from the involuntary conversion of
property $ 72,337
========
Income taxes payable at June 30, 1995, 1994 and 1993 were
$457,055, $106,251 and $0, respectively.
NOTE 12 - RELATED PARTY TRANSACTIONS
Stock Option Plan
-----------------
The Company maintains an Incentive Stock Option and Non-Qualified
Option Plan (the Plan). Pursuant to the terms of the Plan, 10,000
shares of the Company's common stock is reserved for issuance.
The Plan provides for the granting of incentive stock options as
defined under the Internal Revenue Code. Also under the Plan,
non-qualified options may be granted to selected officers and
employees. The Plan was effective October 29, 1990 and expires
October 28, 2000. The exercise price is fair market value on the
date of grant.
Outstanding Stock Options
-------------------------
Incentive stock options to purchase an aggregate amount of 1,500
shares were issued to three key employees and are exercisable at
an aggregate rate of 300 shares per year beginning October 29,
1992. The exercise price is $90 per share.
Prior to the adoption of the Plan, the Company granted to the
Senior Vice President an option to purchase 2,000 shares of common
stock. The option expires March 31, 2004. The option is
exercisable at $67.68 per share.
<PAGE>
During the year ended June 30, 1995, incentive stock options to
purchase an aggregate amount of 2,550 shares were issued to four
key employees and one consultant and are exercisable at an
aggregate rate of 510 shares per year beginning November 8, 1995.
The exercise price is $160.28.
Non -
Option shares ExercisableExercisable
------------- -----------
Outstanding, July 1, 1994 2,900 600
Issued during year ended
June 30, 1995 - 2,550
Exercisable during year
ended June 30, 1995 300 (300)
-------- --------
Outstanding June 30, 1995 3,200 2,850
======== ========
Exercisable June 30, 1995 $243,360
========
F-17
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
- - -------------------------------------------------------------------------
NOTE 12 - RELATED PARTY TRANSACTIONS (CONTINUED)
Stock Warrants
--------------
The Company issued stock warrants to the President of the Company.
The warrants are exercisable into 5,000 shares of the Company's
stock in 1,000 share increments at a price of $100 per share. The
warrants, which expire March 31, 2004, were outstanding at June
30, 1995, 1994 and 1993.
The Company issued additional warrants during the year ended June
30, 1995 to the President that are exercisable into 3,000 shares
of the Company's stock in 1,000 share increments at a price of
$160.28 per share. The warrants, which expire November 8, 2004,
were outstanding at June 30, 1995.
NOTE 13 - SUBSEQUENT EVENTS
Subsequent to June 30, 1995 the Company entered into a $300,000
term loan agreement with a bank as follows:
Note payable - bank - payable in monthly installments of $8,334
commencing one month after the first advance to the Company plus
interest at 8.25%, collateralized by accounts receivable,
inventory, property, plant and equipment, assignment of a letter
of credit confirmed and negotiated by the bank and a nonrecourse
surety agreement executed by the President and a director for
$1,000,000 secured by a pledge of 8,476 shares of the Company's
stock. The first advance is anticipated to occur during the
second quarter of the year ending June 30, 1996. The purpose of
the loan is to assist in financing the construction of an addition
to the Company's facility in Warrington, Pennsylvania (see Notes
1, 2 and 3).
In July, 1995 the Company entered into an operating agreement t to
form a New Jersey limited liability company (LLC), the purpose of
which is to develop, manufacture, produce and sell temperature
measurement devices and other related products or services. The
Company shall contribute property, in the form of cash, inventory
and other business assets which shall have a fair market value of
$300,000, in exchange for 42% of the LLC. The Company will
produce temperature measurement devices to be sold by the LLC
under a manufacturing agreement and will provide administrative
services to the LLC.
F-18
<PAGE>
Method
Exhibit of
Number Description of Exhibit Filing
- - ------- ---------------------- ------
3(a) Articles of Incorporation (incorporated herein
by reference to Exhibit 1 to the Company's Form
10 filed on April 15, 1981).
3(b) By-laws, as amended (incorporated herein by
reference to the Company's Form 10-K for the
fiscal year ended June 30, 1987).
4 Specimen stock certificate (incorporated herein by
reference to Exhibit 3 to the Company's Form 10
filed on April 15, 1981).
10(a) Articles of Agreement between Bucks County Industrial
Development Corporation and the Company (relating
to Warrington, Pennsylvania building) (incorporated
herein by reference to Exhibit 5(ii) to the Company's
Form 10 filed on April 15, 1981).
10(b) Lease dated January 15, 1982 between Dayco Corporation
and the Company (relating to Dover, New Jersey building)
(incorporated herein by reference to Exhibit 3 to the
Company's Report on Form 10-K for the fiscal year ended
June 30, 1981).
10(c) Agreement for Merger and Plan of Reorganization dated
August 5, 1986 among NRC Acquisition Corp., RIL
Electronics, Inc. and the Company (incorporated herein
by reference to Exhibit 2 to the Company's Report on
Form 8-K filed on August 29, 1986).
10(d) Stock option issued to Harold J. Cooley dated March 30,
1989 (incorporated herein by reference to Exhibit 10-e
to the Company's Report on Form 10-K for the fiscal
year ended June 30, 1989).
10(e) Warrants issued to Earl Pollock dated March 30, 1989
(incorporated herein by reference to Exhibit 10-f to
the Company's Report on Form 10-K for the fiscal year
ended June 30, 1989).
10(f) $150,000 note issued to Earl Pollock dated March 2,
1989 (incorporated herein by reference to Exhibit 10-g
to the Company's Report on Form 10-K for the fiscal
year ended June 30, 1989).
10(g) 1990 Incentive Stock Option and Non-Qualified Option
Plan (incorporated herein by reference to Exhibit 10(h)
to the Company's Report on Form 10-K for the fiscal
year ended June 30, 1991).
10(h) Amendment No. 1 to stock option issued to Harold J.
Cooley (incorporated herein by reference to Exhibit 10(i)
to the Company's Report on Form 10-K for the fiscal year
ended June 30, 1991).
10(i) Amendment No. 1 to warrant issued to Earl Pollock
(incorporated herein by reference to Exhibit 10(j) to the
Company's Report on Form 10-K for the fiscal year ended
June 30, 1991).
10(j) Amended note issued to Earl Pollock (incorporated herein
by reference to Exhibit 10(k) to the Company's Report on
Form 10-K for the fiscal year ended June 30, 1991).
<PAGE>
10(k) Line of Credit Agreement between Bucks County Bank and *
Trust Company and the Company, dated November 7, 1994.
10(l) Demand Note, dated November 7, 1994, of the Company in *
favor of Bucks County Bank and Trust Company.
10(m) Open-End Mortgage dated November 7, 1994 by the Company *
in favor of Bucks County Bank and Trust Company.
10(n) Warrant issued to Earl M. Pollock dated November 8, 1994. *
10(o) Employment Agreement, dated June 27, 1995, by and between *
the Company and Harold J. Cooley.
10(p) Operating Agreement of Measurement Dynamics LLC, a New *
Jersey limited liability company, dated July 12, 1995,
by and between the Company, Mark Sitcoske and Ernest W.
DeLany.
11 Computation of earnings per share. *
21 The Company's three subsidiaries are NRC Acquisition
Corp., a Pennsylvania corporation; Northeast Nuclear,
Ltd., a Virgin Islands corporation; and Measurement
Dynamics LLC, a New Jersey limited liability company.
27 Financial Data Schedules *
- - -----------------------
* Filed herewith electronically.
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
EXHIBIT 11
CALCULATIONS OF EARNINGS PER SHARE
----------------------------------
June 30, 1995 June 30, 1994 June 30, 1993
------------- ------------- -------------
Net Income $ 1,278,476 $ 622,353 $ 395,179
------------ ----------- ------------
Average Shares Issued 31,873 31,873 31,873
Average Net Effect
of Dilutive Stock
Options-Based on the
Treasury Stock Method 5,247 3,430 2,611
Less: Average Treasury
Stock (3,698) (3,698) (3,698)
------------ ----------- ------------
Total Stock and
Stock Equivalents 33,422 31,605 30,786
------------ ----------- ------------
Earnings Per Share $ 38.25 $ 19.69 $ 12.84
------------ ----------- ------------
1
<PAGE>
EXHIBIT 10.K
BUCKS COUNTY BANK AND TRUST COMPANY
LINE OF CREDIT AGREEMENT
------------------------
INTENDING TO BE LEGALLY BOUND, BUCKS COUNTY BANK AND TRUST
COMPANY, 4259 West Swamp Road, Doylestown, Pennsylvania 18901, ("Lender")
and NUCLEAR RESEARCH CORPORATION, ("Borrower"), with its principal place
of business at 125 Titus Avenue, Warrington, Pennsylvania 18976, agree as
follows:
1. Grant of Line of Credit.
-----------------------
(a) Subject to the terms and conditions set forth below,
Lender does hereby grant to Borrower a loan in the maximum amount of
$5,000,000 in the nature of a "line of credit". Upon request by Borrower,
Lender shall, from time to time, until this Agreement is terminated,
advance such sum or sums of money as Borrower requests, payable to
Borrower or as Borrower requests, provided that the aggregate total of all
such requests and advances does not at any time exceed the maximum line of
credit. Each advance shall not be deemed a separate loan, but shall be an
advance on account of the entire line of credit.
(b) Notwithstanding the maximum availability under this
line of credit of $5,000,000, the actual availability for advances under
this line of credit shall be limited as follows:
(1) $3,000,000 - date of execution - 9/30/94
(2) $3,500,000 - 10/1/94 - 12/31/95
(3) $5,000,000 - 1/1/96 - 12/31/96
(4) $3,500,000 - 1/1/97 - 6/30/97
(5) $3,000,000 - 7/1/97- 12/31/97
(c) Notwithstanding the above, no draw shall be permitted
in excess of $3,000,000 until the letter of credit referenced in paragraph
4(c)(3) below is in place in a form satisfactory to Lender.
2. Repayment.
---------
Borrower agrees to repay the outstanding principal of the
loan plus accrued interest in full on demand. Until repayment of the
principal balance, Borrower agrees to pay interest monthly on the unpaid
balance of principal at a per annum rate equivalent to 1/2% in excess of
the rate announced by Lender as its "prime rate" as adjusted from time to
time. The term "prime rate" is used merely as a pricing index and is not,
and should not be considered to represent the lowest or best interest rate
available to any borrower. Payments shall commence when billed by Lender.
1
<PAGE>
3. Business Use.
------------
The proceeds of the loan will be used only for the purposes
of Borrower's business.
4. Conditions.
----------
The obligation of Lender to make the loan pursuant to this
Agreement shall be subject to Lender's receipt of the following documents,
each in form and substance satisfactory to Lender:
(a) A note executed by Borrower in the amount of the loan
as security for all of Borrower's obligations hereunder:
(b) A certified corporate resolution authorizing all of
Borrower's actions hereunder;
(c) The following collateral security and surety
documents, including any documents and actions required to perfect any
collateral security:
(1) A security interest in Borrower's accounts
receivable, inventory, machinery, equipment and other collateral which
shall be a first lien except to the extent of purchase money security
interests permitted by this Agreement;
(2) A first lien mortgage on Borrower's real estate
located at 125 Titus Avenue, Warrington, Pennsylvania;
(3) Assignment of a $6,471,090.94 letter of credit
from Korean Exchange Bank confirmed and negotiated by CoreStates Bank,
N.A., which assignment shall be made promptly after such latter of credit
is issued;
(4) Nonrecourse surety agreement executed by Earl M.
Pollock and Dorothy S. Pollock for $1,000,000 secured by a pledge of 8,476
shares of the common stock of Borrower.
5. Set-Off.
-------
As additional collateral security for the payment of
Borrower's indebtedness and obligations to Lender hereunder, Borrower
hereby grants to Lender a security interest in, a lien upon and a right of
set-off against all funds, balances or other property of any kind of
Borrower, or in which Borrower has an interest, now or hereafter in the
possession, custody or control of Lender.
6. Borrower's Loan Account.
-----------------------
To the extent advances are made to Borrower by Lender,
Lender shall enter such advances as debits in the Borrower's loan account.
The Lender shall also record in the Borrower's loan account in accordance
2
<PAGE>
with customary accounting practice all other charges, expenses and other
items properly chargeable to the Borrower; all payments made by the
Borrower on account of indebtedness evidenced by the Borrower'S loan
account; all proceeds of collateral which are finally paid to the Lender
at its own office in cash or solvent credits; and other appropriate debits
and credits. The debit balance of the Borrower's loan account shall
reflect the amount of the Borrower's indebtedness to the Lender from time
to time by reason of advances and other appropriate charges hereunder. At
least once each month, the Lender shall render a statement of account for
the Borrower's loan account which statement shall be considered correct
and accepted by the Borrower and conclusively binding upon the Borrower
unless it notifies the Lender to the contrary within thirty (30) days of
the sending of such statement by the Lender to the Borrower. The Borrower
understands that the Lender will use the maximum line of credit as set out
in paragraph 1 as a maximum ceiling on advances under the line of credit.
The debit balance of the Borrower's loan account shall at no time exceed
the maximum line of credit, and if at any time such excess does arise, the
Borrower shall pay cash to the Lender to be credited to the Borrower's
loan account in such amount as may be necessary to eliminate such excess.
7. Advances and Prepayments - Instructions; Indemnification.
--------------------------------------------------------
(a) Borrower hereby authorizes Lender to make advances to
Borrower and to make repayments from Borrower to Lender by crediting or
debiting Borrower's commercial account number _____ maintained with Lender
upon receipt of information as to the amount of the advance or payment
requested communicated to Lender by Borrower by telephone from any
individual authorized under Borrower's borrowing resolution. As part of
Lender's billing process, Lender will provide Borrower on a monthly basis
with a list of all advances and payments, which Borrower shall be
obligated to review on a timely basis.
(b) Borrower hereby indemnifies and holds Lender harmless
from any and all claims, damages, liabilities, losses, costs and expenses,
including reasonable attorneys' fees, which may arise or be created by the
acceptance of instructions by telephone for making advances to or payments
from Borrower's account.
8. Representations and Warranties.
------------------------------
Borrower represents and warrants that:
(a) Borrower is a corporation which has the necessary
power and authority to enter into and perform this Agreement, the note and
all other documents required by Lender in connection herewith; the
execution and performance thereof have been duly authorized by all
necessary proceedings, and upon their execution and delivery, they will be
valid, binding and enforceable in accordance with their terms except as
may be affected by bankruptcy, insolvency, and other similar laws
affecting creditor's rights and by general equitable principles; and
Borrower's execution and performance of this Agreement will not violate
any laws or regulations applicable to Borrower, any organizational
documents of Borrower or any agreements of Borrower.
3
<PAGE>
(b) All financial statements, statements as to ownership
of Borrower and its assets and other statements and information delivered
to Lender are true and correct in all material respects, disclose all
presently outstanding indebtedness or obligations of Borrower, including
contingent obligations and obligations under leases of property from
others, and all liens and encumbrances against its properties and assets
required under generally accepted accounting principles to be shown
therein; and there have been no material adverse changes in Borrower's
financial condition or business since the date of such statements.
(c) There are no actions, suits, proceedings or claims
which are pending or threatened against Borrower, the adverse
determination of which might substantially affect Borrower's financial
condition or business; Borrower's business is in compliance in all
material respects with all applicable laws and regulations; and Borrower
will advise Lender, in writing, of any changes in circumstances of any
nature which would adversely of affect Borrower's financial condition.
(d) All tax returns required to be filed by Borrower have
been properly prepared, executed and filed. All material taxes,
assessments, fees and other governmental charges upon the Borrower or upon
any of its respective properties, income, sales or franchises which are
due and payable have been paid.
(e) Any employee benefit plan that ii subject to the
provisions of the Employee Retirement Income Security Act of 1974, as
amended, and that is maintained in whole or in part for employees of the
Borrower is in substantial compliance with such provisions, and any
unfunded vested liability with respect to any such plan is not material in
amount.
9. Affirmative Covenants.
---------------------
Borrower covenants and agrees that, so long as any portion
of the liabilities to Lender hereunder remain outstanding, Borrower will:
(a) Deliver to Lender quarterly financial statements and
Form 10-Q as filed within sixty (60) days after the end of each fiscal
quarter, and annual audited financial statements and Form 10-K as filed
within one hundred twenty (120) days after the end of each fiscal year and
permit Lender to examine the books and records of account of Borrower and
make extracts therefrom at any reasonable time upon reasonable notice;
(b) Keep and maintain all of its property and assets
material to the operation of its business in good order and repair, fully
covered by insurance with reputable and financially sound insurance
companies of such types and against such risks and in such amounts as is
customary among similar businesses;
(c) Notify Lender, in writing, promptly of (i) the
institution of any litigation; (ii) the commencement of any administrative
proceedings; or, (iii) the happening of any event if any one of (i), (ii)
or (iii) would materially adversely affect the business operations or
financial condition of Borrower or constitute a default hereunder or under
any of the collateral security or surety documents listed under Paragraph
4 above;
4
<PAGE>
(d) Pay or reimburse Lender for all reasonable costs and
expenses including, but not limited to, reasonable attorney fees and
annual audit costs for audits conducted by Lender's internal audit staff
Lender may pay or incur in connection with the preparation of this
Agreement and all other documentation required hereunder, the making of
and loans hereunder or the collection or enforcement of the same and the
annual audit by Lender's internal audit staff;
(e) Execute any documents, provide Lender with any
information, or take any actions reasonably requested by Lender to carry
out the intent of this Agreement;
(f) Pay on or prior to the date when due (i) all taxes,
assessments and other governmental charges or levies imposed upon Borrower
or any of its properties or income; (ii) all lawful claims of materialmen,
mechanics, carriers, warehousemen, landlords and other like persons which,
if unpaid, might result in the creation of a lien upon any of Borrower's
property; (iii) all other lawful claims which, if unpaid, might result in
the creation of a lien upon any of Borrower's property;
(g) Preserve and maintain the corporate existence of
Borrower in all states where Borrower conducts business;
(h) Submit to Lender the following reports on a monthly
basis: (i) Kepco contract status report, (ii) accounts receivable agings;
and (iii) accounts payable agings;
(i) Submit to Lender quarterly updated cash flow
forecasts;
(j) Maintain a debt-to-worth ratio not to exceed 1.75 to 1
and a minimum current ratio and a minimum current ratio of 1.5 to 1. For
purposes of calculation of the minimum current ratio, the entire
outstanding balance under this line of credit shall be shown as a current
liability. These ratios will be reviewed annually after receipt of the
audited annual financial statement.
10. Negative Covenants
------------------
So long as any liabilities to Lender remain outstanding
hereunder, Borrower shall not, without the prior written consent of
Lender:
(a) Sell, transfer or assign any assets except in the
ordinary course of business for value received; enter into any merger or
consolidation; or acquire assets or stock or other equity interests of
another entity except in the ordinary course of business.
(b) Pay any dividends or make any other distributions on,
or repurchase, redeem or otherwise acquire any of its outstanding stock,
partnership interests or other equity interests except for purchased stock
of a deceased shareholder out of life insurance proceeds received by
Borrower.
(c) incur any indebtedness except indebtedness owing to
Lender, existing indebtedness or trade indebtedness arising in the
ordinary course of business or refunding thereof or purchase money
5
<PAGE>
indebtedness for new equipment; guarantee or otherwise become liable,
directly or indirectly, for the indebtedness or obligations of another
party; make any loans or advances or otherwise create, permit or suffer
the creation of any liens, security interests or any other encumbrances on
any of its property, real or personal, except liens, security interests or
encumbrances in favor of Lender or existing on the date hereof and
reported to Lender or purchase money equipment liens.
