-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, BfLTraIT0Dui0z5//1sgJpTguwGy12ykZogeTDPFw3NtuiNHxii3ng56hXsYsGIx 2eqCclbCqwPgG58B01+HGw== 0000912057-95-003886.txt : 19950518 0000912057-95-003886.hdr.sgml : 19950518 ACCESSION NUMBER: 0000912057-95-003886 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NUCLEAR METALS INC CENTRAL INDEX KEY: 0000276331 STANDARD INDUSTRIAL CLASSIFICATION: 3480 IRS NUMBER: 042506761 STATE OF INCORPORATION: MA FISCAL YEAR END: 0928 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08836 FILM NUMBER: 95539734 BUSINESS ADDRESS: STREET 1: 2229 MAIN ST CITY: CONCORD STATE: MA ZIP: 01742 BUSINESS PHONE: 5083695410 MAIL ADDRESS: STREET 1: 2229 MAIN STREET CITY: CONCORD STATE: MA ZIP: 01742 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) __X__Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 1995 or _____Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from_____to_____ Commission File No. 0-8836 NUCLEAR METALS, INC. (Exact name of Registrant as specified in its charter) Massachusetts 04-2506761 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2229 Main Street, Concord, Massachusetts 01742 (Address of Principal Executive Offices) (Zip Code) (508) 369-5410 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes___X___ No_______ As of May 2, 1995 there were issued and outstanding 2,372,164 shares of the Registrant's Common Stock. NUCLEAR METALS, INC. AND SUBSIDIARIES FORM 10-Q for the quarterly period ended March 31, 1995 INDEX
Page Part I. Financial Information 2 Item I. Financial Statements Consolidated Balance Sheets, March 31, 1995 and September 30, 1994 3 Consolidated Statements of Income: Three Months Ended March 31, 1995 and March 31, 1994 4 Consolidated Statements of Income: Six Months Ended March 31, 1995 and March 31, 1994 5 Consolidated Statements of Cash Flow: Six Months Ended March 31, 1995 and March 31, 1994 6 Notes to Consolidated Financial Statements 7 Item II. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-12 SIGNATURES 13
PART I Item 1. FINANCIAL STATEMENTS PREPARATION OF FINANCIAL STATEMENTS The financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission and are subject to year-end audit by independent public accountants. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. It is suggested that the financial statements be read in conjunction with the financial statements and notes included in the Company's most recent Annual Report on Form 10-K. The information furnished reflects all adjustments which, in the opinion of management, are necessary for a fair statement of results for the interim periods. It should also be noted that results for the interim periods are not necessarily indicative of the results expected for the full year. -2- NUCLEAR METALS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(Unaudited) March 31, September 30, 1995 1994 ------------- ------------- Assets Current Assets: Cash and cash equivalents $ 1,043,000 $ 1,213,000 Marketable Securities 279,000 497,000 Accounts receivable, net of allowances for doubtful accounts of $1,290,000 at March 31, 1995 and September 30, 1994 5,168,000 5,455,000 Inventories 14,990,000 14,486,000 Deferred income tax benefit 675,000 675,000 Other current assets 558,000 371,000 ----------- ----------- Total current assets 22,713,000 22,697,000 ----------- ----------- Property, Plant and Equipment 45,412,000 45,867,000 Less accumulated depreciation 29,917,000 29,706,000 ----------- ----------- Net property, plant and equipment 15,495,000 16,161,000 ----------- ----------- Other assets 1,799,000 1,684,000 ----------- ----------- $40,007,000 $40,542,000 ----------- ----------- ----------- ----------- Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 2,008,000 $ 1,091,000 Accounts payable and accrued expenses 4,276,000 4,129,000 ----------- ----------- Total current liabilities 6,284,000 5,220,000 ----------- ----------- Deferred federal and state income taxes 676,000 676,000 ----------- ----------- Long term obligations 1,404,000 3,768,000 ----------- ----------- Other long-term liabilities 4,626,000 4,626,000 ----------- ----------- Stockholders' equity: Common stock, par value $.10; authorized- 6,000,000 shares; 2,367,164 issued and outstanding for March 31, 1995 and 2,307,464 issued and outstanding for September 30,1994 240,000 230,000 Additional paid-in capital 14,101,000 13,752,000 Retained earnings 12,676,000 12,270,000 ----------- ----------- Total stockholders' equity 27,017,000 26,252,000 ----------- ----------- $40,007,000 $40,542,000 ----------- ----------- ----------- -----------
-3- NUCLEAR METALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE PERIODS ENDED: (Unaudited)
Three Months Ended ----------------------------- March 31, March 31, 1995 1994 ------------- ------------ Net sales and contract revenues $4,212,000 $4,506,000 ---------- ---------- Cost and expenses Cost of sales 3,972,000 3,770,000 Selling, general and administrative 1,485,000 420,000 Research and development 110,000 174,000 ---------- ---------- Total Cost and expenses 5,567,000 4,364,000 ---------- ---------- Operating income (loss) (1,355,000) 142,000 Other income 223,000 20,000 Interest expense, net (107,000) (125,000) ---------- ---------- Income (loss) before income taxes and extraordinary item (1,239,000) 37,000 Benefit for income taxes 939,000 13,000 Extinguishment of Debt, net of taxes of $10,000 585,000 - ---------- ---------- Net income $ 285,000 $ 24,000 ---------- ---------- ---------- ---------- Per Share Information Income/(loss) before extraordinary item (0.13) 0.01 Gain on Extinguishment of Debt, net of taxes of $10,000 0.25 - ---------- ---------- Net income per common and common equivalent share $ 0.12 $ 0.01 ---------- ---------- ---------- ---------- Weighted average number of common and common equivalent shares outstanding 2,347,731 2,297,097
-4- NUCLEAR METALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE PERIODS ENDED: (Unaudited)
Six Months Ended -------------------------- March 31, March 31, 1995 1994 ------------ ------------ Net sales and contract revenues $ 9,839,000 $ 8,806,000 ------------ ------------ Cost and expenses Cost of sales 8,288,000 7,872,000 Selling, general and administrative 2,437,000 1,502,000 Research and development 248,000 408,000 ------------ ------------ Total Cost and expenses 10,973,000 9,782,000 ------------ ------------ Operating income (loss) (1,134,000) (976,000) Other income 235,000 78,000 Interest expense, net (216,000) (289,000) ------------ ------------ Income (loss) before income taxes and extraordinary item (1,115,000) (1,187,000) Benefit for income taxes 936,000 403,000 Extinguishment of Debt, net of taxes of $10,000 585,000 - ------------ ------------ Net income $ 406,000 $ (784,000) ------------ ------------ ------------ ------------ Per Share Information Income/(loss) before extraordinary item (0.08) (0.34) Gain on Extinguishment of Debt, net of taxes of $10,000 0.25 - ------------ ------------ Net income per common and common equivalent share $ 0.17 $ (0.34) ------------ ------------ ------------ ------------ Weighted average number of common and common equivalent shares outstanding 2,328,214 2,295,881
-5- NUCLEAR METALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE PERIODS ENDED: (Unaudited)
Six Months Ended --------------------------- March 31, March 31, 1995 1994 ------------ ------------- Cash flows from operating activities: Net income $ 406,000 $ (784,000) Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 778,000 1,480,000 Changes in assets and liabilities, net (Increase) decrease in accounts receivable 287,000 (3,172,000) (Increase) decrease in other current assets - (247,000) (Increase) decrease in income tax receivable - 2,388,000 (Increase) decrease in deferred income tax benefit - (387,000) (Increase) decrease in inventories (504,000) 177,000 Increase (decrease) in accounts payable and accrued expenses 146,000 (1,562,000) Gain on sale of building (175,000) Changes in prepaid and deferred taxes (187,000) - Other (115,000) - ------------ ------------ Net cash provided (used) by operating activities 636,000 (2,107,000) ------------ ------------ Cash flows from investing activities: Capital expenditures, net (422,000) (237,000) (Purchase) Sale of Marketable Securities 218,000 - Proceeds from sale of Property, Plant & Equipment 487,000 Other - (7,000) ------------ ------------ Net cash provided (used) in investing activities 283,000 (244,000) ------------ ------------ Cash flows from financing activities: Total payments of debt, gross (916,000) (2,623,000) Proceeds from debt (532,000) (Purchases) issuances of common stock 359,000 44,000 Cash Dividends - - ------------ ------------ Net cash provided (used) in financing activities (1,089,000) (2,579,000) ------------ ------------ Net increase (decrease) in cash and equivalents (170,000) (4,930,000) Cash and equivalents at beginning of the period 1,213,000 7,864,000 ------------ ------------ Cash and equivalents at end of the period $ 1,043,000 $ 2,934,000 ------------ ------------ ------------ ------------ Supplemental disclosures of cash flow information: Cash paid during the period for: Interest, net of amounts capitalized $ 16,000 $ 310,000 Income taxes $ - $ 6,000
-6- NOTES 1. The significant accounting policies followed by the Company in preparing its consolidated financial statements are set forth in Note (2) to such financial statements included in Form 10-K for the year ended September 30, 1994. 2. Inventories are stated at the lower of cost (first-in, first-out) or market, and include labor, materials, and overheads for manufacturing and engineering. Inventories at March 31, 1995 and September 30, 1994 consist of:
March 31, September 30, 1995 1994 ----------- ------------- Work-in process $11,343,000 $ 10,021,000 Raw materials 3,255,000 3,721,000 Spare parts 755,000 744,000 ----------- ------------- $14,990,000 $14,486,000 ----------- ------------- ----------- -------------
-7- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SECOND QUARTER FISCAL 1995 COMPARED WITH SECOND QUARTER FISCAL 1994 Net sales decreased by $294,000 or 7% to $ 4,212,000 in the second quarter of fiscal 1995. Sales in the Fabricated Specialty Metal Products industry segment increased by $1,410,000 or 75%, largely due to increased sales of commercial depleted uranium. Sales in the Metal Powders industry segment decreased by $282,000, or 24%. The decrease in the Metal Powders industry segment was due primarily to lower production volume in each of the product areas, with the largest decrease in the medical powder area. Sales in the Depleted Uranium Penetrator industry segments decreased by $1,422,000 or 98%. The decrease in the Depleted Uranium Penetrator segment was mainly due to lower large caliber production. Gross profit in the second quarter decreased by $496,000 or 67% to $240,000. The decrease in gross profit was primarily the result of lower sales volume and an increase of inventory reserves of $575,000 in fiscal 1995. As a percent of sales, gross profit was 6% as compared to 16% for the second quarter of fiscal 1994. Selling, general and administrative expenses increased by $1,065,000 or 253% as compared to the second quarter of fiscal 1994. The increase was primarily the result of higher legal and audit costs during second quarter fiscal 1995. As a percentage of sales, selling, general and administrative expenses increased to 35% as compared to 9% for the same period a year earlier. As a result of the foregoing, the Company sustained an operating loss of $1,355,000 in the second quarter of fiscal 1995 as compared to operating income of $142,000 in the second quarter of fiscal 1994. Other income increased by $203,000 to $223,000, compared to $20,000 for the second quarter of fiscal 1994. This was primarily due to a gain received from the Company's sale of an office building in Acton, Massachusetts. Interest expense decreased by $18,000 to $107,000, from $125,000 for the same period a year earlier. This decrease was primarily the result of the Company's lower levels of outstanding debt. Income taxes benefited during the second quarter of fiscal 1995 were at an effective rate of 2%. The income taxes benefited during the second