Fansteel, FMRI, and Green Lantern Acquisition Request for ...

FanWeilman Dynamics Corporation * Fansteel de Mexico (d.b.a. Intercast) - American Sintered Technologies

1746 Commerce RoadCreston, Iowa 50801 U.S.A.

(P) 641-782-8521 * (F) 641-782-5390

VIA FEDEX

June 21, 2011

Attention: Document Control Desk

United States Nuclear Regulatory Commission

One White Flint North

11555 Rockville Pike

Rockville, Maryland 20852 U.S.A.

Copies To: Larry W. Camper, Director

Division of Waste Management and Environmental Protection

Office of Federal and State Materials and Environmental Management Programs


Keith McConnell, Deputy Director




James Shepherd, Project Engineer




Re: Request for License Modification

NRC License No. SMB-911

Docket No. 40-7580

Dear Sir or Madam:

Pursuant to 10 C.F.R. § 40.46, Fansteel Inc. ("Fansteel"), FMRI, Inc. ("FMRI") and Green Lantern

Acquisition 1, LLC ("GLAl") hereby join in this request for prior written consent for the

modification of the referenced license. This request is being filed in conjunction with your

Page I1

Fanjjadconsideration of the Application for Consent to Indirect Change of Control of FMRI, Inc. dated and

submitted as of June 21, 2011.

The following information is provided to assist the Nuclear Regulatory Commission ("NRC") in itsreview pursuant to NUREG-1556, Volume 15, "Consolidated Guidance About Materials Licenses:

Guidance About Changes of Control and About Bankruptcy Involving Byproduct, Source, or Special

Nuclear Materials Licenses".

Description of the Transaction

At present, Fansteel owns one hundred percent (100%) of the equity securities of FMRI, aspecial purpose entity created for the remediation of the Muskogee Site.

Fansteel proposes to sell GLA1, and GLA1 proposes to purchase, one hundred percent (100%) of

the equity securities of FMRI. After the proposed transaction closes, GLA 1 will own one hundred

percent (100%) of the equity securities of FMRI and will become the parent company of FMRI.

The transaction does not and will not change the name of FMRI. After completion of the

transaction, FMRI will remain the holder of NRC License No. SMB-911. There are no anticipated

changes in FMRI personnel and FMRI remains technically and financially qualified as the licensee

and will continue to fulfill all responsibilities as the licensee. Moreover, the additional economic

and technical resources of GLA 1 will substantially enhance FMRI's commitment to meet all of its

obligations under the license and it is anticipated that a timelier remediation will be effected (please

see Exhibit "A" of the Application for Consent to Indirect Change of Control).

Current FMRI employees responsible for licensed materials and activities are anticipated to

maintain responsibility for such materials and activities after the closing of the transaction.

Proposed supplements to the existing team include The Environmental Quality Company, as the

licensed and bonded general contractor, and Integrated Environmental Management, Inc. as thetechnical advisor for all radiation related matters.

The indirect change of control of FMRI from Fansteel to GLA 1 will not affect the organizational or

operational structure described in NRC License No. SMB-911. Further, there will be no change in the

operating organization, location, facilities, equipment or procedures associated with the

licensed activities; and there will be no change in the use, possession, locations or storage oflicensed materials as a result of the transaction. FM RI's licensed activities will continue in their

current form without interruption of any kind resulting from the Indirect Change of Control. It is

anticipated that the pace of remediation will be increased, facilitated by the enhancements to

financial and technical resources represented by the proposed Indirect Change in Control.

Changes of Personnel

FMRI's current executive management structure comprises a Board of Directors with one (1)

member and one (1) corporate officer. The member and officer is currently the same person, who

is a U.S. citizen, Robert R. Compernolle.

Page I 2

FanThe composition of the Board of Directors and corporate officers will change as a result of the

transaction. At close, it is expected that Robert R. Compernolle will resign from the Board of

Directors and as an officer of FMRI. Prior to resigning, Robert R. Compernolle will appoint, as

directed by GLA 1, new Director(s) and new officer(s). It is expected that Greg Marshall, a U.S.

citizen, will be appointed as a Director and the sole corporate officer, President, of FMRI.

Additionally Todd Packard, a U.S. citizen, will be appointed as a Director. Until the NRC approves the

Indirect Change of Control request, Robert R. Compernolle will remain on the Board of Directors

and as an Officer of FMRI.

Changes of Location, Equipment and Procedures

None. The Transaction will not result in changes in FMRI's headquarters or operational

organization, location, facilities, equipment or procedures related to NRC License No. SMB-911.

There will not be any changes in the use, possession, location or storage of licensed materials as a

result of the Indirect Change of Control.

Surveillance Records

None. The Indirect Change of Control does not affect FMRI's surveillance records. All licensed

activities of FMRI, including all required surveillance, have been performed, documented and

reviewed (including the results, as appropriate), and will continue on an ongoing basis without

interruption. All required surveillance is current and will continue to be current. All surveillance

items and records have been and will continue to be maintained in their existing state and in

accordance with all applicable requirements.

Decommissioning and Related Records Transfers

None. The Indirect Change of Control will not affect FMRI's decommissioning records and

all records will remain in FMRI's custody. The Transaction will not involve the physical relocation

of any records and all records concerning the safe and effective decommissioning of FMRI's

Muskogee Site continue to remain with FMRI. The status of the licensed facilities, including but not

limited to the status of decontamination and decommissioning activities, remains identical to

their status prior to the Transaction. FMRI continues to maintain all records in the same manner as

done previously.

Transferee's Commitment to Abide by the Transferor's Commitments

The Indirect Change of Control of FMRI from Fanseel to GLA 1 does not create a new licensee

and does not change any of FMRI's existing commitments under the NRC License. FMRI, as the

holder of this license, will continue to abide by all commitments contained in NRC License No.

SMB-911. In addition, upon closing GLA 1 will abide by all of FMRI's commitments (reference

Exhibit "D" of the Application for Consent to Indirect Change of Control).

Page I 3

Proposed Revisions to License SMB-911

Appended hereto as Attachment "A" is a markup of License No. SMB-911 to reflect changes

necessary to effect the transaction between Fansteel and FMRI.

The Indirect Change of Control will not affect FMRI's continued compliance with requirements for

financial assurance for decommissioning nor modify any of the License Conditions that pertain to

financial assurance.