11. Default.
-------
This is a demand loan. Lender has the right to demand
repayment of this loan at any time. In addition, upon the happening of
any of the following events, each of which shall constitute a default
hereunder, all liabilities of Borrower to Lender, at the option of Lender,
shall become immediately due and payable:
(a) Failure of Borrower to pay the principal or interest
on the note when due or on any renewal, extension or other modification of
the note or failure to pay when due any interest or installment on any
other obligation of any nature whatsoever owing to Lender if such failure
is not cured within fifteen (15) days after notice is given by Lender to
Borrower;
(b) Failure of Borrower to perform any other obligation
owing to Lender under the note or any agreement with Lender not cured
within 30 days after notice thereof is given by Lender to Borrower or
material breach of any representation, warranty, covenant or agreement
herein contained or contained in any other agreement now or hereafter
entered into between Borrower and Lender;
(c) The filing of bankruptcy, receivership or insolvency
proceedings of any kind by or against Borrower, the making by Borrower of
an assignment for the benefit of creditors, or the suspension of business
by Borrower;
(d) The entry of a judgment in excess of $25,000 against
Borrower;
(e) The issuance of any writs of attachment or execution
against Borrower on account of a judgment in excess of $25,000;
(f) The dissolution, merger, consolidation or
reorganization of Borrower corporation;
(g) The furnishing of materially false information
heretofore or hereafter by Borrower to Lender or the refusal by Borrower
to provide material information hereafter;
(h) Any change in the financial condition of Borrower or
any surety which causes Lender in good faith to believe that performance
of the obligations herein is impaired in any material respect or doubtful;
(i) The guarantee of any surety ceases to be effective for
any reason other than the termination of such guarantee by its terms;
(j) Any change occurs in the control of Borrower unless
the new control person(s) are reasonably satisfactory to Lender.
6
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12. Environmental Matters.
---------------------
(a) "Hazardous Substances" shall mean hazardous wastes,
hazardous substances, hazardous materials, toxic substances, hazardous air
pollutants or toxic pollutants, as those terms are used in any law,
guideline, regulation or ruling of any governmental body and petroleum
products, including gasoline, diesel fuel, motor oil, waste or used oil
and beating oil which are not permitted to be located on the premises by
any requirement of any governmental body or in excess of that which is
normally used in the operation of the Borrower's business.
(b) Borrower hereby represents and warrants that Borrower
has substantially complied with, is currently in substantial compliance
with, has not been charged with, has not received any notice of, and is
not under investigation for the failure to substantially comply with any
and all laws of any governmental body relating to environmental protection
matters, and, specifically, those relating to Hazardous Substances.
(c) Borrower covenants to the Lender that Borrower shall
use all reasonable efforts to prevent the deposit, storage, emission,
discharge or release by Borrower of any Hazardous Substances on its
properties unless such deposit, storage, emission, discharge or release is
authorized by and in full compliance with a duly licensed permit, license,
authorization or other approvaL of a governmental body or does not
constitute a material violation of any laws referred to in paragraph
12(b). Borrower shall notify Lender promptly of any significant or
material environmental event, circumstance or condition relating to its
properties.
(d) If an event of default as set forth under Paragraph 11
of this Agreement shall occur, Borrower shall, upon reasonable notice and
at all reasonable times, permit such visitation of such persons as the
Lender may select in connection with the Lender's consideration of
enforcement or preservation of rights under this Agreement, any note or
any related documents, to visit its properties and perform such reasonable
environmental site investigations and assessments on its properties for
the purposes of determining whether there exists on its properties any
environmental condition which could result in any liability, cost or
expense to the owner or occupier thereof relating to Hazardous Substances.
Borrower will supply to the Lender's representatives such historical and
operational information, including the results of all samples sent for
analysis, correspondence with governmental bodies and previous
environmental audits or environmental reviews regarding its properties as
are within its possession, custody or control or which are reasonably
available to it and which may be reasonably requested by the Lender to
facilitate Lender's assessment of any environmental violations on the
properties of Borrower.
13. Survival of Representations. Warranties and Covenants.
------------------------------------------------------
All representations, warranties and covenants of Borrower
contained herein or made in connection herewith shall survive the making
of and shall not be waived by the execution and delivery of this
Agreement, the note or any collateral or security documentation executed
by Borrower in favor of Lender.
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<PAGE>
14. Miscellaneous.
-------------
(a) No consent or waiver under this Agreement shall be
effective unless in writing. No failure or delay on the part of any party
to this Agreement in exercising any right, power or privilege shall
operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The
rights and remedies of Lender are cumulative and concurrent and not
exclusive of any other rights or remedies Lender may have.
(b) This Agreement and all documents executed hereunder
shall be binding upon and shall inure to the benefit of the parties
hereto, their respective heirs, personal representatives, successors and
assigns. This Agreement may only be modified or amended by a written
document executed by the parties and shall be governed by Pennsylvania
law.
15. Severability.
------------
The provisions of this Agreement are intended to be
severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision
shall, as to such jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without in any manner affecting the
validity or enforceability thereof in any other jurisdiction or the
remaining Provisions hereof in any jurisdiction.
16. Borrower's Affidavit.
--------------------
Borrower hereby avers that:
(a) Lender has not acted as advisor, or given counsel,
with respect to any legal, tax, accounting, investment, business or other
financial matter involving or concerning the Loan or the use of the
proceeds thereof;
(b) Borrower acknowledges Borrower's right to consult with
Borrower's own lawyer, accountant, business, investment and financial
advisors with respect to any matter concerning the loan, the loan
documents or the use of the loan proceeds; and Borrower shall rely solely
on Borrower's own such advisors with respect to all legal, tax,
accounting, business, investment, financial or other matters related in
any respect to the loan, loan documents or use of the loan proceeds;
(c) Borrower specifically acknowledges and agrees that
Lender has no duty to Borrower, particularly no fiduciary duty to
Borrower, other than those specific obligations of Lender set forth in the
loan documents.
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<PAGE>
17. Waiver of Jury Trial.
--------------------
BY ITS EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT NAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER OF IN CONNECTION WITH, THIS AGREEMENT, THE NOTE, ANY
OTHER DOCUMENT OF INSTRUMENT RELATED HERETO OR THERETO, ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
THE LENDER OR THE BORROWER IN CONNECTION HEREWITH OR THEREWITH. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER TO ENTER INTO THIS
AGREEMENT.
EXECUTED ON NOVEMBER 7, 1994.
"Lender" BUCKS COUNTY BANK AND TRUST COMPANY
By: /s/ Edward F. Mulligan (SEAL)
--------------------------------
"Borrower" NUCLEAR RESEARCH CORPORATION
By: /s/ Earl M. Pollock (SEAL)
--------------------------------
Attest: /s/ Thelma Berman (SEAL)
--------------------------------
Surety Acknowledgement
----------------------
As surety for the loan provided pursuant to this Agreement, we
hereby acknowledge that we have reviewed the terms of this Agreement and
hereby confirm our surety obligation.
Date: November 7, 1994.
/s/ Earl M. Pollock (SEAL)
-------------------------
Earl M. Pollock
/s/ Dorothy S. Pollock (SEAL)
---------------------------
Dorothy S. Pollock
9
<PAGE>
EXHIBIT 10.L
BUCKS COUNTY BANK AND TRUST COMPANY
DEMAND NOTE
-----------
November 7, 1994
INTENDING TO BE LEGALLY BOUND, and for value received, the
undersigned corporation ("Borrower") agrees as follows:
1. Obligation - Payment Schedule.
-----------------------------
Borrower promises to pay to the order of BUCKS COUNTY BANK AND
TRUST COMPANY ("Lender"), on demand, at any of its banking offices, the
sum of $5,000,000.00 or, if less, the aggregate unpaid amount advanced by
Lender to Borrower pursuant to the Line of Credit Agreement, and further
agrees to pay interest monthly on the unpaid balance of principal at a per
annum rate equivalent to one-half percent (1/2%) in excess of the rate
announced by Lender as its "prime rate", as adjusted from time to time.
The term "prime rate" is used merely as a pricing index and is not, and
should not be considered to represent, the lowest or best interest rate
available to any borrower. Interest payments shall commence when billed
by Lender.
2. Late Charge.
-----------
If any payment which is to be made hereunder is not paid within
fifteen (15) days after the date when due, the Borrower shall pay to the
Lender a late charge of five cents ($0.05) for each dollar which is so
overdue for the purpose of defraying the expense incident to handling such
delinquency. This provision shall not be deemed to affect or lengthen the
time to cure any default hereunder.
3. Set-off.
-------
As security for the payment of this Note and any renewal,
extension or modification of this Note and for the due payment of any and
all other obligations, direct or indirect, due or to become due, now
existing or hereafter contracted, of Borrower, Borrower agrees that Lender
shall have a lien upon and a security interest in and a right of set-off
against any and all present, future and after-acquired funds, monies,
balances, stocks, bonds, notes and other property at any time in the hands
of Lender in which Borrower has an interest, except that Lender shall have
no right of set-off against, no lien upon or security interest in any IRA
or any other retirement account which is deemed distributed if pledged as
collateral under applicable law.
4. Default.
-------
This is a demand loan. Lender has the right to demand repayment
of this loan at any time. In addition, upon the happening of any of the
1
<PAGE>
following events, each of which shall constitute a default hereunder, all
liabilities of Borrower to Lender, at the option of Lender, shall become
immediately due and payable:
(a) Failure of Borrower to pay the principal or interest on
this Note when due or on any renewal, extension or other modification of
this Note or failure to pay when due any interest or installment on any
other obligation of any nature whatsoever owing to Lender if such failure
is not cured within fifteen (15) days after notice is given by Lender to
Borrower;
(b) Failure of Borrower to perform any obligation owing to
Lender under this Note or any agreement with Lender not cured within
thirty (30) days after notice thereof is given by Lender to Borrower or
material breach of any representation, warranty, covenant or agreement
herein contained or contained in any other agreement now or hereafter
entered into between Borrower and Lender;
(c) The filing of bankruptcy, receivership or insolvency
proceedings of any kind by or against Borrower, the making by Borrower of
an assignment for the benefit of creditors or the suspension of business
by Borrower;
(d) The entry of a judgment in excess of $25,000.00 against
Borrower;
(e) The issuance of any writs of attachment or execution
against Borrower on account of judgment in excess of $25,000.00;
(f) The dissolution, merger, consolidation or reorganization of
Borrower corporation;
(g) The furnishing of materially false information heretofore
or hereafter by Borrower to Lender or the refusal by Borrower to provide
material information hereafter;
(h) Any change in the financial condition of Borrower or any
surety which causes Lender in good faith to believe that performance of
the obligations herein is impaired in any material respect or doubtful;
(i) The guarantee of any surety ceases to be effective for any
reason other than the termination of such guarantee by its terms;
(j) Any change occurs in the control of Borrower unless the new
control person(s) are reasonably satisfactory to Lender.
5. Remedies Upon Default.
---------------------
Should any event of default occur and not be cured in accordance
with Paragraph 4,
(a) The entire unpaid balance of the principal sum with
interest accrued thereon at the rates hereinbefore specified to the date
of said default, and thereafter at the rate of 2% above the rate extent on
the date of default and all other sums due by Borrower hereunder or under
the Loan Agreement, shall, at the option of Lender, and without notice to
Borrower, become due and payable immediately.
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<PAGE>
(b) Lender may forthwith appropriate and apply on account of
the amount payable hereunder, any and all funds, monies, or sums deposited
with Lender to the credit of Borrower, or liquidate and sell any
collateral in the hands of Lender in which Borrower has an interest,
except that Lender shall have no power to appropriate or liquidate any IRA
or any other retirement account which is deemed distributed if pledged as
collateral under applicable law.
(c) In addition, Lender may attach, levy or execute upon and
sell any other assets of Borrower and exercise any other rights or
remedies available to Lender under the Uniform Commercial Code, any other
applicable law, or under the Loan Agreement or any collateral or security
documents executed by Borrower or any surety in accordance with the Loan
Agreement.
(d) Following the date of any default, interest at the above-
stated rate shall accrue and compound on the principal balance due and on
all interest, charges, assessments, costs and fees then or thereafter due
hereunder. In such case, Lender may also recover all costs of suit and
other expenses in connection therewith (including, but not limited to,
costs and attorney fees incurred in any insolvency or bankruptcy
proceeding, or any negotiations related thereto, involving Borrower or any
other person or entity if such proceedings shall in any way jeopardize
Lender's security or collateral or in any way limit or impair Lender's
ability to enforce a claim against any security or collateral provided for
this Note), and also a reasonable attorneys' fee for collection.
6. Remedies Cumulative.
-------------------
The rights and remedies of Lender as provided in this Note shall
be cumulative and concurrent and may be pursued separately, successively
or together against Borrower at the sole discretion of Lender and may be
exercised as often as occasion therefore shall arise. Borrower hereby
waives presentment for payment, demand, protest, notice of protest and
dishonor and all other notices or demands in connection with the delivery,
acceptance, performance, default or enforcement of this Note. The
liability of Borrower hereunder shall be unconditional without regard to
the liability of any other party and shall not be in any manner affected
by any indulgence, extension of time, renewal, waiver or modification
granted or consented to by Lender. Lender shall not by any act or
omission or under any circumstances be deemed to have waived any of its
rights other than any rights waived by Lender in writing. Any reference
herein to Borrower shall be deemed to refer to and be applicable to each
signer separately as well as all of them jointly. If this Note shall be
paid by any Borrower, Lender may surrender this Note and all security
pledged with it to the one so paying. Lender is hereby authorized,
without further notice, to obtain the signature of additional co-makers
and to date this Note as of the date on which the loan is made.
7. Confession of Judgment.
----------------------
(a) UPON THE OCCURRENCE OF ANY DEFAULT WHICH IS NOT CURED
WITHIN THE APPLICABLE GRACE PERIOD, BORROWER HEREBY AUTHORIZES AND
EMPOWERS THE PROTHONOTARY OR CLERK OR ANY ATTORNEY OF ANY COURT OF RECORD
TO APPEAR FOR AND CONFESS JUDGMENT THEREIN AGAINST BORROWER, WITH OR
WITHOUT DECLARATION FILED OR ANY OF THEM FOR THE AMOUNT WHICH FROM THE
FACE HEREOF MAY APPEAR TO BE DUE HEREIN, PLUS REASONABLE ATTORNEYS' FEES.
3
<PAGE>
THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST BORROWER
SHALL NOT BE EXHAUSTED BY THE INITIAL EXERCISE THEREOF, AND THE SAME MAY
BE EXERCISED FROM TIME TO TIME, AS OFTEN AS LENDER SHALL DEEM NECESSARY
AND DESIRABLE, AND THIS NOTE SHALL BE SUFFICIENT WARRANT.
(b) Borrower acknowledges that the full legal significance of
the confession of judgment clause contained in Paragraph 7(a) above has
been carefully examined by Borrower and Borrower does hereby acknowledge
that Borrower has signed this Note, KNOWINGLY, VOLUNTARILY and
UNDERSTANDINGLY, and with knowledge that, Lender may cause judgment to be
confessed against Borrower with or without default, and upon any default
in the obligations of Borrower, may cause execution to issue and as the
result, there may be a judicial sale of real, personal or mixed property
belonging to Borrower. Borrower has access to legal counsel and waives
any rights to have a more detailed explanation of Borrower's legal rights
under this Note and of the effect of the confession of judgment clause.
"Borrower" NUCLEAR RESEARCH CORPORATION
By: /s/ Earl Pollock (SEAL)
-----------------------------------
Attest: /s/ Thelma Berman (SEAL)
------------------------------------
4
<PAGE>
EXHIBIT 10.m
OPEN-END MORTGAGE
-----------------
THIS IS AN OPEN-END MORTGAGE THAT SECURES FUTURE ADVANCES
THIS MORTGAGE is made on November 7, 1994 by Nuclear Research
Corporation, 125 Titus Avenue, Warrington, Pennsylvania 18976 ("Borrower")
in favor of Bucks County Bank and Trust Company, 4259 West Swamp Road,
Doylestown, Pennsylvania 18901 ("Lender"). INTENDING TO BE LEGALLY BOUND,
Borrower agrees as follows:
1. LOAN TERMS -
(a) This is an open-end Mortgage that secures future
advances under a line of credit extended by Lender to Borrower. The
maximum amount of the loan secured by this Mortgage is $5,000,000
("Principal Sum"). This Mortgage shall have the full force, effect and
benefit of a Mortgage to secure advances of money, the lien for which
shall relate back to the date of the Mortgage.
(b) Borrower has executed and delivered to Lender this
Mortgage and a Note of even date herewith, which is hereby incorporated
herein by reference, to secure repayment of the Principal Sum, interest
and all unpaid balances of advances made with respect to the Mortgaged
Premises for the payment of taxes, assessments, maintenance charges,
insurance premiums and costs incurred for the protection of the Mortgaged
Premises, as defined herein, or the lien of the Mortgage and expenses
incurred by the Lender by reason of default by the Borrower under the
Mortgage, all of which are included in and called "Entire Indebtedness".
This Mortgage secures the Note and any extension, modification or renewal
thereof.
2. LENDER'S INSPECTION - Any right or privilege given Lender
to inspect the Mortgaged Premises, whether under this Mortgage, the Note,
any construction loan agreement, mortgage application, or otherwise, and
any actual inspection made by the Lender, its agents, servants, employees,
appraisers, engineers, or architects, shall be deemed to be made for the
sole and exclusive benefit of the Lender. The Borrower, the Borrower's
heirs, successors and assigns, and the Borrower's tenants, agents,
servants, employees, visitors and all other parties shall not be deemed to
be beneficiaries for any purpose of any such inspection. Any approval of
the Mortgaged Premises or of any construction of improvements thereon as
the result of any such inspection by Lender or others acting on behalf of
Lender shall not be deemed any kind of warranty of fitness for any
purpose. Lender shall have no liability of any kind to any party as a
result of any inspection or investigation of the Mortgaged Premises or
otherwise, except for the negligence or willful misconduct of the Lender.
3. MORTGAGED PREMISES - To secure the payment of the Entire
Indebtedness and in consideration of the loan from Lender to Borrower,
Borrower does hereby grant and convey unto Lender the premises herein
called "Mortgaged Premises", consisting of:
1
<PAGE>
ALL THAT CERTAIN lot or piece of ground, with buildings and
improvements now thereon erected, if any, and to be erected, situate and
bounded and described as is more particularly set forth in the legal
description attached hereto, made a part hereof, and marked Exhibit "A":
TOGETHER WITH:
(a) All the right, title and interest of Borrower in and
to all the rights, covenants, privileges and appurtenances thereunto
belonging or in any wise appertaining, and together with all buildings and
improvements presently thereon and hereafter constructed thereon; and
(b) Borrower's fixtures and improvements, including but
not limited to all furnaces, boilers, elevators, heaters, switchboards,
electrical equipment, heating, plumbing, refrigerating, ventilating, air-
cooling and air-conditioning apparatus and systems, electrical and all
other mechanical systems, gas and electrical fixtures, fittings,
machinery, fire protection equipment, and all other building service
equipment used in connection with the operation and maintenance of the
buildings and improvements; and
(c) Any and all tenements, hereditaments and appurtenances
belonging to the real estate or any part thereof hereby mortgaged or
intended so to be or in any way appertaining thereto, and all streets,
alleys, passages, ways, water courses and all easements and covenants now
existing or hereafter created for the benefit of the Borrower or any
subsequent owner or tenant of the Mortgaged Premises over ground adjoining
the Mortgaged Premises and all rights to enforce the maintenance thereof,
and all other rights, liberties and privileges of whatsoever kind or
character, and the reversions and remainders, income, rents, issues and
profits arising therefrom, and all the estate, right, title, interest,
property, possession, claim and demand whatsoever, at law or in equity, of
the Borrower in and to the Mortgaged Premises or any part thereof. (All
of the above-mentioned Mortgaged Premises, buildings, improvements,
fixtures, tenements, hereditaments and appurtenances, and other property
interest are sometimes collectively referred to herein as the "Mortgaged
Property".)
TO HAVE AND TO HOLD the Mortgaged Property hereby conveyed
or mentioned and intended so to be, unto Lender, to its own use forever.
PROVIDED ALWAYS, and this instrument in upon the express
condition that, if Borrower pays to Lender the Principal Sum mentioned in
the Note, the interest thereon and all other sums payable by Borrower to
Lender as are secured hereby, in accordance with the provisions of the
Note and this Mortgage, at the times and in the manner specified, without
deduction, fraud or delay, and Borrower performs and complies with all the
agreements, conditions, covenants, provisions and stipulations contained
herein and in the Note, then this Mortgage, and the estate hereby granted
shall cease and become void.
