<PAGE>


                        AMENDED AND RESTATED CREDIT AGREEMENT


    AGREEMENT made as of this 1st day of October, 1997 between STARMET 
CORPORATION, a Massachusetts corporation (f/k/a Nuclear Metals, Inc.) 
("StarMet"), STARMET POWDERS, LLC, a Delaware limited liability corporation 
("Powders"), STARMET AEROCAST, LLC, a Delaware limited liability corporation 
("AeroCast"), STARMET COMCAST, LLC, a Delaware limited liability corporation 
("ComCast"), STARMET NMI CORPORATION, a Massachusetts corporation ("NMI"), 
STARMET CMI CORPORATION, a Delaware corporation (f/k/a Carolina Metals, Inc.) 
("CMI"), STARMET HOLDINGS CORPORATION, a Massachusetts corporation 
("Holdings"), NMI FOREIGN SALES CORPORATION, a U.S. Virgin Islands 
corporation ("FSC", and together with StarMet, Powders, AeroCast, ComCast, 
NMI, CMI and Holdings, the "Borrowers") and STATE STREET BANK AND TRUST 
COMPANY, an FDIC insured Massachusetts chartered trust company ("Bank").

    WHEREAS, StarMet, CMI and the Bank are parties to a Credit Agreement 
dated as of March 31, 1995, as amended by a First Amendment to Credit 
Agreement dated as of June 30, 1995, a letter agreement dated as of September 
26, 1995, a Forbearance and Amendment Agreement dated as of January 11, 1996, 
a First Amendment to Forbearance and Amendment Agreement dated as of February 
15, 1996, a Second Amendment to Forbearance and Amendment Agreement dated as 
of June 4, 1996, a Second Amendment to Credit Agreement dated as of December 
24, 1996 and a Third Amendment to Credit Agreement dated as of August 7, 1997 
(the "Original Credit Agreement"); 

    WHEREAS, StarMet is engaged in a restructuring where certain of its 
business lines will be transferred to newly organized subsidiaries as 
described in a proxy statement dated August 26, 1997 (the "Proxy Statement")

    WHEREAS, the Borrowers and the Bank have agreed to amend and restate the 
existing credit facility described above so as to, among other things, add 
Powders, Speciality, AeroCast, ComCast, NMI, and Holdings as "Borrowers" 
under the Original Credit Agreement and continue to provide for revolving 
credit facilities to the Borrowers;

    NOW, THEREFORE, the parties agree as follows:

ARTICLE I.  AMOUNT AND TERMS OF THE CREDIT.

    Section 1.01.  The Credit.

    Subject to the terms and conditions hereof, and in reliance on the 
representations and warranties contained herein, Bank hereby establishes a 
credit facility in favor of the Borrowers 

<PAGE>

in the principal amount of $6,550,000  (the "Credit").  The Credit consists of a
revolving line of credit of $6,550,000 ("Revolving Credit").  

    Section 1.02.  The Revolving Credit.

    (a)  Amount.  Provided no Event of Default (as defined in Article V) or 
event which with the passage of time or notice, or both, would become an 
Event of Default has occurred and is continuing, each Borrower may from time 
to time from the date hereof up to February 28, 1998 (the "Maturity Date") 
borrow and reborrow from the Bank and the Bank shall advance funds under the 
Revolving Credit to such Borrower (an "Advance" or the "Advances"); provided 
that the aggregate of all Advances outstanding at any time shall not exceed 
$6,550,000 less the maximum aggregate liability of the Borrowers under any 
outstanding letters of credit issued prior to the date hereof or pursuant to 
this Credit Agreement (the "Maximum Credit"). 

    (b)  Revolving Credit Payment. The aggregate Advances outstanding at any 
time shall not exceed the Maximum Credit.  If the aggregate Advances 
outstanding at any time exceed such limit, then the Borrowers shall 
immediately pay such excess.  The Bank may, without prior notice to the 
Borrowers, charge any of their accounts under the control of the Bank to 
effect such payment.

    (c)  The Revolving Credit Note.  Amounts owed to Bank with respect to 
Advances made by Bank shall be evidenced by Bank's books and records and may, 
at the request of Bank, be further evidenced by a revolving credit note in 
the maximum principal amount of the Revolving Credit (the "Revolving Credit 
Note") in the form of Exhibit 1.02(d) hereto.  The unpaid principal balance 
of the Revolving Credit may be voluntarily prepaid in whole or in part during 
the continuation of the Revolving Credit without premium or penalty; provided 
that if the Revolving Credit is to be terminated by the Borrowers, thirty 
(30) days prior notice shall be given to Bank.  Upon termination, the 
Borrowers shall satisfy the provisions of Section 6.01.  The Revolving Credit 
Note is subject to mandatory repayments, as provided in Section 1.02(b).