quarter of fiscal 1995 also included the benefit of a tax refund of $918,000. Income taxes provided for in the second quarter of fiscal 1994 were at an effective rate of 34%. -8- SIX MONTHS FISCAL 1995 COMPARED WITH SIX MONTHS FISCAL 1994 Net sales increased by $1,033,000 or 12% to $9,839,000 in the first six months of fiscal 1995. Sales in the Fabricated Specialty Metal Products industry segment increased by $2,457,000 or 58%, due to increased sales in all product lines, with the largest increase in beryllium products. Sales in the Metal Powders industry segment decreased by $615,000 or 26%. The decrease in the Metal Powders industry segment was due primarily to decreased production volumes in the medical and ti - aerospace areas. Sales in the Depleted Uranium Penetrator segment decreased by $810,000 or 38%, mainly due to lower large caliber sales. Gross profit increased by $617,000 or 66% to $1,551,000. As a percent of sales, gross profit was 16% as compared to 11% for the first six months of fiscal 1994. Selling, general and administrative expenses increased by $935,000 or 62% as compared to the first six months of fiscal 1994. This increase was the result of higher legal and audit costs. As a percentage of sales, selling, general and administrative expenses increased to 25%, as compared to 17% for the same period a year earlier. As a result of the foregoing, the Company sustained an operating loss of $1,134,000 for the six months ended March 31, 1995 compared to an operating loss of $976,000 in the comparable period of fiscal 1994. Other income increased by $157,000 to $235,000, compared to $78,000 for the same period in fiscal 1994. This was primarily due to a gain received on the sale of an office building in Acton, Massachusetts. Interest expense decreased by $73,000 to $216,000 from $289,000 for the same period a year earlier. This decrease was primarily the result of lower levels of outstanding debt. Income taxes during the first six months of fiscal 1995 and 1994 were at an effective rate of 2% and 34% respectively. -9- SECOND QUARTER FISCAL 1995 COMPARED WITH FIRST QUARTER FISCAL 1995 Net sales decreased by $1,414,000, or 25% in the second quarter of fiscal 1995 as compared to the first quarter. Sales in the Fabricated Specialty Metal Products industry segment decreased by $80,000 or 2%, primarily due to decreased sales of commercial depleted uranium. Sales in the Metal Powders industry segment decreased by $27,000, or 3%. Decreased sales in the Metal Powders industry segment were due primarily to decreased production in steel powders. Sales in the Depleted Uranium Penetrator industry segment decreased by $1,307,000 or 98%, mainly due to lower large caliber sales. Gross profit decreased by $1,068,000 or 82% to $242,000 for the second quarter of fiscal 1995 compared to $1,310,000 for the first quarter. The decrease in gross profit was primarily the result of lower sales volume and an increase in inventory reserves of $575,000 in the second quarter. As a percent of sales, gross profit was 6%, as compared to 23% for the first quarter of fiscal 1995. Selling, general and administrative expenses increased by $533,000 compared to the first quarter of fiscal 1995. The increase was primarily the result of higher legal and audit expenses during the second quarter. As a percentage of sales, selling, general and administrative expenses increased to 35% for the second quarter of fiscal 1995 as compared to 17% for the first quarter of fiscal 1995. Income taxes during the second quarter of fiscal 1995 and the first quarter of fiscal 1995 were at an effective rate of 2%. -10- LIQUIDITY AND CAPITAL RESOURCES Working capital at the end of the first six months of fiscal 1995 was $16,429,000, a decrease of $1,048,000. Cash and investments at the end of the six month period were $1,322,000, a decrease of $388,000 primarily due to repayment of debt. Capital spending will continue in support of facilities both in Concord, Massachusetts and at Carolina Metals, Inc., the Company's Barnwell, South Carolina subsidiary. The Company anticipates that this will require $750,000 during fiscal 1995. During the second quarter, the Company restructured its long- term debt. The principal balance of $3,532,000 outstanding with an insurance company was negotiated at a discount and replaced through a loan from a commercial bank. The bank established a credit facility in the principal amount of $4,650,000. The credit consists of a revolving line of credit in the amount of $2,250,000 and a term credit of $2,400,000, which was outstanding at March 31, 1995. The maturity dates for the term credit and the line of credit are November 30, 1996 and February 29, 1996 respectively. Amounts outstanding under the line of credit and the term note bear interest at the bank's prime rate plus .50%. The Company has granted to the bank a security interest in all assets of the Company and Carolina Metals, Inc. to secure repayment of the loans. The loan documents generally: prohibit the Company and its subsidiaries from repurchasing their securities; contain limitations on indebtedness, guarantees, liens, loans, and investments; require the bank's approval of mergers and consolidations; prohibit disposition of assets other than in the normal course of business; contain limits on transactions with affiliated persons; and prohibit the payment of cash dividends. Additionally, the Company is required to maintain certain financial performance and balance sheet ratios and levels. There was no outstanding balance on the line of credit at March 31, 1995. During the second quarter of fiscal 1995, the Company received a net operating loss carryback tax refund of $918,000. -11- PART II Item 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits: 10A Credit Agreement dated March 31, 1995 between Nuclear Metals, Inc., Carolina Metals, Inc. and State Street Bank and Trust Company. 10B Revolving Credit Note dated March 31, 1995 of Nuclear Metals, Inc. and Carolina Metals, Inc. payable to State Street Bank and Trust Company in the principal amount of $2,250,000. 10C Term Note dated March 31, 1995 of Nuclear Metals, Inc. and Carolina Metals, Inc. payable to State Street Bank and Trust Company in the amount of $2,400,000. b. Reports on Form 8-K: The Company did not file any reports on Form 8-K during the second quarter ended March 31, 1995. -12- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Nuclear Metals, Inc. By /s/ Robert E. Quinn ____________________________________________ Robert E. Quinn, President and Treasurer Chief Executive Officer Date ___May 12, 1995_____________________________ By /s/ James M. Spiezio ____________________________________________ James M. Spiezio, Vice President, Finance Chief Financial Officer Date ___May 12, 1995_____________________________ -13- EX-10.A 2 EXHIBIT 10A EXHIBIT 10A CREDIT AGREEMENT AGREEMENT made as of this 31st day of March, 1995 between NUCLEAR METALS, INC., a Massachusetts corporation ("Nuclear Metals"), CAROLINA METALS, INC., a Delaware Corporation ("Carolina Metals," together with Nuclear Metals, "Borrowers") and STATE STREET BANK AND TRUST COMPANY, an FDIC insured Massachusetts chartered trust company ("Bank"). WHEREAS, Bank has agreed to establish a credit facility for the Borrowers; NOW, THEREFORE, the parties agree as follows: ARTICLE I. AMOUNT AND TERMS OF THE CREDIT. SECTION 1.01. THE CREDIT. Subject to the terms and conditions hereof, and in reliance on the representations and warranties contained herein, Bank hereby establishes a credit facility in favor of the Borrowers in the principal amount of $4,650,000 (the "Credit"). The Credit consists of (a) a revolving line of credit of $2,250,000 ("Revolving Credit"), and (b) a term credit of $2,400,000 ("Term Credit"). SECTION 1.02. THE REVOLVING CREDIT. (a) AMOUNT. Provided no Event of Default (as defined in Article V), or event which with the passage of time or notice or both would become an Event of Default, has occurred and is continuing, each Borrower may from time to time from the date hereof up to February 29, 1996 (the "Maturity Date") borrow and reborrow from Bank, and Bank shall advance funds under the Revolving Credit to such Borrower (an "Advance" or the "Advances"); provided that the aggregate of all Advances outstanding at any time shall not exceed the lesser of (i) $2,250,000 less the maximum aggregate liability of the Borrowers under any outstanding letters of credit issued prior to the date hereof or pursuant to this Credit Agreement (the "Maximum Credit") or (ii) the "Borrowing Base" (as defined below). (b) BORROWING BASE. The Borrowing Base shall consist of 80% of Eligible Accounts less 100% of the maximum outstanding liability under any letters of credit issued by Bank on behalf of either Borrower (including letters of credit issued prior to the date hereof); provided that commencing May 1, 1995 and on the first day of each month thereafter, the percentage of Eligible Accounts in the Borrowing Base shall decline by 1.11%. "Eligible Accounts" means accounts receivable of the Borrowers which (a) arise from the sale of goods which have been shipped or the performance of services which have been performed; (b) are not outstanding for more than 90 days after the date of the invoice for such goods or services; (c) are not represented by a note or other negotiable instrument; (d) the account debtor is credit worthy; (e) the account debtor is not subject to any insolvency proceeding; (f) are not due from a Subsidiary (as defined in Section 2.02) or an Affiliate (as defined in Section 4.17); (g) either (i) are due from an account debtor located in the United States or (ii) are due from an account debtor (other than a Subsidiary or Affiliate) located outside of the United States provided the payment of accounts described in clause (ii) are guaranteed by a commercial letter of credit acceptable to Bank in its sole discretion; (h) are not due directly from the United States government or any agency or department thereof; and (i) have not been deemed unsatisfactory by ten (10) days prior notice given by Bank to the Borrowers. At the time of the first Advance requested hereunder and on the first day of each month commencing on May 1, 1995, the Borrowers shall furnish a computation of the Borrowing Base on the form attached as Exhibit 1.02(b)(ii) ("Borrowing Base Certificate"), together with supporting schedules acceptable to Bank, which certificate shall be prepared as of the close of business on the prior business day and be signed by each Borrowers' chief financial officer or president. By prior notice, Bank may require daily Borrowing Base Certificates. Bank shall be under no obligation to make any Advance if the Borrowers fail to furnish Borrowing Base Certificates as set forth above. In calculating the Borrowing Base, the Borrowers shall deduct from Eligible Accounts the amount of any (i) deposit or payment which an account debtor may have paid with respect to the goods or services to which such account receivable relates, (ii) potential set off, and (iii) dispute. Bank, in its reasonable discretion, may from time to time by sixty (60) days prior notice to the Borrowers (i) modify the percentages applied to any component of the Borrowing Base and (ii) establish sublimits on Advances for each Borrower and in connection therewith require separate Borrowing Base Certificates from the Borrowers. Bank, in its reasonable discretion, may from time to time by ten (10) days prior notice to the Borrowers (a) determine that any item included in the Borrowing Base is unacceptable for inclusion in the Borrowing Base in the future, or (b) establish reserves against the collection of any accounts receivable where Bank has a basis to doubt the full and timely collectability of such accounts receivable. (c) REVOLVING CREDIT PAYMENT. The aggregate Advances outstanding at any time shall not exceed the lesser of (i) the Borrowing Base, as reflected in the most recent Borrowing Base Certificate, or (ii) the Maximum Credit. If the aggregate Advances outstanding at any time exceed such limit, then the Borrowers shall immediately pay such excess. Bank may, without prior notice to the Borrowers, charge any of their accounts under the control