4. BORROWER WARRANTS, COVENANTS AND AGREES -
(a) That Borrower has good and valid title to the
Mortgaged Premises and that it has the right, full power and lawful
authority to grant, bargain, sell, convey, assign, transfer, mortgage,
pledge, set over and confirm the same to the Lender in the manner and form
herein accomplished. The Mortgaged Premises are free and clear of all
encumbrances except as set forth heroin and in the title report issued in
2
<PAGE>
connection with this Mortgage. The Lender, its successors and assigns
will quietly enjoy and possess the Mortgaged Premises to the extent
provided in this Mortgage, and Borrower will warrant and defend the rights
or title of the Lender to the Mortgaged Premises against all lawful claims
not herein specifically excepted;
(b) That all financial statements presented to Lender, are
true and correct in all material respects, and no material adverse change
in the financial circumstances of Borrower has occurred since the
foregoing were presented to Lender. Borrower shall give written notice to
Lender or any material adverse change in the financial circumstances of
Borrower;
(c) To pay all installments of interest and principal to
Lender and the Entire Indebtedness as set forth herein;
(d) To pay when due and payable and before interest or
penalties are due thereon all taxes, local, state and federal, water and
sewer rents, assessments and all other charges or claims which may be
assessed or levied or a lien on the Mortgaged Premises, and to produce to
Lender at or before the last day upon which they may be paid without
penalty or interest, receipts of the current year proving payment of all
such taxes, water and sewer rents, assessments, charges and claims;
provided that, if Borrower shall have deposited with Lender before the due
date thereof sums sufficient to pay such taxes, water and sewer rents,
assessments, charges or claims, the same shall be paid by Lender;
(e) To maintain insurance on the Mortgaged Premises of
such kinds, in such amounts, and in such companies as are satisfactory to
Lender in its reasonable judgment, and if this insurance or any part
thereof shall expire, or be withdrawn, or become void by breach of any
condition thereof by Borrower, or become void or unsafe by reason of the
failure, or impairment of the capital of any company in which said
insurance may then be, or if for any other reason whatsoever this
insurance shall become unsatisfactory to Lender, to effect new insurance
on said Mortgaged Premises satisfactory to Lender in its reasonable
judgment; and to pay as they shall become due all premiums for such
insurance; and to lodge with Lender, as further security for said
indebtedness, all policies therefor, with loss payable clauses attached in
favor of and acceptable to Lender. In the event of loss, Borrower will
give immediate notice by mail to Lender, and Lender may make proof of loss
if not made promptly by Borrower. Borrower hereby directs any insurance
company concerned to pay directly to Lender any moneys not in excess of
the unpaid balance of the Entire Indebtedness which may become payable
under such insurance, including return of unearned premiums, such moneys,
or any part thereof, to be applied at the option of Lender to said unpaid
balance or to the repair of the property damaged; and Borrower appoints
Lender as attorney-in-fact to endorse any draft therefor. In the event of
foreclosure of the Mortgage or other transfer of title to the Mortgaged
Premises, all right, title and interest of Borrower to any insurance
policies then in force covering the Mortgaged Premises shall pass to the
transferee of the Mortgaged Premises. All policies shall be maintained in
full force and effect, shall be assigned and delivered to Lender with
premiums prepaid as collateral security for the payment of the
indebtedness secured hereby, shall be endorsed with a standard mortgagee
and loss payee clause in favor of Lender, not subject to contribution, and
shall provide for at least twenty (20) days notice of cancellation to
Lender. If the insurance, or any part thereof, shall expire, or be
withdrawn, or become void by Borrower's breach of any condition thereof,
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or become void or unsafe by reason of the failure or impairment of the
capital of any company in which the insurance may then be carried, or if
for any reason whatsoever the insurance shall be unsatisfactory to Lender
in its reasonable judgment, Borrower shall place new insurance on the
Mortgaged Property, satisfactory to Lender in its reasonable judgment.
All renewal policies, with premiums paid, shall be delivered to Lender at
least twenty (20) days before expiration of the old policies.
(f) To maintain the Mortgaged Premises in good repair,
order and condition; not to remove, demolish or materially alter the
Mortgaged Premises; not to remove from the Mortgaged Premises, fixtures,
appliances and equipment of any nature covered by the lien of the Mortgage
without having obtained the prior written consent of Lender; and Borrower
will not make, install, or permit to be made or installed, any
alterations, additions, improvements, fixtures, appliances or equipment of
any nature to or in the Mortgaged Premises that would diminish the value
of the Mortgaged Premises without obtaining the prior written consent of
Lender, which consent Lender hereby reserves the right to refuse to grant;
(g) To comply with all laws, ordinances, regulations and
orders relating to the Mortgaged Premises by all federal, state, municipal
and other authorities, including by way of example but not in limitation,
zoning and subdivision ordinances, building codes and Board of Health
regulations;
(h) To notify Lender promptly of commencement of any
proceedings for condemnation of Mortgaged Premises and to permit Lender to
participate in such proceedings and to receive the proceeds of the
condemnation up to the amount of the Entire Indebtedness;
(i) If requested, to furnish Lender within ninety (90)
days of the close of each fiscal year financial statements in form and
detail satisfactory to Lender;
(j) To pay, when due and payable and before interest and
penalties are due thereon, all taxes owing by Borrower to the United
States of America, the Commonwealth of Pennsylvania, and any political or
municipal subdivisions thereof, including income taxes, individual,
partnership, corporation or other entity income or other taxes, estate,
inheritance and real estate taxes and any other taxes, and to produce to
Lender, on or before September 1 of each year, copies of all tax returns
filed and tax bills issued or received during the previous twelve (12)
months and receipts evidencing the full payment of all amounts known to be
due on such returns, and, within twenty (20) days of receipt thereof, all
settlements, notices of deficiency or overassessment and any other notices
pertaining to Borrower's tax liability (except, in the event any tax is
being disputed in good faith, payment need not be made until the contest
is finally determined, provided there is deposited with Lender security if
and as required by Lender to protect Lender against delay and nonpayment
of the tax);
(k) To perform every obligation of the lessor and to
enforce every obligation of the lessee in every lease that is assigned to
Lender or any tenancy in which the rents are assigned to Lender, and not
to modify, alter, waive or cancel any such lease or any part thereof, nor
anticipate for more than one month any rents that may be collectible under
such lease or that may have been assigned to Lender; nor assign any such
lease or any such rents;
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(l) If Lender shall become a party, by intervention
or otherwise, to any action or proceeding, including insolvency or
bankruptcy proceedings, affecting the Mortgaged Premises or the title
thereto or Lender's interest under this Mortgage, or if Lender employs an
attorney to collect any of the indebtedness or to enforce performance of
the obligations, covenants and agreements secured hereby, Borrower shall
reimburse Lender, forthwith upon written notice and without further
demand, for all reasonable costs, charges and counsel fees incurred by
Lender, in any such case, whether or not suit be commenced, and the same
shall be secured hereby as a further charge and lien upon the Mortgaged
Premises.
(m) In the event of default, to pay to Lender, on demand,
all costs and expenses incurred by Lender in connection with the curing of
any such default or the collection of sums secured hereby, including but
not limited to cost of any title search and reasonable attorneys' fees;
(n) To permit Lender, or any persons authorized by Lender,
to enter and inspect the Mortgaged Premises at all reasonable times, and,
in the event of any default by Borrower under the terms of this Mortgage
or accompanying Note, to employ for duration of default as managing agent
of the Mortgaged Premises the person or persons designated by Lender;
(o) To restore, repair or rebuild promptly any part of
Mortgaged Premises damaged by fire or any other casualty to the extent
that insurance proceeds are made available for that purpose;
(p) Not to initiate, join in or consent to any change in
any private restrictive covenant, easement, right of way, zoning
ordinance, or other public or private restrictions relating to use of
Mortgaged Premises or any part thereof;
(q) Not to permit any writ of any execution process to be
levied against the Mortgaged Premises and not to permit any judicial sale
thereof; not to make any assignment for the benefit of creditors;
(r) Not to permit the appointment of a receiver,
liquidator or trustee of the Borrower or of any of the property of
Borrower, insolvency of the Borrower or the adjudication of Borrower as a
bankrupt, or the filing of any petition for the bankruptcy, reorganization
or arrangement of Borrower pursuant to the Federal Bankruptcy Act or any
similar statute, or the institution of any proceeding for the dissolution
or liquidation of Borrower;
(s) That Borrower will warrant and defend the lien of this
instrument to be at all times a first lien on the Mortgaged Premises,
subject only to easements and agreements of record prior to the recording
of this Mortgage.
5. HAZARDOUS SUBSTANCES WASTES -
(a) To Borrower's knowledge, after due inquiry, no
Hazardous Substances have been disposed of on or in the Mortgaged Premises
through any means at any time prior to Borrower's ownership thereof and
Borrower is aware of no condition on or affecting the Mortgaged Premises
which constitutes or might constitute an environmental health hazard.
(b) "Hazardous Substances" shall mean hazardous wastes,
hazardous substances, hazardous materials, toxic substances, hazardous air
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pollutants or toxic pollutants, as those terms are used in any law,
guideline, regulation or ruling of any governmental body and petroleum
products, including gasoline, diesel fuel, motor oil, waste or used oil
and heating oil which are not permitted to be located on the premises by
any requirement of any governmental body or in excess of that which is
normally used in the operation of the Borrower's business.
(c) Borrower hereby represents and warrants that Borrower
has substantially complied with, is currently in substantial compliance
with, has not been charged with, has not received any notice of, and is
not under investigation for the failure to substantially comply with any
and all laws of any governmental body relating to environmental protection
matters, and, specifically, those relating to Hazardous Substances.
(d) Borrower covenants to the Lender that Borrower shall
use all reasonable efforts to prevent the deposit, storage, emission,
discharge or release by Borrower of any Hazardous Substances on its
properties unless such deposit, storage, emission, discharge or release is
authorized by and in full compliance with a duly issued permit, license,
authorization or other approval of a governmental body or does not
constitute a material violation of any laws referred to in paragraph 5(c).
Borrower shall notify Lender promptly of any significant or material
environmental event, circumstance or condition relating to its properties.
Borrower hereby indemnifies, defends and holds harmless Lender from and
against any claim, demand, lose or liability, including, but not limited
to, costs of remedial action, response cost a, personal injury and
property damage, directly or indirectly arising out of or attributable to
the use, generation, deposit, storage, release, threatened release,
discharge, disposal, burial, dumping, spilling, leaking or other presence
of Hazardous Substances on, under or about the Mortgaged Premises except
for any loss arising from the sale of the loan at a discount by Lender.
(e) If an event of default under this Mortgage shall
occur, then Borrower shall, upon reasonable notice and at all reasonable
times, permit such visitation of such persons as the Lender may select in
connection with the Lender's consideration of enforcement or preservation
of rights under this Mortgage, any Note or any related documents, to visit
its properties and perform such reasonable environmental site
investigations and assessments on its properties for the purposes of
determining whether there exists on its properties any environmental
condition which could result in any liability, cost or expense to the
owner or occupier thereof relating to Hazardous Substances. Borrower will
supply to the Lender's representatives such historical and operational
information, including the results of all samples sent for analysis,
correspondence with governmental bodies and previous environmental audits
or environmental reviews regarding its properties as are within its
possession, custody or control or which are reasonably available to it and
which may be reasonably requested by the Lender to facilitate Lender's
assessment of any environmental violations on the properties of Borrower.
6. EVENTS OF DEFAULT - This is a demand loan. Lender has the
right to demand repayment of this loan at any time. In addition, upon the
happening of any of the following events, each of which shall constitute a
default hereunder, all liabilities of Borrower to Lender, at the option of
Lender, shall become immediately due and payable:
(a) Failure of Borrower to pay the principal or interest
on the Note when due or on any renewal, extension or other modification of
the Note or failure to pay when due any interest or installment on any
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other obligation of any nature whatsoever owing to Lender if such failure
is not cured within fifteen (15) days after notice is given by Lender to
Borrower;
(b) Failure of Borrower to perform any obligation owing to
Lender under the Note, this Mortgage or any agreement with Lender not
cured within thirty (30) days after notice thereof is given by Lender to
Borrower or material breach of any representation, warranty, covenant or
agreement herein contained or contained in the Note or in any other
agreement now or hereafter entered into between Borrower and Lender;
(c) The filing of bankruptcy, receivership or insolvency
proceedings of any kind by or against Borrower or the making by Borrower
of an assignment for the benefit of creditors or the suspension of
business by Borrower;
(d) The entry of a judgment in excess of $25,000.00
against Borrower;
(e) The issuance of any writs of attachment or execution
against Borrower on account of a judgment in excess of $25,000.00;
(f) The dissolution, merger, consolidation or
reorganization of Borrower corporation;
(g) The furnishing of materially false information
heretofore or hereafter by Borrower to Lender or the refusal by Borrower
to provide material information hereafter;
(h) Any change in the financial condition of Borrower or
any Surety which causes Lender in good faith to believe that performance
of the obligations herein is impaired in any material respect or doubtful;
(i) The guarantee of any Surety ceases to be effective for
any reason other than the termination of such guarantee by its terms;
(j) Any change occurs in the control of Borrower unless
the new control person(s) are reasonably satisfactory to Lender.
7. REMEDIES UPON DEFAULT - In the event of any default of
Borrower or in the event of condemnation of all or part of the Mortgaged
Premises, unless the Lender agrees otherwise, in addition to all other
rights and remedies of the Lender given by the Note, Line of Credit
Agreement and by law, Lender shall have the following rights, privileges
and remedies:
(a) The Entire Indebtedness shall, at the option of Lender
and without notice or demand to Borrower, become due and payable
immediately. Payment of the same may be enforced and recovered in whole
or in part at any time and from time to time by one or more of the
remedies in this Mortgage or the Note, or both.
(b) Lender may recover as part of the Entire Indebtedness
all costs of suit, including the cost of title searches, attorneys' fees,
appraisal fees, inspections and all "out-of-pocket" expenses, and, in
addition thereto, reasonable attorneys' fees.
(c) Lender may institute an action of mortgage
foreclosure, or take such other action, as the law may allow, at law or in
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equity, for the enforcement thereof and realization on the mortgage
security or any other security which is herein or elsewhere provided for,
and proceed thereon to final judgment and execution thereon for the Entire
Indebtedness, with interest at the rate stipulated in the Note to the date
of default and thereafter at a rate not less than two percent (2%) per
annum above the rate extant on the date of such default, together with all
other sums secured by this Mortgage, all costs of suit, interest at not
less than two percent (2%) per annum above the rate extant on the date of
such default, on any judgment obtained by Lender from and after the date
of any Sheriff's sale of the Mortgaged Premises until actual payment is
made by the Sheriff of the full amount due Lender. Borrower hereby
authorizes and empowers any attorney or attorneys or the Prothonotary or
Clerk of any Court of the Commonwealth of Pennsylvania to appear for
Borrower in any such Court in any appropriate action there or elsewhere
brought at the suit of Lender with or without declaration filed, as of any
term, and to confess or enter judgment, or both, against Borrower for the
Entire Indebtedness due under this Mortgage and the Note, with the cost of
suit, and for so doing this Mortgage or a copy hereof verified by
affidavit shall be sufficient warrant. Any attorney authorized to act for
Borrower to confess judgment against Borrower may also act for and on
behalf of Lender. Borrower executes this authorization for confession of
judgment KNOWINGLY, UNDERSTANDINGLY AND VOLUNTARILY. Borrower waives the
requirement for any further explanation of Borrower's rights.
(d) Lender may enter into possession of the Mortgaged
Premises, and, in addition to its other rights and remedies, exercise the
general rights of a Lender in possession, with or without legal action,
and by force if necessary, collect all rentals therefrom and, after
deducting all costs of collection and administration expense, apply the
net rentals to the payment of taxes, water and sewer rents, charges and
claims, insurance premiums and all other carrying charges, and to the
maintenance, repair or restoration of the Mortgaged Premises, or on
account and in reduction of the principal or interest hereby secured, in
such order and amounts as Lender, in Lender's sole discretion, may elect;
and for said purpose, Borrower hereby assigns to Lender all rentals due
and to become due under any lease or leases of the Mortgaged Premises,
whether now existing or hereafter created, as well as all rights and
remedies provided in such lease or leases for the collection of said
rents; and Borrower hereby authorizes and empowers any attorney or
attorneys of any Court of the Commonwealth of Pennsylvania or elsewhere to
appear for Borrower and as attorney for Borrower to sign an agreement for
entering an amicable action of ejectment for possession of the Mortgaged
Premises, and to confess judgment therein against Borrower and all others
claiming under or through Borrower, in favor of Lender, whereupon a writ
of possession may immediately issue for the possession of the Mortgaged
Premises, without any prior writ or proceeding whatsoever; and for so
doing, this Mortgage or a copy hereof verified by affidavit shall be a
sufficient warrant. Lender may bring such amicable action in ejectment
before or after the institution of foreclosure proceedings upon this
Mortgage, or after judgment thereon or on the Note, or after a Sheriff's
or any Judicial Sale of the Mortgaged Premises. If for any reason after
such action has been commenced it shall be discontinued, or possession of
the Mortgaged Property shall remain in or be restored to Borrower, Lender
shall have the right for the same default or any subsequent default to
bring one or more further amicable actions as above provided to recover
possession of the Mortgaged Premises. Lender may bring an amicable action
in ejectment and confess judgment therein before or after the institution
of proceedings to foreclose this Mortgage or to enforce the Note, or after
entry of judgment therein or on the Note, or after a Sheriff's Sale of the
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Mortgaged Property in which Lender is the successful bidder, it being the
understanding of the parties that the authorization to pursue such
proceedings for obtaining possession and confessing judgment therein is an
essential part of the remedies for enforcement of the Mortgage and the
Note, and shall survive any execution sale to Lender.
(e) The remedies of Lender as provided herein, or in said
Note, and all warrants herein and in said Note contained, and all remedies
provided in the Loan Agreement and any and all other remedies otherwise
provided by law shall be cumulative and concurrent, and may be pursued
singly, successively or together at the sole discretion of Lender, and
such warrants shall not be exhausted by any exercise thereof but may be
exercised as often as occasion therefor shall occur; and the failure to
exercise any such right or remedy shall in no event be construed as a
waiver or release of the same.
(f) In the event Borrower should fail to pay any tax,
claim, lien or encumbrance which shall be or become prior in lien to this
Mortgage, or to pay any insurance premium for insurance required under
this Mortgage, or to keep the Mortgaged Premises in repair, or commits or
permits waste, then Lender, at its option, may pay said claim, lien,
encumbrance, tax assessment or premium with right of subrogation
thereunder, may make such repairs and take such steps as it deems
advisable to prevent or cure such waste, and may appear in any action or
proceeding with respect to any of the foregoing and retain counsel
therein, and take such action therein as Lender deems advisable, and for
any of said purposes Lender may advance such sums of money as it deems
necessary. All such sums advanced shall be added to and become part of
the Entire Indebtedness secured hereby, and repayment thereof, with
interest thereon at the interest rates set forth in the Note from the
dates of the respective expenditures, may be enforced by Lender against
Borrower at any time.
(g) Lender shall have the right, from time to time, to
bring an appropriate action to recover any sums required to be paid by
Borrower under the terms of this Mortgage, as they become due, without
regard to whether or not the Principal Sum or any other sums secured by
the Note and this Mortgage shall be due, and without prejudice to the
right of Lender thereafter to bring an action of Mortgage foreclosure, or
any other action, for any default by Borrower existing at the time the
earlier action was commenced.
(h) Any real estate sold pursuant to any writ of execution
issued on a judgment obtained by virtue of the Note or this Mortgage, or
pursuant to any other judicial proceedings under the Mortgage, may be sold
in one parcel, as an entirety, or in such parcels and in such manner or
order as Lender, in its sole discretion, may elect.
8. WAIVERS -
(a) Borrower hereby waives and releases (1) all errors,
defects and imperfections in any proceeding instituted by Lender under
this Mortgage; (2) all benefit that might accrue to Borrower by virtue of
any present or future laws exempting the Mortgaged Premises, or any part
of the proceeds arising from any sale thereof, from attachment, levy or
sale under execution, or providing for any exemption from civil process,
or extension of time for payment; and (3) all notices not otherwise herein
specifically required of Borrower's default or of Lender's exercise, or
election to exercise, any option under this Mortgage.
