Exhibit 10.YY
------------------------------------------------------------
LOAN AGREEMENT
Dated as of May 28, 1998
AMONG
STARMET CORPORATION
STARMET POWDERS, LLC
STARMET AEROCAST, LLC
STARMET COMMERCIAL CASTINGS, LLC
STARMET NMI CORPORATION
STARMET CMI CORPORATION
STARMET HOLDINGS CORPORATION
NMI FOREIGN SALES CORPORATION
AND
STATE STREET BANK AND TRUST COMPANY
-------------------------------------------------------------
LOAN AGREEMENT
THIS LOAN AGREEMENT is made as of May 28, 1998, among STARMET
CORPORATION, a Massachusetts corporation, STARMET POWDERS, LLC, a Delaware
limited liability company, STARMET AEROCAST, LLC, a Delaware limited liability
company, STARMET COMMERCIAL CASTINGS, LLC, a Delaware limited liability company,
STARMET NMI CORPORATION, a Delaware corporation, STARMET HOLDINGS CORPORATION, a
Massachusetts corporation, and NMI FOREIGN SALES CORPORATION, a U.S. Virgin
Islands corporation, each having its principal place of business and chief
executive office at 0000 Xxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000, and STARMET
CMI CORPORATION, a Delaware corporation having its principal place of business
and chief executive office at Xxxxxxx 00, Xxxxxxxx, Xxxxx Xxxxxxxx 00000,
(individually, a "Borrower" and collectively, the "Borrowers"), and STATE STREET
BANK AND TRUST COMPANY (the "Lender"), a Massachusetts trust company with its
head office at 000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000.
SECTION 1. DEFINITIONS.
1.1 Definitions. As used herein, the following terms shall have the
following meanings:
"Affiliate" means, with reference to any person, (including an
individual, a corporation, a partnership, a trust, any trade or business and any
governmental agency or instrumentality), (i) any director, officer or employee
of that person, (ii) any other person controlling, controlled by or under direct
or indirect common control of that person, (iii) any other person directly or
indirectly holding 10% or more of any class of the capital stock or other equity
interests (including options, warrants, convertible securities and similar
rights) of that person and (iv) any other person with respect to which such
person holds, directly or indirectly, 10% or more of any class of capital stock
or other equity interests (including options, warrants, convertible securities
and similar rights). For purposes of Section 5.1(v) hereof, "Affiliate" means,
within the meaning of Section 414 of the Code, (i) any member of a controlled
group of corporations which includes a Borrower, (ii) any trade or business,
whether or not incorporated, under common control with the Borrower, (iii) any
member of an affiliated service group which includes a Borrower, and (iv) any
member of a group treated as a single employer by regulation.
"Agreement" means this Loan Agreement, including the Exhibits hereto,
as originally executed, or if this Agreement is amended, varied or supplemented
from time to time, as so amended, varied or supplemented.
"Business Day" means any day on which the head office of the Lender is
open for transactions of all of its normal and customary business, and with
respect to Libor Loans, any day which is also a day for trading by and between
banks in United States dollar deposits in the London interbank market in which
the Lender customarily participates.
1
"Closing Date" means the first date on which all of the conditions set
forth in Section 4 have been satisfied and any Loans are to be made hereunder.
"Code" means the Internal Revenue Code of 1986 and the rules and
regulations thereunder, as amended.
"Consolidated" shall have the meaning ascribed to it under GAAP.
"Default" means an event or condition that, but for the requirement
that time elapse or notice be given, or both, would constitute an Event of
Default.
"EBIT" means in relation to the Borrowers for any period, an amount
equal to Net Income determined in accordance with GAAP (with inventory being
determined on a "first-in, first-out" basis) for such period, plus the following
to the extent deducted in computing such Net Income for such period: (i)
Interest Charges for such period, and (ii) taxes on income for such period.
"Encumbrances" shall have the meaning set forth in Section 5.6.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder.
"Event of Default" shall have the meaning set forth in Section 6.1.
"GAAP" means generally accepted accounting principles consistently
applied.
"Indebtedness" with respect to any person means and includes, without
duplication, (i) all items which, in accordance with GAAP, would be included as
a liability on the balance sheet of such person, (ii) the face amount of all
banker's acceptances and of all letters of credit issued by any bank for the
account of such person and all drafts drawn thereunder, (iii) the total amount
of all indebtedness secured by any Encumbrance to which any property or asset of
such person is subject, whether or not the indebtedness secured thereby shall
have been assumed, and (iv) the total amount of all indebtedness and obligations
of others which such person has directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business),
discounted with recourse or agreed (contingently or otherwise) to purchase or
repurchase or otherwise acquire, including, without limitation, any agreement to
advance or supply funds to such other person to maintain working capital, equity
capital, net worth or solvency.
"Initial Financial Statement" shall have the meaning set forth in
Section 3.5.
"Insolvent" or "Insolvency" means that there shall have occurred one or
more of the following events with respect to a person: death; dissolution;
liquidation; termination
2
of existence; "insolvent" or "insolvency" within the meaning of the United
States Bankruptcy Code or other applicable statute; such person's inability to
pay its debts as they come due or failure to have adequate capital to conduct
its business; such person's failure to have assets having a fair saleable value
net of any cost to dispose of such assets in excess of the amount required to
pay the probable liability on its then existing debts (including unmatured,
unliquidated and contingent debts); appointment of a receiver of any part of the
property of, execution of a trust mortgage or an assignment for the benefit of
creditors by, or the filing of a petition in bankruptcy or the commencement of
any proceedings under any bankruptcy or insolvency laws or any laws relating to
the relief of debtors, readjustment of indebtedness or reorganization of debtors
by or against such person, or the offering of a plan to creditors of such person
for composition or extension, except for an involuntary proceeding commenced
against such person which is dismissed within 60 days after the commencement
thereof without the entry of an order for relief or the appointment of a
trustee.
"Interest Expense" means, for any period, interest expense as presented
on the Borrowers' Consolidated financial statements delivered pursuant to
Section 5.1, all amortization of debt discount and deferred debt expense and
other non-cash interest charges, all as determined in accordance with GAAP.
"Interest Period" means, as to any Libor Loan, the period, the
commencement and duration of which shall be determined in accordance with
Section 2.4.1, provided that if any such Interest Period would otherwise end on
a day which is not a Business Day for Libor Rate purposes, such Interest Period
shall end on the Business Day next preceding or next succeeding such day as
determined by the Lender in accordance with its usual practices and notified to
the Borrowers at the beginning of such Interest Period.
"Letters of Credit" means letters of credit in the form customarily
issued by the Lender as standby letters of credit, issued by the Lender at the
request and for the account of the Borrowers.
"Libor Loan Rate" means an annual rate of interest for an Interest
Period equal to the Libor Rate in effect on the first day of such Interest
Period plus the fixed rate spread set forth below which is applicable to the
Borrowers on the day of any Notice of Borrowing or Conversion (based upon the
Borrowers' Consolidated Net Income for the fiscal quarter immediately preceding
such Interest Period, as evidenced by the financial statements required to be
delivered by the Borrowers pursuant to Section 5.1(ii)):
Libor Loan
Quarterly Net Income Fixed Rate Spread
------------------------ -----------------
less than or equal to $0 2.50%
less than or equal to
3
$250,000 but greater than $0 2.00%
less than or equal to
$500,000 but greater than
$250,000 1.75%
less than or equal to
$750,000 but greater than
$500,000 1.50%
greater than $750,000 1.25%
"Libor Loans" means, in relation to any Interest Period, any portion of
the principal amount of any Revolving Loans on which the Borrowers elect
pursuant to Section 2.4 to pay interest at a rate determined by reference to the
Libor Rate.
"Libor Rate" means, with respect to any Interest Period, in the case of
any Libor Loan, the annual rate of interest determined by the Lender, at or
before 10:00 a.m. (Boston time) (or as soon thereafter as practicable) on the
second Business Day prior to the first day of such Interest Period, to be the
annual rate of interest at which deposits of U.S. dollars are offered to the
Lender by prime banks in whatever London interbank market may be selected by the
Lender in its sole discretion, acting in good faith, at or about the time of
determination and in accordance with the usual practice in such market for
delivery on the first day of such Interest Period in immediately available funds
and having a maturity equal to such Interest Period in an amount equal (as
nearly as may be) to the amount of such Libor Loan. Each such determination by
the Lender shall be conclusive.
"Loan" means a loan made to the Borrowers by the Lender pursuant to
Section 2 hereof, and "Loans" means all of such loans, collectively.
"Loan Documents" means, collectively, this Agreement (including,
without limitation, the agreements and other instruments listed or described in
the Closing Checklist attached hereto as Exhibit E), the Note, the Letters of
Credit (and all letter of credit applications relating thereto) and any other
agreements, instruments or documents referred to herein or therein and/or
delivered in connection herewith, and all schedules, exhibits and annexes
thereto.
"Maturity Date" means February 28, 2000.
"Net Income" means the pre-tax income from continuing operations as
presented on the Borrowers' Consolidated statement of operations delivered
pursuant to Section 5.1, as determined for the period in question in accordance
with GAAP, but in any event
4
without giving effect to any non-cash stock compensation charges and excluding
from Net Income (without duplication): (i) any gain or loss, amortization or
deduction arising from any write-up of assets or any subsequent amortization to
the extent of such write-up, except to the extent inclusion thereof shall be
approved in writing by the Lender; (ii) earnings or loss of any Subsidiary
accrued prior to the date it became a Subsidiary; (iii) the net earnings of any
business entity (other than a Subsidiary) in which a Borrower or any of its
Subsidiaries has an ownership interest, except to the extent such net earnings
shall have actually been received by such Borrower or such Subsidiaries in the
form of cash distributions; (iv) any gains or losses on the sale or other
disposition of fixed or capital assets; and (v) the proceeds of any life
insurance policy.
"Net Proceeds" means, with respect to the Offering, cash proceeds
received by Starmet Corporation after payment of any reasonable underwriting
commissions and reasonable expenses.
"Note" means the Revolving Credit Note.
"Notice of Borrowing, Continuation or Conversion" shall have the
meaning set forth in Section 2.4.1.
"Obligations" means any and all obligations of the Borrowers to the
Lender of every kind and description, direct or indirect, absolute or
contingent, primary or secondary, due or to become due, now existing or
hereafter arising, regardless of how they arise or by what agreement or
instrument they may be evidenced or whether evidenced by any agreement or
instrument, and includes obligations to perform acts and to refrain from acting
as well as obligations to pay money.
"Offering" means the offering of equity securities made pursuant to the
Offering Prospectus.
"Offering Prospectus" means the registration statement on Form S-1 with
respect to the Offering of shares of the common stock of Starmet Corporation as
originally filed on April 8, 1998 with the SEC and subsequently amended.
"Permitted Acquisition". An acquisition by a Borrower which meets all
of the following criteria:
(i) is an acquisition of all or some of the capital stock or
assets of a Person engaged in a substantially similar or
complementary business as that in which the Borrowers are
engaged on the Closing Date or a reasonable expansion or
extension thereof;
(ii) the properties and assets acquired by such Borrower in
connection with such acquisition shall be free from all liens,
charges and encumbrances whatsoever, except Encumbrances
permitted under Section 5.5;
5
(iii) no Indebtedness shall be assumed by such Borrower in
connection with such acquisition, except Indebtedness
permitted under Section 5.5;
(iv) immediately prior to, and after giving effect to such
acquisition, no Default or Event of Default shall exist; and
(v) prior to such acquisition, the Lender shall have received
computations from the Borrowers (based upon a compliance
certificate in the form of Exhibit D hereto) showing pro forma
compliance with the financial covenants set forth in Sections
5.18 through 5.21, inclusive, as of the date of, and after
giving effect to, such acquisition.
"Person" or "person" means any individual, corporation, limited
liability company, partnership, limited liability partnership, trust, trade,
business and governmental agency and instrumentality.
"Plans" means, collectively, each "employee pension benefit plan" and
each "employee welfare benefit plan" (each as defined in ERISA) maintained by a
Borrower.