of Bank to effect such payment. (d) THE REVOLVING CREDIT NOTE. Amounts owed to Bank with respect to Advances made by Bank shall be evidenced by Bank's books and records and may, at the request of 2 Bank, be further evidenced by a revolving credit note in the maximum principal amount of the Revolving Credit (the "Revolving Credit Note") in the form of Exhibit 1.02(d) hereto. The unpaid principal balance of the Revolving Credit may be voluntarily prepaid in whole or in part during the continuation of the Revolving Credit without premium or penalty; provided that if the Revolving Credit is to be terminated by the Borrowers, thirty (30) days prior notice shall be given to Bank. Upon termination, the Borrowers shall satisfy the provisions of Section 6.01. The Revolving Credit Note is subject to mandatory repayments, as provided in Section 1.02(c). [cad 179] (e) INTEREST. Advances made by Bank shall bear interest prior to maturity or the occurrence of an Event of Default (computed on the basis of actual number of days elapsed over a 360 day year) on the unpaid principal balances outstanding from time to time at a rate per annum equal to the Prime Rate plus one-half percent (1/2%). After the Maturity Date or the occurrence of an Event of Default, the unpaid principal balance shall bear interest at the Prime Rate plus five (5%) percent. Interest shall be payable monthly in arrears on the first day of each month commencing on May 1, 1995. The effective rate of interest shall change on each day the Prime Rate changes. (f) REQUESTS FOR ADVANCES. Each Advance shall be made on the Banking Day on which Bank receives notice from the Borrower if such notice is received prior to 11:00 a.m. Boston time on such Banking Day, and otherwise on the next Banking Day. Each request for an Advance shall be made to Bank in writing or by telephone by a duly authorized representative of the Borrowers. Bank may rely upon any telephone request which it believes is made by such a representative. The Borrowers agree to indemnify and hold Bank harmless for any action, including the making of Advances hereunder, or loss or expense, taken or incurred by Bank in good faith reliance upon such telephone request. At the time of the initial request for an Advance, the Borrowers shall have provided Bank with a Compliance Certificate substantially in the form of Exhibit 1.02(f) hereto ("Compliance Certificate"). Bank shall be entitled to rely upon the most recent Compliance Certificate in its possession until it is superseded by another certificate. (g) EXPIRATION. The Revolving Credit shall expire on the Maturity Date and all Advances then outstanding under the Revolving Credit shall be due and payable without notice on such date. In the event Bank continues Advances after the Maturity Date without a written extension of the Maturity Date, (i) all such Advances shall be made within the sole discretion of Bank; (ii) the entire Revolving Credit shall be due on demand; and (iii) other than such Advances, the entire Revolving Credit shall earn interest at the rate specified to be earned after maturity in Section 1.02(e). (h) OVERADVANCES. Bank may from time to time in its sole discretion permit Advances to exceed the limitations set forth in this Agreement, including, without limitation, (i) Advances in excess of the Maximum Credit or the Borrowing Base, and (ii) Advances after the Maturity Date or the occurrence of an Event of Default. All such Advances shall be deemed part of the Credit secured by any collateral securing the Credit and supported by any credit enhancements supporting the Credit. The making of an Advance on one or more 3 occasion will not operate to limit, waive or otherwise modify any rights of Bank hereunder on any future occasion unless otherwise agreed in writing. (i) SPECIAL USES. The Borrowers may request portions of the Revolving Credit in the form of letters of credit pursuant to Section 1.05 hereof. (j) USE OF PROCEEDS. Other than as set forth in clause (i) above, proceeds from Advances only shall be used by the Borrowers for working capital purposes. SECTION 1.03. TERM CREDIT. (a) TERM AMOUNT. Subject to the terms and conditions herein, Bank shall loan the Borrowers $2,400,000. (b) TERM NOTE. All amounts owed to the Bank with respect to the Term Credit shall be evidenced by a term note (the "Term Note") dated the date hereof in the form attached hereto as Exhibit 1.03(b). The principal of the Term Note shall be repaid in equal monthly payments of $133,333.33 due and payable on the first day of each month commencing May 1, 1995, with a final balloon payment in the amount of all unpaid principal and accrued interest due and payable on October 1, 1996. The Term Credit may be prepaid upon in whole or in part without penalty or premium provided that any partial prepayments shall be applied to scheduled payments of principal in the inverse order of maturity. (c) INTEREST. The Term Note shall bear interest prior to maturity or the occurrence of an Event of Default (computed on the basis of the actual number of days elapsed over a 360-day year) on the unpaid principal balance outstanding from time to time at a rate per annum equal to the Prime Rate plus one-half percent (1/2%). After maturity, or after the occurrence of an Event of Default and until such Event of Default shall have been cured or waived in writing by Bank, the unpaid principal balance of the Term Note shall bear interest at the Prime Rate plus five percent (5%). Interest shall be payable monthly in arrears on the first day of each month commencing May 1, 1995. The effective rate of interest shall change on each day the Prime Rate changes. (d) USE OF PROCEEDS. All proceeds from the Term Credit shall be paid to satisfy in part the obligations of the Borrowers to The Prudential Insurance Company of America ("Prudential"). SECTION 1.04. DEFINITIONS. "Banking Day" shall mean any day which Bank is open to conduct commercial banking business in Boston, Massachusetts. "Notes" shall mean the Revolving Credit Note, the Term Note and any other notes issued by the Borrowers to Bank pursuant to this Agreement. 4 "Prime Rate" shall mean the rate of interest per annum from time to time announced by Bank as its prime rate, it being understood that such rate is a reference rate, not necessarily the lowest, which serves as the basis upon which effective rates of interest are calculated for obligations making reference thereto. The following terms are defined in the following sections: Advance Section 1.02(a) Affiliate Section 4.17 Banking Day Section 1.04 Base Financial Statement Section 2.04 Bonds Section 4.12(b) Borrowing Base Section 1.02(b) Borrowing Base Certificate Section 1.02(b) Compliance Certificate Section 1.02(f) Closing Fee Section 1.10 Credit Section 1.01 Current Assets Section 4.22 Current Liabilities Section 4.22 Debt Section 4.20 Debt Service Section 4.23 Eligible Accounts Section 1.02(b) ERISA Section 2.10 Event of Default Article V Facility Fee Section 1.08 "L/Cs" Section 1.05(a) Maturity Date Section 1.02(a) Maximum Credit Section 1.02(a) Net Income Section 4.22 1982 Indenture Section 4.12(b) 1985 Trust Agreement Section 4.12(b) Notes Section 1.04 Prime Rate Section 1.04 Prudential Section 1.03(d) Restricted Payments Section 4.24 Revolving Credit Section 1.01 Revolving Credit Note Section 1.02(d) SEC Section 4.08(a) Security Agreement Section 3.01(d) Service Fee Section 1.09 Special Counsel Section 3.01(b) Stock Section 4.27 Subordinated Debt Section 4.20 Subsidiaries Section 2.02 Term Credit Section 1.01 5 Term Note Section 1.03(b) Tangible Assets Section 4.20 Tangible Capital Base Section 4.20 SECTION 1.05. LETTERS OF CREDIT. (a) ISSUANCE PROCEDURES. Each Borrower may request and Bank will issue standby letters of credit (such letters of credit together with any letters of credit outstanding on the date hereof and any renewal of any such outstanding letter of credit, collectively "L/Cs") for the account of such requesting Borrower. With each request, the requesting Borrower shall deliver to Bank an L/C application and L/C agreement together with the proposed form of such L/C (which, together with all schedules and exhibits thereto, shall be in form and substance satisfactory to Bank and its counsel) and such other certificates, documents and other papers and information as Bank may reasonably request. Any foreign beneficiary must be satisfactory to Bank. All L/C's (other than letters of credit which are outstanding on the date hereof and any renewal of any such outstanding letter of credit) must expire at least one day prior to the Maturity Date. Within five Banking Days following receipt of the above-described documents in satisfactory form, Bank shall, provided that no Event of Default exists and no event exists which, with the giving of notice or passage of time, or both, would constitute an Event of Default, issue such L/C. (b) REIMBURSEMENT. The Borrowers agree to pay Bank on each date that any amount is drawn under an L/C, a sum equal to the amount so drawn. The Borrowers agree to pay on demand any and all reasonable expenses incurred by Bank in enforcing any rights under this Section 1.05. In the event any L/C is payable in foreign currency, the Borrowers shall reimburse Bank at Bank's selling rate of exchange on the date such reimbursement is made. (c) COMMISSION. The Borrowers agree to pay Bank in advance one and one-half percent (1.5%) per year (prorated based upon the number of days from the issue date to the expiry date) of the face amount of any L/C issued or renewed after the date hereof, together with any transactional fees at Bank's customary rates. (d) METHOD OF PAYMENT. Bank is authorized to obtain reimbursement by making Advances under the Revolving Credit. Bank may make such Advance even if it causes the outstanding balance to exceed the limits set forth in Section 1.02(a) and the making of such Advance shall be an Event of Default under Article V. (e) AMOUNT. The aggregate amount of L/Cs outstanding at any time shall not exceed $1,250,000. SECTION 1.06. PAYMENT BY THE COMPANY. All payments and prepayments of principal and interest due with respect to the Credit and all other sums due hereunder shall be made by the Borrowers in immediately available 6 funds deposited with Bank. Payments received by Bank after 11:00 a.m. Boston time shall be deemed received on the next succeeding Banking Day. Bank is authorized to make all such payments by Advances under the Revolving Credit. SECTION 1.07. CREDIT FOR UNCOLLECTED ITEMS. Bank will give the Borrowers credit for uncollected items deposited with Bank (a) the next Banking Day for purposes of computing availability under the Revolving Credit and (b) two Banking Days after deposit for purposes of computing interest and fees with respect to the Credit. SECTION 1.08. FACILITY FEE. On the first day of each month (and upon the day of termination if the Credit is terminated), the Borrowers shall pay Bank a facility fee of one-half percent (1/2%) per year of the unused portion of the Revolving Credit for the preceding month. SECTION 1.09. AUDIT EXPENSES. The Borrowers shall pay Bank on demand Bank's customary and reasonable fees and expenses for audit reviews by employees of Bank (currently $400 per man-day plus out-of-pocket expenses). SECTION 1.10. CLOSING FEE. On the date hereof, Bank shall earn a one-time closing fee ("Closing Fee") of $100,000. Upon execution of this Agreement, the Borrowers shall pay $33,334 of the Closing. The balance thereof shall be paid in two equal installments of $33,333 due on October 1, 1995 and December 1, 1995, respectively. ARTICLE II. REPRESENTATIONS AND WARRANTIES. The Borrowers jointly and severally represent and warrant as follows: SECTION 2.01. CORPORATE EXISTENCE AND POWER. Each Borrower and its Subsidiaries (as defined in Section 2.02) are corporations duly incorporated, validly existing and in good standing under the laws of the respective jurisdictions of their incorporation and have full corporate and other power and authority to conduct businesses and own their properties as now conducted and owned. Each Borrower and its Subsidiaries are licensed or qualified as foreign corporations in each jurisdiction where the conduct of their