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(b) Lender shall not by any act of omission or commission
be deemed to waive any of its rights or remedies hereunder unless such
waiver be in writing and signed by Lender and then only to the extent
specifically set forth therein; a waiver on one event shall not be
Construed as continuing or as a bar to or waiver of such right or remedy
on a subsequent event.
9. DECLARATION OF NO SET-OFF - Within one week after requested
to do so by Lender, Borrower shall certify to Lender or to any proposed
assignee of this Mortgage, in a writing duly acknowledged, the amount of
principal, interest and other charges then owing on the obligation secured
by this Mortgage and whether there are any set-offs or defenses against
it.
10. REQUIRED NOTICES - Borrower shall notify Lender promptly of
the occurrence of any of the following:
(a) A fire or other casualty causing damage to the
Mortgaged Premises;
(b) Receipt of notice of condemnation of Mortgaged
Premises;
(c) Receipt of notice from any governmental authority
relating to the structure, use or occupancy of the Mortgaged Premises;
(d) Substantial change in the occupancy of the Mortgaged
Premises;
(e) Threat or commencement of any litigation affecting the
Mortgaged Premises.
11. CONDEMNATION - In the event of any condemnation or taking
of any part of the Mortgaged Premises by eminent domain, alteration of the
grade of any street, or other injury to or decrease in the value of the
Mortgaged Premises by any public or quasi-public authority or corporation,
all proceeds (that is, the award or agreed compensation for the damages
sustained) shall be applicable first to payment of the indebtedness
secured hereby. No settlement for the damages sustained shall be made by
Borrower without Lender's prior written approval. Borrower shall continue
to pay the installments of principal, interest and other charges until
payment of the proceeds shall have been received by the Lender. All the
proceeds shall be applied in the order and in the amounts that Lender, in
Lender's sole discretion, may elect, to the payment of principal (whether
or not then due and payable), interest or any sums secured by this
Mortgage, or toward payment to the Borrower, on such terms as the Lender
may specify, to be used for the sole purpose of altering, restoring or
rebuilding any part of the Mortgaged Property which may have been altered,
damaged or destroyed as a result of the taking, alteration of grade or
other injury to the Mortgaged Premises. Nothing in this Mortgage shall
limit rights otherwise available at law to Lender, including, but not
limited to, rights to intervene as a party to any condemnation proceeding.
12. RESTRICTIONS ON TRANSFER - Without the prior written
consent of Lender, Borrower will not sell or transfer, or permit or suffer
to be sold or transferred, voluntarily or by operation of law (other than
by death or by execution on the Note) all or any of its interest in the
Mortgaged Premises, nor permit a change in the control of Borrower by an
issuance or transfer of stock in Borrower unless the new control person(s)
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is reasonably satisfactory to Lender except stock that is publicly held on
the date of this Mortgage or stock that is transferred to a recipient
reasonably satisfactory to Lender. Any consent of Lender to a sale or
transfer of all or part of the interests of Borrower in the Mortgaged
Premises or an issuance or transfer of stock or of any other interests in
Borrower other than permitted above shall pertain to the referenced sale,
transfer or issuance only and shall not constitute, or obligate Lender to
approve, any further sale, transfer or issuance or relieve any person of
any liability hereunder or under the Note. Any violation of or failure to
comply with the provisions of this section shall constitute an immediate
Event of Default hereunder and under the Note.
13. RIGHTS AND REMEDIES CUMULATIVE -
(a) The rights and remedies of Lender as provided in the
Note, in this Mortgage and in the warrants contained in both, shall be
cumulative and concurrent, may be pursued separately, successively or
together against Borrower or against the Mortgaged Property, or both, at
the sole discretion of Lender, and may be exercised as often as occasion
therefor shall arise. The failure to exercise any such right or remedy
shall in no event be construed as a waiver or release thereof.
(b) Any failure by Lender to insist upon strict
performance by Borrower of any of the terms and provisions of this
Mortgage or of the Note shall not be deemed to be a waiver of any of the
terms or provisions of the Mortgage and Note, and Lender shall have the
right thereafter to insist upon strict performance by the Borrower of any
and all of them.
(c) Lender may release, regardless of consideration, any
part of the security held for the indebtedness secured by this Mortgage
without, as to the remainder of the security, in any way impairing or
affecting the lien of this Mortgage or its priority over any subordinate
lien.
(d) For payment of the indebtedness secured hereby, Lender
may resort to any other security therefor held by Lender in such order and
manner as Lender may elect.
14. AMENDMENT - This Mortgage cannot be changed or amended
except by agreement in writing signed by the party against whom
enforcement of the change is sought.
15. APPLICABLE LAW - This Mortgage shall be governed by and
construed according to the law of the Commonwealth of Pennsylvania.
16. CONSTRUCTION - Whenever used in this Mortgage, unless the
context clearly indicated a contrary intent:
(a) The word "Borrower" shall mean the person who executes
this Mortgage and any subsequent owner of the Mortgaged Property and his
respective heirs, executors, administrators, successors and assigns;
(b) The word "Lender," shall mean the person specifically
named herein as "Lender" or any subsequent holder of this Mortgage;
(c) The word "person" shall mean individual, corporation,
partnership or unincorporated association;
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(d) The use of any gender shall include all genders;
(e) The singular number shall include the plural and the
plural the singular as the context may require.
17. CAPTIONS - The captions preceding the text of the
paragraphs or subparagraphs of this Mortgage are inserted only for
convenience of reference and shall not constitute a part of this Mortgage,
nor shall they in any way affect its meaning, constitution or effect.
18. NOTICES - All communications or notices to be given by
either party to the other hereunder shall be sent certified mail addressed
to the Lender, Bucks County Bank and Trust Company, 4259 West Swamp Road,
Doylestown, Pennsylvania 18901, or to such other address an the Lender may
specify in a written notice to the Borrower, and to the Borrower, Nuclear
Research Corporation, 125 Titus Avenue, Warrington, Pennsylvania 18976, or
to such other address as the Borrower may specify in a written notice
approved and accepted by Lender.
EXECUTED by Borrower under seal the day and year first above
written.
"Borrower" NUCLEAR RESEARCH CORPORATION
By: /s/ Earl Pollock (SEAL)
------------------------
President
Attest: /s/ Thelma Berman (SEAL)
------------------------
Secretary
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EXHIBIT 10.N
WARRANT TO PURCHASE 3,000 SHARES OF COMMON STOCK
VOID AFTER 5:00 P.M., PHILADELPHIA TIME, ON
NOVEMBER 8, 2004
NUCLEAR RESEARCH CORPORATION
INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA
This certifies that, for value received, EARL M. POLLOCK or
registered assigns (the "Warrant Holder") is entitled to purchase from
NUCLEAR RESEARCH CORPORATION (the "Company") at any time from the date
hereof until 5:00 p.m., Philadelphia time, on November 8, 2004, at an
exercise price of $160.28 per share (the "Warrant Price"), Three Thousand
(3,000) shares of the Company's Common Stock, stated value $5.00 per share
(the "Warrant Shares"). The number of Warrant Shares and the Warrant
Price shall be subject to adjustment from time to time as set forth below.
1. EXERCISE OF WARRANT.
a. This Warrant may be exercised in whole at any time or
in part, as hereinafter provided, from time to time, by presenting this
Warrant with the Exercise Form attached hereto duly executed and by making
simultaneous payment of the Warrant Price at the principal office of the
Company, 125 Titus Avenue, Warrington, Pennsylvania 18976, or such other
place as the Company may designate in writing to the Warrant Holder.
Payment of such price shall be made at the option of the Warrant Holder in
cash or by check.
b. Any partial exercise of this Warrant must be in
multiples of 1,000 Warrant Shares. No other partial exercise shall be
effective and shall be null and void.
c. Upon any partial exercise of this Warrant, there shall
be issued to the Warrant Holder a new Warrant in respect of the Warrant
Shares as to which this Warrant shall not have been exercised. This
Warrant may be exchanged at the office of the Company by surrender of this
Warrant properly endorsed for one or more new Warrants of the same
aggregate number of Warrant Shares as are evidenced by the Warrant
exchanged. This Warrant is transferrable at the office of the Company in
the manner and subject to the limitations set forth below.
2. NO RIGHTS AS SHAREHOLDER PRIOR TO ISSUANCE OF STOCK
CERTIFICATES. No rights or privileges of a shareholder of the Company in
respect to any of the Warrant Shares shall inure to the Warrant Holder, or
any other person entitled to exercise this Warrant as herein provided,
unless and until stock certificates representing such Warrant Shares shall
have been issued and delivered by the Company hereunder.
3. ADJUSTMENTS.
a. In the event that, prior to delivery by the Company of
all of the Warrant Shares, there shall occur an increase or decrease in
the number of shares of Common Stock of the Company issued and outstanding
as a result of a subdivision or consolidation of shares or other capital
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adjustment, or the payment of a stock dividend or other increase or
decrease in such shares, effected without receipt of consideration by the
Company, then, in any such event, the remaining number of Warrant Shares
still subject to this Warrant and the Warrant Price therefor shall be
adjusted in a manner determined by the Board of Directors of the Company
such that the adjusted number of Warrant Shares and the adjusted Warrant
Price shall be the substantial equivalent of the number of Warrant Shares
still subject to this Warrant and the Warrant Price thereof prior to such
change.
b. In the event that the Company shall propose to take
any action of the type described in Section (a) above, then the Company
shall give notice to the Warrant Holder, which notice shall specify the
record date, if any, with respect to any such action and the date on which
such action is to take place. Such notice shall also set forth such facts
with respect thereto as shall be reasonably necessary to indicate the
effect of such action (to the extent such effect may be known at the date
of such notice) on the amount or type of securities or other property
issuable upon conversion. In the case of any action which would require
the fixing of a record date, such notice shall be given at least twenty
(20) days prior to the date so fixed, and in the case of all other
actions, such notice shall be given at least thirty (30) days prior to the
taking of such proposed action.
c. If so requested by the Warrant Holder, the Company
shall, within one hundred twenty (120) days after the end each of its
fiscal years, deliver to the Warrant Holder a certificate of the
independent public accountants for the Company: (i) setting forth the
number of shares of Common Stock, or the kind and amount of any securities
or property other than shares of Common Stock, for which this Warrant is
exercisable; and (ii) setting forth in reasonable detail the facts
requiring any adjustments made during such fiscal year.
4. RESERVATION OF SHARES. The Company covenants and agrees
that all shares of Common Stock which may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance, be validly
issued, fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issuance thereof (other than taxes in respect
of any transfer occurring contemporaneously with such issuance). The
Company further covenants and agrees that, during the period within which
rights represented by this Warrant may be exercised, the Company will at
all times have authorized and reserved a sufficient number of shares of
Common Stock to provide for the exercise of the rights represented by this
Warrant, and will at its expense expeditiously upon each such reservation
of shares of Common Stock use its best efforts to procure the listing
thereof (subject to issuance or notice of issuance) on any stock exchanges
on which shares of the Common Stock are then listed.
5. RESTRICTIONS ON TRANSFERABILITY.
a. The Warrant Holder has been advised and understands
that this Warrant and the Warrant Shares issuable upon the exercise hereof
have not been registered under the Securities Act of 1993, as amended (the
"Act"), are "Restricted Securities" within the meaning of Rule 144 under
the Act, and are subject to restrictions on transfer, and that the Company
is under no obligation to register this Warrant or the Warrant Shares
under the Act or to take any action which would make available to the
Warrant Holder any exemption from such registration. The Warrant Holder
and any holders of Warrant Shares, by acceptance hereof and thereof, agree
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not to transfer or otherwise dispose of this Warrant or the Warrant Shares
except in compliance with the Act and other applicable securities laws,
and then only against receipt of an agreement of the transferee to comply
with the provisions of this Section 5 with respect to any resale or other
disposition of such securities.
b. Pursuant to Section 203(d) of the Pennsylvania
Securities Act of 1972, as amended, and to the extent, if any, required
thereby, the Warrant Holder, by its acceptance hereof, agrees not to sell
this Warrant within twelve months of the date hereof.
6. SEVERABILITY. In the event that one or more of the
provisions of this Warrant shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Warrant, but
this Warrant shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
7. GOVERNING LAW. This Warrant shall be governed and
construed in accordance with the laws of the Commonwealth of Pennsylvania.
8. CAPTIONS. The captions used in this Warrant are for
convenience only; they form no part of this Warrant and shall not affect
its interpretation.
9. NOTICES. Any notice required by the provisions of this
Warrant to be given to the holders of this Warrant or of the Warrant
Shares shall be deemed given if deposited in the United States mail, first
class postage prepaid, and addressed to each holder of record at his or
her address appearing on the books of the Company.
NUCLEAR RESEARCH CORPORATION
By:/s/ Earl M. Pollock
-------------------------------
Earl M. Pollock
President
[Corporate Seal]
Attest:
------------------------------
Secretary
Dated as of November 8, 1994
<PAGE>
EXERCISE FORM
[To Be Signed Only Upon Exercise of Warrant]
To Nuclear Research Corporation:
The undersigned, the Warrant Holder of the enclosed Warrant, hereby
irrevocably elects to transfer the purchase right represented by such
Warrant for, and to purchase thereunder * shares of the Common
Stock of Nuclear Research Corporation and herewith makes payment to
Nuclear Research Corporation of $ therefor, and requests that
the certificate or certificates for such shares be issued in the name of
and delivered to the undersigned.
Dated:
--------------- ------------------------------
[SIGNATURE MUST CONFORM IN ALL
RESPECTS TO NAME OF HOLDER AS
SPECIFIED ON THE FACE OF THE
WARRANT]
------------------------------
------------------------------
------------------------------
------------------------------
Address
------------------------------
Tax Identification No.
*Insert the number of shares of the Common Stock of Nuclear
Research Corporation as to which the Warrant is being exercised
without making any adjustment for any stock or other securities
or property or cash which, pursuant to the adjustment provisions
of the Warrant, may be deliverable upon exercise.
<PAGE>
Exhibit 10.O
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made this 27th day of June, 1995, by and between
Nuclear Research Corporation, a corporation (hereinafter called "the
Company"), and Harold J. Cooley, an individual (hereinafter called
"Employee").
W I T N E S E T H:
The Company wishes to continue employing Employee and Employee
wishes to continue being employed by the Company. Employment will continue
on the terms and conditions contained in this Agreement and not by the
terms and conditions of the prior written Agreement between the parties.
The prior Agreement, dated October 1, 1986, will be terminated as of the
date this Agreement is signed.
NOW, THEREFORE, in consideration of the facts, mutual promises
and covenants contained herein and intending to be legally bound hereby,
the Company and Employee agree as follows:
1. DEFINITIONS. As used herein, the following terms shall
have the following meanings:
(a) "AFFILIATE," shall mean a person who, (i) with respect
to any entity, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
entity; or (ii) with respect to Employee is a parent, spouse or issue of
Employee, including persons in an adopted or step relationship.
(b) "BASE COMPENSATION" shall mean the annual rate of
compensation set forth in Section 5, as adjusted from time to time, in the
Company's sole discretion and in accordance with the formula provided in
Section 5(b). Base Compensation shall exclude any bonus payments.
(c) "CAUSE" shall include, but not be limited to, the
following: (i) Employee is convicted of any felony or any other crime
involving moral turpitude whether or not such felony or crime of moral
turpitude is related to Employee's employment; (ii) gross negligence or
willful misconduct of Employee in connection with his employment; (iii)
any act of fraud, misappropriation or personal dishonesty by Employee
relating to or involving the Company in any material way; (iv)
insubordination in connection with his employment; (v) material violation
by Employee of any of his obligations hereunder; (vi) any
misrepresentation made in this Agreement, in any application or any
information provided by Employee to the Company in connection with
Employee's employment with the Company and/or selection for Employee's
position; (vii) unauthorized disclosure of confidential information,
unless such disclosure was (A) believed in good faith by Employee to be
appropriate in the course of properly carrying out his duties under the
Agreement, or (B) required by an order of a court having jurisdiction over
the subject matter or a summons, subpoena or order of any legislative body
(including any committee thereof) or any governmental or administrative
agency; (viii) use of illegal drugs by Employee; or (ix) the existence of
any material conflict between the interests of the Company and Employee
that is not disclosed in writing by Employee to the Board and approved by
the Board in advance.
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(d) "DISABILITY" shall mean Employee's inability to
perform the essential functions of his job, with or without a reasonable
accommodation because of a physical or mental health condition.
(e) "TERM OF EMPLOYMENT" shall mean the period specified
in Section 4 hereof.
2. EMPLOYMENT. The Company hereby continues to emploY
Employee and Employee hereby accepts continued employment by the Company
for the period and upon the terms and conditions specified in this
Agreement.
3. OFFICE AND DUTIES.
(a) Employee shall serve the Company generally as
Executive Vice President and his authority, duties and powers in such
capacity shall be such as may be determined from time to time by the Board
of Directors or the President of the Company, provided however, such
authority, duties and powers are consistent with the position of an
executive officer of a Pennsylvania business corporation.
(b) Employee's title shall not be changed without written
authorization of Employee.
(c) During Employee's employment with the Company,
Employee shall devote his entire working time, energy, skill and best
efforts to the performance of his duties hereunder in a manner which will
faithfully and diligently further the business and interests of the
Company and shall not during the term of Employee's employment with the
Company, directly or indirectly, be engaged in any other business activity
requiring any amount of his business time (whether or not such business
activity is pursued for gain, profit or pecuniary advantage), except for
services which are or may be rendered to or for the benefit of any
Affiliate of the Company.
(d) Employee is not permitted or authorized to make any
disbursements or purchases or to incur any liabilities on behalf of the
Company or otherwise to obligate the Company in any matter outside of his
general duties.
4. TERM.
(a) This Agreement shall be for an initial term of seven
(7) years, commencing on July 1, 1995, and ending on June 30, 2002, unless
sooner terminated as hereinafter provided.
(b) Unless either party elects to terminate this Agreement
at the end of the initial term or any renewal term by giving the other
party written notice of such election at least thirty (30) days before the
expiration of the then current term, this Agreement shall be deemed to
have been renewed for an additional term of one (1) year commencing on the
day after the expiration of the then current term.
5. BASE COMPENSATION AND BONUSES.
(a) For all of the services rendered by Employee to the
Company, Employee shall receive Base Compensation at the annual rate of
Two Hundred Twenty-One Thousand Dollars ($221,000), less taxes and other
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<PAGE>
deductions required by law. The Base Compensation shall be paid to the
Employee in bi-weekly installments.
(b) Employee's Base Compensation shall be automatically
increased as of January 1 of each year during the initial term hereof or
during any renewal term. The increase in Employee's Compensation shall be
at the Company's discretion and will be no less than the increase in the
Consumer Price Index (as defined by the United States's Department of
Labor) and no more than the average percentage increase in Base
Compensation (i.e., exclusive of bonuses) of the highest three percentage
Base Compensation increases of the Company's Officers, other than the
Employee, for the adjustment year.
(c) The Company may, pursuant to action by the Board of
Directors of the Company, otherwise increase, but not decrease the Base
Compensation payable to Employee hereunder during the initial term of this
Agreement or during any renewal term.
(d) In addition to the Base Compensation payable by the
Company to Employee, if the Employee is employed by the Company at the end
of each fiscal year he may be eligible to receive a bonus.
(e) If employed at the end of the fiscal year, Employee
may be eligible to receive a bonus equal to the sum of: (i) 1.5% of the
Company's income before income taxes in excess of 10% and up to 20% of the
average shareholders' equity of the Company as of the end of the preceding
fiscal year plus (ii) 2.0% of the Company's income before income taxes in
excess of 20% and up to 30% of the average shareholders' equity of the
Company as of the end of the preceding fiscal year, plus (iii) 2.25% of
the Company's income before income taxes in excess of 30% of the average
shareholders' equity of the Company as of the end of the preceding fiscal
year. For purposes of this Section, "average shareholders' equity" is
defined as the shareholders' equity of the preceding three (3) fiscal
years divided by three.
6. BENEFITS AND EXPENSES.
(a) During Employee's employment he shall be entitled to
participate in the Company's insured benefits and policies (including
payment or reimbursement of disability insurance, participation in
medical, health, accident or group insurance plans and any other benefits
or policies) generally made available by the Board from time to time to
other executive employees of the Company, according to the terms,
restrictions, conditions and exclusions of such benefits or policies.