"Prime Rate" means the annual rate of interest announced by the Lender
from time to time, at the principal office of the Lender, as its prime rate.
"Prime Rate Loans" means any Revolving Loans (or any portion thereof)
as to which the interest rate is the Prime Rate.
"Restricted Payments" means (i) any cash or property dividend,
distribution, or other payment, direct or indirect, to any Person who now or in
the future may hold an equity interest in a Borrower, whether evidenced by a
security or not; and (ii) any payment on account of the purchase, redemption,
retirement or other acquisition of any capital stock of a Borrower, or any other
payment or distribution made in respect thereof, either directly or indirectly
(though excluding any stock options granted to officers, employees or
directors).
"Revolving Credit Maximum Amount" means $10,000,000.
"Revolving Credit Note" shall have the meaning set forth in
Section 2.1.1.
"Revolving Loan" shall have the meaning set forth in Section 2.1.1.
"Revolving Loan Account" means the account on the books of the Lender
in which will be recorded Revolving Loans made by the Lender to the Borrowers
pursuant to this Agreement, payments made on such Revolving Loans and other
appropriate debits and credits as provided by this Agreement.
6
"Stated Amount" means, with respect to each Letter of Credit
outstanding at any given time, the maximum amount then available to be drawn
thereunder (without regard to whether any conditions to drawing could then be
met).
"Subsidiary" means any corporation, association, joint stock company,
business trust or other similar organization of which 50% or more of the
ordinary voting power for the election of a majority of the members of the board
of directors or other governing body of such entity is held or controlled by a
Borrower or a Subsidiary of a Borrower; or any other such organization the
management of which is directly or indirectly controlled by a Borrower or a
Subsidiary of a Borrower through the exercise of voting power or otherwise; or
any joint venture, whether incorporated or not, in which a Borrower has a 50%
ownership interest or any other entity which would be consolidated with the
Borrower in presenting its financial statements in accordance with GAAP.
"Tangible Net Worth" means the amount which is equal to the
Consolidated net worth of the Borrowers computed in accordance with GAAP and
with inventory and cost of goods sold determined on a "first in, first out"
basis, and minus (i) the book value, net of applicable reserves, of all
intangible assets of the Borrowers, including, without limitation, goodwill,
trademarks, trade names, copyrights, patents and any similar rights and deferred
debt expense, (ii) intercompany accounts with Affiliates (including receivables
due from Affiliates), unless existing on the date of the Initial Financial
Statement, or created thereafter in the ordinary course of business, consistent
with past practices, and (iii) to the extent not otherwise approved in advance
by Lender, any write up in the book value of any asset of a Borrower resulting
from revaluation thereof after the date of the Initial Financial Statement.
"Taxes" means, any and all taxes (including, without limitation,
income, receipts, franchise, ad valorem or excise taxes, transfer or gains taxes
or fees, use taxes, withholding, payroll or minimum taxes) imposed on, or
otherwise payable by, or for which responsibility for payment, withholding or
collection lies with, a Borrower by any governmental authority, federal, state
or otherwise, including any taxes imposed on any of a Borrower's Subsidiaries or
other Affiliates for which a Borrower may be liable under applicable law or by
agreement to which a Borrower is a party or by which it is bound or subject to,
and including, but not limited to, any interest, penalties or additions to tax
with respect thereto.
"Total Liabilities" means, at any date as of which the amount thereof
shall be determined, all obligations of the Borrowers that should, as determined
in accordance with GAAP, be classified as liabilities on the Consolidated
balance sheet of the Borrowers.
"Unused Commitment" for any period of time means the difference for
each day during such period between the Revolving Credit Maximum Amount in
effect and the sum of the principal amount of Revolving Loans actually
outstanding hereunder and the Stated Amount of all outstanding Letters of
Credit.
7
"Year 2000 Problem" means any significant risk that computer hardware
or software used in the business or operations of any Borrower will not, in the
case of dates or time periods occurring after December 31, 1999, function at
least as effectively as in the case of dates or time periods occurring prior to
January 1, 2000.
SECTION 2. REVOLVING LOANS.
2.1 Revolving Loans.
2.1.1 Upon the terms and subject to the conditions of this
Agreement, and in reliance upon the representations, warranties and covenants of
the Borrowers made herein, the Lender agrees to make loans ("Revolving Loans")
to the Borrowers at the Borrowers' request from time to time, from and after the
date hereof and prior to the Maturity Date, provided that the principal amount
of Revolving Loans outstanding at any time, plus the aggregate Stated Amount of
Letters of Credit outstanding at such time, plus the aggregate amount of any
unreimbursed draws under outstanding Letters of Credit, shall not exceed the
Revolving Credit Maximum Amount, and provided, further, that at the time the
Borrowers request a Revolving Loan and after giving effect to the making thereof
there has not occurred and is not continuing any Default or Event of Default.
The Borrowers agree that it shall be an Event of Default hereunder if at any
time the debit balance of the Revolving Loan Account, plus the aggregate Stated
Amount of Letters of Credit outstanding at any time, plus the aggregate amount
of unreimbursed draws under outstanding Letters of Credit at such time, shall
exceed the Revolving Credit Maximum Amount unless the Borrowers shall, upon
notice of such excess from the Lender, promptly pay cash to the Lender to be
credited to the Revolving Loan Account in such amount as shall be necessary to
eliminate the excess. Each Revolving Loan shall be in a minimum amount of
$100,000 or an integral multiple thereof. The Revolving Loans shall be evidenced
by a Revolving Credit Note (the "Note") in the form of Exhibit A hereto.
2.1.2 Subject to the provisions of Section 2.5, the Borrowers
may prepay outstanding Revolving Loans and the Note in whole or in part at any
time without premium or penalty. Amounts so paid in respect of the Revolving
Loans and the Note and other amounts may be borrowed and reborrowed from time to
time as provided in Section 2.1.1. On the Revolving Credit Maturity Date, the
Borrowers shall repay all outstanding Revolving Loans and the Note, together
with all unpaid interest thereon and all fees and other amounts due hereunder.
2.2. Letters of Credit. Upon the terms and subject to the
conditions of this Agreement, and in reliance upon the representations,
warranties and covenants of the Borrowers made herein, the Lender agrees to
issue, to the extent permitted by law and the Uniform Customs Practices of the
International Chamber of Commerce governing Letters of Credit (Publication No.
500 or any successor thereto), Letters of Credit upon the
8
application of the Borrowers during the period from the date hereof to the
Maturity Date; provided that the aggregate Stated Amount of Letters of Credit
outstanding at any time, plus the aggregate amount of all unreimbursed draws
under such outstanding Letters of Credit, shall not at any time (i) exceed
$4,000,000, or (ii) cause the principal amount of Revolving Loans outstanding at
such time (after taking into account such Stated Amount and all such
unreimbursed draws) to exceed the Revolving Credit Maximum Amount; and provided,
further, that at the time the Borrowers request the issuance of a Letter of
Credit and after giving effect to the issuance thereof, there has not occurred
and is not continuing any Default or Event of Default. All Letters of Credit
shall expire not later than the date which is one (1) month prior to the
Maturity Date. Amounts drawn under the Letters of Credit shall become
immediately due and payable by the Borrowers to the Lender and shall bear
interest at the rate then applicable to Revolving Loans unless, to the extent
there is availability under the Revolving Credit Maximum Amount, such amounts
shall be added to the Revolving Loan Account as Revolving Loans and shall be
immediately due and payable upon the maturity of the Revolving Credit Note.
Without limiting the foregoing, if any Letter of Credit would by its terms
expire after the Maturity Date, the Borrowers shall, on the Maturity Date, cause
another letter of credit issued by another bank satisfactory to the Lender to be
substituted therefor or cause another bank satisfactory to the Lender to
indemnify the Lender to its satisfaction against any and all liabilities and
obligations in respect to such Letter of Credit and, in such event, this
Agreement and the other Loan Documents shall continue in full force and effect
until all of the Obligations under any such Letters of Credit have been paid in
full to the Lender. In order to evidence such Letters of Credit, the Borrowers
shall enter into, with the Lender, such agreements and execute such instruments
and documents as the Lender customarily requires in like transactions.
2.3 Interest and Fees.
2.3.1 Interest on any Revolving Loans shall be calculated and
due and payable based upon the following interest rate alternatives:
(i) In the absence of any election by the Borrowers under clause
(ii) below, either initially with respect to any Revolving
Loan or at the expiration of the applicable Interest Period
under such clause (ii) below, such Revolving Loans shall bear
interest at a rate per annum equal to the Prime Rate in effect
from time to time, with interest thereon being payable monthly
in arrears on the last Business Day of each month. Any change
in the Prime Rate shall result in a change on the same day in
the rate of interest to accrue from and after such day on the
unpaid balance of principal of the Revolving Loans bearing
interest with reference to the Prime Rate.
(ii) In the manner and subject to the provisions set forth in
Sections 2.1, 2.4 and 2.5, so long as no Default or Event of
Default has occurred and is then continuing, the Borrowers may
elect from time to time prior to the Maturity Date to have all
or a portion of the unpaid principal amount of
9
any Revolving Loan bear interest during any particular
Interest Period applicable to Libor Loans at the Libor Loan
Rate and be treated as a Libor Loan, with interest, in all
cases, being due and payable on the last day of the applicable
Interest Period relating to such Libor Loan (but in any event,
no less frequently than quarterly), provided, that any such
portion of any Loan shall be in an amount not less than
$100,000 or an integral multiple thereof.
The rates of interest set forth above shall apply before an Event of Default.
After an Event of Default pursuant to Section 6 of this Agreement, interest
shall accrue on the balance hereof at Lender's sole discretion at a rate equal
to four percent (4%) per annum above the highest rate that would otherwise apply
to amounts outstanding hereunder.
2.3.2 The Borrowers shall pay to the Lender a commitment fee,
payable quarterly in arrears on the last Business Day of each quarter, equal in
the aggregate to one-quarter of one percent (0.25%) per annum of the Unused
Commitment during the preceding quarter.
2.3.3 The Borrowers authorize the Lender to charge to the
Revolving Loan Account or to any deposit account which the Borrowers may
maintain with the Lender the principal, interest, fees, charges, taxes and
expenses provided for in this Agreement or any other document executed or
delivered in connection herewith.
2.3.4 If, after the date hereof, the Lender shall have
determined that the adoption of any applicable law, rule, regulation, guideline,
directive or request (whether or not having the force of law) regarding capital
requirements for banks or bank holding companies, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Lender with any of the foregoing
imposes or increases a requirement by the Lender to allocate capital resources
to the Lender's commitment to make Revolving Loans or issue Letters of Credit
which has or would have the effect of reducing the return on the Lender's
capital to a level below that which the Lender could have achieved (taking into
consideration the Lender's then existing policies with respect to capital
adequacy and assuming full utilization of the Lender's capital) but for such
adoption, change or compliance by any amount deemed by the Lender to be
material, then: (i) the Lender shall promptly after its determination of such
occurrence give notice thereof to the Borrowers; and (ii) to the extent that the
costs of such increased capital requirements are not reflected in the Prime
Rate, the Borrowers and the Lender shall thereafter attempt to negotiate in good
faith, within 30 days following the date the Borrowers receive such notice, an
adjustment payable hereunder that will adequately compensate the Lender in light
of the circumstances. If the Lender and the Borrowers are unable to agree to
such adjustment within 30 days following the date upon which the Borrowers
receive such notice, then commencing on the date of such notice (but no earlier
than the effective date of any such increased capital requirement), the fees
payable hereunder shall increase by an amount that will, in the Lender's
10
reasonable determination, provide adequate compensation. The provisions of this
Section 2.3.5 shall be applied to the Borrowers so as not to discriminate
against the Borrowers vis-a-vis other customers of the Lender.