The proposed changes to License are as follows:

" License Condition No. 1. Strike "(a subsidiary of Reorganized Fansteel)".

" License Condition No. 2 through 24. No change.

" License Condition No. 25. Change "Fansteel" to "FMRI".

" License Condition 26 through 54. No change.

" Change the condition precedent paragraph, ie. the final paragraph, to: "If the transactiondoes not close on or before August 3, 2011, including without limitation, the executionand delivery of all required documents, this amendment shall become null and void.However, on written application and for good cause shown, this date may be extended inwriting."

Proposed Revisions to Financial Assurance

Concurrent with the Commission's review of the transaction, each of the parties to the transaction,including Fansteel, FMRI and GLA 1, is respectfully asking the Commission to consider and approve

an amendment to the Primary Note whereby the maturity of the Primary Note shall be extended

to December 31, 2023, while maintaining the current semi-annual payment amortization schedule,

by eliminating the balloon payment currently due on or before December 31, 2013. (Markup of

the Primary Note is appended hereto as Attachment "B".)

As discussed with Staff, at this time, it is not anticipated that Fansteel will have sufficient funds

available from operations or the ability to commercially finance the upcoming balloon payment of

approximately Sixteen Million Two Hundred Eighty Six Thousand Two Hundred and Six and 00/100

Dollars ($16,286,206). (Please note, the amount of the balloon payment is subject to reduction

based on the settlement and collection of certain legacy insurance coverage(s), and the application

of those proceeds as prescribed by Fansteel's Second Amended Plan of Reorganization, by anyadditional payments Fansteel makes toward the principal balance, and progress that reduces

the cost of the remaining remediation.) However, by maintaining the current amortization,

with the extended maturity that has been requested, it is expected that Fansteel will continue

to be able to meet its semi-annual funding commitment of Seven Hundred Thousand and

00/100 Dollars ($700,000) and thereby FMRI will continue to receive funding for the

decommissioning of the Muskogee Site.Page 1 4

Further, decommissioning financial assurance will be enhanced by the Issuance of (a)

performance bonds in the aggregate amount of Fifteen Million and 00/100 Dollars

($15,000,000), (b) Pollution Legal Liability Insurance from the ACE insurance Companies ("Ace"),

in favor of FMRI, In the amount of Ten Million and 001100 Dollars ($10,000,000), and (c)

modified Pollution Legal Liability Insurance from the Navigators Insurance Companies

("Navigators"), in favor of Fansteel, in the amount of Fifteen Million and 00/100 Dollars

($15,000,000). With respect to the Pollution Legal Liability Insurance referred to in (b) and (c)

in this Section, the coverage afforded includes, but is not limited to, costs resulting from

changed regulation, changed conditions, migration off-site. The policy issued by Ace, policy (b)

above, has a $250,000 deductible- The policy Issued by Navigators, policy (c) above, provides

coverage for costs resulting from any claim against Fansteel. The Navigators policy, (c) above,

has a Two Hundred and Fifty Thousand and 00/100 Dollars ($250,000) deductible.

Conclusion

The parties hereto respectfully ask the Commission for their timely review and consent so the

transaction may close on or before August 3, 2011. Should there be any need for additional

information, please let us know. Thank you for your review and kind consideration of this matter.

Respectfully submitted by the signatories hereto as of the date first written above:

for Fonsteel Inc.,

By: Curtis J. Zamec, II

Its: President and Chief Executive Officer

for FMRi, Inc.,

By: Robert R. CompersIIts: President

page 15

Application for Materials License Amendment

Attachment "A", Draft Mark-up of Materials License SMB-911

Attachment "B", Draft Mark-up of Promissory Note dated January 23, 2004

Attachments:

cc: Larry W. Camper, NRC

Keith McConnell, NRC

James Shepherd, NRC

Shellie Chard-McClary, State of Oklahoma

David Bell, Counsel for Green Lantern Acquisition 1, LLC

Page I 6

NRC FORM 313 U.S. NUCLEAR REGULATORY COMMISSION APPROVED BY OMB: NO. 3150-0120 EXPIRES: 3/3112012(3-2009)'10 OFR 30,39 Z 33 Estimated burden per response to comply with this mandatory collection request: 4.334, 35, 36, 39. and 40 hours. Submittal of the application is necessary to determine that the applicant is

nqualified and that adequate procedures exist to protect the public health and safety.Send comments regarding burden estimate to the Records and FOlAIPrivacy ServicesBranch (T-5 F53), U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001,or by internet e-mail to [email protected], and to the Desk Officer, Office of

APPLICATION FOR MATERIALS LICENSE Infomation and Regulatory Affairs. NEOB-10202, (3150-0120), Office of Managementand Budget, Washington, DC 20503. If a means used to impose an informationcollection does not display a currently valid OMB control number, the NRC may notconduct or sponsor. and a person Is not required to respond to, the informationcollection.

INSTRUCTIONS: SEE THE APPROPRIATE LICENSE APPLICATION GUIDE FOR DETAILED INSTRLCTIONS FOR COMPLETING APPLICATION.SEND TWO COPIES OF THE ENTIRE COMPLETED APPLICATION TO THE NRC OFFICE SPECIFIEC BELOW.

APPLI N RIBLITION Or -.-- r-U.

OFFICE OF FEDERAL & STATE MATERIALS ANDENVIRONMENTAL MANAGEMENT PROGRAMSDIVISION OF MATERIALS SAFETY AND STATE AGREEMENTSU.S. NUCLEAR REGULATORY COMMISSIONWASHINGTON, OC 20555-0001

ALL OTHER PERSONS FILE APPLICATIONS AS FOLLOWS:

IF YOU ARE LOCATED IN:

ILLINOIS, INDIANA, IOWA, MICHIGAN, MINNESOTA, MISSOURI, OHIO, OR WISCONSIN, SENIAPPLICATIONS TO:

MATERIALS LICENSING BRANCHU.S. NUCLEAR REGULATORY COMMISSION. REGION III2443 WARRENViLLE ROAD. SUITE 210LISLE, IL 60532-4352