However, both parties agree that the benefits available during the
Employee's employment may be altered, amended or eliminated by the Board
of Directors at any time and in its sole discretion. Nothing in this
Agreement shall create any rights or benefits beyond those which may exist
under the applicable plan document and/or policy statement.
(b) Employee shall be entitled to take vacations at such
time and for such duration as shall be reasonable and be approved by the
President of the Company. The total amount of vacation time per year
shall not be more than twenty (20) business days (four (4) weeks) per
year.
(c) During Employee's employment, the Company will provide
Employee with an automobile of reasonable value and age to use during his
employment with the Company and will reimburse Employee for all reasonable
and necessary expenses associated with Employee's use of the car in
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<PAGE>
connection with the performance of Employee's duties hereunder.
Reimbursement will be provided upon receipt of proper documentation or
vouchers from Employee. No reimbursement will be paid for any traffic or
parking tickets received by Employee.
(d) The Company also agrees to reimburse Employee upon
presentation of vouchers for all other reasonable expenses incurred by
Employee in the performance of his duties hereunder.
7. INABILITY.
(a) If Employee is unable to perform the essential
functions of his job, with or without reasonable accommodations, for
whatever reason, for a period of twelve (12) consecutive weeks or for a
cumulative period of fifteen (15) weeks during any twelve-month period,
Company shall have the right to terminate this Agreement and Employee's
employment.
(b) If Employee's inability is due to a Disability, the
Company's sole obligation is to pay Employee's last full year's Base
Compensation for one year following termination due to the Employee's
inability.
(c) If Employee's inability is not due to a Disability,
Employee is entitled only to payment for all unpaid, Base Compensation
accrued to the date of termination.
(d) The termination of this Agreement and Employee's
employment with the Company pursuant to this Section 7 shall release the
Company from all liabilities and obligations, other than as described in
this Section 7. The Employee is not released from Employee's obligations
and restrictions under Sections 13 and 14 of this Agreement.
8. DEATH.
(a) In the event the Employee dies, subject to Subsections
8(b) and 8(c), the Company's obligation to Employee shall be limited to
payment to Employee's beneficiary of a sum equal to the Employee's Base
Compensation, less taxes and other normal deductions, for his most recent
two (2) full years of employment with the Company, not to exceed Five
Hundred Thousand Dollars ($500,000).
The gross payments to Employee's beneficiary shall be
made in accordance with the terms, conditions and restrictions of any life
insurance policy obtained by the Company as provided in Subsection 8(b)
below; provided, however, the Company may prepay any amounts due to
Employee's beneficiary.
(b) Payments described within Subsection 8(a) above are
contingent upon the Company obtaining a life insurance policy, at a
reasonable cost, to completely cover the obligation contained therein.
(c) If the Company is not able to obtain a policy
described above in Subsection 8(b) for at least Five Hundred Thousand
Dollars ($500,000), the Company will only be responsible to pay Employee's
beneficiary a sum equal to Employee's most recent year's Base
Compensation. Payments will be made over a twelve month period in equal
installments, beginning one month from Employee's death.
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<PAGE>
(d) This Agreement terminates immediately upon Employee's
death and only Section 8 of the Agreement survives the termination.
9. TERMINATION OF THE COMPANY'S BUSINESS.
(a) If the Company merges or consolidates with a company
that controls over 50% of the voting control of the Company or is acquired
by any party who is not an Affiliate of the Company as of the date hereof,
the Company may terminate this Agreement and Employee's employment on two
(2) weeks prior notice.
(b) If termination of Employee's employment and this
Agreement are pursuant to this Section 9, the Company shall pay Employee
his Base Compensation accrued through the date of termination plus a sum
equal to the Employee's most recent two (2) full years' Base Compensation,
less taxes and other normal deductions. Any such payment to the Employee
shall be made in two lump sums: one half (1/2) of the two years of Base
Compensation to be paid within thirty (30) days of Employee's termination
and one half (1/2) of the two years of Base Compensation to be paid within
thirteen (13) months of the Employee's date of termination. Employee
shall not, however, be released from Employee's obligations and
restrictions under Sections 13 and 14 of this Agreement.
10. TERMINATION BY THE COMPANY FOR CAUSE.
(a) The Company may terminate this Agreement for Cause on
one (1) days notice after providing Employee with ten (10) days to cure.
(b) Upon termination for Cause, the Company shall have no
liability or obligation under this Agreement, except to pay Employee his
unpaid Base Compensation accrued through the date of termination.
(c) Employee's termination for Cause does not relieve
Employee of the obligations or restrictions in Sections 13 and 14 of this
Agreement.
11. TERMINATION BY THE COMPANY WITHOUT CAUSE.
(a) Notwithstanding any other provision of this Agreement,
Employee remains an at-will employee, and therefore, the Company shall
have the right to terminate the employment of Employee hereunder for any
or no reason at all.
(b) If the Employee is terminated without Cause the
Company shall be obligated to pay Employee, subject to the restriction in
Subsection 11(c), Employee's Base Compensation accrued through the date of
termination and the Employee's Base Compensation for the remainder of the
Agreement. The rate of Base Compensation paid for the remainder of the
Agreement will be at the rate of Employee's Base Compensation as of the
date of Employee's termination. Payments will be made in accordance with
the regular pay practices of the Company as if Employee were an employee.
(c) If the Employee is terminated by the Company without
Cause and then obtains other employment, Employee shall promptly advise
Company in writing and any Compensation earned by Employee from such other
employment will be deducted from the amount owed by the Company to
Employee. Compensation, for purposes of this Subsection 9(c), includes
but is not limited to wages, overtime pay, commissions and bonus payments
received by the Employee.
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<PAGE>
(d) Employee's termination pursuant to this Section 11
does not relieve him of his obligations and restrictions stated in
Sections 13 and 14 of this Agreement.
12. TERMINATION BY EMPLOYEE.
(a) Notwithstanding any other provision of this Agreement,
Employee may terminate his Employment and this Agreement for any or no
reason, upon thirty (30) days' written notice to the Company. The Company
may waive Employee's obligation to work during this thirty (30) day notice
period and terminate his employment immediately. However, if the Company
takes this action in the absence of agreement by Employee, Employee shall
receive unpaid Base Compensation which otherwise would be due through the
end of the notice period.
(b) Other than as specifically set forth in this Section
12, Employee's termination pursuant to this Section 12 will release the
Company from all liabilities and obligations to the Employee.
(c) Termination of Employee's employment with Company
pursuant to this Section 12 shall not, however, release Employee from
Employee's obligation and restrictions under Sections 13 and 14 of this
Agreement.
13. THE COMPANY PROPERTY.
(a) All advertising, sales, and other materials or
articles or information, including without limitation data processing
reports, customer sales analyses, invoices, price lists or information,
samples, or any other materials or data of any kind furnished to Employee
by the Company or developed by Employee on behalf of the Company or at the
Company's direction or for the Company's use or otherwise in connection
with Employee's employment hereunder, are and shall remain the sole and
confidential property of the Company. If the Company requests the return
of such materials at any time during, at or after the termination of
Employee's employment, Employee shall deliver the same to the Company
immediately, retaining no copies.
(b) Immediately upon termination of Employee's employment,
whether initiated by Employee or Company, whether with or without Cause,
Employee shall deliver to the Company's President, retaining no copies,
all Company property (for example, keys and credit cards), and all
documents, records, files, customer lists, computer programs and other
data relating to the Company, regardless of where or by whom said writings
were kept or prepared.
14. NONCOMPETITION, TRADE SECRETS, ETC.
(a) During Employee's employment with the Company and for
a period of one (1) year after the termination of Employee's employment,
for whatever reason, whether initiated by Employee or the Company, whether
with or without cause, Employee shall not directly or indirectly (i)
induce or attempt to induce, any employee, present or future customer or
supplier of the Company or any Affiliate to terminate his employment or
its relationship with the Company or any Affiliate; (ii) solicit or
attempt to solicit, sell, lease, or offer to sell or lease, except on
behalf of the Company or any Affiliate, to any present or future customer
of the Company or any Affiliate, any goods or services competitive to the
goods and services now or hereafter offered for sale or lease by the
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<PAGE>
Company or any Affiliate; or (iii) engage in (as a principal, shareholder,
partner, director, officer, agent, employee, consultant or stockholder who
owns greater than five percent (5%) of the outstanding shares of stock, or
in any other capacity) or be financially interested in any business
operation within the United States of America which is involved in
business activities which can reasonably be deemed to be in competition
with business activities carried on by the Company, or being definitely
planned by the Company at the time of the termination of Employee's
employment.
(b) During Employee's employment and at all times
thereafter, Employee shall not use for Employee's personal benefit, or
disclose, communicate or divulge to, or use for the direct or indirect
benefit of any person, firm, association or company, other than the
Company, any other information which Employee acquires in the course of
his employment which is not otherwise lawfully known by and readily
available to the general public. This confidential information includes,
but is not limited to: any information regarding the Company's business
methods, policies, procedures, or techniques; research or development
projects or results; trade secrets or other knowledge or processes of or
developed by the Company; any names and addresses of customers or clients
or any data on or relating to past, present or prospective customers or
clients; any other confidential information relating to or dealing with
the business operations or activities of the Company, made known to
Employee or learned or acquired by Employee while in the employ of the
Company.
(c) Employee acknowledges that the restrictions and
covenants contained in this Section 14, in view of the nature of the
business in which the Company is engaged and the Employee's position
within the Company, are reasonable and necessary in order to protect the
legitimate interests of the Company, that their enforcement will not
impose a hardship on Employee or significantly impair his ability to earn
a livelihood, and that any violation thereof would result in irreparable
injuries to the Company. Therefore, Employee acknowledges that, in the
event of his violation of any of these restrictions, the Company shall be
entitled to institute and prosecute proceedings in any court of competent
jurisdiction, either in law or in equity, to obtain preliminary and
permanent injunctive relief, as well as damages and an equitable
accounting of all earnings, profits and other benefits arising from such
violation and/or to enforce a specific performance thereof by Employee,
which rights shall be cumulative and in addition to any other rights or
remedies to which the Company may be entitled.
(d) If the restrictions in this Subsections 14 should be
adjudged unreasonable in any proceeding, then the period of time shall be
reduced by such amount or the area shall be reduced by the elimination of
such portion or both such reductions shall be made so that such
restrictions may be enforced in such area and for such time as is adjudged
to be reasonable. If Employee violates any of the restrictions contained
in this Subsection 14, the period of such violation (from the commencement
of any such violation until such time as such violation shall be cured by
Employee to the satisfaction of the Company) shall not count toward or be
included in the two year restrictive period contained in the Subsections
above.
(e) The provisions of this Section 14 shall survive the
expiration of this Agreement at the end of its term, at any time prior
thereto, or at the end of any renewal term.
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15. PRIOR AGREEMENTS. Employee represents to the Company (a)
that there are no restrictions, agreements or understandings whatsoever to
which Employee is a party which would prevent or make unlawful his
execution or performance of this Agreement, (b) that there are no
agreements or restrictions or understandings whatsoever to which Employee
is a party which place any limitations on the companies or individuals
with which or whom he may do business; (c) that he is free and able to
execute any agreement and to enter into employment with the Company and
(d) that this Agreement supersedes any other written or oral agreement(s)
between Employee and the Company.
16. MISCELLANEOUS.
(a) INDULGENCES, ETC. Neither the failure nor any delay
on the part of either party to exercise any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof. Nor
shall any single or partial exercise of any right, remedy, power or
privilege preclude any other or further exercise of the same or of any
other right, remedy, power or privilege. Nor shall any waiver of any
right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with
respect to any other occurrence. No waiver shall be effective unless it
is in writing and is signed by the party asserted to have granted such
waiver.
(b) CONTROLLING LAW. This Agreement and all questions
relating to its validity, interpretation, performance and enforcement
(including without limitation provisions concerning limitations of
actions), shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania, notwithstanding any conflict-of-laws
doctrines of such state or other jurisdiction to the contrary, and without
the aid of any canon, custom or rule of law requiring construction against
the draftsman.
(c) NOTICES. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given, made and received
when delivered (personally, by courier services such as Federal Express,
or by Messenger) or when deposited in the United States mails, registered
or certified mail, postage pre-paid, return receipt requested, addressed
as set forth below:
(i) If to Employee:
Harold J. Cooley
1 Zabela Drive
Spring Valley, NY 10977
Attention: Harold J. Cooley
With a copy to:
------------------------
------------------------
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(ii) If to the Company:
Nuclear Research Corporation
125 Titus Avenue
Warrington, PA 18976
Attention: Earl M. Pollock, President
With a copy to:
Mark K. Kessler, Esquire
Wolf, Block, Schorr and Solis-Cohen
Twelfth Floor Packard Building
15th & Chestnut Streets
Philadelphia, PA 19102
In addition, notice by mail shall be by air mail if
posted outside of the continental United States.
Any party may alter the address to which
communications or copies are to be sent by giving notice of such change of
address in conformity with the provisions of this Section 16(c). Such
changed designation is effective ten (10) days after such changed
designated is supplied.
(d) BINDING NATURE OF AGREEMENT. This Agreement shall be
binding upon and inure to the benefit of the Company and its Affiliates
and its successors and assigns including any transferee of the business
operation, as a going concern, in which Employee will be employed and
shall be binding upon Employee, his Affiliates and personal
representatives. The Company may assign its rights and obligations under
this Agreement in whole or in part to any one or more Affiliates, but no
such assignment shall relieve the Company of its obligations to Employee
if any such assignee fails to perform such obligations.
(e) EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to
be an original as against any party whose signature appears thereon, and
all of which shall together constitute one and the same instrument. This
Agreement shall become binding when one or more counterparts hereof,
individually or taken together, shall bear the signatures of all of the
parties reflected hereon as the signatories. Any photographic or xerox
copy of this Agreement, with all signatures reproduced on one or more sets
of signature pages, shall be considered for all purposes as if it were an
executed counterpart of this Agreement.
(f) PROVISIONS SEPARABLE. The provisions of this
Agreement are independent of and separable from each other, and no
provision shall be affected or rendered invalid or unenforceable by virtue
of the fact that for any reason any other or others of them may be invalid
or unenforceable in whole or in part.
(g) ENTIRE AGREEMENT. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or
written, except as herein contained. The express terms hereof control and
supersede any course of performance and/or usage of the trade inconsistent
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<PAGE>
with any of the terms hereof. This Agreement may not be modified or
amended other than by an agreement in writing, signed by both parties.
(h) SECTION HEADINGS. The Section headings in this
Agreement are for convenience only; they form no part of this Agreement
and shall not affect its interpretation.
(i) SETTLEMENT OF DISPUTES. Any disputes regarding the
interpretation or enforcement of the Agreement shall be resolved by
binding arbitration to be held in the Commonwealth of Pennsylvania in
accordance with the rules and procedures of the American Arbitration
Association then in effect, except claims by the Company with regard to
alleged breaches by Employee of any obligations and restrictions in
Sections 13 and 14 above may be brought by the Company in any court of
competent jurisdiction. The Arbitration Hearing will take place in the
Commonwealth of Pennsylvania. If the parties cannot agree on a location
for the Hearing within thirty (30) days, the Arbitrator will select the
location.
IN WITNESS WHEREOF, the parties have duly executed and delivered
this Agreement as of the day and year first above written.
NUCLEAR RESEARCH CORPORATION
/s/ Harold J. Cooley 06/27/95(SEAL) By: /s/ Earl M. Pollock 06/27/95
- - ------------------------------ ------------------------------
Harold J. Cooley Date President Date
Attest: /s/ Joseph S. Gross Attest: /s/ Mark S. Pollock
--------------------- ------------------------
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Exhibit 10.P
OPERATING AGREEMENT OF
MEASUREMENT DYNAMICS LLC
------------------------
This Operating Agreement for MEASUREMENT DYNAMICS LLC, a New
Jersey limited liability company (the "Company") to be formed, is entered
into this 12th day of July, 1995 by and between, NUCLEAR RESEARCH
CORPORATION, a Pennsylvania corporation ("NRC"), Mark A. Sitcoske
("Sitcoske") and Ernest W. DeLany ("DeLany"), individuals (collectively,
the "Principals") (NRC and the Principals sometimes shall be referred to
herein collectively as the "Initial Members"):
W I T N E S S E T H:
- - - - - - - - - -
The Company shall be formed by the Initial Members to conduct
the business (as hereinafter described) and manufacture the products
mutually developed to date by the Principals and NRC, with a view to
expanding such business by access to the capital resources, expertise, and
manufacturing capabilities of NRC. Promptly following formation of the
Company, the Company will enter into an employment agreement with each of
the Principals. In addition, NRC and the Principals will enter into a
Contribution Agreement pursuant to which the Company will acquire, by
contribution, all of the material business assets of the Principals
necessary to conduct the business as contemplated in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises of the parties hereto and of other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound hereby,
agree as follows:
I. FORMATION
---------
1.01 FORMATION. The Members shall organize the Company as a
Limited Liability Company pursuant to the provisions of the New Jersey
Limited Liability Company Act, as amended, N.J. Rev. Stat. section 42:2B-1
ET SEQ. (the "Act").
1.02 NAME. The name of the Company shall be Measurement
Dynamics LLC, and all business shall be conducted under such name, and
title to all property, real, personal, or mixed owned or leased to the
Company shall be conducted in that name or any other name, but in any
case, only to the extent permitted by applicable law.
1.03 EFFECTIVE DATE. This Agreement shall become effective upon
filing and acceptance of a Certificate of Formation in the form attached
hereto as EXHIBIT A (the "Certificate") with the office of the Secretary
of State of the State of New Jersey.
1.04 REGISTERED OFFICE AND AGENT. The registered agent for
service of process and the registered office shall be that Person and
location reflected in the Certificate as filed with the office of the
Secretary of State of the State of New Jersey.
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1.05 PRINCIPAL OFFICE. The principal office of the Company
shall be at Dover, New Jersey, or at such other place or places as the
Board may from time to time designate. The Company may maintain such
other offices and places of business as the Board may from time to time
deem advisable.
1.06 TERM. The Company shall commence business on the Effective
Date and shall be dissolved on June 30, 2025 and its affairs wound up in
accordance with the terms of the Act, unless the term is extended by
amendment to this Agreement and the Certificate, or unless the Company is
sooner dissolved and wound up in accordance with the provisions of the Act
or this Agreement.
1.07 FISCAL YEAR. The Company shall operate on a fiscal year
ending June 30.
II. DEFINED TERMS
-------------
The following defined terms used in this Agreement shall have
the meanings specified below, in addition to any other defined terms used
herein:
"ACT" means the New Jersey Limited Liability Company Act, as amended,
N.J. Rev. Stat. section 42:2B-1 ET SEQ (1937).
"AFFILIATE" means, with respect to any Member, any Person
related by blood or marriage to such Member or any Person that directly or
indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such Member. For the purpose of this
definition the term "control" shall mean, with respect to any Person, the
beneficial ownership of 25% or more of the equity or voting interests in
such Person.
"AGREEMENT" means this Agreement, as amended from time to time.
"AVAILABLE CASH" means the total annual cash gross receipts of
the Company derived from all sources (including the release of amounts
previously held as reserves), other than from a Disposition or a
Refinancing, less the annual Operating Expenses.
"BANKRUPTCY" means an adjudication of bankruptcy or the entry of
an order for relief or the filing of a voluntary case or petition under
the federal bankruptcy law or any state or local bankruptcy law and, in
addition, any other status constituting bankruptcy within the meaning of
the Act.
"BOARD" means the Board of Managers of the Company as more fully
described in Article VI of this Agreement.
"CAPITAL CONTRIBUTION" means the total amount of money or other
property contributed or agreed to be contributed, as the context requires,
to the Company by each Member pursuant to the terms of this Agreement.
Any reference to the Capital Contribution of a Member shall include the
Capital Contribution made by any predecessor holder of the interest in the
Company of such Member allocable to such interest.
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"CASH FLOW" means Available Cash, less any amounts set aside by
the Board for the restoration or creation of reserves, or for anticipated
capital expenditures or working capital needs, as they determine are
necessary or appropriate.
"CERTIFICATE" means the Certificate of Organization of the
Company filed with the Office of the Secretary of the State of New Jersey
on the Effective Date in the form attached hereto as EXHIBIT A.