2.3.5 Anything hereinbefore to the contrary notwithstanding,
if any present or future applicable law (which expression, as used in this
Agreement, includes statutes and rules and regulations thereunder and
interpretations thereof by any competent court or by any governmental or other
regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time heretofore or hereafter made upon or otherwise issued
to the Lender by any central bank or other fiscal, monetary or other authority,
whether or not having the force of law) shall (i) subject the Lender to any tax,
levy, impost, duty, charge, fee, deduction or withholding of any nature with
respect to this Agreement, the maximum amount of the Revolving Loans or Letters
of Credit or the payment to the Lender of any amounts due to it hereunder, or
(ii) materially change the basis of taxation of payments to the Lender of the
principal or the interest on or any other amounts payable to the Lender
hereunder, or (iii) impose or increase or render applicable any special or
supplemental special deposit or reserve or similar requirements or assessment
against assets held by, or deposits in or for the account of, or any liabilities
of, or loans by an office of the Lender in respect of the transactions
contemplated herein, or (iv) impose on the Lender any other conditions or
requirements with respect to this Agreement, the Revolving Credit Maximum
Amount, the Letters of Credit or any Revolving Loan, and the result of any of
the foregoing is (A) to increase the cost to the Lender of making, funding or
maintaining all or any part of the Revolving Loans or the Letters of Credit, or
(B) to reduce the amount of principal, interest or other amount payable to the
Lender hereunder, or (C) to require the Lender to make any payment or to forego
any interest or other sum payable hereunder, the amount of which payment or
foregoing interest or other sum is calculated by reference to the gross amount
of any sum receivable or deemed received by the Lender from the Borrowers
hereunder, then, and in each such case not otherwise provided for hereunder, the
Borrowers will, upon demand made by the Lender accompanied by calculations
thereof in reasonable detail, pay to the Lender such additional amounts as will
be sufficient to compensate the Lender for such additional cost, reduction,
payment or foregoing interest or other sum, provided that the foregoing
provisions of this sentence shall not apply in the case of any additional cost,
reduction, payment or foregoing interest or other sum resulting from any taxes
charged upon or by reference to the overall net income, profits or gains of the
Lender.
2.4 Loan Requests.
2.4.1 All requests under this Agreement for Revolving Loans or
for a conversion of the interest rate applicable to any Revolving Loan (or
portion thereof) under Section 2.3 above to a rate of a different type or for a
continuation of a Revolving Loan (or a portion thereof) at an interest rate of
the same type for an additional Interest Period, shall be made by the Borrowers
in writing (or by telephone and then promptly confirmed in writing) (each such
request to be irrevocable), substantially in the form
11
attached hereto as Exhibit C (each a "Notice of Borrowing, Continuation or
Conversion"), specifying (a) the amount of the requested advance or portion of
outstanding principal into which the type of interest rate requested is to be
converted or continued, (b) the requested borrowing or interest rate conversion
or continuation date, (c) whether the requested advance or affected principal
portion is to be treated as a Libor Loan, and (d) if the requested advance or
affected principal portion is to be in whole or in part a Libor Loan, the length
of the requested Interest Period for such advance or principal portion as
applicable (which must be, in the case of Libor Loans and subject to
availability, for one, two, three or six months), provided, however, that no
Interest Period shall extend beyond the Maturity Date.
2.4.2 Each Notice of Borrowing, Continuation or Conversion
must be delivered to an officer of the Lender no later than 11:00 a.m. Boston
time, (a) 2 Business Days prior to the requested advance, continuation or
conversion date, in the case of Libor Loans, or (b) on the requested advance,
continuation or conversion date, in the case of Prime Rate Loans. If the
Borrower does not request that an existing Libor Loan be maintained as a Libor
Loan at least 2 Business Days prior to the end of the Interest Period applicable
to such Loan, in accordance with the procedure set forth herein, then the
Borrowers shall be deemed to have requested that such Loan be converted into a
Prime Rate Loan.
2.5 Libor Loan Provisions.
2.5.1 The Lender shall promptly notify the Borrowers upon
determining any Libor Rate. Each such notice shall be conclusive and binding
upon the Borrowers. If, with respect to any Interest Period, the Lender is
unable to determine the Libor Rate relating thereto, or adverse or unusual
conditions in or changes in applicable law relating to the London interbank
market make it illegal or, in the reasonable judgment of the Lender,
impracticable, to fund therein the amount of the requested Libor Loan or make
the projected Libor Rate unreflective of the actual costs of funds therefor to
the Lender, or if it shall become unlawful for the Lender to charge interest on
the Loans on a Libor Rate basis, then in any of the foregoing events the Lender
shall so notify the Borrowers and interest will be calculated and payable in
respect of such projected Interest Period (and thereafter for so long as the
conditions referred to in this sentence shall continue) by reference to the
Prime Rate in accordance with Section 2.3.1(i).
2.5.2 In the event the Lender shall incur any loss, cost or
expense as a result of:
(i) any payment, prepayment of or election to change the interest
rate applicable to any principal of a Libor Loan on a date
other than the last day of any Interest Period applicable
thereto, or
12
(ii) any failure by the Borrowers to borrow or convert into any
Libor Loan on the date or in the amount specified in a Notice
of Borrowing, Continuation or Conversion, or
(iii) any increase in the cost to the Lender of making Libor Loans
(including without limitation costs associated with increases
in taxes, with reserves required by law or regulation, or with
any other governmental assessments, in connection with Libor
Loans),
then in any such event the Borrowers shall pay to the Lender such amount or
amounts as shall be sufficient (in the reasonable opinion of the Lender) to
compensate the Lender fully for such loss, cost or expense, such compensation to
include, without limitation, an amount equal to the excess, if any, of (a) the
amount of interest that would have accrued on the principal amount so paid,
prepaid or converted or not borrowed for the period from the date of such
payment, prepayment or conversion to the last day of the Interest Period for
such Revolving Loan or, in the case of a failure to borrow, for the entire
Interest Period for such Revolving Loan, commencing on the date of such failure
to borrow, at the applicable rate of interest for such Revolving Loan provided
for herein, over (b) the amount of interest (as reasonably determined by the
Lender) the Lender would have been offered in the London interbank market for
dollar deposits of amounts comparable to such principal amount at a maturity
comparable to said period.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
The Borrowers hereby jointly and severally represent, warrant and
covenant as follows:
3.1 Organization and Qualification. Each Borrower (i) is a corporation
or limited liability company duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or formation as
indicated on Exhibit B hereto; (ii) has all requisite corporate or limited
liability company (as applicable) power and authority to own its property and
conduct its business as now conducted and as presently contemplated; and (iii)
is duly qualified and in good standing in each jurisdiction (which jurisdictions
are listed on Exhibit B hereto) where the nature of its properties or its
business requires such qualification. Since the date of the Initial Financial
Statement, each Borrower has continued to engage in substantially the same
business as that in which it was then engaged and is engaged in no unrelated
business.
3.2 Corporate and Limited Liability Company Authority; Valid
Obligations; Approvals. The execution, delivery and performance of the Loan
Documents and the transactions and other documents contemplated hereby and
thereby are within each Borrower's corporate or limited liability company (as
applicable) authority, have been authorized by all necessary corporate or
limited liability company (as applicable) proceedings on the part of such
Borrower, and do not and will not contravene any
13
provision of law, its charter document, operating agreement or its by-laws (as
applicable), or contravene any provisions of, or constitute a Default or Event
of Default hereunder or a default under any other agreement, instrument,
judgment, order, decree, permit, license or undertaking binding upon or
applicable to such Borrower or any of its properties, or result in the creation,
other than in favor of the Lender, of any mortgage, pledge, security interest,
lien, encumbrance or charge upon any of the properties or assets of such
Borrower. The Loan Documents have been duly executed and delivered and
constitute the legal, valid and binding obligations of each Borrower enforceable
in accordance with their terms. The execution, delivery and performance of the
Loan Documents and the transactions and other documents contemplated hereby and
thereby do not require any approval or consent of, or filing or registration
with, any person.
3.3 Title to Properties; Absence of Liens. Each Borrower has good and
marketable title to all of its properties, assets and rights of every name and
nature now purported to be owned by it, which properties, assets and rights
include all those necessary to permit such Borrower to conduct its business as
such business was conducted on the date of the Initial Financial Statement, free
from all liens, charges and encumbrances whatsoever except for insubstantial and
immaterial defects in title and liens, charges or encumbrances permitted under
Section 5.6.
3.4 Compliance. Except as set forth on Exhibit B hereto, each Borrower
(i) has all necessary permits, approvals, authorizations, consents, licenses,
franchises, registrations and other rights and privileges (including without
limitation patents, trademarks, trade names and copyrights) to allow it to own
and operate its business without any violation of law or the rights of others,
(ii) is duly authorized, qualified and licensed under and in compliance with all
applicable laws, regulations, authorizations and orders of public authorities
(including, without limitation, laws relating to hazardous materials, hazardous
waste, oil, and protection of the environment and laws relating to ERISA or to
employee benefit plans generally), and (iii) has performed all obligations
required to be performed by it under, and is not in default under or in
violation of, its charter, operating agreement or by-laws (as applicable), or
any agreement, lease, mortgage, note, bond, indenture, license or other
instrument or undertaking to which it is a party or by which any of it or any of
its properties are bound, except for any such violations or failures to comply
under clauses (i) through (iii) above which, individually or in the aggregate,
would not have a material adverse effect on the business, condition (financial
or otherwise), results of operations or assets of any Borrower, and no Borrower
has received any notice by any governmental authority or third party with
respect to the generation, storage, or disposal or release or threat of release
of hazardous substances, hazardous materials, or oil, or with respect to any
violation of any federal, state or local environmental, health or safety statute
or regulation.
3.5 Financial Statements. The Borrowers have furnished to the Lender
the audited Consolidated balance sheet of the Borrowers as of September 30, 1997
and the related audited Consolidated statements of operations and stockholders'
(or members') equity and cash flows for the year then ended, which were prepared
in accordance with
14
GAAP, certified by independent certified public accountants acceptable to the
Lender (the present accountants Xxxxxx Xxxxxxxx LLP being acceptable to the
Lender) and fairly present the Consolidated financial position of the Borrowers
as at the close of business on such date and the results of its operations for
the year then ended. The Borrowers have also furnished to the Lender the
unaudited Consolidated balance sheet of the Borrowers as of March 31, 1998 and
the unaudited Consolidated statements of operations, stockholder's (or members')
equity and cash flow of the Borrowers for the fiscal quarter then ended,
certified by the chief financial officer of the Borrowers, which are subject to
normal, recurring year-end adjustments that shall not in the aggregate be
material in amount (the "Initial Financial Statement"). The Borrowers have also
furnished to the Lender the unaudited pro forma Consolidated balance sheet of
the Borrowers as of March 31, 1998, prepared as if the Offering had been
completed as of the Closing Date. At the date hereof, no Borrower has any
material Indebtedness or other liabilities, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, that are not set
forth on the Initial Financial Statement or on Exhibit B hereto. Since the
Initial Financial Statement there have been no material adverse changes,
individually or in the aggregate, in the assets, liabilities, financial
condition or business of any Borrower, except as set forth on Exhibit B hereto.
3.6 Events of Default; Solvency. As of the date of this Agreement, no
Default or Event of Default exists and no Borrower is, or immediately after
giving effect to the consummation of the Revolving Loans will be, Insolvent.
3.7 Taxes. Each Borrower has filed all federal, state and other tax
returns required to be filed for all Taxes (or has filed appropriate
extensions), and has paid (or has established adequate reserves in accordance
with GAAP for the payment of) all Taxes, assessments and other such governmental
charges due from such Borrower. No Borrower has executed any waiver that would
have the effect of extending the applicable statute of limitations in respect of
any Tax.
3.8 Labor Relations; Litigation. No Borrower is engaged in any unfair
labor practice and, except as set forth on Exhibit B attached hereto, there is
no litigation, proceeding, governmental investigation (administrative or
judicial) or labor dispute, pending or, to the best knowledge of the Borrowers,
threatened against any Borrower, which, if decided adversely to such Borrower,
could have a materially adverse effect on the business, properties or condition
(whether financial or otherwise) of any Borrower or on the ability of any
Borrower to perform its obligations under this Agreement or any other agreement
or document contemplated hereby, nor is any substantial basis for any such
litigation or labor dispute known to exist.