ALABAMA, CONNECTICUT. DELAWARE. DISTRICT OF COLUMBIA, FLORIDA. GEORGIA, ALASKA, ARIZONA, ARKANSAS, CAUFORNIA. COLORADO, HAWAII, IDAHO, KANSASKENTUCKY, MAINE, MARYLAND, MASSACHUSEITS, NEW HAMPSHIRE, NEW JERSEY, LOUISIANA, MISSISSIPPI, MONTANA, NEBRASKA, NEVADA, NEW MEXICO, NORTHNEW YORK, NORTH CAROLINA. PENNSYLVANIA, PUERTO RICO, RHODE ISLAND, SOUTH DAKOTA, OKLAHOMA, OREGON, PACIFIC TRUST TERRITORIES, SOUTH DAKOTA, TECAROLINA, TENNESSEE. VERMONT, VIRGINIA, VIRGIN ISLANDS, OR WEST VIRGINIA, UTAH, WASHINGTON, OR WYOMING, SEND APPLICATIONS TO:SEND APPLICATIONS TO:

LICENSING ASSISTANCE TEAM NUCLEAR MATERIALS LICENSING BRANCHDIVISION OF NUCLEAR MATERIALS SAFETY U.S. NUCLEAR REGULATORY COMMISSION, REGION IVU.S. NUCLEAR REGULATORY COMMISSION, REGION I 612 E. LAMAR BOULEVARD, SUITE 400475 ALLENDALE ROAD ARLINGTON, TX 76011-4128KING OF PRUSSIA, PA 19406-1415

PERSONS LOCATED IN AGREEMENT STATES SEND APPLICATIONS TO ThE U.S. NUCLEAR REGULATORY COMMISSION ONLY IF THEY WISH TO POSSESS AND USE LICENSEDMATERIAL IN STATES SUBJECT TO U.S.NUCLEAR REGULATORY COMMISSION JURISDICTIONS.

X(AS,

1 THIS IS AN APPLICATION FOR (Check apprpraiat item) 2. NAME AND MAILING ADDRESS OF APPUCANT (Inceude ZIP code)

A. NEW LICENSE FMRI, Inc.

V B. AMENDMENTTOUCENSENUMBER SMB-911 Number 10 Tantalum Place--- Muskogee, Oklahoma 74403

i C. RENEWAL OF UCENSE NUMBER

i. ADDRESS W.ERE.UCES EM RIAL WL B. 4. N F PERSON TO BE CONTACTED ABOUT THIS APPLICATION

Robert (Bob) R. CompernolleTELEPHONE NUMBER

(847) 525-2772

SUBMIT ITEMS 6 THROUGH II ON 8.1/2 X 11" PAPER. THE TYPE AND SCOPE OF INFORMATION TO BE PROVIDED IS DESCRIBED IN THE LICENSE APPUCATION GUIDE.

S. RADIOACTIJE MATERIAL -a. Element and mass number, b. chemical andf/r physical form; and c. maidmum amount Fe PURPOSE(SI FOR WHICH LICENSED MATERIAL WILL BE USED.

which will be possessed at any ore tine.

7. INDIVIDUAL(S) RESPONSIBLE FOR RADIATION SAFETY PROGRAM AND THEIRTRAINING EXPERIENCE 8. TRAINING FOR INDIDUALS WORKING IN OR FREQUENTING RESTRICTED AREAS.

9. FACILITIESAND EQUIPMENT. 10. RADIATION SAFETY PROGRAM.

12. LICENSE FEES (See 10 CFR 170 and Section 170.31)11. WASTE MANAGEMENT. AM4 .. o0.00

13. CERTIFICATION. (Must be compleladbyapplicani) THE APPLICANT UNDERSTANDS THAT ALL STATEMENTS AND REPRESENTATIONS MADE IN THISAPPLICATION ARE BINDINGUPON THE APPLICANT.

THE APPLICANT AND ANY OFFICIAL EXECUTING THIS CERTIFICATION ON BEHALF OF THE APPLICANT. NAMED IN ITEM 2, CERTIFY THAT THIS APPLICATION IS PREPARED INCONFORMITY WITH TITLE 10, CODE OF FEDERAL REGULATIONS, PARTS 30, 32. 33.34, 35, 36, 39, AND 40. AND THAT ALL INFORMATION CONTANED HEREIN IS TRUE ANDCORRECT TO THE BEST OF THEIR KNOWLEDGE AND BELIEF.

WARNING: 18 U.S.C. SECTION 1001 ACT OF JUNE 25. 194B 62 STAT 749 MAKES IT A CRIMINAL OFFENSE TO MAKE A WILLFULLY FALSE STATEMENT OR REPRESENTATION TOANY DEPARTMENT OR AGENCY OF THE UNITED STATES AS TO ANY MATTER WITHIN ITS JURISDICTION.

CERTIFYINýG OFFICER -TYPED/PRINTED NAME AND TITLE DATE

Robert R. Compernolle 06/21/201

FOR NRC USE ONLYYPPFVE [E .... FE.....E.. C RY jAMOUNT RECEIVED HECK .NUMBER COMMENTS

APPROVED BY DATE 7NRC FORM 313 (3-2009) PRINTED ON RECYCILU PAPER

1NRC FORM 374 U.S. NUCLEAR REGULATORY COMMISSION

MATERIALS LICENSEPursuant to the Atomic Energy Act of 1954, as amended, the Energy Reorganization Act of 1974 (Public Law 93-438), and Title 10,

Code of Federal Regulations, Chapter I, Parts 30, 31, 32, 33, 34, 35, 36, 39, 40, and 70, and in reliance on statements and

representations heretofore made by the licensee, a license is hereby issued authorizing the licensee to receive, acquire, possess, andtransfer byproduct, source, and special nuclear material designated below; to use such material for the purpose(s) and at the place(s)designated below; to deliver or transfer such material to persons authorized to receive It in accordance with the regulations of theapplicable Part(s). Thlp license shall be deemed to contain the conditions specified In Section 183 of the Atomic Energy Act of 1954.as amended, and is subject to all applicable rules, regulations, and orders of the Nuclear Regulatory Commission now or hereafter ineffect and to any conditions specifted' below.

Licensee

1. FMRI (+RM',,.. ,, . , "Oi 3. License Number SMB-911, Amendment 12

2. Number Ten Tantalum Place 4. Expiration Date September 30, 2002Muskogee, Oklahoma 74403 5. Docket No. 40-7580

Reference No.