respective businesses or the ownership of their respective properties require such licensing or qualification and where the failure to be so licensed or 7 qualified would have a material adverse effect on the business, finances or operations of such Borrower or any of its Subsidiaries. SECTION 2.02. SUBSIDIARIES. Any corporation, business trust, partnership or other business entity in which either Borrower or any Subsidiary of such Borrower owns or has options to acquire 50% or more of the voting control shall constitute a Subsidiary. The Borrowers currently have no Subsidiaries except as set forth in Exhibit 2.02. The ownership of each Subsidiary is set forth on Exhibit 2.02. SECTION 2.03. POWER AND AUTHORITY RELATIVE TO BORROWING; LEGAL AND BINDING NATURE; COMPLIANCE WITH OTHER INSTRUMENTS. Each Borrower and its Subsidiaries has full power and authority and has taken all required corporate and other action necessary to permit such Borrower to execute and deliver and perform all of its obligations contained in this Agreement and all documents or instruments required hereby or incident or collateral hereto, and to borrow hereunder, and none of such actions will violate any provision of law applicable to, or of the charter or by-laws of, such Borrower or any such Subsidiary, or result in the breach of or constitute a default under any agreement or instrument to which such Borrower or any such Subsidiary is a party or by which any of them is bound. This Agreement and all documents or agreements required hereby or incident hereto to which the Borrowers are a party are the valid and binding obligations of the Borrowers enforceable in accordance with their terms. Neither the execution, delivery nor performance by the Borrowers or any of their Subsidiaries of any of the obligations contained in this Agreement or in any document or instrument required hereby or incident or collateral hereto requires the consent, approval or authorization of any person or governmental authority. Neither Borrower nor any of their Subsidiaries is in violation of any term of its charter or by-laws, or any agreement, instrument, mortgage, indenture, contract, judgment, decree, order, statute, rule or governmental regulation applicable to the Borrowers or any of their Subsidiaries except for possible minor violations none of which could, either individually or in the aggregate, have any material adverse effect on the business, financial condition or assets of either Borrower or any of their Subsidiaries and except as otherwise disclosed on an Exhibit to this Agreement. The execution, delivery and performance of this Agreement, all agreements incident or collateral hereto, and the Credit will not result in the creation of any security interest, lien, charge or encumbrance upon any of the properties or assets of the Borrowers or any of their Subsidiaries except in favor of Bank. SECTION 2.04. FINANCIAL CONDITION. The audited financial statement dated September 30, 1994 previously delivered to Bank (the "Base Financial Statement") has been prepared with due diligence and in accordance with generally accepted accounting principles and practices. The Base Financial 8 Statement fairly presents the financial condition of the Borrowers and their Subsidiaries as of the date of such statement and the results of their operations for the period then ending. The Borrowers and their Subsidiaries have no material contingent liability (including, without limitation, contingent tax and environmental liability) nor any burdensome agreement or commitment which could have a material adverse effect on its business or financial condition except as disclosed in the Base Financial Statement. SECTION 2.05. NO MATERIAL ADVERSE CHANGE. Since the date of the Base Financial Statement, there has been no material adverse change in the condition (financial or otherwise), properties or business operations of either Borrower or any of their Subsidiaries and neither Borrower nor any of their Subsidiaries has paid any dividends or made any distributions on or purchased or otherwise acquired any shares of the capital stock of either Borrower or any of their Subsidiaries. SECTION 2.06. LITIGATION. Except as set forth in Exhibit 2.06 hereto, there are no suits or proceedings pending or, to the best knowledge of the Borrowers, threatened against or affecting them or any of their Subsidiaries which could have a material adverse effect on the business, assets or financial condition of either of the Borrowers or any of their Subsidiaries. Moreover, there are no suits or proceedings pending or, to the knowledge of the Borrowers, threatened with respect to the transactions contemplated by this Agreement. SECTION 2.07. TITLE. Except as set forth in Exhibit 2.07, the Borrowers and their Subsidiaries have good and marketable title to all of the properties and assets reflected in the Base Financial Statement or acquired since such date (except for materials used, inventory sold, accounts receivable collected and other items disposed of, all in the ordinary course of business), free and clear of all mortgages, liens and encumbrances except liens permitted by Section 4.14; easements, restrictions and minor defects in title which do not, either individually or in the aggregate, materially detract from the value or materially limit the use of any real property; and certain assets listed on Exhibit 2.14 which are not owned but which are reflected on the balance sheet as capitalized leases. SECTION 2.08. TAX RETURNS AND PAYMENTS. Except as set forth on Exhibit 2.08 attached hereto, all of the tax returns and tax reports relating to taxes on income and, to the best knowledge of the Borrowers, all other tax returns and reports of each Borrower and their Subsidiaries required by law to be filed have been duly filed, or extensions of the time for filing have been duly obtained, and, except as set forth in Exhibit 2.08 hereto, the Borrowers and their Subsidiaries have paid all taxes shown due thereon. Except as set forth in Exhibit 2.08 attached hereto, the federal income tax returns of the Borrowers and their Subsidiaries have never been audited by the Internal 9 Revenue Service. Except as set forth on Exhibit 2.08 attached hereto, there are in effect no waivers of the applicable statutes of limitations for federal taxes for any period. No deficiency assessment or proposed adjustment of the federal income taxes of either Borrower or of any of their Subsidiaries is pending except as set forth in Exhibit 2.08 and the Borrowers have no knowledge of any proposed liability of a substantial nature for any tax to be imposed upon any of their properties or assets, for which there is not an adequate reserve reflected in the Base Financial Statement. SECTION 2.09. COMPLIANCE WITH LAW. The Borrowers and their Subsidiaries have all necessary franchises, permits, licenses and other rights to allow them to conduct their businesses as presently conducted, and are not in default with respect to any order or decree of any court, or under any law, order or regulation of any governmental authority, or under the provisions of any contract or agreement to which any of them is a party or by which they may be bound, which default would have a material adverse effect on the business, finances or operations of any of them. SECTION 2.10. PENSION MATTERS. Except as set forth in Exhibit 2.10, neither Borrower nor any of their Subsidiaries has incurred (a) any material accumulated funding deficiency within the meaning of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or (b) any material liability to the Pension Benefit Guaranty Corporation in connection with any employee benefit plan established or maintained by it; nor has either Borrower or any of their Subsidiaries had any tax assessed against it by the Internal Revenue Service for any alleged violation under Section 4975 of the Internal Revenue Code. Neither Borrower nor any of their Subsidiaries has any material unfunded liability under a pension plan or a contingent liability for withdrawal from a multi-employer pension plan except as disclosed in the Base Financial Statement. SECTION 2.11. ENVIRONMENTAL MATTERS. Except as set forth on Exhibit 2.11, neither Borrower nor any of their Subsidiaries has (a) been named as a potentially responsible party or received notice of an investigation that could lead to such designation under any proposed environmental cleanup; (b) incurred any unsatisfied liability (contingent or otherwise) in connection with the release, spill, generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of hazardous materials, toxic substances or solid waste under any state or federal environmental law; or (c) occupied in the past or currently occupies any site designated as environmentally contaminated. The Borrowers and their Subsidiaries have all licenses, permits, certificates and similar authorizations required to conduct its business under applicable environmental laws and is not subject to any pending investigation or proceeding to revoke, limit or terminate such authorizations. 10 SECTION 2.12. COMPLIANCE WITH REGULATION U. None of the proceeds of the Credit will be used to purchase, carry or refinance any borrowing the proceeds of which were used to purchase or carry any "margin securities" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System. SECTION 2.13. CREDIT AGREEMENTS. Set forth on Exhibit 2.13 is a complete and correct list of all existing loan agreements, indentures, purchase agreements, leases, guarantees or other instruments relating to extensions of credit or money borrowed for an amount in excess of $25,000 under which either Borrower or any of their Subsidiaries is or may become directly or indirectly obligated. SECTION 2.14. LEASES AND OPTIONS TO PURCHASE. Set forth on Exhibit 2.14 is a complete and correct list of all existing leases with respect to, or options to purchase any, real estate or any equipment involving a commitment or potential commitment in excess of $25,000 under which either Borrower or any of their Subsidiaries is or may become directly or indirectly obligated. SECTION 2.15. REAL ESTATE OWNED. Set forth on Exhibit 2.15 is a complete and correct list of all real estate owned by each Borrower or any of their Subsidiaries. SECTION 2.16. FISCAL YEAR. The fiscal year end for each Borrower is September 30, 1994. ARTICLE III. CONDITIONS. SECTION 3.01. CONDITIONS TO THE FIRST ADVANCE. The obligation of Bank to make the first Advance and fund the Term Credit is subject to the fulfillment of the following conditions: (a) THE NOTE. The Borrowers shall have executed and delivered to Bank the Revolving Credit Note. (b) THE TERM NOTE. The Borrowers shall have executed and delivered to Bank the Term Note. 11 (c) LEGAL OPINIONS FROM COUNSEL FOR THE COMPANY. Bank shall have received the written opinion of Peabody & Arnold, counsel for the Borrowers, in form satisfactory to Goodwin, Procter & Hoar special counsel to Bank (said special counsel and any successor counsel shall be hereinafter referred to as "Special Counsel"). (d) THE SECURITY AGREEMENT. The Borrowers shall have executed and delivered to Bank a security agreement in a form approved by Special Counsel (the "Security Agreement"), granting to Bank a first priority security interest in all accounts, inventory and general intangibles of the Borrowers and all financing statements and other documents in connection therewith shall have been duly filed or recorded. (e) INSURANCE. Each Borrower shall have delivered to Bank an executed Certificate of Insurance in the form of Exhibit 3.01(e) hereto. (f) COMPLIANCE CERTIFICATE. The Borrowers shall have delivered to Bank an executed Compliance Certificate dated the date of the first Advance. (g) OFFICER'S CLOSING CERTIFICATE. Each Borrower shall have delivered to Bank an executed Officer's Closing Certificate in substantially the form of Exhibit 3.01(g) hereto. (h) BORROWING BASE CERTIFICATE. The Borrowers shall have delivered to Bank an executed current Borrowing Base Certificate. (i) REQUEST FOR LOAN. The Borrowers shall have delivered to Bank a written request specifying the amount of the Advance. (j) NO DEFAULT. No Event of Default and no event which, with the giving of notice