3.9 Restrictions on the Borrowers. No Borrower is party to or bound by
any contract, agreement or instrument, nor subject to any charter or other
corporate restriction which will, under current or foreseeable conditions,
materially and adversely affect its business, property, assets, operations or
conditions, financial or otherwise.
15
3.10 Contracts with Affiliates, Etc. Except as disclosed on Exhibit B
attached hereto, and except for agreements or transactions (in each case) in the
ordinary course of business and on an arm's-length basis, no Borrower is a party
to or otherwise bound by any agreements, instruments or contracts (whether
written or oral) with any Affiliate, except for any such agreement, instrument
or contract (other than an agreement, instrument or contract with respect to
Indebtedness for borrowed money) as would not materially and adversely affect
the condition (financial or otherwise), properties, business or results of
operations of any Borrower.
3.11 Disclosure. No representations and warranties made by any Borrower
in this Agreement, any other Loan Document or in any other agreement,
instrument, document, certificate, statement or letter furnished to the Lender
by or on behalf of any Borrower, and no other factual information heretofore or
contemporaneously furnished by or on behalf of any Borrower to the Lender, in
connection with any of the transactions contemplated by any of the Loan
Documents contains (as of the date given) any untrue statement of fact or omits
to state a fact necessary in order to make the statements contained therein not
misleading in any material respect in light of the circumstances in which they
are made. Except as disclosed herein or in the Initial Financial Statement or in
the other Loan Documents, there is no fact known to any Borrower which
materially adversely affects, or which would in the future materially adversely
affect, the business, condition (financial or otherwise), results of operations
or assets of any Borrower.
3.12 Subsidiaries. As of the date hereof, no Borrower has any
Subsidiaries, except as disclosed on Exhibit B attached hereto.
3.13 Offering.
(i) A registration statement on Form S-1 (File No. 333-49629) with
respect to the common stock of Starmet Corporation (the "Registration
Statement") has been prepared by the Borrowers in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "SEC" or the "Commission") thereunder; and has been
filed with the Commission. There has been delivered to the Lender copies of such
registration statement, together with copies of all exhibits requested by the
Lender. The Borrowers have also prepared a related preliminary prospectus, a
copy of which has also been provided to the Lender.
(ii) The Commission has not issued any order preventing or suspending
the use of the preliminary prospectus, and the preliminary prospectus has
conformed in all material respects to the requirements of the Act and the Rules
and Regulations and, as of its date, has not included any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; as of the Closing Date, the registration statement will
have become effective and the registration statement and the prospectus, and any
amendments or supplements thereto, will contain all material statements and
16
information required to be included therein by the Act and the Rules and
Regulations and in all material respects conform to the requirements of the Act
and the Rules and Regulations, and neither the registration statement nor the
prospectus, nor any amendment or supplement thereto, will include any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
SECTION 4. CONDITIONS OF LOANS.
4.1 Conditions to Initial Revolving Loan. Notwithstanding the execution
of this Agreement by the parties hereto on May 28, 1998, it is understood and
agreed that the effectiveness of this Agreement and of any of the obligations of
the Lender hereunder (including specifically, but without limitation, the
obligation of the Lender to make the initial Revolving Loan) is subject to the
fulfillment to the satisfaction of the Lender on or prior to the Closing Date of
the following conditions precedent:
4.1.1 Receipt by the Lender of all of the agreements,
documents, instruments, certificates and opinions listed or described on the
Closing Checklist attached hereto as Exhibit E, in form and substance
satisfactory to the Lender, and duly executed and delivered by the parties
thereto, along with such additional instruments, certificates, opinions and
other documents as the Lender shall reasonably request.
4.1.2 The representations and warranties contained herein
shall be true and accurate on and as of the Closing Date, the Borrowers shall
have performed and complied with all covenants and conditions required herein to
be performed or complied with by them prior to the making of such Revolving
Loan, and no Default or Event of Default shall be continuing or result from the
Revolving Loans to be made on the Closing Date or the transactions contemplated
hereby.
4.1.3 The Offering shall have been successfully completed and
become effective on or prior to the Closing Date upon the terms set forth in the
Offering Prospectus (in the form delivered to the Lender), and Starmet
Corporation shall have received Net Proceeds therefrom of at least $40,000,000,
it being understood and agreed that if the Offering shall not have been
successfully completed and such Net Proceeds received by September 30, 1998,
then this Agreement shall be terminated and deemed incapable of thereafter
becoming effective, notwithstanding the execution hereof on May 28, 1998.
4.2 Conditions to all Loans. The obligation of the Lender to make any
Revolving Loan is subject to the fulfillment to the satisfaction of the Lender
immediately prior to or contemporaneously with each such Loan of each of the
following conditions: (i) the representations and warranties contained herein or
otherwise made in writing by or on behalf of the Borrowers pursuant hereto or in
connection with the transactions contemplated hereby shall be true and correct
in all material respects at the time of each such Loan (except for
representations and warranties limited as to time or with respect to
17
a specific event) with and without giving effect to the Loan to be made at such
time and the application of the proceeds thereof, (ii) no Default or Event of
Default shall be continuing or result from such Loan, (iii) no material adverse
change in the condition (financial or otherwise), business or properties of any
Borrower shall have occurred since the date of the Initial Financial Statement,
and (iv) no change in applicable law or regulation shall have occurred as a
consequence of which it shall have become and continue to be unlawful for the
Lender or any Borrower to perform any of its respective agreements or
obligations under any Loan Document to which it is a party.
SECTION 5. COVENANTS.
During the term of this Agreement and so long as any Obligation of any
Borrower in respect of any Loan remains outstanding, the Borrowers hereby
jointly and severally covenant to the Lender that:
5.1 Financial Statements and Other Reporting Requirements. The
Borrowers shall furnish to the Lender:
(i) as soon as available to the Borrowers, but in any event
within 120 days after each fiscal year-end, the Consolidated balance
sheet of the Borrowers as at the end of, and related Consolidated
statements of operations, stockholders' equity and cash flow for, such
year, prepared in accordance with GAAP applied in a manner consistent
with the Borrowers' past practices, and audited and certified without
qualification by independent certified public accountants satisfactory
to the Lender; and concurrently with such financial statements, if in
the opinion of such accountants a Default or Event of Default exists
with respect to accounting matters, a written statement by such
accountants that, in the making of the audit necessary for their report
and opinion upon such financial statements, they have obtained
knowledge of such Default or Event of Default, and they shall disclose
in such written statement the nature and status thereof;
(ii) as soon as available to the Borrowers, but in any event
within 60 days after the end of each fiscal quarter of each fiscal year
of the Borrowers, the Consolidated balance sheet of the Borrowers as at
the end of, and related Consolidated statements of operations,
stockholders' equity and cash flow for, the portion of the year then
ended and for the quarter then ended, prepared in accordance with GAAP
(with the exception of footnotes) applied in a manner consistent with
the audited financial statements required by clause (i) above (subject
to normal year-end audit adjustments, none of which shall be materially
adverse) and certified pursuant to the report to be delivered to the
Lender under clause (iv) of this Section 5.1;
(iii) promptly as they become available, copies of all such
financial statements, proxy material and reports as any Borrower shall
send to or make generally available to stockholders and of all regular
and periodic reports filed by
18
any Borrower or any of its Subsidiaries with any securities exchange or
with the Commission or any governmental authority succeeding to any or
all of the functions of said Commission, and promptly as they become
available, a copy of each report (including any so-called management
letters) submitted to the Borrowers by independent certified public
accountants in connection with each annual audit of the books of the
Borrowers by such accountants or in connection with any interim audit
thereof pertaining to any phase of the business of any Borrower;
(iv) concurrently with each delivery of financial statements
pursuant to clause (i) and clause (ii) of this Section 5.1, a chief
financial officer's report in substantially the form of Exhibit D
hereto, and including, without limitation, computations in reasonable
detail evidencing compliance with the covenants contained in Sections
5.18 through 5.21, inclusive;
(v) at least 30 days prior to the first day of each fiscal
year of the Borrowers, projections of the quarterly balance sheet,
income and cash flow statements of the Borrowers for such fiscal year
in form acceptable to the Lender, and certified by the chief financial
officer of the Borrowers (it being recognized by the Lender that
projections as to future results are not to be viewed as facts and that
the actual results for the period or periods covered by the projections
may materially differ from the projected results);
(vi) concurrently with the delivery of each financial
statement pursuant to subsection (ii) of this Section 5.1, a detailed
aged trial balance of all accounts receivable as of the last day of
such quarter, along with a detailed inventory breakdown setting forth
an analysis of the value of such inventory by location and
classification as of the last day of such quarter and otherwise in form
and substance satisfactory to the Lender;
(vii) promptly after obtaining knowledge of the existence
thereof, notice of (a) the occurrence of any event which constitutes a
Default or Event of Default, together with the nature and duration
thereof and the action proposed to be taken with respect thereto, (b)
the occurrence of any condition or event with respect to any Borrower
or any Affiliate which could be expected to constitute a material
adverse change in or to have a material adverse effect on the business,
properties or condition (financial or otherwise) of any Borrower,
together with the nature and duration thereof and the action proposed
to be taken with respect thereto, (c) any litigation or any
investigative proceedings of a governmental agency or authority
commenced or threatened against any Borrower, any Affiliate or any Plan
which could be expected to have a material adverse effect on the
business, properties or condition (financial or otherwise) of any
Borrower, or the issuance of any judgment, award, decree, order or
other determination in or relating to any such litigation or
proceedings, (d) the occurrence of a reportable event (as defined in
ERISA) or any communications to, or receipt of communications from, the
19
PBGC, the United States Department of Labor or the IRS by any Borrower
or any Affiliate relating to any Plan, along with copies of all such
communications, (e) the adoption by any Borrower of any stock option or
executive compensation plan, whether or not subject to ERISA, and any
Plan subject to ERISA, or the substantial modification of any such
plan, along with the vesting and funding schedules and other principal
provisions thereof, and (f) any unprivileged communications given or
received by any Borrower in any way relating to compliance with, any
violation or potential violation of, or any potential liability under,
any environmental law or regulation (including those relating to
pollution control, hazardous materials and hazardous wastes), along
with copies of all such communications; and
(viii) from time to time, such other financial data and
information about any Borrower as the Lender may reasonably request.
5.2 Conduct of Business. Each Borrower will maintain its corporate or
limited liability company (as applicable) existence, continue to have a fiscal
year ending on September 30 of each year and notify the Lender in advance of any
change in such fiscal year (whereupon the Lender shall have the right to require
modifications to the financial covenants hereunder in order to correspond to any
such change in fiscal year), and remain or engage in substantially the same,
similar or complementary business as that in which it is now engaged or a
reasonable expansion or extension thereof, and will duly observe and comply with
all applicable laws and all requirements of any governmental authorities
relative to it, its assets or to the conduct of its business, including laws
relating to the environment, pollution control, hazardous materials and
hazardous waste (except where the failure to observe and comply with such laws
or requirements would not materially and adversely affect the condition
(financial or otherwise), properties, business, or results of operations of any
Borrower or the ability of any Borrower to perform its obligations to the
Lender) and will maintain and keep in full force and effect all licenses and
permits necessary to the proper conduct of its business.
5.3 Maintenance and Insurance. Each Borrower will maintain and keep its
properties in good repair, working order and condition so that its business may
be properly and advantageously conducted at all times, and will comply with the
provisions of all material leases to which it is a party or under which it
occupies property so as to prevent any material loss or forfeiture thereof or
thereunder. Each Borrower at all times will maintain insurance with such
insurance companies, in such amounts against such hazards and liabilities and
for such purposes as is customary in the industry for companies of established
reputation engaged in the same or similar businesses and owning or operating
similar properties. Upon request of the Lender from time to time, the Borrowers
shall furnish to the Lender certificates or other evidence satisfactory to the
Lender of compliance with the foregoing insurance provisions.
5.4 Taxes. Each Borrower will pay or cause to be paid all taxes,
assessments or governmental charges on or against it or its properties prior to
such taxes becoming
20
delinquent, except for any tax, assessment or charge which is being contested in
good faith by proper legal proceedings and with respect to which adequate
reserves have been established and are being maintained, provided that no
enforcement action to enforce a lien has been commenced against such Borrower
with respect to any such tax, assessment or charge which is material in amount.