6. Byproduct Source, and/orSpecial Nuclear Material

Natural uraniumand thorium

A. Natural Uranium

B. Natural Thorium

C. Natural Uranium

D. Natural Thorium

7. Chemical and/or PhysicalForm

Any

A. Tin slags, ores,concentrates,process residues,and uranium oxides

B. Tin slags, ores,concentrates,process residues,and thorium hydroxide

C. As a contaminantin soil andsediment

D. As a contaminantin soil andsediment

8. Maximum amount that Licensee

May Possess at Any One TimeUnder This License

400 tons as elementaluranium and thorium

A. 43,000 kg uranium

B. 71,000 kg thorium

C. 4,000 kg uranium

D. 2,500 kg thorium

9. Authorized place of use: The licensee's existing facilities at Muskogee, Oklahoma, as described in thesubmittal of January 14, 2003.

10. Authorized use: For activities related to decommissioning and characterization of contaminatedfacilities, equipment, and land, and maintenance of control over licensed materials in accordance withstatements, representations, and conditions contained in the application submitted by letter dated January14, 2003, and supplemented by letters dated May 8, and July 24, 2003 (re: DP), and July 24, 2003 (re:license transfer).

NRC FORM 374A U.S. NUCLEAR REGULATORY COMMISSION2License NumberSMB-911

MATERIALS LICENSE Dockei or Reference Number

SUPPLEMENTARY SHEET 40-7580

Amendment No. 12

11. Deleted by Amendment 4, dated March 1999.

12. The licensee shall have a qualified Plant Radiation Safety Officer (PRSO) on site for all licensedactivities.

13. Deleted by Amendment 2, dated February 1999.

14. The minutes of the Radiation Safety Committee meeting shall be submitted, as a minimum, to theCommittee members.


16. Deleted by Amendment 5, dated May 1999.




20. Deleted by Amendment 6, dated August 1999.

21. Deleted by Amendment 11, dated December 4, 2003.

22. Deleted by Amendment 6, dated August 1999.



25. All source material stored outside of the process buildings at the Raeee• facility (other than materialcontained in the ponds and as contaminants in soils and sediments) shall be placed on raised pallets on aconcrete pad. The area shall be sheltered by a roof and shall be surrounded by a concrete berm forcontainment.

26. Remediation and decommissioning activities at the Muskogee facility shall be performed in accordancewith the decommissioning plan and supplemental correspondence submitted by letter dated January 24,2003, and supplemented by letters dated May 8, and July 24, 2003 (re: DP).



29. In accordance with provisions of 10 CFR 40.42(g)(4)(i) Licensee shall, not later than May 31, 2004,provide a physical description - dimensions, types of liners, etc. - of Pond 1, Pond IS and 1N, and Pond 4,the time during which each [of] the ponds were used, what process-related materials and how much wasplaced in each of the ponds, and how and where those materials were disposed when the ponds wereclosed.

NRC FORM 374A U.S. NUCLEAR REGULATORY COKMMISSTON 3License NumberSMB-911

MATERIALS LICENSE Docket or Reference Number


Amendment No. 12

30. At the time Ponds 2 and 3 are emptied, Licensee shall undertake to excavate and dispose of anyidentified WIP material that migrated from the ponds For the purpose of this paragraph, WIP that migratedfrom ponds 2 and 3 shall be defined as material that exhibits the same physical characteristics as thesludge-like material contaitned in the ponds.

31. Licensee shall conduct an additional characterization of any additional contaminants at the site,including all soils, buildings and groundwater on the site, using guidance in NUREG-1757, Vol. 2. Uponagreement by NRC that any additional contamination is adequately characterized, Licensee shall identifythe cost to remediate all contamination identified in this study. Work shall be performed according to thefollowing schedule:

a. Submit a site characterization plan not later than February 28, 2011.b. Submit a site characterization report (SCR) not later than December 29, 2011.c. Develop detailed work plans to be submitted with the SCR, including cost and schedule, for any

additional work identified in the SCR.

32. The licensee shall not have a removable fraction of residual radioactivity on any specific buildingsurface that exceeds 3%.

33. Before release of any equipment, Licensee shall characterize all surfaces, interior and exterior, andshall remediate all contaminated equipment to the limits of RG 1.86.

34. Licensee shall verify the conditions used in its dose analyses (secular equilibrium, ratio of decaychains, etc.) for each area of remediation not later than the date of submission of the FSSR for Phases 3and 4.

35. Licensee shall remediate the site to residual radioactive levels to ensure that exposure to residualradiation in all media from applicable pathways will not result in a dose exceeding 25 mrem/y, as specified

N Conci

i~ DCGL1

where:

Conci -= concentration of radionuclide i

DCGLi -= derived concentration guideline level for radionuclide i

N -= total number of radionuclidesIn 10 CFR 20.1402. Licensee will establish remediation levels (DCGLs) as part of the Phase 3 Workplan,approved by NRC, that demonstrate the 25 mrem/y dose limit will not be exceeded.

36. Licensee shall use the sum of fractions rule, as shown below, to fraction the concentration whenmultiple radionuclides are present so that the total dose will not exceed 25 mrem/y.

37. In accordance with 10 CFR 40.42(g)(4)(ii), Licensee shall provide to NRC the following detailed plans,including work to be performed by contractors and the qualifications of all contractors, for remediatingcontamination at the site identified in the July 24, 2003 DP:

a. WIP (Phase 1) not later than August 2, 2004.b. CaF (Phase 2) not later than January 2, 2007c. all contaminated soil, buildings and equipment not later than August 1, 2011.

NRC FORM 374A U.S. NIUCI EAR REGULATORY COMMISSION 4License NumberSMB-91 1

MATERIALS LICENSE Docker or Reference Number

SUPPLEMENTARY SHEET 40-7580Amendment No. 12

d. groundwater remediation (Phase 4) not later than January 5, 2012.

38. Licensee shall obtain NRC approval of survey and sampling methods prior to reuse of any materials.NRC will be notified 30 days before the survey is performed. NRC or its contractor will be given theopportunity to observe the licenseer]s survey and perform an independent confirmatory survey. NRC willreview the results to determine if the material meets release criteria.