"CODE" means the Internal Revenue Code of 1986, as amended, or
any successor statute. All references to specific sections of the
Internal Revenue Code shall be deemed to include any provisions of the
Internal Revenue Code which replace or supersede the sections in effect at
the time of execution of this Agreement.
"CONTRIBUTED ASSETS" means the assets contributed by the
Principals to the Company and shall have the meaning ascribed to such term
in the Contribution Agreement.
"CONTRIBUTION AGREEMENT" means that certain Contribution
Agreement dated July 12, 1995, among NRC and the Principals attached
hereto as EXHIBIT B.
"DISPOSITION" means a sale or other disposition of assets of the
Company outside the ordinary course of business.
"EBIT" means the earnings (excluding extraordinary gain or loss)
of the Company, before payment of interest due on the Company's
outstanding indebtedness, for the four quarters immediately preceding the
Repurchase Date as reported on the Company's income statements for such
twelve-month period, and income taxes.
"EMPLOYMENT AGREEMENTS" means the Employment Agreements between
the Company and Ernest W. DeLany and Mark A. Sitcoske, respectively,
substantially in the form attached as EXHIBIT E.
"FORMULA PRICE" means the price at which each unit of Membership
Interest shall be purchased or sold under the terms of Section 8.05.
During the first twelve months of the term of this Agreement, the Formula
Price shall equal the fair market value of a unit of Membership Interest
as determined by an independent appraiser selected by unanimous consent of
the Members. Beginning on the first anniversary of the Formation Date,
the Formula Price shall equal a fraction, the numerator being the
difference of (A) EBIT multiplied by four and (B) Outstanding Debt, and
the denominator being the number of units of Membership Interest held by
all Members on the Repurchase Date. At any time after the fourth
anniversary of the Formation Date, the Board may establish a new Formula
Price, provided that such change is ratified by unanimous consent of the
Members. If the Formula Price has not changed within twelve (12) months
preceding the occurrence, after the fourth anniversary of the Formation
Date, of any event which triggers any buy/sell right under Section 8.05
herein, a new Formula Price shall then be established by the Board which
shall apply retrospectively to such buy/sell event, provided that such
change is ratified by unanimous consent of the Members. If the Company
fails to take action as required above, any Member may cause the Company
to hire an independent appraiser acceptable to all of the Members of the
purposes of establishing a new Formula Price, provided that the Member (or
Members) seeking such change reimburses the Company for the reasonable
costs of employing such appraiser. The determination of such appraiser as
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to the Formula Price shall be binding and conclusive on the Company and
each of the Members.
"INITIAL MEMBERS" means NRC, Sitcoske and DeLany.
"LIQUIDATOR" means such Person or Persons as shall be chosen by
unanimous consent of the Board or, if there are no duly elected Managers
at the time in question, such other Person who may be appointed in
accordance with applicable law and who shall be responsible for taking all
action necessary or appropriate to wind up the affairs of, and distribute
the assets of, the Company upon its dissolution.
"MANAGERS" mean Managers of the Company chosen by the Members
under the terms of Section 6.02.
"MANUFACTURING AGREEMENT" means the Manufacturing Agreement
between Company and NRC, the form of which is attached hereto as EXHIBIT
D.
"MEMBERS" means the Initial Members and such other Persons as
shall become Members under the terms of this Agreement.
"MEMBERSHIP INTEREST" means units of Membership Interest in the
Company. The number of units of Membership Interest owned initially by
each Member is set forth in Section 4.04. The terms "Membership Interest"
or "interests in the Company," for the purposes of this Agreement
includes, without limitation, the rights to profits, losses, gains,
credits and distributions from the Company.
"MDI MANAGERS" means Managers chosen by the Principals under the
terms of Section 6.02(c).
"NET PROCEEDS" means the net cash proceeds and/or other assets
(the value of which shall be determined in good faith by the Board or the
Liquidator, if applicable) of the Company available for distribution,
after the payment of all expenses and previously outstanding indebtedness,
including any indebtedness to the Members (or to the establishment by the
Board of any reserves or provisions for future capital requirements of the
Company deemed appropriate by them).
"NJBCA" means the New Jersey Business Corporation Act, N.J. Rev.
Stat. sections 14A:1-1 ET SEQ. (1937).
"NRC" means Nuclear Research Corporation, a Pennsylvania
corporation, one of the Members.
"NRC MANAGERS" mean Managers chosen by NRC under the terms of
Section 6.02(b).
"NRC NOTES" means those notes setting forth the Company's
obligations to repay the NRC Loan, as such term is defined in Section
1.02. of the Contribution Agreement.
"OPERATING EXPENSES" means all cash expenditures, including,
without limitation, all amounts payable pursuant to the Management
Agreement and the Manufacturing Agreement, other capital expenditures and
payments of principal of and interest on loans to and/or notes from the
Company (including payment, in accordance with their terms, of any loans
from or notes to the Members and their affiliates, there being no
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obligation created hereby for the Members or their affiliates to make any
such loans). Operating Expenses shall not include expenses properly
allocable to any Disposition or Refinancing for purposes of calculating
the Net Proceeds.
"OUTSTANDING DEBT" means the outstanding principal amount of all
indebtedness of the Company as stated on the Company's balance sheet at
the end of the quarter immediately preceding the Repurchase Date.
"PERSON" means any individual, trust, corporation, partnership,
proprietorship or any other entity.
"PRINCIPALS" means DeLany and Sitcoske, who are also Members.
"REFINANCING" means the incurrence or refinancing of
indebtedness of the Company for borrowed money from which the Company
realizes proceeds which are not, in the discretion of the Board, required
to be retained by the Company.
"REPURCHASE DATE" means the date on which the employment by the
Company of either or both of the Principals has terminated which has given
rise to any of the buy/sell rights set forth in Section 8.05.
"SERVICES AGREEMENT" means the Administrative Services Agreement
to be entered into by Company and NRC, the form of which is attached
hereto as EXHIBIT C.
"TRANSFER" means a sale, assignment, transfer, exchange,
mortgage, pledge, grant of a security interest, or other disposition or
encumbrance (including, without limitation, by operation of law), or the
acts thereof.
III. BUSINESS OF THE COMPANY
3.01 BUSINESS OF THE COMPANY. The purposes of the Company are
to develop, manufacture, produce and sell temperature measurement devices
and other related products or services.
3.02 AUTHORITY OF THE COMPANY. In order to accomplish its
purposes, the Company may engage in any lawful business permitted by the
Act or the laws of any jurisdiction in which the Company may do business
and is empowered and authorized to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for
the furtherance and accomplishment of its purposes, including, but not
limited to, the following:
(a) construct, operate, maintain, improve, buy, own, sell,
convey, assign, mortgage, refinance, rent or lease any real estate and any
personal property;
(b) engage in any kind of activity, and perform and carry
out contracts of any kind necessary to, or in connection with, or
incidental to, the accomplishment of the purposes of the Company;
(c) borrow money and issue evidences of indebtedness in
furtherance of the Company business and secure any such indebtedness by
mortgage, security interest or other lien, any or all of which debt
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instruments may contain confessions of judgment against the Company if the
Board consent thereto;
(d) maintain and operate the Company's assets;
(e) negotiate for and conclude agreements for the sale,
exchange or other disposition of all or any part of the property of the
Company; and
(f) hire and compensate employees, agents, independent
contractors, attorneys and accountants.
IV. MEMBERS' CONTRIBUTIONS; ADMISSION TO MEMBERSHIP
4.01 INITIAL MEMBERS.
The Initial Members of the Company are NRC, Sitcoske and DeLany.
4.02 CAPITAL CONTRIBUTIONS. In accordance with the terms of the
Contribution Agreement:
(a) NRC shall contribute property, in the form of cash,
inventory and other business assets, which the parties hereto agree shall
have fair market value of $300,000;
(b) The Principals shall contribute the Contributed
Assets, which the parties hereto agree have fair market value of $414,000.
4.03 RETURN OF CAPITAL CONTRIBUTION. Except as specifically
provided in this Agreement, no Member shall be entitled to demand or
receive the return of its Capital Contribution. Upon dissolution and
liquidation of the Company, the Members shall look solely to the Company
assets for the return of their Capital Contributions, and no Member shall
be liable for such return, even if such assets are insufficient to return
the full amount of such Capital Contributions.
4.04 INTERESTS IN THE COMPANY;
In exchange for the Capital Contributions set forth in
Section 4.02, the Members shall be entitled to the following interests in
the Company.
(a) NRC shall have 300,000 units of Membership Interest;
(b) Sitcoske shall have 207,000 units of Membership
Interest;
(c) DeLany shall have 207,000 units of Membership
Interest.
4.05 NO CERTIFICATION. Membership Interests in the Company
shall not be certificated.
4.06 CAPITAL ACCOUNTS.
(a) A separate "Capital Account" shall be established and
maintained for each Member as provided in this Section 4.06. Without
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duplication, the Capital Account of each Member shall be credited with the
cash and the fair market value of any property (net of liabilities assumed
by the Company and liabilities to which such property is subject)
contributed to the Company by such Member, plus all income, gain, or
Profits of the Company allocated to such Member pursuant to Article V
(including for purposes of this Section 4.06 income and gain exempt from
tax), and shall be debited with the sum of (i) all Losses or deductions of
the Company allocated to such Member pursuant to Article V, (ii) such
Member's distributive share of expenditures of the Company described in
Section 705(a)(2)(B) of the Code, and (iii) all cash and the fair market
value of any property (net of liabilities assumed by such Member and the
liabilities to which such property is subject) distributed by the Company
to such Member pursuant to Article V. The amount of the Capital Account
of a Member shall be determined in accordance with the rules set forth in
Treasury Regulation 1.704-1(b)(2)(iv). Any references in any Section or
subsection of this Agreement to the Capital Account of a Member shall be
deemed to refer to such Capital Account as the same may be credited or
debited from time to time as set forth above.
(b) Except as may otherwise be provided in this Agreement,
whenever it is necessary to determine the Capital Account of a Member for
purposes of Article V, the Capital Account of such Member shall be
determined after giving effect to all allocations and distributions for
transactions effected prior to the time as of which such determination is
to be made. Any Member, including any substitute Member, who shall
acquire an interest or whose interest shall be increased by means of a
transfer to him of all or part of the interest of another Member, shall
have a Capital Account which reflects such transfer.
4.07 WITHDRAWAL AND RETURN OF CAPITAL. Although the Company may
make distributions to the Members from time to time in return of their
Capital Contributions, no Member shall have the right to withdraw or
demand a return of any of his Capital Contribution or Capital Account
without the consent of the Board, except upon dissolution or liquidation
of the Company. If then required by the Act, the Certificate shall be
amended to reflect any withdrawal of a Member's Capital Contribution or
any portion thereof. Under circumstances requiring a return of any
Capital Contribution or constituting a withdrawal of a Member, no Member
shall have the right to receive property other than cash except as may be
specifically provided in this Agreement. No Member shall have the right
to withdraw from the Company without the consent of each other Member.
4.08 INTEREST ON CAPITAL. No interest shall be payable on any
Capital Contributions made to the Company or on the balance of the Capital
Accounts of the Members.
4.09 ISSUANCE OF ADDITIONAL MEMBERSHIP INTERESTS AND SECURITIES.
In order to raise additional capital or to acquire assets, to
redeem or retire Company debt or for any other Company purpose, the Board
is authorized to cause the Company to issue in addition to the units of
Membership Interest issued to the Members specified in this Agreement,
additional units of Membership Interest or classes thereof from time to
time to Members or to other persons and to admit them to the Company as
additional Members, provided that the Board obtains the unanimous consent
of the Members prior to any such issuance.
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4.10 CONTRIBUTION OF NEW PRODUCTS. The parties hereto
acknowledge that the Capital Contribution of the Initial Members set forth
in this Article IV shall be deemed to include products and product ideas
which are related to the Company's business, which have been originated by
any of the Members prior to or during the term of this agreement (the "New
Products"). Each Member shall submit for consideration by the Board the
New Products originated by such Member. In the event that the Board
determines not to approve the development by the Company of any such New
Products, all rights, interest and claims of the Company with respect to
such New Products shall terminate, and, subject to the terms of any
applicable agreements between such Member and the Company, such New
Product shall be deemed to be the property of such Member.
V. PROFITS, LOSSES AND DISTRIBUTIONS
5.01 PROFIT AND LOSS. "Profit" and "Loss" shall mean for each
fiscal year of the Company or other period, an amount equal to the
Company's taxable income or loss for such year or other period, as
determined by the Company's accountants in accordance with Code Section
703(a), and including, without limitation, each item of Company income,
gain, loss, or deduction which must be separately stated pursuant to Code
Section 703(a), taking into account the following adjustments:
(a) all income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profit or
Loss shall be added to such taxable income or loss;
(b) any expenditure of the Company described in Code
Section 705(a)(2)(B), or treated as such an expenditure and not otherwise
taken into account in computing Profit or Loss, shall be subtracted from
such taxable income or loss;
(c) notwithstanding any other provision of this Agreement,
any items of Company income, gain, loss or deduction which are required to
be specially allocated shall not be taken into account in computing Profit
and Loss; and
(d) with respect to property contributed to the Company,
or (at the option of the Board) any increase or decrease in the Capital
Accounts of the Members to reflect a revaluation of Company property in
accordance with the provisions of Treasury Regulation Section 1.704-
1(b)(2)(iv)(f), the calculation of Profit and Loss shall be made by taking
into account book basis and book depreciation, if any, in accordance with
Treasury Regulation Section 1.704-1(b)(2)(iv)(g)(3), rather than tax
depreciation which would be taken into account in accordance with Code
Section 703(a). Profit and Loss for all purposes of this Agreement shall
be determined in accordance with the accrual method of accounting, except
that any adjustments made pursuant to Code Section 754 shall not be taken
into account. Except as otherwise specifically required by this Agreement
or the Code, every item of income, gain, loss, deduction, credit, or tax
preference entering into the computation of such Profit and Loss shall be
considered allocated to each Member in the same proportion as Profit and
Loss is allocated to such Member.
5.02 ALLOCATION OF PROFIT AND LOSS. Except as otherwise
required under the Code, all Profit or Loss shall be allocated to the
Members in accordance with the following rules:
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(a) After making the special allocations required by
Section 5.02(c), (d) and (e) of this Agreement, if any, whenever the
aggregate Capital Account balances of the Members will represent a
positive number after allocation of Profit or Loss for the taxable year or
other period, Profit or Loss for such year or other period shall be
allocated so as to produce, as nearly as possible, positive Capital
Account balances for each Member which correspond to the amounts each
Member would receive in a hypothetical distribution of the proceeds of a
liquidation of the Company in accordance with the priorities set forth in
Section 5.04 of this Agreement in a case where the aggregate amount of
such proceeds equals the aggregate positive Capital Account balances of
the Members.
(b) After making the special allocations required by
Section 5.02(c), (d), and (e) of this Agreement, if any, whenever the
aggregate Capital Account balances of the Members will represent zero or a
negative number after allocation of Profit and Loss for the taxable year
or other period, Profit or Loss for such year or other period shall be
allocated so as to produce, as nearly as possible, zero Capital Account
balances for all the Members, or negative Capital Account balances of the
Members which are proportionate to their Units, as the case may be.
(c) items of income, gain, loss and deduction for federal
income tax purposes with respect to any property contributed to the
Company or any property which has been revalued in accordance with the
provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(f), shall be
allocated among the Members so as to take into account any variation
between the adjusted tax basis of such property to the Company and the
book basis of such property, in accordance with Code Section 704(c) and
applicable Regulations thereunder. Without limiting the foregoing, the
Company will allocate items of income, gain, loss and deduction with
respect to the property contributed to the Company by the Principals upon
formation of the Company under Treasury Regulation Section 1.704-3(b).
(d) In the event that any Member receives an unexpected
adjustment, allocation or distribution as described in Treasury Regulation
Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), which results in such
Member's Capital Account deficit balance being in excess of the amount
such Member is obligated or treated as obligated to restore, such Member
shall be allocated items of income and gain in an amount and manner
sufficient to eliminate such excess deficit balance as quickly as
possible. This provision is intended as a "qualified income offset" as
defined in Treasury Regulation Section 1.704-1(b)(2)(ii)(d).
(e) Income from cancellation of indebtedness of the
Company shall be allocated to the Members in accordance with their
respective shares of such indebtedness determined under Code Section 752
and applicable Treasury Regulations thereunder immediately prior to such
cancellation. To the extent any such income is not recognized by such
Members pursuant to Code Section 108, the basis of Company property shall
be reduced in accordance with any reduction in the basis of such Members'
interests in the Company pursuant to Code Sections 108(b) and 1017, and
such Members shall not elect to reduce the basis of depreciable property
before reducing other tax attributes of such Members. The Capital
Accounts of any such Members shall be reduced to reflect any such
reduction in the basis of Company property in accordance with the
reduction in their respective bases in their interests in the Company.
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5.03 DISTRIBUTIONS OF CASH FLOW.
(a) Cash Flow, if any, shall be paid at such times and in
such amounts as the Board, in its sole discretion, shall designate.
(b) Cash Flow, if and when distributed, shall be
distributed (i) first, in payment of principal of and accrued interest on
any loans to the Company from Members (notwithstanding that such principal
or interest may not be due and payable at such time), in order of priority
and in proportion to the amounts of principal and accrued interest
outstanding on all such loans of equal priority, and then (ii) to the
Members PRO RATA according to the number of units of Membership Interest
held by each Member. Notwithstanding the foregoing, the Company shall not
prepay any principal or interest outstanding on the NRC Notes before such
amounts are due and payable under the terms of the NRC Notes, unless such
prepayment is approved by unanimous consent of the Board.
(c) Notwithstanding the foregoing, and to the extent not
previously distributed pursuant to Section 5.03(b) or Section 5.04, the
Board shall distribute to the Members out of Cash Flow or Net Proceeds
with respect to each taxable year at least an amount of cash sufficient to
pay the assumed (as hereinafter provided) federal and state income tax
liabilities of the Members with respect to any taxable income or gain of
the Company allocated to the Members (or, if any Member is a corporation
that has in effect an election to be treated as an "S corporation" for
federal income tax purposes or a similar election for state income tax
purposes (an "S Election"), such liabilities of the shareholders of such
Member), calculated as if each Member (or such Member's shareholders in
the case of a Member who has made an S Election) were taxed at the highest
marginal combined federal, state and local income tax rate (including any
surtax and any portion of FICA tax, e.g. the Medicare portion, applicable
without regard to any cap, but not any other portion of a FICA tax)
applicable to any Member (the "Marginal Tax Rate"), taking into account
any prior allocation of losses or other tax benefits, all as reasonably
estimated by the Board, on or before the end of the third month following
the last day of such taxable year or other period. To the extent they
exceed the amounts distributable to any Member for any taxable year under
Sections 5.03(b) or 5.04, any such distributions shall be a credit against
future distributions to such Member under this Agreement.
5.04 DISTRIBUTION OF PROCEEDS FROM DISPOSITION, REFINANCING OR
DISSOLUTION.
(a) In the event of a Disposition of Company assets, a
Refinancing, or the dissolution of the Company, the net cash proceeds
and/or other assets (the value of which shall be determined in good faith
by the Board or the Liquidator, if applicable) of the Company available
for distribution, after the payment of all expenses and previously
outstanding indebtedness, including any indebtedness to the Members (or to
the establishment by the Board of any reserves or provisions for future
capital requirements of the Company deemed appropriate by them) (the "Net
Proceeds") shall be distributed PARI PASSU as follows:
NRC 42%
Sitcoske 29%
DeLany 29%
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(b) Except in the event of a dissolution of the Company or
a Disposition of substantially all of the assets of the Company, or as
provided in Section 5.03(c), the Board shall have discretion as to the
timing and amounts of and distributions pursuant to this Section 5.04.