or the lapse of time, or both, would become an Event of Default, has occurred and is continuing. (k) CLOSING FEE. Bank shall have received from the Borrowers $33,334 of the Closing Fee. (l) PRUDENTIAL. The Borrowers shall have paid to Prudential $3,000,000 and Prudential shall have delivered to the Borrowers a release and waiver of claims satisfactory in form and substance to Bank by which Prudential releases and waives any and all claims against the Borrowers in connection with that certain Note Agreement dated October 21, 1987, as amended. SECTION 3.02. CONDITIONS TO SUBSEQUENT ADVANCES. Each request for a subsequent Advance shall be deemed to be a representation by the Borrowers to Bank that all representations and warranties contained in Article II hereof or in any Exhibit, Schedule or Certificate attached hereto or delivered to Bank in connection herewith were true and correct when made, and continue to be true and correct except those 12 items which relate to a specific date and except as disclosed to Bank by the Borrowers, and that no Event of Default, and no event which, with the giving of notice or the lapse of time, or both, would become an Event of Default, has occurred and is then continuing. ARTICLE IV. COVENANTS OF THE COMPANY The Borrowers jointly and severally covenant that: SECTION 4.01. PAYMENT OF AMOUNTS DUE. The Borrowers will make all payments of principal and interest on the Credit in accordance with the terms hereof and thereof and will observe, perform and comply with each and every one of the covenants, terms and conditions contained herein, in the Credit or in any other document or instrument required hereby or incident or collateral hereto to be observed, performed or complied with by them. SECTION 4.02. CORPORATE EXISTENCE. The Borrowers and each of their Subsidiaries will maintain and preserve in full force and effect their respective corporate existences and, insofar as reasonable and practicable, will maintain and preserve in full force and effect all material rights, licenses, patents and franchises, and comply with all applicable regulations in all jurisdictions necessary for the conduct of their businesses. SECTION 4.03. MAINTENANCE OF PROPERTIES. The Borrowers and each of their Subsidiaries will maintain, preserve, protect and keep all properties used or useful in the conduct of their businesses in good repair, working order and condition, and from time to time make such repairs, renewals, replacements, betterments and improvements thereto as are necessary to permit such businesses to be properly and advantageously conducted at all times. SECTION 4.04. PAYMENT OF TAXES. The Borrowers and each of their Subsidiaries will pay and discharge all lawful taxes, assessments and governmental charges or levies imposed upon them or upon their income or profits, or upon any property belonging to them before the same shall become past due, as well as all lawful claims for labor, materials and supplies, which, if not paid when due, might become a lien or charge upon such property or any part thereof; provided, however, that neither Borrower nor any of their Subsidiaries shall be required to pay and discharge any such tax, assessment, charge, levy or claim so long as the validity thereof shall be contested in good faith by appropriate proceedings and an adequate reserve for the payment thereof is established on the books of the appropriate Borrowers or the appropriate Subsidiary in accordance with generally accepted accounting principles. 13 SECTION 4.05. COMPLIANCE WITH ERISA. The Borrowers and their Subsidiaries will satisfy, or cause to be satisfied, the minimum annual funding standard required by ERISA for any employee benefit plan established or maintained by it which is subject to ERISA and the Borrowers and their Subsidiaries will not permit any tax or penalty to be incurred by it as a result of any failure to satisfy any such minimum funding requirement or as a result of any violation of the provisions of Section 4975 of the Internal Revenue Code or any regulation issued thereunder. SECTION 4.06. COMPLIANCE WITH LAWS. The Borrowers and their Subsidiaries at all time in all material respects will comply with applicable provisions of laws, rules, regulations, licenses, permits, approvals and orders and observe all requirements of federal, state, local and other governmental authorities including, without limitation, all provisions of the Fair Labor Standard Rules of 1938, the Occupational Safety and Health Act of 1970 and all applicable environmental laws; provided, however, that neither Borrower nor any of their Subsidiaries shall be required to comply with such requirements so long as the validity or applicability thereof shall be contested in good faith by appropriate proceedings and an adequate reserve is established on the books of such Borrower or any such Subsidiary in accordance with generally accepted accounting principles. SECTION 4.07. INSURANCE. The Borrowers and their Subsidiaries will keep their insurable properties insured by financially sound and reputable insurers satisfactory to Bank against such risks and in such amounts as are deemed prudent by the Borrowers and are reasonably acceptable to Bank and will name Bank as a Loss Payee under all insurance policies maintained with respect to insurable properties subject to a security interest or lien in favor of Bank. The Borrowers and their Subsidiaries will maintain in full force and effect public liability insurance against claims for bodily injury, death or physical property damages occurring upon, in, about, or in connection with the use of any properties occupied or controlled by them, or through the operation of any motor vehicles by their agents or employees or arising in any manner out of the businesses carried on by them in such amounts and with such coverages as are deemed prudent by the Borrowers and are reasonably acceptable to Bank. SECTION 4.08. ACCOUNTS AND REPORTS. The Borrowers will furnish or cause to be furnished to Bank the following reports: (a) ANNUAL REPORTS. As soon as available, and in any event within ninety (90) days after the end of each fiscal year of the Borrowers, consolidated and consolidating audited financial statements of the Borrowers, of the Borrowers, together with all notes thereto, prepared in reasonable detail and in accordance with generally accepted accounting principles consistently applied (except there will be no required notes to the consolidating 14 balance sheet) such consolidated (but not consolidating) statements to be duly certified by Arthur Anderson & Co., SC or other certified, independent public accountants selected by the Borrowers and acceptable to Bank. Such statements shall be accompanied by a statement of such certified, independent public accountants that the examination made in certifying such statements did not disclose the existence of any condition or event which constitutes an Event of Default under this Agreement or which, after notice or lapse of time or both, would constitute such an Event of Default, or a statement specifying the nature and period of existence of any such condition or event disclosed by such examination; provided, however, that in issuing such statement, such accountants shall not be required to exceed the scope of normal accounting procedures conducted in connection with their audit opinion. Notwithstanding the foregoing, delivery within the period specified above of a copy of the Annual Report on Form 10-K of Nuclear Metals filed with the Securities and Exchange Commission (the "SEC"), shall be deemed to satisfy the requirements of this Section 4.08(a) so long as the Form 10-K contains all of the information required by this Section 4.08(a), or, is otherwise supplemented so that such Form, together with such supplemental information, satisfies the requirements hereof. (b) QUARTERLY REPORTS. As soon as available, and in any event within forty-five (45) days after the end of each quarterly accounting period in each fiscal year of the Borrowers, unaudited consolidated and consolidating financial statements of the Borrowers prepared in reasonable detail and in accordance with generally accepted accounting principles consistently applied (except that such statements need not contain notes thereto) certified by the chief financial officers of the Borrowers, which statements shall contain balance sheets as of the end of such accounting period and statements of profit and loss for the period from the beginning of such fiscal year to the end of such accounting period. Notwithstanding the foregoing, delivery within the period specified above of a copy of the Quarterly Report on Form 10-Q of Nuclear Metals filed with the SEC, shall be deemed to satisfy the requirements of this Section 4.08(b) so long as the Form 10-Q contains all of the information required by this Section 4.08(b), or, is otherwise supplemented so that such Form, together with such supplemental information, satisfies the requirements hereof. (c) MONTHLY REPORTS. As soon as available, and in any event within thirty (30) days after the end of each monthly accounting period in each fiscal year, consolidated and consolidating unaudited financial statements of the Borrowers prepared in reasonable detail and in accordance with generally accepted accounting principles consistently applied (except that such statements need not contain notes thereto and except as may be otherwise required hereby) certified by their respective chief financial officers, which statements shall contain balance sheets as of the end of such accounting period and statements of profit and loss for the period from the beginning of such fiscal year to the end of such accounting period. (d) PERIODIC REPORTS. With the monthly financial statements furnished pursuant to subsection (c) hereof, (i) summary of all Advances and L/C's outstanding at the end of such period, (ii) consolidated and consolidating accounts receivable aging based on invoice date, (iii) a backlog sales report, (iv) an updated Compliance Certificate, and (v) such other reports as Bank shall reasonably request. With the quarterly financial statements furnished 15 pursuant to subsection (b) hereof, a list of the names and addresses of the respective customers of each Borrower. (e) AUDITOR'S MANAGEMENT LETTER. Promptly after receipt by either Borrower, copies of the management letter, if any, provided by the independent certified public accountants who audit the annual financial statements. (f) PUBLIC INFORMATION. Promptly, copies of all reports and financial statements which either Borrower sends to its stockholders as a class or which either Borrower, or any of their Subsidiaries, file with the Securities and Exchange Commission or any other public body. (g) PROJECTIONS. At least thirty (30) days prior to the end of each fiscal year of the Borrowers, projections for the next fiscal year indicating the Borrowers' expected operating results (on a consolidated and consolidating basis), Borrowing Bases and proposed capital expenditures. Such projections shall be made on a month-by-month basis. (h) ACCOUNTING PRINCIPLES. Reports furnished under this Agreement shall be prepared in accordance with generally accepted accounting principles except that unaudited statements shall be subject to normal year end adjustments and there shall be no requirement for notes thereto. Any accounting terms not otherwise defined shall have the same meaning provided by generally accepted accounting principles. Compliance with the covenants set forth in this Agreement will be determined on the basis of accounting principles used in the preparation of the Base Financial Statements. In the event that any subsequent reports shall have been prepared in accordance with accounting principles different than those used in the Base Financial Statements, the Borrowers shall inform Bank of such changes in accounting principles and shall provide to Bank, with such subsequent reports, such supplemental reconciling financial information as may be required to ascertain performance by the Borrowers and their Subsidiaries with the covenants contained in this Agreement. SECTION 4.09. INFORMATION AND INSPECTION. At all reasonable times and as often as Bank