39. Licensee shall, prior to application for license termination or any partial site release, describe thenature of the permanent surface water and E&S controls identified in §8.3.2.6 of the DP, and why they areconsistent with the unrestricted release criteria of 10 CFR 20.1402,

40. Licensee shall update the DP not later than December 31, 2003, to describe current activities toremediate radioactive contamination in groundwater.

41. Licensee shall develop a method not later than January 15, 2012, to be approved by NRC, todemonstrate compliance with radioactive release criteria for groundwater.

42. Licensee shall update Figure 8-3 of the January 2003, DP submittal annually, and submit the revised

figure to NRC not later than January 15, of each year until license termination.

43. FMRI shall submit, by March 31st of each year, an accounting of expenses that shall include:

a. the same line items as provided in Table 15-11 of the Decommissioning Plan,b. the amount spent on each line item during the reporting period,c. the cumulative amount spent for each line item through the end of the reporting period,d. identification of variances (both positive and negative) between the planned expense and the actual

expense for each line item during the reporting period,e. an explanation of the reasons for variances that exceed 5% of the planned expense for a line item

during the reporting period,f. a comparison of the cost of work remaining to the funding remaining under the assurances provided to

the NRC, wherei. the cost of work remaining must be determined by estimating the amount and cost of labor,

materials, services, etc., required to complete the work, and not by simply subtracting the costof work performed from the amount budgeted for decommissioning, and

ii. if the cost of remaining activities exceeds the remaining amounts assured to the NRC, then theaccounting, to the extent possible, must include a detailed plan to adjust the work plan to theavailable funding.

g. all expenses not covered by the line items of Table 15-11, if any, and an explanation of the reason forsuch expenses

44. FMRI shall submit, by March 31st of each year, an accounting of income from Reorganized Fansteelthat shall include amounts paid to FMRI:a. annual mandatory prepayments,

NRC FORM 374A U.S. NUCLEAR REGULATORY COMMISSION 5License NumberSMB-91 1

MATERIALS LICENSE Docket or Reference Number


Amendment No. 12

b. minimum semi-annual payment,c. additional annual prepayment (1) insurance proceeds, and (2) reorganized debtor asset sale proceeds,d. payments under the secondary promissory note,e. payments under the contingent promissory note, andf. any other payments" rdbeived.

45. FMRI shall submit, by March 31st of each year, updated versions of Tables 15-11 and 15-12, showingactual figures for previous periods, and updated projections using current information.

46. FMRI shall maintain, for inspection at its facility, monthly updates of its accounting of expenses andincome.

47. FMRI shall provide annual financial statements of FMRI and Reorganized Fansteel to NRC within 30days of the issuance of such statements.

48. If any payment due to FMRI under the Notes from Reorganized Fansteel has not been paid on the dateit is due, and if such payment default is not cured within three working days following the due date, FMRIshall, within three additional working days, notify Reorganized Fansteel in writing, initiate appropriate actionto collect the payment, and notify the NRC in writing of the late payment and the actions initiated to collectthe payments below:a. Payment Due Date Under Primary Promissory Note

i. April 10 - annual mandatory prepaymentsii. June 30 - first minimum semi-annual paymentiii. December 31 - second minimum semi-annual payment.

b. Payment Due Date under the Primary Promissory Note for additional annual prepayment (insuranceproceeds and reorganized debtor asset sale proceeds), if any, within 30 days after receipt byReorganized Fansteel

c. Payment Due Date for Secondary Promissory Note by January 1 of each year, commencing in 2009d. Payment Due Date under the Contingent Promissory Note as determined at the time the principal

amount of the note is established

49. FMRI shall, up to the amount available, replenish any withdrawal from the Decommissioning TrustFund within 30 days of receipt of any payments or proceeds intended to provide for replenishment, asprovided in the Decommissioning Plan or the terms and conditions of the Joint Reorganization Plan asapproved by the United States Bankruptcy Court.

50. Licensee shall provide to NRC not later than August 2, 2004, the experience and educationrequirements for the HPS [Health Physics Supervisor), the CS [Construction Supervisor], and the QCO[Quality Control Officer].

51. Not later than August 2, 2004, Licensee shall define changes to the FSSP [Final Status Survey Plan]that may be made without prior approval of NRC.

52. Not later than August 1, 2004, Licensee shall make available at the site for review by NRC a revisedRWMP and QA Plan, for Phase 1 of decommissioning activities. Thereafter, Fansteel shall update andhave available at the site the RHSP, EMP, RWMP and QA Plan prior to the beginning of each phase ofdecommissioning.

53. Licensee shall conduct the following final status surveys and submit reports to NRC to demonstratecompliance with decommissioning criteria. NRC will be notified 30 days before a survey is performed, and

NRC FORM 374A (1-5. NUCLEAR RFGULATORY COMMISSION 6License Number

SMB-91 1MATERIALS LICENSE Docket or Reference Number

SUPPLEMENTARY SHEET 40-7580Amendment No. 12

NRC or its contractor will be given the opportunity to observe the licensee's survey and perform anindependent confirmatory survey. If NRC does not approve a survey, additional remediation and resurveyshall be promptly conducted.a. Immediately following completion of remediation of all soils, buildings and equipment, but not later than

nine months after approval of the FSSP, Licensee shall conduct a final status survey of all areasremediated and submit a Phase 3 FSSR

b. Immediately following completion of remediation of the groundwater, Licensee shall conduct a finalstatus survey of site groundwater and submit a Phase 4 FSSR.

54. Not later than February 28, 2011, Licensee shall submit, applicable FSSPs for Phases 3 and 4, forprior NRC approval, which shall include measures to evaluate volumetric, subsurface, and groundwatercontamination that are beyond the scope of MARSSIM (NUREG-1 575, Table 1.1)

FOR THE NUCLEAR REGULATORY COMMISSION

This license amendment is approved as of this date, subject to the following:

If the Ftnccl zzrprct r iz~t;r,, a appvzd by th. Uni... Statzo ,..,,, ,,., C,..t ............. f Dzlaýa der-cted •'c,;G r 214-,-2ee, including without limitation the execution and delivery of all

truni nitbcczm ffocib Dombor 31 2003,this amendment shall become null and void. However, on written application and for good cause shown,

this date may be extended in writing.