5.5 Limitation of Indebtedness. Except with the prior written consent
of the Lender, no Borrower will create, incur, assume or suffer to exist, or in
any manner become or be liable directly or indirectly with respect to, any
Indebtedness except: (i) the Obligations; (ii) Indebtedness for borrowed money
existing on the date of this Agreement and described on Exhibit B hereto or in
the Initial Financial Statement; (iii) Indebtedness on open account for the
purchase price of services, materials and supplies incurred by such Borrower in
the ordinary course of business, or consisting of open account transactions
between the Borrowers in the ordinary course of business, (in any such case not
as a result of borrowing), so long as all of such open account Indebtedness
shall be promptly paid and discharged when due or in conformity with customary
trade terms and practices, except for any such open account Indebtedness which
is being contested in good faith by such Borrower and as to which adequate
reserves required by GAAP have been established and are being maintained; and
(iv) Indebtedness in respect of capital leases and purchase money security
interests of any Borrower representing obligations permitted to be incurred by
the terms of this Agreement and (except in the case of any such liabilities
assumed by a Borrower in connection with an acquisition permitted by Section
5.7(ii)) incurred in the ordinary course of business and consistent with past
practices; provided, that the aggregate principal amount of Indebtedness
permitted by this clause (iv) shall not exceed $10,000,000 at any one time
outstanding.
5.6 Restrictions on Liens. Without the Lender's prior written consent,
no Borrower will create, incur, assume or suffer to exist any mortgage, pledge,
security interest, lien or other charge or encumbrance, including the lien or
retained security title of a conditional vendor, ("Encumbrances") upon or with
respect to any property or assets, real or personal, of such Borrower, or assign
or otherwise convey any right to receive income, except:
(i) Encumbrances existing on the date of this Agreement and
set forth on Exhibit B hereto;
(ii) Encumbrances in favor of the Lender;
(iii) liens for taxes, fees, assessments and other
governmental charges to the extent that payment of the same is not
required in accordance with the provisions of Section 5.4;
(iv) liens incurred or deposits made in the ordinary course of
such Borrower's business in connection with workers' compensation,
unemployment insurance, social security and other similar laws, or
liens of mechanics, laborers,
21
materialmen, carriers and warehousemen arising by operation of law to
secure payment for labor, materials, supplies or services incurred in
the ordinary course of such Borrower's business, but only if the
payment thereof is not at the time required and such liens do not,
individually or in the aggregate, materially detract from the value or
limit the use of any property subject thereto; or
(v) Encumbrances in respect of the purchase money obligations
permitted to be incurred under Section 5.5(iv), provided that (i) each
such Encumbrance is given solely to secure the purchase price of such
property, does not extend to any other property and is given at the
time of the acquisition of the property, and (ii) the Indebtedness
secured thereby does not exceed the lesser of the cost of such property
or its fair market value at the time such security interest attaches.
5.7 Mergers, Acquisitions and Purchases and Sales of Assets. No
Borrower will (i) consolidate or merge with or into any other corporation or
other entity, provided that any Borrower (other than Starmet Corporation) may
merge or consolidate into or with another Borrower if no Default or Event of
Default has occurred and is continuing or would result from such merger or
consolidation, (ii) acquire the assets or stock of any entity, other than in
connection with acquisitions of interests in other corporations or business
entities engaged in a similar or complementary business as that in which such
Borrower is now engaged or in a reasonable extension or expansion thereof
(either through the purchase of assets or capital stock or otherwise), provided
that (a) each such acquisition is a Permitted Acquisition, and (b) in the case
of a Permitted Acquisition all or a portion of which is paid for in cash, the
aggregate amount of any single such acquisition shall not exceed $7,500,000, and
the aggregate amount of all such acquisitions for all Borrowers shall not exceed
$15,000,000, or (iii) sell, lease, transfer or otherwise dispose of or discount
any portion of its assets (including any note, instrument or account), other
than (a) the sale of finished goods and the disposition of scrap, waste and
obsolete items in the ordinary course of business, and (b) the sale or
disposition of less than 49% of the capital stock of one of its wholly-owned
Subsidiaries for fair market value, provided that prior to such sale or
disposition, the Lender shall have received computations from the Borrowers
(based upon a compliance certificate in the form of Exhibit D hereto) showing
pro forma compliance with the financial covenants set forth in Sections 5.18
through 5.21, inclusive, as of the date of, and after giving effect to, such
sale or disposition, and certifying that immediately prior to, and after giving
effect to such sale or disposition, no Default or Event of Default exists. For
purposes of this Section 5.7, the transfer of assets between the Borrowers shall
not be deemed to be a sale, lease, transfer, disposition or discount of assets.
Notwithstanding the foregoing, each Borrower has the ability to purchase capital
assets in the ordinary course for the expansion of such Borrower's lines of
business.
5.8 Investments and Loans. No Borrower will make or have outstanding at
any time any investments in or loans to any other person, whether by way of
advance, guaranty, extension of credit, capital contribution, purchase of
stocks, notes, bonds or
22
other securities or evidences of Indebtedness, or acquisition of limited or
general partnership interests or interests in any limited liability company,
other than: (i) in direct obligations of the United States of America, maturing
within one year of their issuance; (ii) in time certificates of deposit or
repurchase agreements, maturing within one year of their issuance, from banks or
other financial institutions in the United States having capital, surplus and
undivided profits in excess of $200,000,000; (iii) in short-term commercial
paper carrying the highest rating by Moody's or Standard and Poor's rating
services and issued by corporations headquartered in the United States, in
currency of the United States; (iv) in shares of money-market mutual funds
having assets in excess of $100,000,000 and substantially all of the assets of
which consist of investments referred to in clauses (i) through (iii),
inclusive, above; (v) advances to employees for business related expenses to be
incurred in the ordinary course of business and consistent with past practices
in an amount not to exceed $300,000 in the aggregate outstanding at any one
time, provided that no such advances to any single employee shall exceed
$100,000 in the aggregate; (vi) investments by a Borrower in an Affiliate,
provided that (a) no such investments shall exceed $10,000,000 in the aggregate
for all Borrowers, of which only $5,000,000 in the aggregate may consist of
investments in any one Affiliate, and (b) immediately prior to and after giving
effect to such investment, no Default or Event of Default shall exist; and (vii)
investments in addition to those permitted by this Section 5.8 and disclosed on
Exhibit B attached hereto.
5.9 Restricted Payments No Borrower will, directly or indirectly
(through any Affiliate or otherwise), declare, pay or make any Restricted
Payment. Notwithstanding the foregoing, (a) each Borrower may make payments of
regular compensation and bonuses to employees of such Borrower in the ordinary
course of business and consistent with past practices, (b) each Borrower may
make payments under subsisting management contracts with Affiliates set forth on
Exhibit B, or any renewals or replacements of such contracts, (c) each Borrower
may (i) make distributions to its shareholders and (ii) repurchase shares of its
capital stock, in each case in an amount not to exceed 50% of its Net Income (as
determined in accordance with GAAP) for the preceding fiscal year, provided that
(x) at the time of the declaration of and payment of any such distribution or
repurchase of Shares, and after giving effect thereto, no Default or Event of
Default shall exist, and (y) prior to the declaration of and payment of any such
distribution or repurchase of Shares, the Lender shall have received
computations from the Borrowers (based upon a compliance certificate in the form
of Exhibit D hereto) showing pro forma compliance with the financial covenants
set forth in Sections 5.18 and 5.21, respectively, as of the date of, and after
giving effect to, such distribution or repurchase, and (d) Starmet Corporation
may repay on or after the Closing Date the Debentures (as defined in Section 3.5
of Exhibit B hereto) in an aggregate principal amount not exceeding $2,250,500,
provided that (x) immediately prior to and after giving effect to such
repayment, no Default or Event of Default shall exist, and (y) such repayment is
made with Net Proceeds from the Offering.
5.10 ERISA Compliance.
23
None of the Borrowers, any Plan and any fiduciary thereof shall (i)
engage in any "prohibited transaction" or incur, whether or not waived, any
"accumulated funding deficiency" (both as defined in ERISA and the Code), (ii)
fail to satisfy any additional funding requirements set forth in Section 412 of
the Code and Section 302 of ERISA, or (iii) terminate or withdraw from
participation in any Plan in a manner which could result in the imposition of a
lien on any property of, or impose a substantial withdrawal liability on, any
Borrower. Each Borrower and each Plan shall comply in all material respects with
ERISA.
5.11 Inspection by the Lender; Books and Records. Each Borrower will
permit the Lender or its designees, at any reasonable time and from time to
time, to visit and inspect the properties of such Borrower, to examine and make
copies of the books and records of such Borrower and to discuss the affairs,
finances and accounts of such Borrower with appropriate officers. Without
limitation of the foregoing, the Lender will be permitted to conduct field
examinations from time to time in its discretion, provided that the cost to the
Borrowers of any single field examination shall not exceed $2,500. Each Borrower
will keep adequate books and records of account in which true and complete
entries will be made reflecting all of its business and financial transactions,
and such entries will be made in accordance with GAAP and applicable law.
5.12 Use of Proceeds. The Borrowers will use the proceeds of the Loans
solely for their respective working capital needs and the issuance of Letters of
Credit. No portion of any Loans shall be used for the purpose of purchasing or
carrying any "margin security" or "margin stock" as such terms are used in
Regulations G, U or X of the Board of Governors of the Federal Reserve System.
5.13 Transactions with Affiliates. No Borrower will, directly or
indirectly, enter into any transaction with any Affiliate except in the ordinary
course of business on terms that are no less favorable to such Borrower than
those which might be obtained at the time in a comparable arm's-length
transaction with any person who is not an Affiliate.
5.14 No Amendments to Certain Documents. No Borrower will at any time
cause or permit any of the charter or other incorporation documents or operating
agreement or by-laws of such Borrower (as applicable) to be modified, amended or
supplemented in any material respect whatever, without the express prior written
agreement, consent or approval of the Lender, which consent will not be
unreasonably withheld.
5.15 Subsidiaries. The Borrowers will give the Lender written notice of
the formation after the date hereof of any Subsidiary, and agree that they will
cause any such Subsidiary to engage in the business of conducting branches or
divisions of the business now conducted by the Borrowers or holding any of the
property of the Borrowers, or in reasonable extensions or expansions thereof.
The Borrowers will, at the direction of the Lender, and if such Subsidiary is
wholly owned by a Borrower, cause such Subsidiary to
24
become a party to this Agreement and to such of the other Loan Documents as the
Lender shall require.
5.16 Operating Accounts. The Borrowers will maintain their primary
operating, deposit and disbursement accounts with the Lender.
5.17 Year 2000. Each Borrower will take all action necessary to assure
its computer based systems are able to effectively process data, including
dates, on and after January 1, 2000. The Borrowers will, upon their knowledge
thereof, promptly notify the Lender in writing of any Year 2000 Problem and, at
the request of the Lender, the Borrowers will provide the Lender with assurance
reasonably acceptable to the Lender of the Borrowers' Year 2000 capability.
5.18 Leverage. The Borrowers will not permit the ratio of (i) Total
Liabilities to (ii) Tangible Net Worth as of any fiscal quarter-end to be more
than 0.60 to 1.0.
5.19 Profitability. The Borrowers will not permit their Net Income to
be less than $750,000 as of the end of each fiscal quarter ending on or after
September 30, 1998.
5.20 Interest Coverage. The Borrowers will not permit the ratio of (i)
EBIT to (ii) the aggregate Interest Charges on all Indebtedness of the Borrowers
to be less than 2.0 to 1.0 for each fiscal year of the Borrowers, commencing
with the fiscal year ending September 30, 1999.
5.21 Tangible Net Worth. The Borrowers will not permit their Tangible
Net Worth to be less than the sum of (i) $60,000,000 plus, (ii) on a cumulative
basis, an amount equal to 75% of the Borrowers' positive Net Income earned in
each of their fiscal quarters (commencing with the fiscal quarter ending June
30, 1998). Any quarterly or annual losses incurred by the Borrowers shall not
reduce the amount of Tangible Net Worth required to be maintained from time to
time pursuant to this Section 5.21.