5.05 WITHHOLDING OBLIGATIONS. Unless treated as a Tax Payment
Loan (as hereinafter defined), any amount paid by the Company for or with
respect to any Member on account of any withholding tax or other tax
payable with respect to the income, profits or distributions of the
Company pursuant to the Code, the Treasury Regulations, or any state or
local statute, regulation or ordinance requiring such payment (a
"Withholding Tax Act") shall be treated as a distribution to such Member
for all purposes of this Agreement, consistent with the character or
source of the income, profits or cash which gave rise to the payment or
withholding obligation. To the extent that the amount required to be
remitted by the Company under the Withholding Tax Act exceeds the amount
then otherwise distributable to such Member, the excess shall constitute a
loan from the Company to such Member (a "Tax Payment Loan") which shall be
payable upon demand and shall bear interest, from the date that the
Company makes the payment to the relevant taxing authority, at the lesser
of (i) a variable rate per annum at all times equal to two percent (2%) in
excess of the prime rate of interest published in THE WALL STREET JOURNAL
or (ii) the maximum legal interest rate under applicable law. So long as
any Tax Payment Loan or the interest thereon remains unpaid, the Company
shall make future distributions due to such Member under this Agreement by
applying the amount of any such distribution first to the payment of any
unpaid interest on all Tax Payment Loans of such Member and then to the
repayment of the principal of all Tax Payment Loans of such Member. The
Board shall have the authority to take all actions necessary to enable the
Company to comply with the provisions of any Withholding Tax Act
applicable to the Company and to carry out the provisions of this Section.
Nothing in this Section shall create any obligation on the Members to
advance funds to the Company or to borrow funds from third parties in
order to make any payments on account of any liability of the Company
under a Withholding Tax Act.
VI. MANAGEMENT POWERS, DUTIES AND RESTRICTIONS
6.01 MANAGEMENT BY MANAGERS.
(a) Except for those matters in which the approval of the
Members is required by this Agreement or by nonwaivable provisions of
applicable law, and subject to the provisions of Section 6.01(c), the
powers of the Company shall be exercised by or under the authority of, and
the business and affairs of the Company shall be managed under the
direction of, the Managers.
(b) Managers shall have the authority and responsibility
of directors and officers under Chapter 6 of the NJBCA.
(c) Managers shall manage the business and affairs of the
Company and exercise its powers collectively as the Board of Managers (the
"Board"), which shall act through (i) meetings and consents as set forth
in Sections 6.03 and 6.05; (ii) through committees pursuant to Section
6.09; and (iii) through individual Managers to whom authority and duties
have been delegated pursuant to Section 6.11.
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(d) Notwithstanding the provisions of Sections 6.01(a) and
(c), the Board may not cause the Company to do any of the following
without the consent of all of the Members:
(i) Amend the Certificate, except in the case where
the amendment:
(A) restates without change all of the operative
provisions of the Certificate;
(B) changes the name or the registered office of
the Company; or
(C) accomplishes any of the foregoing purposes;
(ii) Amend this Agreement;
(iii) Approve a merger, dissolution or sale of
substantially all of the assets of the Company;
(iv) Approve any spin-off with respect to any of the
assets of the Company;
(v) Approve any extension or renewal of the term of
the Manufacturing Agreement or the Services Agreement; or
(vi) Take any other action for which the consent of
the Members is required under the terms of this Agreement.
(e) Approval by the duly authorized resolution of the
Board shall be required to take any action contemplated herein,
notwithstanding the requirement of obtaining the consent of the Members.
6.02 NUMBER AND TERM OF OFFICE OF MANAGERS.
(a) There shall be five Managers of the Company which as a
group shall constitute the Board. The Board shall be made up of two
classes of Managers: (i) NRC Managers and (ii) MDI Managers.
(b) So long as it shall remain a Member, NRC shall have
the right to choose three NRC Managers. The initial NRC Managers shall be
Earl Pollock, Jack Cooley and Mark Pollock.
(c) So long as the Principals or either of them remain(s)
a Member, they (or in the case only one Principal remains a Member, he)
shall have the right to choose two MDI Managers. The initial MDI Managers
shall be Mark A. Sitcoske and Ernest W. DeLany.
(d) Each Manager shall hold office until the next annual
meeting of Members and until his successor shall have been elected and
qualified. A Manager need not be a Member or an Affiliate of a Member or
be a resident of the State of New Jersey.
6.03 MEETINGS.
(a) Meetings of the Board may be held at such place either
within or without the State of New Jersey as the majority of Managers may
designate from time to time or as may be designated in the notice calling
the meeting.
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(b) A regular meeting of the Board shall be held annually,
immediately following the annual meeting of Members, at the place where
such meeting of the Members is held or at such other place and time as a
majority of the Managers in office after the annual meeting of Members may
designate. In addition to such regular meetings, the Board shall have the
power to fix by resolution the place, date and hour of other regular
meetings of the Board. No notice shall be required to be given of any
regular meeting, unless the same is held at other than the place or time
for holding such meeting as fixed in accordance with the preceding
sentence.
(c) Special meetings of the Board shall be held whenever
ordered by the CEO or two members of the Board, upon at least five (5)
days advance notice to each other Manager. Such notice need not be in
writing or state the purpose or purposes of, nor the business to be
transacted at, such meeting, except as may otherwise be required by law or
provided for by the Certificate or this Agreement.
6.04 QUORUM; ACTION BY THE MANAGERS.
(a) Presence in person or by proxy of all of the Managers
shall constitute a quorum for the transaction of business of the Board, or
any committee thereof.
(b) Each Manager shall have one vote at meetings of the
Board, or any committee thereof. Any action approved by a majority of
votes of Managers present, either in person or by proxy, shall be the act
of the Board or of the committee, unless the act of a greater number is
required by law, the Certificate or by the provisions of this Agreement.
6.05 ACTION OF BOARD WITHOUT A MEETING. Any action required or
permitted to be taken pursuant to authorization voted at a meeting of the
Board, or any committee thereof, may be taken without a meeting if, prior
or subsequent to the action, all members of the Board or of such
committee, as the case may be, consent thereto in writing and the written
consents are filed with the minutes of the proceedings of the Board or
committee. Such consent shall have the same effect as a unanimous vote of
the board or committee for all purposes, and may be stated as a unanimous
vote in any certificate or other document filed with the office of the
Secretary of State.
6.06 WAIVER OF NOTICE. Notice of any meeting of the Board need
not be given to any Manager who signs a waiver of such notice, whether
before or after the meeting. The attendance of any Manager at a meeting
without protesting prior to the conclusion of the meeting the lack of
notice of such meeting shall constitute a waiver of notice by such Board
Member. Notice of an adjourned meeting of the Board need not be given if
the time and place are fixed at the meeting adjourning and if the period
of adjournment does not exceed ten (10) days in any one adjournment.
6.07 PARTICIPATION IN MEETING BY CONFERENCE TELEPHONE. Where
appropriate communication facilities are reasonably available, any or all
Managers shall have the right to participate in all or any part of a
meeting of the Board or a committee thereof by means of conference
telephone or any means of communication by which all persons participating
in the meeting are able to hear each other.
6.08 COMPENSATION OF MANAGERS. The Board shall have the
authority to establish compensation of Managers for services to the
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Company, provided that an action to approve compensation of a NRC Manager
shall be approved by unanimous vote of the Board.
6.09 COMMITTEES. The Board may appoint from among its members
an executive committee and one or more other committees, each of which
shall have one or more members, at least one member of which shall be an
MDI Manager. To the extent provided by such resolution, each such
committee shall have and may exercise all the authority of the Board,
except that no such committee shall (i) amend the Certificate; (ii) elect
or appoint any person to be Manager or any Manager to any office; (iii)
submit to Members any action that requires Members' approval; (iv) amend
or repeal any resolution theretofore adopted by the Board which by its
terms is amendable or repealable only by the Board; (v) violate the
provisions of this Agreement.
6.10 PROXIES. Every Manager may authorize by proxy another
Manager to act for him at a meeting of the Board. Every proxy shall be
executed in writing by the Manager or his agent, except that a proxy may
be given by a Manager or his agent by any means of electronic
communication which results in a writing. All proxies shall be revocable
at will. A grant of a later proxy shall revoke an earlier proxy.
6.11 AUTHORIZATION OF TITLES FOR MANAGERS. The Board, by
resolution adopted from time to time, may select particular Managers to
perform such duties as the Board, in its sole discretion, shall deem
appropriate. The Board may assign titles to particular Managers. The
Board shall only delegate to any single Manager or group of Managers
duties delegated to an officer of a corporation and not the Board's
general authority to manage the business and affairs of the Company as
described in Section 6.01. Unless the Board shall decide otherwise, if
the title is one commonly used for officers of a business corporation
formed under the NJBCA, the assignment of such title shall constitute the
delegation to such Managers of the authority and duties that are normally
associated with that office, subject to any specific delegation of
authority and duties made to such Manager by action of the Board. Each
Manager shall hold such office until his successor shall be duly
designated and shall qualify or until he shall resign or shall be removed
by action of the Board. Any Manager serving in a particular office may
resign from such office at any time. Such resignation shall be in writing
and shall take effect at the time specified therein, or if no time be
specified, at the time of its receipt by the Board. Any Manager may be
removed from an office by action of the Board whenever in its judgment the
best interests of the Company will be served thereby; provided, however,
that such removal shall be without prejudice to the contract rights, if
any, of the Manager so removed. Any vacancy occurring in such office,
once created, may be filled by action of the Board. The Managers
initially shall serve in the offices set forth beside their names as
follows: Earl Pollock - Chairman; Jack Cooley - Chief Executive Officer;
Mark A. Sitcoske - President; Mark Pollock - Chief Financial Officer and
Treasurer; and Ernie DeLany - Executive Vice President.
6.12 APPOINTMENT OF EMPLOYEES AND AGENTS. The Board may
appoint, employ, contract or otherwise deal with any Persons for the
transaction of the business of the Company, which Persons may, under
supervision of the Board, perform any acts or services for the Company as
the Board may approve.
6.13 EMPLOYMENT AGREEMENTS. The Company shall enter into
Employment Agreements with Sitcoske and DeLany substantially in the form
attached hereto as EXHIBITS E-1 AND E-2, respectively.
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6.14 SERVICES AGREEMENT. The Company shall enter into the
Services Agreement with NRC substantially in the form attached hereto as
EXHIBIT C and shall be authorized to pay such fee to NRC as is required by
the terms of such agreement.
6.15 MANUFACTURING AGREEMENT. The Company shall enter into the
Manufacturing Agreement with NRC substantially in the form attached hereto
as EXHIBIT D and shall be authorized to pay such fees and reimburse such
expenses to NRC as is required by the terms of such agreement.
6.16 APPROVAL OF BUDGETS. During the first twelve- month
period following the effective date of this Agreement, the Board shall
approve the quarterly budgets of the Company at least thirty (30) days
prior to the beginning of each quarter. During the second twelve-month
period, the Board shall approve budgets on a semi-annual basis at least
sixty (60) days prior to the beginning of each six-month period. During
all succeeding twelve-month periods, the Board shall approve budgets on an
annual basis at least ninety (90) days prior to the beginning of each
twelve-month period. So long as the Company has achieved, in all material
respects, all targets set forth in the last quarterly, semi-annual or
annual budget, as the case may be, the President and Executive Vice
President shall be responsible for day-to-day operations of the Company.
VII. MEMBERS' MEETINGS
7.01 PLACE OF MEMBERS' MEETINGS. Meetings of Members may be
held at such place, within or without the State of New Jersey, as shall be
mutually agreed upon by the Members. If no such place is designated by
the Board Members, all meetings of the Members shall be held at the
registered office of the Company.
7.02 ANNUAL MEETING.
(a) A meeting of the Members shall be held in each
calendar year, commencing with the year 1996, at such time as the Board
may determine, or if the Board fails to set a time, on the First Monday of
May at 10:00 o'clock A.M., if not a legal holiday, and if such day is a
legal holiday, then such meeting shall be held on the next business day.
(b) At each annual meeting, the Members shall choose
Managers in a manner, consistent with the requirements of Section 6.02 of
this Agreement, to hold office until the next succeeding annual meeting
and until their respective successors are elected and qualified, or until
their earlier resignation or removal.
7.03 SPECIAL MEETINGS. Except as otherwise specifically
provided by law, special meetings of the Members may be called at any time
by any two members of the Board.
7.04 NOTICE OF MEMBERS' MEETINGS.
(a) Written notice of the time, place and purpose or purposes
of every meeting of the Members shall be given not less than ten (10) nor
more than sixty (60) days before the date of the meeting, either
personally or by mail, to each Member of record entitled to vote at the
meeting.
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(b) When a meeting is adjourned to another time or place,
it shall not be necessary to give notice of the adjourned meeting if the
time and place to which the meeting is adjourned are announced at the
meeting at which the adjournment is taken and at the adjourned meeting
only such business is transacted as might have been transacted at the
original meeting, unless quorum is no longer present at the time of such
adjournment. However, if after the adjournment the Board fixes a new
record date for the adjourned meeting, a notice of the adjourned meeting
shall be given to each Member of record on the new record date entitled to
notice thereof.
7.05 WAIVER OF NOTICE; WAIVER OF LAPSE OF TIME.
(a) Notice of a meeting need not be given to any Member
who signs a waiver of such notice, whether before or after the meeting.
The attendance of any Member at a meeting, without protesting prior to the
conclusion of the meeting the lack of notice of such meeting, shall
constitute a waiver of notice by such Member.
(b) Whenever Members are authorized to take any action
after the lapse of a prescribed period of time, the action may be taken
without such lapse if such requirement is waived in writing, before or
after the taking of such action, by every Member entitled to vote thereon
as at the date of the taking of such action.
7.06 QUORUM. Unless otherwise provided in the Certificate or by
law, the presence, of the all of the Members holding interests of the
Company shall constitute a quorum at such meeting. The Members present,
at a duly organized meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough Members to leave less than a
quorum.
7.07 VOTING.
(a) VOTING LIST. The Company shall keep at its principal
office or its registered office, a record or records containing the names
and addresses of all Members and the number of units of Membership
Interest held by them. The list shall be produced (or be available by
means of a visual display) at the time and place of the meeting, be
subject to the inspection of any Member for reasonable periods during the
meeting and be prima facie evidence as to who are the Members entitled to
examine such list or to vote at any meeting.
(b) RECORD DATE. The Board shall fix a date as record
date for determining the Members entitled to vote at any meeting of
Members or adjournment thereof or entitled to give a written consent
without a meeting, provided that such record date shall not be more than
sixty (60) days prior to the meeting or Company action or event to which
it relates or less than ten (10) days before the date of the meeting.
(c) VOTING OF INTERESTS. Unless otherwise provided by
this Agreement, the Certificate or by law, whenever any action, other than
the selection of Managers, is to be taken by vote of the Members, it shall
be authorized by the affirmative vote of Members owning not less than 70%
in the aggregate of the units of Membership Interest in the Company.
7.08 ACTION BY UNANIMOUS CONSENT OF MEMBERS. Any action
required or permitted to be taken at a annual or special meeting of
Members may be taken without a meeting if all the Members entitled to vote
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thereon consent thereto in writing. The record date for determining
members entitled to consent to action in writing without a meeting shall
be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the Company in the
required manner for giving notice under this Agreement.
7.09 ANNUAL FINANCIAL STATEMENTS. Annual financial reports of
the Company's business shall contain such information as the Board
determines and need not be certified by a Certified Public Accountant
unless the Board shall so direct.
7.10 CONDUCT OF MEETINGS. All meetings of the Members shall be
presided over by the chairman of the meeting, who shall be an NRC Manager
(or representative thereof) designated by unanimous consent. The chairman
of any meeting of Members shall determine the order of business and the
procedure at the meeting, including such regulation of the manner of
voting and conduct of discussion as the chairman deems to be in order,
provided that the rules for conduct of the meeting shall not conflict with
Robert's Rules of order.
VIII. WITHDRAWAL OF MEMBERS; TRANSFERS
OF MEMBERSHIP INTERESTS
8.01 RESTRICTIONS ON TRANSFERS OF INTERESTS.
(a) Except as specifically provided in this Article VIII,
neither a Transfer of units of Membership Interest nor a Transfer of any
rights with respect thereto may be effected without the consent of all of
the Members (which consent may be withheld by any Member arbitrarily).
Any attempted Transfer by a person of units of Membership Interest or
right, or any part thereof, in or in respect of the Company other than in
accordance with this Article VIII shall be, and is hereby declared, null
and void AB INITIO.
(b) Notwithstanding the provisions of Section 8.01(a), the
following may occur without the consent of any of the Members:
(i) In the case of the Bankruptcy of a Member,
vesting of the Member's interest in the Company in hands of the trustee,
receiver or administrator of the bankrupt's estate;
(ii) In the case of a death or incompetency of a
Member who is a natural person, vesting of his Membership Interest in his
personal representative and, in the case of death, in his beneficiaries;
or
(iii) Transfer of a Member's interest in the Company to
an Affiliate.
(c) Notwithstanding anything herein to the contrary, no
transferee of a Member's interest in the Company shall become a
substituted Member with respect to the transferred interest, unless and
until all of the Members give their written consent thereto (which written
consent may be withheld by any Member arbitrarily) and the transferee
shall:
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(i) Assume all the obligations of his predecessor
under this Agreement with respect to the interest transferred accruing
from and after the effective date of the Transfer;
(ii) Deliver to the Board a written statement, in form
and substance satisfactory to the Board, acknowledging the assumption of
the transferror's obligations under this Agreement and that the transferee
has read the provisions of this Agreement and intends to be legally bound
as a Member by all the terms and conditions of this Agreement and any
amendments or modifications thereof, and execute a counterpart of the
Agreement as then in effect; and
(iii) Pay all reasonable expenses (including, without
limitation, legal and accounting fees) incurred by the Company in
connection with such Transfer, including but not limited to the cost of
the preparation, filing and publishing of any amendment to the Company's
Certificate and any fictitious name or similar registrations necessary or
desirable to the Company in connection therewith.
(d) Except as otherwise specifically provided in this
Agreement, a Member may not withdraw from the Company or have the right to
receive Company distributions, the return of his contribution or the fair
value of his interest in the Company, at any time prior to the dissolution
and winding up of the Company.
8.02 COMPLIANCE WITH SECURITIES LAWS. The Members acknowledge
and confirm that the units of Membership Interest held by them may
constitute securities and that the units of Membership Interest have not
been registered under any federal or state securities laws by virtue of
exemptions from the registration provisions thereof and consequently
cannot be sold except pursuant to appropriate registration or exemption
from registration as applicable. No transfer or assignment of all or any
part of the Membership Interest of a Member (except a transfer upon the
death, incapacity or Bankruptcy of a Member to his personal representative
and beneficiaries), including, without limitation, any transfer of a right
to distributions, profits and/or losses to a Person, whether or not such
Person becomes a Member, may be made unless the Company is provided with
an opinion of counsel acceptable to the Board (both as to the identity of
the counsel and the substance of the opinion) to the effect that such
transfer or assignment (a) may be effected without registration of the
interest under the Securities Act of 1933, as amended, and (b) does not
violate any applicable federal or state securities laws (including any
investment suitability standards) applicable to the Company or the
transferee. In no event may any Member who is a Pennsylvania resident
sell all or any portion of his Membership interest within 12 months after
the date of purchase thereof if such sale would be violative of the
provisions of Section 203(d)(i) of the Pennsylvania Securities Act of
1972, as amended.
8.03 ALLOCATIONS WITH RESPECT TO TRANSFEROR'S INTEREST. Upon
the assignment by a Member of all or any part of his interest in the
Company to a Person becoming a substitute Member, the net profits, net
losses and credits for the entire fiscal year of the Company during which
such assignment occurred shall be pro-rated between assignor and assignee
on the basis of the number of days in the fiscal year preceding and
succeeding the effective time of the assignment, regardless of the period
of the year in which such profit or loss was actually recognized or such
credit became available.
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8.04 OTHER PROHIBITED TRANSFERS. Notwithstanding anything to
the contrary contained in any other provision of this Agreement, after the
date hereof the sale or exchange or other disposition of all or any part
of an interest in the capital and/or profits of the Company within the
meaning of Section 708 of the Code may not be made (and will be invalid)
if the interest sought to be sold or exchanged or otherwise disposed of,
when added to all other interests in the Company's capital and/or profits
transferred within the 12 consecutive month period ending on the date of
such purported sale or exchange, would cause the termination of the
Company's status as a partnership for federal income tax purposes pursuant
to Section 708(b)(1)(B) of the Code.