Date; By: Daniel M. Gillen, ChiefDecommissioning BranchDivision of Waste ManagementOffice of Nuclear Materials Safety

and Safeguards

v~

PROMISSORY NOTE

(Primary FMRI Note)

$30,600,000.00 North Chicago, IllinoisOrrx$-,,o1 0),"wtn January 23, 2004

FOR VALUE RECEIVED and IN ACCORDANCE WITH the SECONDAMENDED JOINT REORGANIZATION PLAN OF FANSTEEL, INC. AND SUBSIDIARIES,dated December 23, 2003, under Chapter II of the Bankruptcy Code (as amended, modified orsupplemented from time to time, the "Reorganization Plan"), the undersigned, FANSTEEL INC.,a Delaware corporation ("Fansteel"), HEREBY PROMISES TO PAY to the order of FMRI,INC., a Delaware corporation ("FMRI"), the principal sum of THIRTY MILLION SIXHUNDRED THOUSAND DOLLARS ($30,600,000.00) on or before December 31, %1 (the"Maturity Date") in accordance with the payment schedule set forth below. .OZ3

Definitions:

"Additional Mandatory Prepayment" means a payment made from time to time byFansteel to FMRI comprised of Net Insurance Proceeds recovered by Fansteel with respect to theMuskogee Facility claims and/or Asset Sale Proceeds. No Additional Mandatory Prepaymentshall be counted in computing the $4,000,000.00 limit of the Annual Mandatory Prepayment.

"Annual Mandatory Prepayment" means an annual payment to be made within100 days of Fansteel's fiscal year-end, in an amount equal to 50% of Excess Available Cash, upto a maximum of $4,000,000.00, provided however, that if in any given fiscal year (A) the sumof the two Minimum Semi-Annual Payments and 50% of Excess Available Cash is less than (B)the budgeted amount for the current-year's remediation costs, then, additionally, up to 50% of theprior fiscal year-end cash balance shall be paid to FMRI, as and to the extent permissible underapplicable law, so that FMRI shall have been reimbursed in full by Fansteel for the current year'sremediation costs.

"Asset Sale Proceeds" means, with respect to any Asset sale by Fansteel and itssubsidiaries, including Wellman, outside of the ordinary course of business, 50% of the first$2,000,000.00 of sale proceeds, 35% of the next $3,000,000.00 of sale proceeds, and 25% of allsale proceeds in excess of $5,000,000.00, in each case net of(i) all transaction costs and (ii) allamounts, if any, due to Fansteel's secured creditors as a result of such sale(s); provided howeverthat Asset Sale Proceeds for purposes of this Note does not include the Old Fansteel DivestitureAsset Sale Proceeds.

"Asset(s)" means any and all real or personal property of any nature, including,without limitation, any real estate, buildings, structures, improvements, privileges, rights,easements, leases, subleases, licenses, goods, materials, supplies, furniture, fixtures, equipment,work in process, accounts, chattel paper, cash, deposit accounts, reserves, deposits, contractualrights, intellectual property rights, claims, causes of action and any other general intangibles ofFansteel, as the case may be, of any nature whatsoever.

"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as codified intitle 1I of the United States Code, 11 U.S.C. §§ 101-1330, as now in effect or hereafter amended,and as applicable to the Fansteel Chapter 11 Case.

9467255.18

"Bankruptcy Court" means the United Stated District Court for the District ofDelaware, or such other court as may have jurisdiction over the Reorganization Plan.

"Cash" means cash and cash equivalents, including, but not limited to, wiretransfers, bank deposits, checks and legal tender of the United States.

"Decommissioning Trust" means all cash on deposit with the Bank of Waukegan,Waukegan, Illinois, pursuant to the Standby Trust Agreement dated February 3, 1994, asamended, by and between Fansteel and the Bank of Waukegan as trustee under Trust No. 2740.

"Excess Available Cash" means an amount to be determined by Fansteel within90 days of each Fansteel fiscal year-end and to be certified by Fansteel's independent auditors,such amount to be equal to (A) the difference in dollars between the fiscal year-end cash balanceof Fansteel and the previous fiscal year-end cash balance of Fansteel, less (B) the sum of(i) thenet increase in borrowings, if any, in dollars by Fansteel against its credit lines, (ii) theRemaining Asset Sale Proceeds, if any, and (iii) capital expenditures of Fansteel, provided, thatif such capital expenditures exceed 5% of consolidated sales in any given fiscal year, the amountin dollars equal to the excess of such capital expenditures over 5% of consolidated sales shall beadded back to the fiscal year-end cash balance for the purpose of determining "Excess AvailableCash."

"Exit Facility" means the new senior secured credit facility, in an aggregateprincipal amount of$10,000,000.00, between Fansteel and Weilman, as borrowers, and CongressFinancial Corporation (Central), as lender, dated the date hereof.

"Exit Muskogee Note Funding" means the funding, if any, provided to Fansteelpursuant to the Exit Facility that is specifically designated as funding for the obligations ofFansteel under this Note.

"Fansteel" has the meaning set forth in the preamble hereto.

"FMRI" has the meaning set forth in the preamble hereto.

"L/C Cash Reserve" means all Cash on deposit with the Bank of Waukegan,Waukegan, Illinois, pursuant to the Standby Trust Agreement dated February 3, 1994, asamended, by and between Fansteel and the Bank of Waukegan as trustee under Trust No. 2740.

"Maturity Date" has the meaning set forth in the preamble hereto.

"Minimum Semi-Annual Payment" means a payment in the amount of$700,000.00, except that the first semi-annual payment shall be a payment in the amount of$450,000.00, the difference between $700,000.00 and the $250,000.00 payment made byFansteel on the date hereof.

"Muskogee Facility" means Old Fansteel's site located at Number Ten TantalumPlace, Muskogee, Oklahoma.

"Net Insurance Proceeds" means the amount of insurance proceeds received byFansteel and/or any of its subsidiaries with respect to any and all claims made by Fansteel and/orany subsidiary for insurance coverage in respect of the Muskogee Facility net of Fansteel's costsrelated to the litigation and/or settlement of such claims.

"NRC" means the United States Nuclear Regulatory Commission.

9467255.19 22

"Old Fansteel" means Fansteel Inc., a Delaware Corporation, as it existed prior tothe Effective Date (as defined in the Reorganization Plan) of the Reorganization Plan.