SECTION 6. EVENTS OF DEFAULT; ACCELERATION.
6.1 The following shall constitute events of default (individually, an
"Event of Default"):
(i) default in the payment, when due or payable, of any Obligation for
the payment of money; or
(ii) default in the performance or observance of or compliance with (i)
any of the provisions of Sections 2 (other than the payment of principal and
interest), 5.1, 5.5 through 5.9, inclusive, 5.11 through 5.21, inclusive, of
this Agreement, or (ii) any term or condition of the Note (other than the
payment of principal and interest on the Note), or (iii) any other covenant or
condition of this Agreement, any other Loan Document or any
25
other Obligation not listed previously in this Section, and such default
continues for more than 15 days; or
(iii) any representation or warranty at any time made by or on behalf
of any Borrower in any Loan Document or otherwise shall prove to have been false
in any material respect upon the date when made or deemed to have been made; or
(iv) the occurrence of any default under any agreement, note or other
instrument evidencing or relating to any obligation of any Borrower to any other
person or entity for the payment of $500,000 or more; or
(v) issuance of an injunction which might have a material adverse
effect on the condition (financial or otherwise), properties, business or
results of operations of any Borrower, or attachment which in the aggregate
exceeds $500,000 in value, against any Borrower, any property of any Borrower or
any endorser, guarantor or surety for any Obligation which is not dismissed or
bonded, to the satisfaction of the Lender, within 30 days after its issuance;
(vi) calling of a meeting of creditors, formation or appointment of a
committee of creditors or liquidating agents or offering of a composition or
extension to creditors by, for or with the consent or acquiescence of any
Borrower or any endorser, guarantor or surety for any Obligation;
(vii) Insolvency of any Borrower or any endorser, guarantor or surety
for any Obligation;
(viii) any money judgment or judgments aggregating in excess of
$1,000,000 are entered against any Borrower or any endorser, guarantor or surety
for any Obligation (except to the extent fully covered by insurance and the
insurance carrier has not reserved the right to disallow such claim), and shall
continue unsatisfied and in effect for a period of 30 days, provided that the
total cost of any bond applied in order to procure a stay of execution in any
such litigation shall not exceed $100,000; or
(ix) any Loan Document, or any covenant, agreement or obligation
contained therein or evidenced thereby, shall cease in any material respect to
be legal, valid, binding or enforceable in accordance with its terms, or shall
be cancelled, terminated, revoked or rescinded; or
(x) any action at law, suit in equity or other legal proceeding to
cancel, revoke or rescind any Loan Document shall be commenced by or on behalf
of any Borrower or any other person bound thereby, or by any court or any other
governmental or regulatory authority or agency of competent jurisdiction; or any
court or any other governmental or regulatory authority or agency of competent
jurisdiction shall make a determination that, or shall issue a judgment, order,
decree or ruling to the effect that, any one or more of the Loan Documents, or
any one or more of the obligations of any Borrower or any other
26
person under any one or more of the Loan Documents, are illegal, invalid or
unenforceable in any material respect in accordance with the terms thereof; or
(xi) at any time after the date hereof, more than 50% of the
outstanding shares of any class of voting equity securities of Starmet
Corporation is beneficially owned (as defined in Rule 13d-3 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) by any
"person" or any "group" (as defined in Section 13(d)(3) of the Exchange Act)
other than the person or group owning such percentage of shares on the Closing
Date (after giving effect to the Offering); or
(xii) except as otherwise permitted by Section 5.7(iii), any change in
equity ownership of any Borrower other than Starmet Corporation; or
(xiii) either of the following two persons shall cease to hold their
respective offices as specified or shall cease to perform substantially all of
his duties and responsibilities as such officer for a period of more than thirty
(30) days (exclusive of vacations not in excess of such officer's normal annual
vacation allowance): (A) Xxxxxx X. Xxxxx shall cease to be the President, or (B)
Xxxxx X. Xxxxxxx shall cease to be the Vice President of Finance or Treasurer,
as the case may be, and Chief Financial Officer, of each Borrower and its
Subsidiaries, unless the Lender has determined in its sole discretion that the
occurrence of such event will not have a material adverse effect on the
business, properties or condition (financial or otherwise) of any Borrower.
6.2 If an Event of Default shall occur and be continuing, the Lender
may, at its option, (i) declare any or all of the Obligations of the Borrowers
to the Lender to be immediately due and payable without further notice or
demand, whereupon the same shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrowers, (ii) limit, suspend or terminate the Borrowers'
right to borrow hereunder, and (iii) exercise any rights and remedies under this
Agreement and law; provided that in the event of any Event of Default specified
in Sections 6.1(vi) or 6.1(vii), all Obligations shall become immediately due
and payable automatically and without any requirement of notice from the Lender
or action by the Lender.
SECTION 7. SET OFF.
Any deposits or other sums at any time credited by or due from the
Lender to any Borrower may, without notice (any such notice being expressly
waived hereby) and to the fullest extent permitted by law and without regard to
any source of payment whatsoever, at any time during the continuance of an Event
of Default, be applied to or set off against Obligations on which such Borrower
is primarily liable and may at or after the maturity thereof be applied to or
set off against Obligations on which such Borrower is secondarily liable.
27
SECTION 8. GENERAL.
8.1 Written Notices. Any notices, expressly required by this Agreement
to be in writing, to any party hereto shall be deemed to have been given when
delivered by hand, when sent by telecopier, when delivered to any overnight
delivery service freight pre-paid or 3 days after deposit in the mails, postage
prepaid, and addressed to such party at its address given at the beginning of
this Agreement or at any other address specified in writing. Written notices to
the Borrowers shall be sent to the attention of Xxxxx X. Xxxxxxx, Vice President
of Finance, with a copy to Xxxxxx X. Xxxxxxx, Esq., Peabody & Xxxxxx, 00 Xxxxx
Xxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, and written notices to the Lender shall be
sent to the attention of Xxxxxxx X. Xxxxx XX, Vice President, with a copy to
Xxxxxx X. Xxxxxx, Esq., Goulston & Storrs, P.C., 000 Xxxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000-0000. Any notice, unless otherwise specified, may be given
orally or in writing.
8.2 No Waivers. No failure or delay by the Lender in exercising any
right, power or privilege hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise thereof 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 otherwise provided by law.
8.3 Further Assurances. The Borrowers shall do, make, execute and
deliver all such additional and further acts, things, assurances, and
instruments as the Lender may reasonably require more completely to vest in
and assure to the Lender its rights hereunder and under the other Loan
Documents and to carry into effect the provisions and intent of this
Agreement and the other Loan Documents.
8.4 Governing Law. This Agreement and the other Loan Documents shall be
deemed to be contracts made under seal and shall be construed in accordance with
and governed by the laws of The Commonwealth of Massachusetts (without regard to
conflicts of laws rules). Any legal action or proceeding arising out of or
relating to this Agreement or any Obligation may be instituted in the courts of
The Commonwealth of Massachusetts or of the United States of America for the
District of Massachusetts, and each Borrower hereby irrevocably submits to the
jurisdiction of each such court in any such action or proceeding; provided,
however, that the foregoing shall not limit the Lender's rights to bring any
legal action or proceeding in any other appropriate jurisdiction.
8.5 Expenses, Taxes and Indemnification.
(a) The Borrowers will pay and indemnify and hold the Lender harmless
against all taxes (other than taxes on the income of the Lender), charges and
expenses of every kind or description, including without limitation attorneys'
fees and expenses and the costs and expenses of field audits and commercial
finance exams, reasonably incurred or
28
expended by the Lender in connection with or in any way related to the Lender's
relationship with the Borrowers, whether hereunder or otherwise.
(b) The Borrowers shall absolutely and unconditionally indemnify and
hold the Lender harmless against any and all claims, demands, suits, actions,
causes of action, damages, losses, settlement payments, obligations, costs,
expenses and all other liabilities whatsoever which shall at any time or times
be incurred or sustained by the Lender or by any of its shareholders, directors,
officers, employees, subsidiaries, affiliates or agents (except any of the
foregoing incurred or sustained as a result of the gross negligence or willful
misconduct of the Lender) on account of, or in relation to, or in any way in
connection with, associated with or ancillary to this Agreement, the other Loan
Documents and the other documents executed or delivered in connection herewith,
and the arrangements or transactions contemplated therein, whether or not all or
any of the transactions contemplated by, associated with or ancillary to this
Agreement or any of such documents are ultimately consummated.
8.6 Amendments, Waivers, Etc. This Agreement, the Note and the other
Loan Documents and any provision hereof or thereof may be waived, discharged or
terminated only by an instrument in writing signed by the Lender and may be
amended only by an instrument in writing signed by the Borrowers and the Lender.
8.7 Binding Effect of Agreement. This Agreement shall be binding upon
and inure to the benefit of the Borrowers and the Lender and their respective
successors and assigns. The Lender may sell, assign or otherwise transfer all or
any portion of its right, title and interest in, and its obligations under, this
Agreement, the Loans made and to be made hereunder, or grant participations in
its right, title and interest herein and therein. The Borrowers may not assign
or transfer their rights or obligations hereunder.
8.8 Computation of Interest and Fees, Etc. Interest, fees and charges
shall be computed daily on the basis of a year of 360 days and paid for the
actual number of days for which due. If the due date for any payment of
principal is extended by operation of law, interest shall be payable for such
extended time. If any payment required by this Agreement becomes due on a day on
which banks in Boston, Massachusetts are required or permitted by law or an
appropriate authority to remain closed, such payment may be made on the next
succeeding day on which such banks are open, and such extension shall be
included in computing interest in connection with such payment. All payments
required of the Borrowers hereunder or under the Note shall be made in lawful
money of the United States of America in federal or other funds immediately
available to the recipient thereof at the prescribed place of payment.
8.9 Entire Agreement; Miscellaneous. This Agreement, including the
exhibits hereto, sets forth the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein, and supersedes
all prior agreements, promises, covenants, arrangements, communications,
representations, warranties, whether oral or written, by any officer, employee
or representative of any party hereto. The captions for
29
the sections of this Agreement are for ease of reference only and are not an
integral part of this Agreement. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures hereto and thereto were
upon the same instrument. The provisions of this Agreement are severable, and if
any of these provisions shall be held by any court of competent jurisdiction to
be unenforceable, such holdings shall not affect or impair any other provision
hereof.
8.10 Use of Term "Borrowers". Each Borrower expressly acknowledges and
agrees that the Obligations constitute the obligations of the Borrowers jointly
and severally, and, as used herein (unless the context clearly indicates
otherwise), the term "Borrowers" shall mean, on a joint and several basis, each
and every Borrower, and, accordingly, each covenant, representation, warranty,
obligation or requirement applicable to the Borrowers hereunder or under any
other Loan Document shall be independently applicable to each and every
Borrower.
In connection with the foregoing, each Borrower (other than Starmet
Corporation) hereby appoints Starmet Corporation as its true and lawful
attorney-in-fact for any and all purposes relating to the Agreement, the other
Loan Documents or the Obligations. Each Borrower (other than Starmet
Corporation) acknowledges to each of Starmet Corporation and the Lender that the
foregoing appointment is irrevocable and coupled with an interest. Each Borrower
represents and warrants to the Lender that the Lender shall be entitled to rely
on any action, notice, communication of Starmet Corporation as being the act,
notice, or communication, as the case may be, of each Borrower, unless expressly
instructed in writing by Starmet Corporation to the contrary.