shall reasonably request on one (1) day's written notice, the Borrowers will furnish to Bank from time to time with reasonable promptness full information pertinent to any covenant, provision or condition hereof or to any matter in connection with their business and permit any authorized representative designated by Bank to visit and inspect any of their properties and those of their Subsidiaries, including their books (and to make extracts therefrom), and to discuss their affairs, finances and accounts with their officers. The Borrowers and their Subsidiaries, will, in addition, furnish to Bank with reasonable promptness such financial information as Bank shall reasonably request. Without limiting the generality of the foregoing, Bank shall be entitled to conduct field audits of the accounts receivable and inventory of the Borrowers and their Subsidiaries, and subject to the limitations set forth in Section 1.09 hereof, the Borrowers shall pay on demand Bank's out-of-pocket expenses and reasonable field audit fees. 16 SECTION 4.10. ADDITIONAL ADVICE. The Borrowers will promptly advise Bank of (i) any material casualty loss whether or not insured; (ii) the threat of or commencement of any material litigation; (iii) the assertion by any governmental authority or private party of a material violation of or material liability arising under any environmental law; (iv) any change which constitutes or, after notice or lapse of time or both, would constitute an Event of Default as defined in Article V of this Agreement; and (v) each waiver, consent or amendment granted or made with respect to instruments or agreements relating to borrowed money in excess of $100,000 and each request by either Borrower therefor. SECTION 4.11. PAYMENT OF BANK EXPENSES. The Borrowers will bear all reasonable expenses incurred by Bank in connection with the negotiation, preparation, execution, amendment, interpretation, administration, termination or enforcement of this Agreement (whether or not the Credit is consummated) and the making and collection of the Credit, including without limitation, the reasonable fees and disbursements of Special Counsel and appraisers employed by Bank. SECTION 4.12. LIMITATION ON INDEBTEDNESS. Neither Borrower nor any of their Subsidiaries will create, incur, assume, or become, be or remain liable in any manner in respect of, or allow to exist, any indebtedness (which term includes all indebtedness, obligations and liabilities which in accordance with generally accepted accounting principles would be reflected on the balance sheet of either Borrower or any of their Subsidiaries as a liability and any negative cash balance; all indebtedness, obligations and liabilities, whether or not assumed by either Borrower or any of their Subsidiaries, secured by any mortgage, pledge or lien existing on property owned by either Borrower or any of their Subsidiaries; and all amounts representing rental payments which, in accordance with generally accepted accounting principles, would be classified as a liability on its balance sheet), except for: (a) the Credit and any other obligations owed to Bank in connection with this Agreement or otherwise; (b) the obligations to Barnwell County, South Carolina and the Massachusetts Industrial Finance Agency and Bank related to those certain industrial revenue notes or bonds (collectively "Bonds") issued pursuant to that certain (i) Indenture dated as of May 11, 1982 ("1982 Indenture") between Barnwell County, South Carolina and Bank, (ii) Indenture dated as of September 27, 1984 between Barnwell County, South Carolina and Bank, and (iii) Security and Trust Agreement dated as of June 1, 1985 ("1985 Trust Agreement") between Nuclear Metals, the Massachusetts Industrial Finance Agency and Bank; (c) indebtedness representing trade debt, wages, employee benefits and similar indebtedness incurred in the ordinary course of business; 17 (d) indebtedness secured by liens to the extent permitted by Section 4.14; (e) liabilities for taxes, assessments, governmental charges, liens or claims to the extent that payment thereof is not required by Section 4.04; (f) indebtedness in respect of final judgments for the payment of money not in excess of $50,000 in the aggregate at any time outstanding (excluding sums covered by insurance) which has been in force for less than the applicable appeal period or less than sixty (60) days, whichever is sooner, provided that such indebtedness may remain outstanding if the appropriate Borrower or the appropriate Subsidiary at the time shall in good faith be prosecuting an appeal, or proceedings for review or pending and in respect of which a stay shall have been obtained pending such appeal or review; (g) Subordinated Debt; (h) such other indebtedness of the Borrowers and their Subsidiaries which is specifically disclosed in Exhibit 4.12 attached hereto; (i) indebtedness of either Borrower to the other provided such indebtedness is not represented by a note or other negotiable instrument. SECTION 4.13. LIMITATION ON LIABILITY FOR OBLIGATIONS OF OTHERS. Neither Borrower nor any of their Subsidiaries will assume, guarantee, endorse or otherwise be or become liable, contingently or otherwise, for the obligations of any other corporation, firm or entity or other person, except: (a) guarantees in favor of the Bank in connection with the Bonds; (b) for the endorsement of negotiable instruments for deposit or collection in the normal course of its business; and (c) guarantees and other contingent liabilities which are disclosed on Exhibit 4.13. SECTION 4.14. LIMITATION ON LIENS. Neither Borrower nor any of their Subsidiaries will create, incur, assume or allow to be created, incurred or assumed, or to exist, any pledge of, or any mortgage, lien, charge or encumbrance of any kind on, any of its property or assets, or subject any of such assets to prior payments of any other indebtedness whether by subordination agreement, transfer of assets or otherwise, or own or acquire or agree to acquire any property of any character subject to or upon any mortgage, conditional sale agreement or other title retention agreement except: (a) liens in favor of Bank; 18 (b) any lien securing the purchase price of any fixed asset to be used in the business of either Borrower or any of their Subsidiaries, but not any renewal, extension or refunding of any such lien or the indebtedness secured thereby, provided that (i) each such lien shall at all times be confined solely to the item of property so acquired, and (ii) the aggregate indebtedness secured by all such liens does not exceed $500,000 at any one time or if such indebtedness so exceeds $500,000, Bank has consented in writing in advance of the subject transaction; (c) liens for taxes, assessments, governmental charges and levies or for claims to the extent that payment thereof is not then required by such Section 4.04; (d) liens in respect of judgments which had been in force for less than the applicable appeal period or less than sixty (60) days, whichever is sooner, so long as execution is not levied thereunder, or in respect of which the appropriate Borrower or the appropriate Subsidiary at the time shall in good faith be prosecuting an appeal, or proceedings for review are pending and in respect of which a stay of execution shall have been obtained pending such appeal or review; (e) liens on deposits made in connection with, or to secure payment of, workmen's compensation, unemployment insurance or similar programs; liens, charges or encumbrances imposed by law, such as carriers', warehousemen's and mechanics' liens and similar involuntary liens arising in the ordinary course of business which do not, individually or in the aggregate, materially detract from the value or limit the use of any property subject thereto; landlords' liens in respect of rent not in default; and liens on deposits made to secure the performance of bids, appeal bonds and surety bonds; and (f) liens and encumbrances which are disclosed on Exhibit 4.14. SECTION 4.15. SALE OF ACCOUNTS RECEIVABLE. Neither Borrower nor any of their Subsidiaries will sell or transfer any of its accounts receivable, whether with or without recourse. SECTION 4.16. LOANS AND INVESTMENTS. Neither Borrower nor any of their Subsidiaries will purchase or otherwise acquire or retain any stock, partnership interest, or obligations of, or make any loans or advances to, or investments in any corporation or other entity or person, including loans or advances to or investments in Carolina Metals by Nuclear Metals other than: (a) the present investment of Nuclear Metals in its Subsidiaries; (b) open account transactions between the Borrowers and between Subsidiaries in the ordinary course of business; 19 (c) loans or advances for reimbursable expenses to employees not exceeding $50,000 outstanding in the aggregate at any time; (d) obligations of the United States of America, or any agency thereof, maturing not more than one (1) year from the date of issue thereof, provided that Bank shall acquire a perfected first security interest in such obligation simultaneously with its purchase or acquisition; (e) certificates of deposit or other obligations maturing not more than one (1) year from the date of issue thereof issued by a bank, provided that Bank have a perfected first security interest in such obligation; and (f) indebtedness of either Borrower to the other permitted pursuant to Section 4.12(i). SECTION 4.17. TRANSACTIONS WITH AFFILIATED PERSONS. Neither Borrower nor any of their Subsidiaries will enter into any transaction with any Affiliate, except on terms no less favorable to either such Borrower or any such Subsidiary than would be available in a bona fide arm's length transaction with a non-affiliated person or entity. "Affiliate" means any officer, director or shareholder who owns ten percent (10%) or more of any class of securities of Nuclear Metals or any Subsidiary of either Borrower; any entity where either Borrower owns directly or indirectly ten percent (10%) or more of any class of securities or interest issued by such entity; or any entity that controls, is controlled by or under common control with either Borrower or any of their Subsidiaries. SECTION 4.18. CONSOLIDATION, MERGER AND DISPOSITION OF ASSETS. Neither Borrower nor any of their Subsidiaries will consolidate with or merge into or with another corporation, partnership or other entity; directly or indirectly issue, sell, assign, pledge or otherwise encumber or dispose of any shares of its capital stock or the capital stock of any such Subsidiary; sell, lease or otherwise dispose of all or any material portion of its properties or assets (other than in the ordinary course of its business) to any firm, person or corporation; or acquire any material portion of the properties or assets of any other corporation, partnership or entity, whether in one or a series of related transactions, except: (a) any Subsidiary may merge into or consolidate with its respective parent Borrower (provided that such Borrower shall be the surviving corporation); (b) with prior written consent of Bank, either Borrower may transfer equipment to the other Borrower; (c) Nuclear Metals may issue capital stock for cash and may issue options or warrants to any person for cash or to employees for services; 20 provided that in each case no Event of Default as set forth in Article V hereof, and no condition or event which after notice or lapse of time, or both, would constitute an Event of Default, would exist immediately after any such transaction or series of related transactions. SECTION 4.19. CHANGES IN BUSINESS. Neither Borrower nor any of their Subsidiaries will materially alter the nature of its business. SECTION 4.20. DEBT-TANGIBLE CAPITAL BASE. The ratio of Debt to Tangible Capital Base of the Borrowers shall not exceed at any time 1.20 to 1.0. "Debt" shall mean the sum of all liabilities (including all liabilities to Bank), both short- term and long-term, of the Borrowers and all of their Subsidiaries, but excluding stockholders equity and Subordinated Debt. "Subordinated Debt" means the outstanding principal amount of any debt of either Borrower which is subordinated to the obligations of the Borrowers to Bank in form and substance satisfactory to Bank and its Special Counsel. "Tangible Assets" shall mean the sum of all assets of the Borrowers and all Subsidiaries, but excluding intangible assets such as goodwill, organization expenses, patents, trademarks, copyrights, research and development costs, training costs, unamortized debt discount and similar items deemed to be intangible by Bank. "Tangible Capital Base" shall mean Tangible Assets, less Debt, plus Subordinated Debt. SECTION 4.21. TANGIBLE CAPITAL BASE. The Tangible Capital Base of the Borrowers shall be not less than $25,000,000 at any time. SECTION 4.22. NET INCOME. The Net Income of the Borrowers for the periods set forth below shall not be less than the amounts set forth opposite such periods:
PERIOD NET INCOME January 1, 1995 - March 31, 1995 $ 50,000 April l, 1995 - June 30, 1995 $350,000 July 1, 1995 - September 30, 1995 $300,000
21 October 1, 1995 - December 31, 1995 $150,000 January 1, 1996 - March 31, 1996 $250,000 April 1, 1996 - June 30, 1996 $250,000 July 1, 1996 - September 30, 1996 and each consecutive three month period thereafter $300,000
"Net Income" shall mean all net income of the Borrowers before interest and taxes. SECTION 4.23. CAPITAL EXPENDITURE. In any fiscal year, unless Bank otherwise consents in writing, the Borrowers and their Subsidiaries shall not make or incur expenditures which are properly chargeable to capital account under generally accepted accounting principles (including leases which are capitalized) in an aggregate amount in excess of $1,000,000. SECTION 4.24. RESTRICTED PAYMENTS. Neither Borrower nor any of their Subsidiaries will, directly or indirectly, declare, order, pay or make any Restricted Payment (as hereinafter defined), except the Borrowers may prior to the occurrence of an Event of Default or an event which with notice or the passage of time will constitute an Event of Default, and provided that such Restricted Payment will not constitute an Event of Default or such an event: (a) declare and pay dividends on its Stock payable solely in Stock; (b) make exchanges of one or more classes of Stock provided that no cash or other property is distributed in such exchange; or (c) retire Stock out of the net proceeds of the simultaneous sale of other Stock; and (d) pay principal and interest on Subordinated Debt to extent permitted by Bank pursuant to a subordination agreement or agreements in form and substance satisfactory to Bank. For the purposes of this Section 4.24, the following terms shall have the following respective meanings: (i) Restricted Payments shall mean: (a) any payment or declaration of any dividend on any class of Stock of Nuclear Metals or any other distribution on account of any class of Stock; 22 (b) any redemption, purchase or other acquisition by Nuclear Metals, directly or indirectly, of any shares of its Stock; and (c) any payments of principal or interest made by either Borrower in respect of any Subordinated Debt. (ii) "Stock" shall mean capital stock and warrants or options to purchase stock. SECTION 4.25. RESTRICTION ON USE OF PROCEEDS. None of the proceeds of the Credit shall be used by the Borrowers to purchase commodities except for use in the ordinary course of the Borrowers' business or for the purpose of purchasing or carrying, or refinancing any borrowing the proceeds of which were used to purchase or carry any "margin securities" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System. SECTION 4.26. INTENTIONALLY OMITTED. SECTION 4.27. CONTROLLING INTEREST. Nuclear Metals will at all times own 100% of the issued and outstanding capital stock of Carolina Metals. SECTION 4.28. BANK ACCOUNTS. The Borrowers shall maintain at all times their principal operating accounts with Bank and other operating accounts with other banks approved by Bank. A complete list of all existing banks, mutual fund, brokerage or other accounts containing cash, cash equivalents or marketable securities for the Borrowers and all of their Subsidiaries is set forth on Exhibit 4.28. Neither Borrower nor any of their Subsidiaries will open any further account of the type required to be listed on Exhibit 4.28 without prior notice in writing to Bank. SECTION 4.29. FURTHER SECURITY. The Borrowers agree to provide Bank with such security interest or liens as Bank may hereafter reasonably request with respect to their assets or assets of any of their Subsidiaries. SECTION 4.29. FISCAL YEAR. The Borrowers shall (a) maintain the same fiscal year end, and (b) not change such fiscal year end without prior written consent of Bank. 23 SECTION 4.30. AMENDMENTS TO DOCUMENTS. Neither Borrower shall agree to any amendment or modification to any instrument or agreement executed by either Borrower in connection with any Subordinated Debt or any of the Bonds, nor shall either Borrower request, or consent to, any waiver of any provision contained in any of the foregoing. ARTICLE V. EVENTS OF DEFAULT. If, while any part of the principal of or interest on the Credit remains unpaid or while this Agreement shall be in effect, any one of the following "Event of Default" shall occur: (a) nonpayment of principal of the Revolving Credit when due; (b) nonpayment of principal of the Term Credit when due; (c) failure to pay any Advances in excess of the Borrowing Base as required by Section 1.02(c); (d) failure to pay any amounts due with respect to letters of credit issued by Bank when due; (e) nonpayment of interest on the Advances or on the Term Credit when due; (f) either Borrower shall (i) apply for or consent to the appointment of a receiver, trustee or liquidator of it or of all or a substantial part of its assets; (ii) admit in writing its inability to pay its debts as they mature; (iii) make a general assignment for the benefit of creditors; (iv) be adjudicated a bankrupt or insolvent; (v) file a voluntary petition in bankruptcy or a petition or an answer seeking reorganization or an arrangement with creditors to take advantage of any insolvency law; (vi) file any answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization or insolvency proceeding or fail to dismiss such petition within thirty (30) days after the filing thereof; or (vii) take any corporate action for the purpose of effecting any of the foregoing; (g) an order, judgment or decree shall be entered, without the application, approval or consent of either Borrower by any court of competent jurisdiction, approving a petition seeking reorganization or liquidation of such Borrower or appointing a receiver, trustee or liquidator of either Borrower or of all or a substantial part of its assets; (h) any representation or warranty made by the Borrowers herein or hereunder or in any certificate, document or instrument furnished pursuant hereto shall prove to have been false or incorrect in any material respect when made; (i) default by the Company in the performance of any covenant or agreement contained in Sections 4.01 through 4.19 or Sections 4.23 through 4.30; 24 (j) except as otherwise set forth herein, default by the Company in the performance of any other covenant or agreement contained herein or in any document or instrument required hereby or incidental or collateral hereto which shall not have been remedied within thirty (30) days after written notice thereof shall have been given to the Borrowers by Bank; (k) default by either Borrower in the performance of any covenant or agreement contained in any other agreement to which it is a party or by which it is bound involving a liability in excess of $100,000 which shall not be remedied within the period of time (if any) within which such other agreement permits such default to be remedied without the consent or waiver of the other party thereto, unless such default is waived or excused as a matter of law; (l) failure by either Borrower to make any payment of principal or interest beyond the period of grace contained in the respective instrument or agreement evidencing any indebtedness for money borrowed in excess of $100,000 to which it is a party or by which it may be bound (unless such default is the result of a good faith dispute arising under such agreement or instrument), or default by either Borrower in the performance of any other covenant or agreement contained in any such agreement or instrument which results in the acceleration of the maturity of any indebtedness to others of such Borrower under such agreement or instrument; (m) default by either Borrower in the performance of any covenant or agreement contained in the Security Agreement or other documents in favor of Bank executed in connection with this Agreement which continues beyond any grace period provided therein; (n) all or any substantial part of the property of either Borrower shall be condemned, seized or otherwise appropriated by any governmental authority or any officer or instrumentally thereof; (o) a judgment or judgments for the payment of money in excess of the sum of $100,000 in the aggregate (not covered by insurance) shall be rendered against either Borrower and such judgment or judgments shall remain unsatisfied and in effect for any period of sixty (60) days without a stay of execution; (p) either Borrower shall fail to deposit proceeds of Bank's collateral with Bank; (q) the Borrowers or either Borrower if separate Borrowing Base Certificates are required by Bank pursuant to Section 1.02(b) hereof shall deliver to Bank a materially inaccurate Borrowing Base Certificate to Bank; (r) there shall occur any material adverse change in the financial condition of either Borrower; 25 (s) (i) George Matthews shall cease, for any reason, to be the Chairman and Chief Executive Officer of Nuclear Metals and a successor to Mr. Matthews reasonably satisfactory to Bank, shall not have become Chairman and Chief Executive Officer within ninety (90) days of the date of cessation, or (ii) Robert Quinn shall cease, for any reason, to be the President of Nuclear Metals and a successor to Mr. Quinn reasonably satisfactory to Bank, shall not have become President within ninety (90) days of the date of cessation, provided, however, that in either event, an Event of Default shall not arise until sixty (60) days after Bank has given the Borrowers written notice thereof; then and in every such event, while such event shall be continuing, Bank may, by written notice to the Borrowers, declare the Credit (and any Notes issued) to be forthwith due and payable, whereupon the Credit shall forthwith become due and payable and the right to borrow hereunder shall terminate; provided, however, that upon the happening of any event under Subsections (f) or (g) of this Article V, then the Credit shall, without the taking of any action by Bank, immediately become due and payable and the right to borrow hereunder shall immediately terminate. ARTICLE VI. MISCELLANEOUS. SECTION 6.01. TERM OF AGREEMENT. This Agreement shall terminate whenever all of the following conditions shall have been met: (i) all principal of and interest of the Credit and all other amounts due and payable under this Agreement have been paid and discharged in full, (ii) all letters of credit or other financial accommodation provided by Bank shall have been terminated or an indemnity provided in a form acceptable to Bank, (iii) the Borrowers shall have provided indemnity by cash or other collateral satisfactory to Bank for any projected fees, expenses and other contingent liabilities, and (iv) the Borrowers shall have no further right to borrow under the Credit. SECTION 6.02. INDEMNITY. The Borrowers agree to indemnify and hold harmless Bank and each of their directors, officers, agents, employees and counsel, from and against any and all losses, claims, damages, liabilities or expenses imposed on or incurred by any of them in connection with the lending relationship reflected in this Agreement except as a result of such indemnified parties' negligence or willful misconduct. This indemnity shall survive termination of the Agreement. SECTION 6.03. CONSENT TO JURISDICTION. Each Borrower irrevocably consents and submits to the non-exclusive jurisdiction of the Superior Court in the Commonwealth of Massachusetts and the United States District Court for the