"Old Fansteel Divestiture Asset Purchase Agreements" means (i) the assetpurchase agreement dated as of September 2, 2003, by and among Old Fansteel, as seller, andPhoenix Aerospace Corporation, Hydro Carbide, Inc. and California Drop Forge, Inc., each aDelaware corporation, and HBD Industries, Inc., as guarantor, and (ii) the asset purchaseagreement dated as of October 1, 2003 by and among Old Fansteel, as seller and PlantsvilleAcquisition, LLC, a Connecticut limited liability company, each agreement governing the termsand conditions of the Old Fansteel Divestiture Asset Sale.

"Old Fansteel Divestiture Asset Sale" means the sale by Fansteel of (i)substantially all of the assets of Old Fansteel's Hydro Carbide and California Drop Forgeoperating divisions, (ii) any and all assets of Old Fansteel's Plantsville Division, and (iii) theequipment and inventory of Old Fansteel's Lexington Facility, pursuant to the Old FansteelDivestiture Asset Purchase Agreements and/or any other agreement(s) approved by theBankruptcy Court.

"Old Fansteel Divestiture Asset Sale Proceeds" means the net proceeds of the OldFansteel Divestiture Asset Sale.

"Remaining Asset Sale Proceeds" means, with respect to any Asset sale byFansteel outside of the ordinary course of business, 50% of the first $2,000,000.00 of saleproceeds, 65% of the next $3,000,000.00 of sale proceeds, and 75% of all sale proceeds in excessof $5,000,000.00, in each case net of (i) all transaction costs and (ii) all amounts, if any, due toFansteel's secured creditors as a result of such sale(s); provided however that Remaining AssetSale Proceeds for purposes of this Note does not include any Old Fansteel Divestiture Asset SaleProceeds.

"Reorganization Plan" has the meaning set forth in the preamble hereto.

"Wellman" means Wellman Dynamics, Corp., a Delaware corporation.

The principal of this Note shall be paid as follows:

Principal shall be paid in (i) an initial payment of $250,000.00 on the date hereof,(ii) a second payment of $450,000.00 on or before June 30, 2004, (iii) consecutive installmentsof the Minimum Semi-Annual Payment commencing on December 31, 2004 and continuingthereafter on the last day of each second and fourth calendar quarter, (iv) an Annual MandatoryPrepayment, (v) Additional Mandatory Prepayments from time to time as required pursuant tothe covenants set forth in this Note and (vi) on the Maturity Date, in the event that the principalhas not been repaid in full prior thereto, the final installment shall be a payment equal to theamount necessary to repay in full the outstanding principal balance hereof.

All payments made to FMRI on account of principal hereof shall be noted byFMRI on the schedule that is attached hereto and hereby made a part hereof; provided, howeverthat any error or omission by FMRI in this regard shall not affect the obligation of Fansteel topay the full amount of the principal due to FMRI.

If any amount payable hereunder shall be due on a day on which banks arerequired or authorized to close in Chicago (any other day being a "Business Dy"), such paymentmay be made on the next succeeding Business Day.

94672.53.18 3

Principal is payable in lawful money of the United States and in immediatelyavailable funds at the offices of FMRI, Number Ten Tantalum Place, Muskogee, Oklahoma74403, Attention: A. Fred Dohmann, Chief Executive Officer & President, or at such other placeas FMRI shall designate in writing to Fansteel.

Fansteel may, at its option, prepay this Note, in whole at any time or in part fromtime to time, without penalty or premium.

Fansteel hereby agrees that during the term of this Note:

1. Fansteel shall pay to FMRI any Exit Muskogee Note Funding thatFansteel receives; such Exit Muskogee Note Funding shall reduce the principal amount duepursuant to this Note;

.2. All Net Insurance Proceeds, if any, received by Fansteel shall be paidto FMRI within 30 days of receipt; provided that FMRI shall use any Net Insurance Proceedsthat it receives to repay its borrowings, if any, from the Decommissioning Trust (such repaymentof borrowings to the Decommissioning Trust shall not reduce the outstanding principal amountof this Note); and provided further that FMRI shall deem any Net Insurance Proceeds that itreceives in excess of any repayment of borrowings to the Decommissioning Trust as AdditionalMandatory Prepayment(s) (such Additional Mandatory Prepayment(s) shall reduce theoutstanding principal amount of this Note);

3. All Asset Sale Proceeds, if any, received by Fansteel and/ or any of itssubsidiaries shall be paid to FMRI within 30 days of receipt; provided that FMRI shall use anyAsset Sale Proceeds that it receives to repay its borrowings, if any, from the DecommissioningTrust (such repayment of borrowings to the Decommissioning Trust shall not reduce theoutstanding principal amount of this Note); and provided further that FMRI shall deem anyAsset Sale Proceeds that it receives in excess of any repayment of borrowings to theDecommissioning Trust as Additional Mandatory Prepayment(s) (such Additional MandatoryPrepayment(s) shall reduce the outstanding principal amount of this Note);

4. All Excess Available Cash, if any, held by Fansteel and/ or any of itssubsidiaries shall be paid to FMRI within 10 days of the determination of such Excess AvailableCash pursuant to its definition above; provided that FMRI shall use any Excess Available Cash*that it receives to repay its borrowings, if any, from the Decommissioning Trust (such repaymentof borrowings to the Decommissioning Trust shall not reduce the outstanding principal amountof this Note); and provided further that FMRI shall deem any Excess Available Cash that itreceives in excess of any repayment of borrowings to the Decommissioning Trust as AdditionalMandatory Prepayment(s) (such Additional Mandatory Prepayment(s) shall reduce theoutstanding principal amount of this Note); and

5. Fansteel shall not pay a dividend to any shareholder.

If any of the following shall occur (each a "Default"): (a) Fansteel shall fail to payany principal of this Note when due (whether by scheduled maturity, required prepayment,acceleration, demand or otherwise); provided that Fansteel's failure to pay any principal of thisNote when due shall not be deemed a Default if FMIRI shall be able to borrow such principalamount due from the Decommissioning Trust (the outstanding borrowings by FMRI from theDecommissioning Trust in the aggregate at any one time not to exceed $2,000,000); providedfurther for purposes of clarification, Fansteel's failure to pay any Net Insurance Proceeds or