8.11 WAIVER OF JURY TRIAL. EACH BORROWER HEREBY IRREVOCABLY WAIVES
TRIAL BY JURY IN ANY JURISDICTION AND IN ANY COURT WITH RESPECT TO, IN
CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE OBLIGATIONS, OR ANY
INSTRUMENT OR DOCUMENT DELIVERED PURSUANT HERETO OR THERETO, OR ANY CLAIM OR
DISPUTE HOWSOEVER ARISING, BETWEEN THE BORROWERS AND THE LENDER. THIS WAIVER
SHALL BE EFFECTIVE FOR EACH DOCUMENT EXECUTED BY THE BORROWERS OR THE LENDER AND
DELIVERED TO THE LENDER OR THE BORROWERS, AS THE CASE MAY BE, WHETHER OR NOT
SUCH DOCUMENT SHALL CONTAIN A WAIVER OF JURY TRIAL. EACH BORROWER FURTHER
ACKNOWLEDGES THAT ALL DOCUMENTS DELIVERED BY THE LENDER OR THE BORROWERS ARE
SUBJECT TO THIS WAIVER OF JURY TRIAL AS TO ANY ACTION THAT MAY BE BROUGHT AS TO
ANY OF SUCH DOCUMENTS, AND CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND
FREELY MADE.
30
WITNESS the execution hereof under seal on the day and year first above
written.
STARMET CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
----------------------
Name: Xxxxx X. Xxxxxxx
Title: CFO
STARMET POWDERS, LLC
By: /s/ Xxxxx X. Xxxxxxx
----------------------
Name: Xxxxx X. Xxxxxxx
Title: Treasurer
STARMET AEROCAST, LLC
By: /s/ Xxxxx X. Xxxxxxx
----------------------
Name: Xxxxx X. Xxxxxxx
Title: Treasurer
STARMET COMMERCIAL CASTINGS, LLC
By: /s/ Xxxxx X. Xxxxxxx
----------------------
Name: Xxxxx X. Xxxxxxx
Title: Treasurer
STARMET NMI CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
----------------------
Name: Xxxxx X. Xxxxxxx
Title: Treasurer
STARMET CMI CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
----------------------
Name: Xxxxx X. Xxxxxxx
Title: Treasurer
31
STARMET HOLDINGS CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
----------------------
Name: Xxxxx X. Xxxxxxx
Title: Treasurer
NMI FOREIGN SALES CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
----------------------
Name: Xxxxx X. Xxxxxxx
Title: Treasurer
STATE STREET BANK AND TRUST COMPANY
By: /s/ Xxxxxxx X. Xxxxx XX
------------------------
Name: Xxxxxxx X. Xxxxx XX
Title: Vice President
32
Exhibit A
REVOLVING CREDIT NOTE
$10,000,000.00 Date: May 28, 1998
FOR VALUE RECEIVED, the undersigned (hereinafter, together with their
respective successors in title and assigns, collectively called the
"Borrowers"), by this promissory note (hereinafter, together with the Schedule
annexed hereto, called "this Note"), absolutely and unconditionally, and jointly
and severally, promise to pay to the order of State Street Bank and Trust
Company (hereinafter, together with its successors in title and assigns, called
the "Lender"), the principal sum of Ten Million and 00/100 Dollars
($10,000,000.00), or so much thereof as shall have been advanced by the Lender
to the Borrowers by way of Revolving Loans under the Loan Agreement (as
hereinafter defined) and shall remain outstanding, such payment to be made as
hereinafter provided, and to pay interest on the principal sum outstanding
hereunder from time to time from the date hereof until the said principal sum or
the unpaid portion thereof shall have become due and payable as hereinafter
provided.
Capitalized terms used herein without definition shall have the meaning
set forth in the Loan Agreement.
The unpaid principal (not at the time overdue) under this Note shall
bear interest at the rate or rates from time to time in effect under the Loan
Agreement. Accrued interest on the unpaid principal under this Note shall be
payable on the dates specified in the Loan Agreement.
On February 28, 2000, the date of the final maturity of this Note,
there shall become absolutely due and payable by the Borrowers hereunder, and
the Borrowers hereby jointly and severally promise to pay to the Lender, the
balance (if any) of the principal hereof then remaining unpaid, all of the
unpaid interest accrued hereon and all (if any) other amounts payable on or in
respect of this Note or the indebtedness evidenced hereby.
Each overdue amount (whether of principal, interest or otherwise)
payable on or in respect of this Note or the indebtedness evidenced hereby shall
(to the extent permitted by applicable law) bear interest at the rates and on
the terms provided by the Loan Agreement. The unpaid interest accrued on each
overdue amount in accordance with the foregoing terms of this paragraph shall
become and be absolutely due and payable by the Borrowers to the Lender on
demand by the Lender. Interest on each overdue amount will continue to accrue as
provided by the foregoing terms of this paragraph, and will (to the extent
permitted by applicable law) be compounded daily until the obligations of the
Borrowers in respect of the payment of such overdue amount shall be discharged
(whether before or after judgment).
A-1
Each payment of principal, interest or other sum payable on or in
respect of this Note or the indebtedness evidenced hereby shall be made by the
Borrowers directly to the Lender in United States dollars, at the address of the
Lender set forth in the Loan Agreement, on the due date of such payment, and in
immediately available and freely transferable funds. All payments on or in
respect of this Note or the indebtedness evidenced hereby shall be made without
set-off or counterclaim and free and clear of and without any deductions,
withholdings, restrictions or conditions of any nature.
This Note is made and delivered by the Borrowers to the Lender pursuant
to the Loan Agreement, dated as of May 28, 1998, by and among the Borrowers and
the Lender (hereinafter, as originally executed, and as now or hereafter varied
or supplemented or amended and restated, called the "Loan Agreement"). This Note
evidences the joint and several obligations of the Borrowers (a) to repay the
principal amount of the Revolving Loans made by the Lender to the Borrowers
pursuant to the Loan Agreement; (b) to pay interest, as herein and therein
provided, on the principal amount hereof remaining unpaid from time to time; and
(c) to pay other amounts which may become due and payable hereunder or
thereunder as herein and therein provided.
The Borrowers will have the right to prepay the unpaid principal of
this Note in full or in part upon the terms contained in the Loan Agreement. The
Borrowers will have an obligation to prepay principal of this Note from time to
time if and to the extent required under, and upon the terms contained in, the
Loan Agreement. Any partial payment of the indebtedness evidenced by this Note
shall be applied in accordance with the terms of the Loan Agreement.
Pursuant to and upon the terms contained in Section 6 of the Loan
Agreement, the entire unpaid principal of this Note, all of the interest accrued
on the unpaid principal of this Note and all (if any) other amounts payable on
or in respect of this Note or the indebtedness evidenced hereby may be declared
to be immediately due and payable, whereupon the entire unpaid principal of this
Note, all of the interest accrued on the unpaid principal of this Note and all
(if any) other amounts payable on or in respect of this Note or the indebtedness
evidenced hereby shall (if not already due and payable) forthwith become and be
due and payable to the Lender without presentment, demand, protest or any other
formalities of any kind, all of which are hereby expressly and irrevocably
waived by the Borrowers, excepting only for notice expressly provided for in the
Loan Agreement.
All computations of interest payable as provided in this Note shall be
computed by the Lender daily on the basis of a 360 day year and paid for the
actual number of days for which due. The interest rate in effect from time to
time shall be determined in accordance with the terms of the Loan Agreement.
A-2
Should all or any part of the indebtedness represented by this Note
be collected by action at law, or in bankruptcy, insolvency, receivership or
other court proceedings, or should this Note be placed in the hands of
attorneys for collection after default, the Borrowers hereby jointly and
severally promise to pay to the holder of this Note, upon demand by the
holder hereof at any time, in addition to principal, interest and all (if
any) other amounts payable on or in respect of this Note or the indebtedness
evidenced hereby, all court costs and attorneys' fees and all other
collection charges and expenses reasonably incurred or sustained by the
holder of this Note.
The Borrowers hereby irrevocably waive notice of acceptance,
presentment, notice of nonpayment, protest, notice of protest, suit and all
other conditions precedent in connection with the delivery, acceptance,
collection and/or enforcement of this Note or any collateral or security
therefor, except for notices expressly provided for in the Loan Agreement. The
Borrowers hereby absolutely and irrevocably consent and submit to the
jurisdiction of the courts of the Commonwealth of Massachusetts and of any
federal court located in Suffolk County in the said Commonwealth in connection
with any actions or proceedings brought against the Borrowers by the holder
hereof arising out of or relating to this Note.
This Note is intended to take effect as a sealed instrument. This Note
and the obligations of the Borrowers hereunder shall be governed by and
interpreted and determined in accordance with the laws of the Commonwealth of
Massachusetts without regard to its law relating to choice of law.
Each of the Borrowers shall be jointly and severally liable for the
full amount owing under this Note.
IN WITNESS WHEREOF, this REVOLVING CREDIT NOTE has been duly executed
by the undersigned on the day and in the year first above written in Boston,
Massachusetts.
STARMET CORPORATION
By:
---------------------------------
Name:
Title:
STARMET POWDERS, LLC
By:
---------------------------------
Name:
Title:
A-3
STARMET AEROCAST, LLC
By:
---------------------------------
Name:
Title:
STARMET COMMERCIAL CASTINGS, LLC
By:
---------------------------------
Name:
Title:
STARMET NMI CORPORATION
By:
---------------------------------
Name:
Title:
STARMET CMI CORPORATION
By:
---------------------------------
Name:
Title:
STARMET HOLDINGS CORPORATION
By:
---------------------------------
Name:
Title:
NMI FOREIGN SALES CORPORATION
By:
---------------------------------
Name:
Title:
A-4
SCHEDULE TO REVOLVING CREDIT NOTE
DATE AMOUNT TYPE OF LOAN INTEREST INTEREST AMOUNT PAID NOTATION
OF LOAN (PRIME RATE RATE* PERIOD** MADE BY
OR LIBOR)
----------- ---------- -------------- ------------- -------------- ------------- ---------------
----------------------------
* For Prime Rate Loans, insert "Prime Rate"
For Libor Loans, insert "Libor Loan Rate"
-- For Libor Loans only
A-5
Exhibit B
DISCLOSURE
[To be inserted by Borrowers]
B-1
Exhibit B
Disclosure Schedule
Section 3.1
Organization and Qualification
FSC is not in good standing in the U.S. Virgin Islands.
Entity Qualified In
Starmet Corporation (MA Corporation) MA
Starmet NMI Corporation (MA Corporation) MA
Starmet CMI Corporation (DE Corporation) DE, SC
Starmet Commercial Castings, LLC (DE LLC) DE, MA
Starmet Aerocast, LLC (DE LLC) DE, MA
Starmet Powders, LLC (DE LLC) DE, MA
Starmet Holdings Corporation (MA Corporation) MA
NMI Foreign Sales Corporation (U.S. Virgin Islands
Corporation)
Exhibit B
Disclosure Schedule
Section 3.3
Title to Properties
Leases: Contract Value Date Term
ALCO Capital Purchase Order #100717 $76,260.00 06/22/94 5 yr lease
RESOURCE INC.
AT&T Equipment Lease #0004721 $77,101.91 05/13/97 5 yr lease
IKON Purchase Order #100990 $129,000.00 12/30/96 5 yr lease
Liens:
1. The CMI IRB (defined in Section 3.5) is secured by a lien on the South
Carolina real property.
2. The Palmetto Loans (defined in Section 3.5) are secured by mortgages on
CMI's property, subordinated to the CMI IRB lien.
Exhibit B
Disclosure Schedule
Section 3.4
Compliance
1. StarMet Corporation ("Starmet" or the "Company") is named as a
Potentially Responsible Party in regard to the Xxxxx Flats, Kentucky,
Superfund Site.
2. StarMet has received a notice of responsibility letter from the state
of Massachusetts in regards to a closed holding basin facility on its
property in Concord, Massachusetts. The basin facility and the Concord
property have been classified as a priority disposal site, requiring
remediation. Pursuant to a Supplemental Memorandum of Decision, the
U.S. Army agreed to pay the Company for the removal of the holding
basin material. StarMet has entered into a sub-contract with Zhagrus
Environmental, Inc. for the disposal of any hazardous waste at the
basin facility. By letter dated May 11, 1998 the Company was notified
by Zhagrus that Zhagrus expected to incur additional costs in
connection with its work under the disposal contract, and a request by
Zhagrus that the Company pay Zhagrus for such additional costs. Without
admitting liability, the Company (i) has requested further information
from Zhagrus regarding this issue in order to determine if it is liable
and (ii) intends to request a contract price modification for any
liability for such additional cost under its contract with the U.S.