Eastern District of Massachusetts in connection with any action, proceeding or 26 claim arising out of or relating to this Agreement or other document executed in connection with this Agreement. In any such litigation, each Borrower waives personal service and agrees that service may be made in the manner specified for Notices under this Agreement. SECTION 6.04. WAIVER OF JURY TRIAL. Each Borrower waives trial by jury in any action or proceeding of any kind arising out of or relating to this Agreement or other document executed in connection with this Agreement. SECTION 6.05. NOTICES. Except as otherwise specifically provided in this Agreement, all notices hereunder shall be deemed to have been given when delivered in person or, if mailed, when actually received by the party to whom addressed; provided, however, that any written notice given pursuant to Article V hereof shall be deemed to be effective when mailed, so long as such notice is mailed by registered or certified mail, addressed to any party at its address set forth below or at any other address notified in writing to the other parties hereto. Actual receipt shall be conclusively presumed if such notice shall be mailed by registered or certified mail, addressed to any party at its address set forth below or at any other address notified in writing to the other parties hereto by notice pursuant to this Section, and if the sender shall have received back a return receipt. To Bank: State Street Bank and Trust Company 225 Franklin Street Boston, Massachusetts 02110 Attention: William R. Dewey IV With a copy to: Goodwin, Procter & Hoar Exchange Place Boston, Massachusetts 02109 Attention: Jon D. Schneider, P.C. To the Borrowers: Nuclear Metals, Inc. Carolina Metals, Inc. 2229 Main Street Concord, MA 01742 Attn: James M. Spiezio With a copy to: Peabody & Arnold 50 Rowes Wharf Boston, Massachusetts 02110 Attention: Thomas A. Wooters, Esq. 27 SECTION 6.06. NO WAIVER. No failure to exercise, and no delay in exercising, on the part of Bank, any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. SECTION 6.07. SETOFF. Any sums due from Bank to either Borrower, any property in the possession of Bank and any balance in the Borrower's accounts with Bank may be held and treated as collateral security for the payment of the obligations of the Borrowers to Bank and, after the occurrence of an Event of Default, may be applied to the payment of such obligations regardless of the adequacy of other collateral. Any sums due from any financing institution that may participate in the Credit or property of the Borrowers in the possession of such institution may be held as collateral security for the payment of the obligations of the Borrowers to Bank as if such institution had extended the Credit directly to the Borrowers and, after the occurrence of an Event of Default, may be applied to the payment of such obligations regardless of the adequacy of other collateral. SECTION 6.08. CONSTRUCTION. This Agreement shall be deemed to be a contract made under the laws of the Commonwealth of Massachusetts, and shall be construed in accordance with the laws of the Commonwealth of Massachusetts. The descriptive headings of the several Sections hereof are for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. SECTION 6.09. AMENDMENTS, WAIVERS AND CONSENTS. Compliance by the Borrowers with any term, covenant or condition of this Agreement may be omitted or waived (either generally or in a particular instance and either retroactively or prospectively) only by a consent or consents in writing signed by Bank. SECTION 6.10. COUNTERPARTS. This Agreement may be executed in any number of counterparts which together shall constitute one Agreement. SECTION 6.10. JOINT AND SEVERAL OBLIGATIONS. The obligations of the Borrowers hereunder and under any agreement or instrument executed in connection herewith, including the Notes, shall be joint and several. 28 SECTION 6.11. PRIOR FACILITIES. The Credit is in substitution for the $6,000,000 line of credit facility that was previously made available by Bank to Nuclear Metals and the Borrowers acknowledge and agree that all rights and claims under or relating to such facility have been terminated and waived and Bank has no further obligations to either Borrower thereunder. SECTION 6.12. GUARANTEES. Each Borrower irrevocably and unconditionally guarantees the payment and performance of the obligations to Bank of the other Borrower under, arising from or relating to any L/C which is outstanding as of the date hereof and Carolina Metals guarantees the payment and performance of the obligations of Nuclear Metals to Bank under, arising from or relating to the Bonds issued in connection with the 1982 Indenture and the 1985 Trust Agreement, including without limitation, any guaranty of such Bonds by Nuclear Metals in favor of Bank. The above guarantees are of payment and not collection. SECTION 6.13. CONFIDENTIALITY, ETC. The Bank agrees to use reasonable precautions to keep confidential, in accordance with safe and sound banking practices, any non-public information supplied to it by the Borrowers pursuant to this Agreement which is identified by the Borrowers as being confidential at the time the same is delivered to the Bank, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for the Bank, (iii) to bank examiners, auditors or accountants, (iv) in connection with any litigation to which the Bank is a party, (v) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first executes and delivers to the respective Bank a confidentiality agreement, or (vi) to the extent it subsequently becomes public. The Bank may assign or sell participations in, all or any part of the Credit to another bank or other entity. 29 IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal as of the date first above written. NUCLEAR METALS, INC. By: /s/ James M. Spiezio ------------------------------ Name: James M. Spiezio Title: Vice President Finance CAROLINA METALS, INC. By: /s/ James M. Spiezio ------------------------------ Name: James M. Spiezio Title: President STATE STREET BANK AND TRUST COMPANY By: /s/ William R. Dewey IV ------------------------------ Name: William R. Dewey IV Title: Assistant Vice President 30 EX-10.B 3 EXHIBIT 10B EXHIBIT 10B REVOLVING CREDIT NOTE $2,250,000 March 31, 1995 FOR VALUE RECEIVED, the undersigned, NUCLEAR METALS, INC., a Massachusetts corporation and CAROLINA METALS, INC., a Delaware corporation (the "Borrowers"), hereby jointly and severally promise to pay to the order of STATE STREET BANK AND TRUST COMPANY, an FDIC insured Massachusetts chartered trust company ("Bank"), in lawful money of the United States of America in immediately available funds at its office at 225 Franklin Street, Boston, Massachusetts 02110 the principal sum of TWO MILLION TWO HUNDRED AND FIFTY THOUSAND DOLLARS ($2,250,000) or such lesser sum as may from time to time be outstanding under the terms of a Credit Agreement between the Borrowers and Bank of even date herewith, as amended, modified, supplemented and/or restated from time to time (the "Credit Agreement"). The Borrowers promise to pay interest on the unpaid principal balance at the rates and at the times provided in the Credit Agreement. This Note may be prepaid only in accordance with the terms of the Credit Agreement. This Note will become due and payable at the Maturity Date (as defined in the Credit Agreement) and earlier upon the occurrence of an Event of Default (as defined in the Credit Agreement). The Borrowers agree to pay all reasonable legal fees and other costs of collection of this Note. No delay or omission on the part of the holder in exercising any right hereunder shall operate as a waiver of such right, nor shall any waiver on one occasion be deemed to be an amendment or waiver of any such right with respect to any future occasion. The Borrowers hereby waive presentment, demand, protest and notice of every kind and assents to any one or more indulgences, to any substitution, exchange or release of collateral (if at any time there be available collateral to the holder of this Note) and to the addition or release of any other party or persons primarily or secondarily liable. This Note shall be governed and construed under the laws of the Commonwealth of Massachusetts and shall be deemed to be under seal. NUCLEAR METALS, INC. WITNESS: /s/ By: /s/ James M. Spiezio - - -------------------------- ------------------------------- Name: Title: Vice President Finance CAROLINA METALS, INC. WITNESS: /s/ By: /s/ James M. Spiezio - - -------------------------- ------------------------------- Name: Title: President 2 EX-10.C 4 EXHIBIT 10C EXHIBIT 10C TERM NOTE $2,400,000 March 31, 1995 Boston, Massachusetts FOR VALUE RECEIVED, the undersigned, NUCLEAR METALS, INC., a Massachusetts corporation and CAROLINA METALS, INC., a Delaware corporation (the "Borrowers") hereby jointly and severally promise to pay STATE STREET BANK AND TRUST COMPANY (the "Bank"), or order, at the Bank, TWO MILLION FOUR HUNDRED THOUSAND DOLLARS ($2,400,000) with interest from the date hereof (computed on the actual number of days elapsed over a 360 day year) on the unpaid balance from time to time outstanding at the Prime Rate (as defined in the Credit Agreement referred to below) plus one half percent (1/2%) per annum, such interest to be paid monthly in arrears on the first day of each month commencing May 1, 1995. Payments of principal shall be paid in monthly installments due and payable on the first day of each month commencing May 1, 1995 in the amounts set forth in the Credit Agreement, with a final balloon payment in the amount of all unpaid principal and accrued interest due and payable on October 1, 1996. This Note may be at any time or from time to time secured and may be prepaid at any time in whole or in part at the option of the Borrowers, provided that any partial prepayments shall be applied to scheduled payments of principal in the inverse order of maturity. This Note is issued pursuant to the Credit Agreement of even date, as amended, modified, supplemented and/or restated from time to time ("Credit Agreement") between the Bank and the Borrowers, and the holder of this Note is entitled to the benefits and rights of the Bank under said Credit Agreement. This Note may become due and payable and matured upon the occurrence of an Event of Default (as defined in the Credit Agreement). The Borrowers agree to pay all reasonable legal fees and other costs of collection of this Note. After maturity, or after the occurrence of an Event of Default under the Credit Agreement, and until such Default shall have been cured or waived in writing by Bank, the unpaid principal balance hereof shall bear interest at the Prime Rate (as defined in the Credit Agreement) plus 5%. Prior to the occurrence of an Event of Default, all payments shall be applied first to accrued interest and then to principal. After the occurrence of an Event of Default, payments may be applied in such order as the Bank determines. No delay or omission on the part of the holder in exercising any right hereunder shall operate as a waiver of such right or of any other right of such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. The undersigned and every endorser or guarantor of this Note regardless of the time, order or place of signing waives presentment, demand, protest and notices of every kind and assents to any one or more indulgences, to any substitutions, exchanges or releases of collateral if at any time there be available to the holder collateral for this Note, and to the additions or releases of any other parties or persons primarily or secondarily liable. All rights and obligations hereunder shall be governed and construed according to the internal statutes and laws of The Commonwealth of Massachusetts from time to time in effect and this Note shall be deemed to be under seal. NUCLEAR METALS, INC. WITNESS: /s/ By: /s/ James M. Spiezio - - -------------------------- ------------------------------- Name: Title: Vice President Finance CAROLINA METALS, INC. WITNESS: /s/ By: /s/ James M. Spiezio - - -------------------------- ------------------------------- Name: Title: President 2 -----END PRIVACY-ENHANCED MESSAGE-----