9467253.18 4

Asset Sale Proceeds or Excess Available Cash to FMRI as required pursuant to this Note shall bea Default; or (b) Fansteel shall fail to perform or observe any material covenant contained in thisNote, and such failure shall remain unremedied for five days after written notice thereof shallhave been given to Fansteel by FMRI; or (c) Fansteel shall admit in writing its inability to pay itsdebts generally, or shall make a general assignment for the benefit of creditors; or (d) anyproceeding shall be instituted by or against Fansteel seeking to adjudicate it a bankrupt orinsolvent, or seeking dissolution, liquidation, winding up, reorganization, arrangement,adjustment, protection, relief or composition of it or its debts under any law relating tobankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order forrelief or the appointment of a receiver, trustee, custodian or other similar official for Fansteel orfor any substantial part of its property, or Fansteel shall take any action to authorize or effect anyof the actions set forth above in this clause (d); or (e) any provision of this Note or any otherrelated document shall at any time for any reason be declared to be null and void by a court ofcompetent jurisdiction, or the validity or enforceability thereof shall be contested by Fansteel, ora proceeding shall be commenced by Fansteel seeking to establish the invalidity orunenforceability thereof, or Fansteel shall deny that it has any liability or obligation hereunder orthereunder;

then FMRI may (i) declare the outstanding principal amount of this Note to beimmediately due and payable, whereupon the outstanding principal amount of this Note shallbecome and shall be forthwith due and payable, without diligence, presentment, demand, protestor other notice of any kind, all of which are hereby expressly waived, and (ii) exercise any andall of its other rights under applicable law, hereunder.

All payments made by Fansteel hereunder will be made without setoff,counterclaim or other defense. All such payments shall be made free and clear of and withoutdeduction for any present or future income, stamp or other taxes, levies, imposts, deductions,charges, fees, withholding, restrictions or conditions of any nature, now or hereafter imposed,levied, collected, withheld or assessed by any jurisdiction or by any political subdivision ortaxing authority thereof or therein, and all interest, penalties or similar liabilities, excluding taxeson the overall net income of FMRI (such non-excluded taxes are hereinafter collectively referredto as the "Ttxes"). If Fansteel shall be required by law to deduct or to withhold any Taxes fromor in respect of any amount payable hereunder, (i) the amount so payable shall be increased tothe extent necessary so that after making all required deductions and withholdings (includingTaxes on amounts payable to FMRI pursuant to this sentence) FtMRI receives an amount equal tothe sum it would have received had no such deductions or withholdings been made, (ii) Fansteelshall make such deductions or withholdings and (iii) Fansteel shall pay the full amount deductedor withheld to the relevant taxation authority in accordance with applicable law. Whenever anyTax is payable by Fansteel, as promptly as possible thereafter Fansteel shall send FMRI anofficial receipt showing payment. In addition, Fansteel agrees to pay any present or future taxes,charges or similar levies which arise from any payment made hereunder or from the execution,delivery, performance, recordation or filing of, or otherwise with respect to, this Note(hereinafter referred to as "Other Taxes"). Fansteel will indemnify FMRI for the full amount ofTaxes or Other Taxes (including, any Taxes or Other Taxes on aniounts payable to FMRI underthis paragraph) paid by FMPI and any liability (including penalties, interest and expenses)arising therefrom or with respect thereto, upon written demand by FMRI therefor.

9467255.18 5

Fansteel agrees that all notices or other communications provided for hereundershall be in writing (including telecommunications) and shall be mailed, telecopied or delivered toFansteel at the address of Fansteel set forth next to its signature, or at such other address as mayhereafter be specified by Fansteel to FMRI (at its address set forth herein) in writing. All noticesand communications shall be effective (i) if mailed, when received or three days after mailing,whichever is earlier, (ii) if telecopied, when transmitted and confirmation is received, iftransmitted on a Business Day and, if not, on the next Business Day, and (iii) if delivered, upondelivery, if delivered on a Business Day and, if not, on the next Business Day.

Fansteel agrees that the NRC, pursuant to the Pledge Agreement, dated the datehereof, by FMi in favor of the NRC, shall be a third-party beneficiary of this Note.

No failure on the part of FM.RJ or the NRC, as the case may be, to exercise, andno delay in exercising, any right, power, privilege or remedy hereunder shall operate as a waiverthereof, nor shall any single or partial exercise thereof by FMRI or the NRC, as the case may be,preclude any other or further exercise thereof or the exercise of any other right, power, privilegeor remedy of FMRU. No amendment or waiver of any provision of this Note, nor consent to anydeparture by Fansteel therefrom, shall in any event be effective unless the same shall be inwriting and signed by FMR.I or the NRC, as the case may be, and then such waiver or consentshall be effective only in the specific instance and for the specific purpose for which given.

Any provision hereof which is prohibited or unenforceable in any jurisdictionshall, as to such jurisdiction, be ineffective only to the extent of such prohibition orunenforceability without invalidating the remaining provisions hereof or affecting the validity orenforceability of such provision in any other jurisdiction.

Fansteel hereby agrees to pay on demand all costs and expenses (including,without limitation, all reasonable fees and expenses of counsel to FMRI) incurred by FMRI inconnection with (i) the preparation, execution, delivery, administration and amendment of thisNote and the other Documents, and (iii) the enforcement of the rights of FMRI and/or the NRC,as the case may be, and the collection of all amounts due, hereunder.

Fansteel hereby (i) irrevocably submits to thejurisdiction of the United StatesBankruptcy Court for the District of Delaware or any Illinois State or Federal court sitting inChicago in any action or proceeding arising out of or relating to this Note, (ii) waives anydefense based on doctrines of venue or forum non conveniens. or similar rules or doctrines, and(iii) irrevocably agrees that all claims in respect of such an action or proceeding may be heardand determined in the United States Bankruptcy Court for the District of Delaware or suchIllinois State or Federal court. Fansteel would (by its acceptance hereof) waive any right to trialby jury in any action, proceeding or counterclaim arising out of or relating to this Note.

9467M5.16 6

This Note shall be governed by, and construed in accordance with, the laws of theState of Illinois.

FANSTEEL~h~

By:______RuName: R. Mitchael M'cEnteeTitle: Vice President & Chief Financial Officer

Address: One/tantalum PlaceNorth Chicago IL 60035

Attention P- Michael McEnteeTelephone: 847-689-4900Telex: NoneTelecopier: 847-689-0307

9467255.18 7