8.05 BUY-SELL RIGHTS
(a) NRC (or its nominee) shall have the right to purchase
the units of Membership Interest held by either Principal at the Formula
Price upon the occurrence of the following with respect to such Principal:
(i) Such Principal voluntarily terminates his
employment by the Company; or
(ii) Company terminates such Principal for "cause" as
such term is defined in the Employment Agreement
(b) Each Principal shall have the right to require NRC (or its
assigns) to buy at the Formula Price the units of Membership Interest held
by such Principal upon the occurrence of the following with respect to
such Principal:
(i) The Company terminates such Principal for any
reason other than for "cause" as such term is defined his Employment
Agreement.
(ii) Such Principal dies during the term of such
Principal's employment by the Company.
(iii) Such Principal's employment with the Company is
terminated because such Principal became disabled within the meaning of
Section 6 of his Employment Agreement.
(c) In order to finance the repurchase required under
clause (b)(ii) of this Section 8.06, NRC shall purchase key man insurance
with respect to both of the Principals provided such insurance is
available at standard rates. NRC may pay to a Principal in installments,
at NRC's option, the excess of the amount owed in connection with such
repurchase over the proceeds of such insurance, PROVIDED THAT all amounts
remaining unpaid shall be paid on the fifth anniversary of the Repurchase
Date.
(d) NRC may pay to a Principal in installments at NRC's
option any amounts owed in connection with such repurchase pursuant to
clause (b)(iii) of this Section 8.05, with principal and accrued interest
payable with interest accruing in ten (10) equal semi-annual installments
at a rate of 8% per annum on the then outstanding principal balance.
Notwithstanding the foregoing, the parties acknowledge that NRC shall have
the right to prepay at any time.
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(e) All Transfers made pursuant to terms of this Section
8.05 shall be subject to the restrictions on transfer of Membership
Interests set forth in this Article 8.
IX. TERMINATION OF THE COMPANY
9.01 DISSOLUTION.
(a) The Company shall dissolve upon, but not before, the
first to occur of the following:
(i) A Disposition of all or substantially all of the
Company's assets and the receipt of the final payments to be paid by the
purchaser or transferee thereof (or a determination by the Liquidator that
it is unlikely that any additional payments will be made);
(ii) The written consent of all of the Members;
(iii) The death, insanity, Bankruptcy, expulsion or
resignation of any Member, unless Members owning not less than 70% of the
units of Membership Interest vote to continue the Company;
(iv) A decision of the Board to dissolve the Company;
or
(v) December 31, 2095.
(b) Dissolution of the Company shall be effective on
December 31, 2095 or the day on which the event occurs giving rise to the
dissolution, but the Company shall not terminate until the Certificate
shall have been cancelled and the assets of the Company shall have been
distributed as provided in Section 9.02 below. Notwithstanding the
dissolution of the Company prior to the termination of the Company, as
aforesaid, the business of the Company and the affairs of the Members, as
such, shall continue to be governed by this Agreement.
(c) Notwithstanding anything in this Agreement to the
contrary, upon a Disposition of substantially all of the assets of the
Company where all or any portion of the consideration payable to the
Company is to be received by the Company more than ninety (90) days after
the date on which such Disposition occurs, the Board may elect to continue
the Company solely for purposes of collecting the deferred payments and
making distributions to the Members. In such event (i) gain recognized
and cash distributed in any year as a result of such Disposition shall be
allocated and distributed among the Members in the same proportion as such
gain and cash would have been allocated and distributed were such cash
available for distribution and such gain required to be recognized for
federal income tax purposes in the year in which such Disposition
occurred; and (ii) income attributable to interest on deferred payments
shall be allocated among, and such interest shall be distributed to, the
Members as if the deferred payment obligations received by the Company had
been distributed in kind to the Members under subsection 9.02(c) in the
proportions provided for in Section 5.04.
9.02 WINDING UP AND DISTRIBUTIONS.
(a) In the event of a dissolution of the Company pursuant
to Section 9.01, the assets of the Company shall be liquidated by the
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Liquidator and, after Company obligations have been discharged or provided
for, and any reserves which the Liquidator deems reasonably necessary to
provide for contingent and unforeseen liabilities or obligations of the
Company have been established, the net proceeds of such liquidation shall
be distributed in accordance with Section 5.04.
(b) All liquidating distributions shall be made in cash or
in kind, in the discretion of the Liquidator. In connection with the sale
by the Company and reduction to cash of its assets, although the Company
has no obligation to offer to sell any properties to the Members, any
Member, at the option of the Liquidator, may bid on and purchase any
assets. If the Liquidator shall determine that an immediate sale of part
or all of the Company assets would cause undue loss to the Members, the
Liquidator may defer liquidation of and withhold from distribution for a
reasonable time any assets of the Company (except those necessary to
satisfy the Company's current obligations).
(c) If any assets of the Company are to be distributed in
kind, such assets shall be distributed on the basis of the fair market
value thereof and any Member entitled to any interest in such assets shall
receive such interest therein as a tenant-in-common with all other Members
so entitled. The fair market value of such assets shall be determined by
an independent appraiser to be selected by the Liquidator.
(d) In connection with the termination of the Company, the
Company's accountants shall prepare and furnish to each Member a statement
setting forth the assets and liabilities of the Company as of the date of
complete liquidation. After distribution of all of the assets of the
Company, the Members shall cease to be such, and the Board shall cause to
be executed, acknowledged and filed all documents necessary to cancel the
Certificate and fictitious name certificates, if any, and to terminate the
Company.
X. BOOKS, RECORDS AND TAX ELECTIONS
10.01 BOOKS AND RECORDS. The Board shall cause to be kept
full and accurate books of the Company. All books and records of the
Company shall be kept at the Company's principal office and shall be
available at reasonable times for inspection and copying by the Members or
their duly authorized representatives. The books of the Company shall be
kept on the accrual or cash basis as the Board shall determine, and the
fiscal period of the Company shall also be determined by the Board.
Capital accounts for each Member shall be maintained as part of the books
of the Company and the amount of profits or losses of the Company, as well
as capital contributions to the Company, and distributions from the
Company, shall be credited or charged, as the case may be, to the capital
account of each Member. An annual statement showing the income and
expenses of the Company (and the portion allocable to each Member), a
balance sheet of the Company at the end of the fiscal year, and a
statement of members' equity, together with all other information needed
by the Members for income tax purposes, shall be prepared by the Company's
accountants, without audit unless otherwise determined by the Board, and
furnished to each Member within 75 days after the end of each fiscal year
of the Company.
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10.02 CAPITAL ACCOUNTS. No Member shall have any obligation
to eliminate a deficit balance in his capital account at any time, or
bring his capital account into any particular parity with any other
Member's capital account at any time, although this sentence shall not
limit a Member's obligations pursuant to other sections of this Agreement.
10.03 TAX ELECTIONS. The Board may cause the Company to
make such tax elections (including, without limitation, the election under
Section 754 of the Internal Revenue Code) as the Board deem appropriate in
its sole discretion.
10.04 TAX MATTERS PARTNER. NRC is hereby designated as the
"tax matters partner" of the Company pursuant to section 6231(a)(7) of the
Code. NRC shall designate one of the NRC Managers to undertake the duties
of "tax matters partner."
XI. INDEMNIFICATION OF MANAGERS AND AGENTS
11.01 DEFINITIONS. As used in this Article XI:
(a) "Company Agent" means any Person who is or was an
employee or agent of the Company and any person who is or was a director,
officer, trustee or employee of any Other Enterprise, serving or
continuing to serve as such at the request of the Company, or the legal
representative of any such person;
(b) "Other Enterprise" means any domestic or foreign
corporation, any limited liability company other than the Company, and any
partnership, joint venture, sole proprietorship, trust, employee benefit
plan or Other Enterprise, whether or not for profit, served by a Company
Agent;
(c) "Expenses" means reasonable costs, disbursements and
counsel fees;
(d) "Liabilities" means amounts paid or incurred in
satisfaction of judgments, fines (including any excise taxes assessed on a
person with respect to an employee benefit plan), penalties and
settlements, provided that, in the case of a settlement, the Company shall
have given its prior approval to the terms of the settlement;
(e) "Proceeding" means any pending, threatened or
completed civil, criminal, administrative or arbitrative action, suit or
proceeding, and any appeal therein and any inquiry or investigation which
could lead to such action, suit or proceeding.
11.02 MANDATORY INDEMNIFICATION OF MANAGERS.
(a) The Company shall indemnify each Manager against his
Expenses and Liabilities in connection with any Proceeding involving the
Manager by reason of his being or having been such a Manager, other than a
Proceeding by or in the right of the Company. Indemnification shall be
provided by this section, to the full extent permitted by New Jersey law,
only if such Manager acted in good faith and in a manner he reasonably
22
<PAGE>
believed to be in or not opposed to the best interests of the Company and
with respect to any criminal Proceeding, such Manager had no reasonable
cause to believe his conduct was unlawful.
(b) The Company shall indemnify, to the fullest extent
permitted by New Jersey law, each Manager against his Expenses in
connection with any Proceeding by or in the right of the Company to
procure a judgment in its favor which involves the Manager by reason for
his being or having been such Manager, if he acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests
of the Company.
The Board or a committee thereof, acting by a majority
vote of Managers who were not parties to or otherwise involved in the
Proceeding, shall determine on a case by case basis, if indemnification as
described in (a) or (b) above is proper in the circumstances because the
Manager met the applicable standard of conduct set forth in (a) or (b)
above.
(c) Notwithstanding any limitations contained in (a) and
(b) above, the Company shall indemnify each Manager against Expenses to
the extent that such Manager has been successful on the merits or
otherwise in any Proceedings or in defense of any claim, issue or matter
therein.
11.03 OPTIONAL INDEMNIFICATION OF COMPANY AGENTS.
(a) The Company may, at its option, indemnify each Company
Agent against his Expenses and Liabilities in connection with any
Proceeding involving the Company Agent by reason of his being or having
been such a Company Agent, other than a Proceeding by or in the right of
the Company. Indemnification shall be provided by this section, to the
full extent permitted by New Jersey law, only if such Company Agent acted
in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company and with respect to any
criminal Proceeding, such Company Agent had no reasonable cause to believe
his conduct was unlawful.
(b) The Company may, at its option, indemnify, to the
fullest extent permitted by New Jersey law, each Company Agent against his
Expenses in connection with any Proceeding by or in the right of the
Company to procure a judgment in its favor which involves the Company
Agent by reason for his being or having been such Company Agent, if he
acted in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the Company.
(c) Notwithstanding any limitations contained in (a) and
(b) above, the Company may, at its option, indemnify each Company Agent
against Expenses to the extent that such Company Agent has been successful
on the merits or otherwise in any Proceedings or in defense of any claim,
issue or matter therein.
11.04 ADVANCES. Expenses incurred by a Manager or Company
Agent in connection with a Proceeding may be paid by the Company in
advance of the final disposition of the Proceeding as authorized by the
Board upon receipt of an undertaking by or on behalf of the Manager or
Company Agent to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified as provided in this Article XI.
23
<PAGE>
11.05 INSURANCE. The Company may purchase and maintain
insurance on behalf of any Manager or Company Agent against any Expenses
incurred in any Proceeding and any Liabilities asserted against such
Person by reason of such Person having been a Manager or Company Agent.
The Company may purchase such insurance from, or such insurance may be
reinsured in whole or in part by, an insurer owned by or otherwise
affiliated with the Company, whether or not such insurer does business
with other insureds.
11.06 NON-EXCLUSIVITY OF RIGHTS. The indemnification and
advancement of Expenses provided by or granted pursuant to this Agreement
shall not exclude any other rights, including the right to be indemnified
against Liabilities incurred in Proceedings by or in the right of the
Company, to which a Manager or Company Agent may be entitled under any
statute, provisions of the Certificate or this Agreement, vote of Members
or Managers, or otherwise, provided that no indemnification payment shall
be made to or on behalf of a Manager or Company Agent if a judgment or
other final adjudication adverse to the Company Agent establishes that its
actions or omissions (i) were in breach of its duty of loyalty to the
Company or its Members, (ii) were not in good faith or involved a knowing
violation of law or (iii) resulted in a receipt by the Company Agent of an
improper personal benefit.
11.07 AMENDMENT. The provisions of this Article XI relating
to the indemnification and advancement of Expenses to Managers shall
constitute a contract between the Company and each of its Managers which
may be modified as to any Manager only with that person's consent or as
specifically provided in this section. Notwithstanding any other
provision of this Agreement relating to their amendment generally, any
repeal or amendment of this Article XI which is adverse to any Manager
shall apply to such Manager only on a prospective basis, and shall not
limit the rights of a Manager to indemnification or to the advancement of
Expenses with respect to any action or failure to act occurring prior to
the time of such repeal or amendment. Notwithstanding any other provision
of this Agreement, no repeal or amendment of this Agreement shall affect
any or all of this Article XI so as to either limit indemnification or the
advancement of Expenses in any manner unless adopted by the affirmative
vote of Members owning not less than 70% of the units of Membership
Interest; provided that no such amendment shall have retroactive effect
inconsistent with the preceding sentence.
XII. GENERAL PROVISIONS
12.01 AMENDMENTS. No amendment of this Agreement shall be
binding unless such amendment is proposed in writing by the Board, and the
unanimous written consent of the Members is obtained with respect thereto;
provided, however, that no such amendment may increase the obligations of
one or more of the Members to make capital contributions to the Company or
make one or more of the Members personally liable for any obligations of
the Company or modify the allocation of distributions of cash or Company
profits and losses, or modify the method of determining distributions of
cash and allocations of profits and losses without the written agreement
of all Members adversely affected thereby.
12.02 INDULGENCES, ETC. Neither the failure nor any delay
on the part of any party hereto to exercise any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof, nor
24
<PAGE>
shall any single or partial exercise of any right, remedy, power or
privilege preclude any other or further exercise of the same or of any
other right, remedy, power or privilege, nor shall any waiver of any
right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with
respect to any other occurrence. No waiver shall be effective unless it
is in writing and is signed by the party asserted to have granted such
waiver.
12.03 CONTROLLING LAW. This Agreement and all questions
relating to its validity, interpretation, performance and enforcement,
shall be governed by and construed in accordance with the substantive laws
of the State of New Jersey, notwithstanding any conflict-of-law provisions
to the contrary.
12.04 NOTICES. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given, made and received
only when delivered personally, by courier service such as Federal
Express, or by other messenger or by the United States mails, registered
or certified mail, postage prepaid, return receipt requested, addressed to
the Company at its principal place of business, to the attention of
Treasurer, and addressed to any other party at the address shown for such
party on the Company's books.
Any party may alter his address on the Company's books
by giving notice thereof to the Company, but such change shall not be
effective unless and until such notice is actually received by the
Company.
12.05 EXHIBITS. Any Exhibits attached hereto are hereby
incorporated by reference into, and made a part of, this Agreement.
12.06 BINDING NATURE OF AGREEMENT. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns, except
that no party may assign or transfer its rights or obligations under this
Agreement in any manner other than as provided in this Agreement.
12.07 EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to
be an original as against any party whose signature appears thereon, and
all of which shall together constitute one and the same instrument. This
Agreement shall become binding when one or more counterparts hereof,
individually or taken together, shall bear the signatures of all of the
parties reflected hereon as the signatories.
12.08 PROVISIONS SEPARABLE. The provisions of this
Agreement are independent of and separable from each other, and no
provision shall be affected or rendered invalid or unenforceable by virtue
of the fact that for any reason any other or others of them may be invalid
or unenforceable in whole or in part.
12.09 PARAGRAPH HEADINGS. The paragraph headings in this
Agreement are for convenience only; they form no part of this Agreement
and shall not affect its interpretation.
25
<PAGE>
12.10 GENDER, ETC. Words used herein, regardless of the
number and gender specifically used, shall be deemed and construed to
include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context requires.
12.11 NUMBER OF DAYS. In computing the number of days for
purposes of this Agreement, all days shall be counted, including
Saturdays, Sundays and holidays; provided, however, that if the final day
of any time period falls on a Saturday, Sunday or holiday on which federal
banks are or may elect to be closed, then the final day shall be deemed to
be the next day which is not a Saturday, Sunday or holiday.
12.12 INTERPRETATION. No provision of this Agreement is to
be interpreted for or against either party because that party or that
party's legal representative or counsel drafted such provision.
12.13 RELIANCE. Each party acknowledges that, in entering
into this Agreement and making any Capital Contributions pursuant hereto,
he is relying solely upon his own investigation and the contents of this
Agreement and any agreements executed concurrently herewith and not upon
any statements made or materials produced by any other party or such other
party's representatives.
12.14 FURTHER ASSURANCES. In addition to the documents and
instruments to be delivered as herein provided, each of the parties hereto
shall, from time to time at the request of the Board, execute and deliver
such instruments and shall take such other action as may be required to
carry out more effectively the terms of this Agreement.
12.15 CORPORATE AUTHORITY. Any corporation signing this
Agreement represents and warrants that the execution, delivery and
performance of this Agreement by such corporation has been duly authorized
by all necessary corporate action and is valid and binding upon such
corporation.
12.16 NO THIRD-PARTY BENEFICIARIES. Notwithstanding
anything to the contrary contained herein, no provision of this Agreement
is intended to benefit any party other than the Company, the other
signatories hereto and their permitted successors and assigns nor shall
any such provision be enforceable by any other party.
12.17 WAIVER OF PARTITION. Each party does hereby waive any
right to partition or the right to take any other action which might
otherwise be available to such party outside of the provisions of this
Agreement for the purpose of severing his relationship with the Company or
such party's interest in the property held by the Company from the
interests of the other parties until the end of the term of both this
Company and any successor entity formed pursuant to the terms hereof.
12.18 NOMINAL TITLE HOLDER. Any or all Company property
may, at the option of the Board, be held in the name of one or more
nominal title holders chosen by the Board for the Company.
12.19 CONTROVERSIES WITH INTERNAL REVENUE SERVICE. In the
event of any controversy with the Internal Revenue Service or any other
taxing authority involving the Company or any Member or Members, the
outcome of which may adversely affect the Company, directly or indirectly,
or the amount of allocation of profits, gains, credits or losses of the
Company to one or more Members, the Company may, at its option, incur
26
<PAGE>
expenses it deems necessary or advisable in the interest of the Company in
connection with any such controversy, including, without limitation,
attorneys' and accountants' fees.
27
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
Members:
NUCLEAR RESEARCH CORPORATION
By: /s/ H. J. Cooley
-----------------------------
H. J. Cooley,
Executive Vice-President
/s/ Mark A. Sitcoske
- - ----------------------------------
Mark A. Sitcoske
/s/ Ernest W. DeLany
- - ----------------------------------
Ernest W. DeLany
28
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED FINANCIAL STATEMENTS FOUND IN THE ACCOMPANYING ANNUAL REPORT ON FORM
10-K OF NUCLEAR RESEARCH CORPORATION FOR THE YEAR ENDED JUNE 30, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. THIS
EXHIBIT SHALL NOT BE DEEMED FILED FOR PURPOSES OF SECTION 11 OF THE SECURITIES
ACT OF 1933 AND SECTION 18 OF THE SECURITIES EXCHANGE ACT OF 1934, OR
OTHERWISE SUBJECT TO THE LIABILITIES OF SUCH SECTIONS, NOR SHALL IT BE DEEMED
PART OF ANY OTHER FILING THAT INCORPORATES THIS REPORT BY REFERENCE, UNLESS
SUCH OTHER FILING EXPRESSLY INCORPORATES THIS EXHIBIT BY REFERENCE.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-1-1994
<PERIOD-END> JUN-30-1995
<CASH> 66,905
<SECURITIES> 0
<RECEIVABLES> 5,859,872
<ALLOWANCES> 0
<INVENTORY> 3,509,290
<CURRENT-ASSETS> 9,601,782
<PP&E> 3,845,520
<DEPRECIATION> 2,440,061
<TOTAL-ASSETS> 11,168,668
<CURRENT-LIABILITIES> 4,966,796
<BONDS> 0
<COMMON> 159,365
0
0
<OTHER-SE> 5,634,872
<TOTAL-LIABILITY-AND-EQUITY> 11,168,668
<SALES> 27,051,737
<TOTAL-REVENUES> 27,051,737
<CGS> 21,623,610
<TOTAL-COSTS> 21,623,610
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 308,746
<INCOME-PRETAX> 2,052,376
<INCOME-TAX> 773,900
<INCOME-CONTINUING> 1,278,476
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,278,476
<EPS-PRIMARY> 38.25
<EPS-DILUTED> 38.25
</TABLE>