Army.
3. As part of the five-year relicensing process under the federal Nuclear
Regulatory Commission (NRC), StarMet was reissued NRC licenses for both
the Concord and Barnwell facilities. The relicensing program is now
being administered in Massachusetts by the Massachusetts Department of
Public Health ("DPH"), and in the State of South Carolina by the South
Carolina Department of Health and Environmental Control ("DHEC").
StarMet has approached both DPH and DHEC regarding (i) the transfer of
the Concord license to StarMet NMI Corporation and (ii) changing the
name of the Barnwell license to reflect CMI's change of name.
StarMet has had ongoing discussions with the these agencies regarding
Decontamination and Decommissioning funding and financial assurance
plans. At present, StarMet has posted letters of credit with each of
DPH and DHEC in the respective amounts of (i) $750,000 for DPH and (ii)
$2,800,000 and $73,024 for DHEC as security for Decontamination and
Decommissioning expenses.
4. The Company is currently in default of various financial covenants of
its existing credit facility with State Street.
Exhibit B
Disclosure Schedule
Section 3.5
Financials
Other Indebtedness
- $3,200,000 Xxxxxxxx County, South Carolina Industrial Development
Revenue Note, September 27, 1984 (Carolina Metals, Inc.) (the "CMI
IRB")
- $500,000.00 Loan to Palmetto Federal Savings Bank of South Carolina
("Palmetto"), November 29, 1995, and a separate letter of credit in the
amount of $73,024, as well as a $995,000 Loan from Palmetto and Lower
Savannah Regional Development Corporation dated March 20, 1998 (Starmet
CMI as Obligor and StarMet as Guarantor) (collectively, the "Palmetto
Loans")
- StarMet Corporation has issued subordinated debentures to the following
individuals (collectively, the "Debentures"):
Date of Maturity
Name Issue Date Amount
Xxxxxx Xxxxxx 10-Jan-96 30-Sep-98 $ 83,500
WIAF Investors 10-Jan-96 30-Sep-98 334,000
Xxxxxx Xxxxxxxx 10-Jan-96 30-Sep-98 83,000
Xxxxxxxx Xxxxxx 16-Sep-96 30-Sep-98 25,000
Xxxxxxx Xxxxxx 16-Sep-96 30-Sep-98 225,000
Xxxxx Xxxxxx 16-Sep-96 30-Sep-98 100,000
Xxxxx Xxxxxx 09-Sep-97 22-Sep-00 500,000
WIAF Investors 23-Dec-97 31-Dec-99 500,000
Xxxxxx Xxxxxx 23-Dec-97 31-Dec-99 150,000
Xxxxxxxx Xxxxxx 23-Dec-97 31-Dec-99 50,000
Xxxxxx Xxxxxxxx 23-Dec-97 31-Dec-99 50,000
Xxxxxx Xxxxxxxx 23-Dec-97 31-Dec-99 150,000
------------
$ 2,250,500
------------
------------
This information is also set forth on the Initial Financial Statement.
Exhibit B
Disclosure Schedule
Section 3.8
Litigation
On December 9, 1997, Brush Xxxxxxx, Inc. filed a patent infringement
suit against Starmet Corporation in the United States District Court for the
District of Massachusetts, alleging patent infringement of its process patent
for investment casting of beryllium aluminum alloys and seeking an injunction
and monetary damages. On March 28, 1998 the U.S. Patent and Trademark Office
granted the Company's request for reexamination of the previously issued Brush
Xxxxxxx patent which served as the basis for its complaint. This matter is set
forth in further detail in the Registration Statement.
Exhibit B
Disclosure Schedule
Section 3.10
Contracts With Affiliates
1. Starmet Corporation expects to license or assign various intellectual
property that it owns to its operating subsidiaries.
2. Each of Starmet Corporation, Starmet Powders, Starmet Commercial
Castings and Starmet Aerocast lease a portion of space at the Concord
facility from Starmet NMI Corporation pursuant to a lease dated
October 1, 1997.
3. Agreement, effective March 1, 1993, between Starmet and Xxxxxxxx
Associates Limited.
4. Agreement, effective March 1, 1993, between Starmet and Xxxxxx X.
Xxxxxx.
Exhibit B
Disclosure Schedule
Section 3.11
Disclosure
The following document, and all Exhibits thereto, relating to Starmet
Corporation, which was previously filed with the SEC, is hereby incorporated
by reference to this Exhibit B for the purposes of additional disclosure:
1. The Registration Statement.
Any disclosure set forth in any section of this Exhibit B will be
sufficient to disclose such item notwithstanding any other section which, by its
terms, would require the item to be disclosed there.
Exhibit B
Disclosure Schedule
Section 3.12
Subsidiaries
1. Trio Star, LLC, a joint venture with R-Cubed Composites, Inc. and
Advanced Product Labs.
Exhibit C
STARMET CORPORATION AND SUBSIDIARIES
State Street Bank and Trust Company
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Re: Loan Agreement dated as of May 28, 1998 (the "Agreement")
Ladies and Gentlemen:
Pursuant to Section 2.4 of the Agreement, the undersigned hereby
confirms its request made on _______________, 19__ for a [Prime Rate] [Libor]
Loan in the amount of $_______________ on _______________, 19__.
[The Interest Period applicable to said Loan will be [one] [two]
[three] [six] months.]*
[Said Loan represents a [conversion] [continuation] of a [Prime Rate]
[Libor] Loan in the same amount made on ____________________.]**
The representations and warranties contained or referred to in
Section 3 of the Agreement are true and accurate in all material respects on
and as of the effective date of the Loan (or continuation or conversion) as
though made on and as of such date (except to the extent that such
representations and warranties expressly relate to an earlier date); and no
Default or Event of Default has occurred and is continuing or will result
from the Loan (or continuation or conversion) to be made pursuant to this
request.
STARMET CORPORATION
STARMET POWDERS, LLC
STARMET AEROCAST, LLC
STARMET COMMERCIAL CASTINGS, LLC
STARMET NMI CORPORATION
STARMET CMI CORPORATION
STARMET HOLDINGS CORPORATION
NMI FOREIGN SALES CORPORATION
By:
------------------------------------
In his capacity as Treasurer of
each of the above-named
Borrowers and hereunto duly
authorized by each of the
above-named Borrowers
-----------------------------------
* To be inserted in any request for a Libor Loan.
** To be inserted in any request for a conversion or continuation
C-1
Exhibit D
CERTIFICATE OF CHIEF FINANCIAL OFFICER
STARMET CORPORATION, STARMET POWDERS, LLC, STARMET AEROCAST, LLC,
STARMET COMMERCIAL CASTINGS, LLC, STARMET NMI CORPORATION, STARMET CMI
CORPORATION, STARMET HOLDINGS CORPORATION and NMI FOREIGN SALES CORPORATION
(collectively, the "Borrowers") HEREBY CERTIFY THAT:
This Certificate is furnished pursuant to Section 5.1(iv) of the Loan
Agreement dated as of May 28, 1998 among the Borrowers and State Street Bank and
Trust Company (the "Agreement"). Unless otherwise defined herein, the terms used
in this Certificate and Schedule 1 attached hereto have the meanings described
in the Agreement.
As required by Section 5.1(i) or (ii) of the Agreement, Consolidated
financial statements of the Borrowers for the (year) (quarter) ended _________,
19__ (the "Financial Statements") prepared in accordance with GAAP (subject, in
the case of quarterly statements, to normal year-end audit adjustments, none of
which are or will be materially adverse) accompany this Certificate. The
Financial Statements present fairly the Consolidated financial position of the
Borrowers as at the date thereof and the Consolidated results of operations of
the Borrowers for the period covered thereby.
Schedule 1 attached hereto sets forth financial data and computations
evidencing the Borrowers' compliance with the covenants of the Agreement set
forth in Sections 5.18 through 5.21, inclusive, all of which data and
computations, to the best of the knowledge and belief of the chief financial
officer ("Chief Financial Officer") executing and delivering this Certificate on
behalf of the Borrowers, are true, complete and correct.
The activities of the Borrowers during the period covered by the
Financial Statements have been reviewed by the Chief Financial Officer and by
employees or agents under his immediate supervision. Based on such review, to
the best knowledge and belief of the Chief Financial Officer, during the period
covered by the Financial Statements, and as of the date of this Certificate, (a)
the Borrowers have, or have caused to have, kept, observed, performed and
fulfilled each and every covenant and condition of the Agreement (except to the
extent waived by Lender and noted on Schedule 1 attached hereto) and the Note,
and (b) no Default or Event of Default has occurred or is occurring.
Witness my hand this ____ day of ____________, 19__.
STARMET CORPORATION
STARMET POWDERS, LLC
D-1
STARMET AEROCAST, LLC
STARMET COMMERCIAL CASTINGS, LLC
STARMET NMI CORPORATION
STARMET CMI CORPORATION
STARMET HOLDINGS CORPORATION
NMI FOREIGN SALES CORPORATION
By:______________________________________
In his capacity as Chief
Financial Officer of each of
the above-named Borrowers and
hereunto duly authorized by
each of the above-named
Borrowers
D-2
Exhibit E
CLOSING AGENDA
STATE STREET BANK AND TRUST COMPANY ("SSB")
$10,000,000 REVOLVING CREDIT FACILITY
TO
STARMET CORPORATION AND SUBSIDIARIES
_____________ __, 1998
------------------------------------------------------------------------
LENDER: State Street Bank and Trust Company ("SSB")
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Xxxxxxx X. Xxxxx XX, Vice President
Tel.: (000) 000-0000
Fax: (000) 000-0000
BORROWERS: Starmet Corporation and Subsidiaries ("Borrowers")
0000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Xxxxxx X. Xxxxx, President
Xxxxx X. Xxxxxxx, Vice President of Finance
Phone: ( )
Fax: ( )
LENDER'S COUNSEL: Goulston & Storrs ("G&S")
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Xxxxxx X. Xxxxxx, Esq.
Tel.: (000) 000-0000
Fax: (000) 000-0000
BORROWERS' Peabody & Xxxxxx ("P&A")
COUNSEL: 00 Xxxxx Xxxxx
X-0
Xxxxxx, XX 00000
Xxxxxx X. Xxxxxx, Esq.
Tel.: (000) 000-0000
Fax: (000) 000-0000
E-2
RESPONSIBILITY DOCUMENT
A) FINANCING DOCUMENTS
G&S 1. Loan Agreement
P&A/BORROWER a. Disclosure Schedule
G&S 2. Revolving Credit Note ($10,000,000)
Borrower 3. Miscellaneous
(a) Notice of Borrowing
(b) Wire Instructions
(c) Financial Statements
(d) Offering Documents
(e) Evidence of Insurance
P&A 4. UCC-11 (tax and UCC) searches for
each Borrower (MA, SC, others?)
P&A 5. UCC-3 termination statements to be
filed with appropriate filing
offices
B) CORPORATE PROCEEDINGS
P&A/(G&S Form) 6. Officers'/Manager's Certificate for
each Borrower
(a) Certified Articles of
Organization/Certified
Certificate of Incorporation
/Certificate of Formation
(b) By-Laws/Operating Agreement
(c) Borrowing Resolutions
(d) Incumbency
P&A 7. Long-form Legal Existence and Good
Standing Certificates for each
Borrower from MA, DEL and SC
(as applicable)
P&A [8. Foreign Qualification Certificates
for each Borrower
from __________]
C) LEGAL OPINION
P&A/(G&S Form) 9. Opinion of P&A, as counsel to each
Borrower, as to Due Authorization,
Execution, Delivery,
E-3
Enforceability, Etc., delivered to
SSB (including with respect to the
Offering)
D) POST-CLOSING
10. Tax Good Standing Certificate for
each Borrower from MA, DEL and SC
(as applicable)
E-4
FORM OF LEGAL OPINION OF
PEABODY & XXXXXX
[To be modeled on Boston Acoustics Opinion, with appropriate modifications]