    (d)  Interest.  Advances made by Bank shall bear interest prior to 
maturity or the occurrence of an Event of Default (computed on the basis of 
actual number of days elapsed over a 360 day year) on the unpaid principal 
balances outstanding from time to time at a rate per annum equal to the Prime 
Rate plus one-half percent (1/2%).  After the Maturity Date or the occurrence 
of an Event of Default, the unpaid principal balance shall bear interest at 
the Prime Rate plus five (5%) percent.  Interest shall be payable monthly in 
arrears on the first day of each month commencing on October 1, 1997.  The 
effective rate of interest shall change on each day the Prime Rate changes.

    (e)  Requests for Advances.  Each Advance shall be made on the Banking 
Day on which Bank receives notice from the Borrower if such notice is 
received prior to 11:00 a.m. 

                                          2
<PAGE>


Boston time on such Banking Day, and otherwise on the next Banking Day.  Each 
request for an Advance shall be made to Bank in writing or by telephone by a 
duly authorized representative of the Borrowers.  Bank may rely upon any 
telephone request which it believes is made by such a representative.  The 
Borrowers agree to indemnify and hold Bank harmless for any action, including 
the making of Advances hereunder, or loss or expense, taken or incurred by 
Bank in good faith reliance upon such telephone request.  At the time of the 
initial request for an Advance, the Borrowers shall have provided Bank with a 
Compliance Certificate substantially in the form of Exhibit 1.02(e) hereto 
("Compliance Certificate").  Bank shall be entitled to rely upon the most 
recent Compliance Certificate in its possession until it is superseded by 
another certificate.

    (f)  Expiration.  The Revolving Credit shall expire on the Maturity Date 
and all Advances then outstanding under the Revolving Credit shall be due and 
payable without notice on such date.  In the event Bank continues Advances 
after the Maturity Date without a written extension of the Maturity Date, (i) 
all such Advances shall be made within the sole discretion of Bank; (ii) the 
entire Revolving Credit shall be due on demand; and (iii) other than such 
Advances, the entire Revolving Credit shall earn interest at the rate 
specified to be earned after maturity in Section 1.02(d).

    (g)  Overadvances.  Bank may from time to time in its sole discretion 
permit Advances to exceed the limitations set forth in this Agreement, 
including, without limitation, (i) Advances in excess of the Maximum Credit, 
and (ii) Advances after the Maturity Date or the occurrence of an Event of 
Default. All such Advances shall be deemed part of the Credit secured by any 
collateral securing the Credit and supported by any credit enhancements 
supporting the Credit.  The making of an Advance on one or more occasion will 
not operate to limit, waive or otherwise modify any rights of Bank hereunder 
on any future occasion unless otherwise agreed in writing.

    (h)  Special Uses.  The Borrowers may request portions of the Revolving 
Credit in the form of letters of credit pursuant to Section 1.05 hereof.

    (i)  Use of Proceeds.  Proceeds from Advances only shall be used by the 
Borrowers for working capital purposes.

    Section 1.03. Agency.  

    Each of the Borrowers hereby appoints StarMet as its agent to take any 
action and perform any obligation under this Agreement.  The Bank may 
conclusively rely upon any action taken by StarMet as binding on all of the 
Borrowers.

                                          3
<PAGE>

    Section 1.04.  Definitions.

    "Banking Day" shall mean any day which Bank is open to conduct commercial 
banking business in Boston, Massachusetts.

    "Notes" shall mean the Revolving Credit Note and any other notes issued 
by the Borrowers to Bank pursuant to this Agreement.

    "Prime Rate" shall mean the rate of interest per annum from time to time 
announced by Bank as its prime rate, it being understood that such rate is a 
reference rate, not necessarily the lowest, which serves as the basis upon 
which effective rates of interest are calculated for obligations making 
reference thereto.

    The following terms are defined in the following sections:

    Advance                                      Section 1.02(a)
    Affiliate                                    Section 4.17
    Banking Day                                  Section 1.04
    Base Financial Statement                     Section 2.04
    Bonds                                        Section 4.12(b)
    Compliance Certificate                       Section 1.02(e)
    Closing Fee                                  Section 1.10
    Credit                                       Section 1.01
    Current Assets                               Section 4.22
    Current Liabilities                          Section 4.22
    Debt                                         Section 4.20
    Debt Service                                 Section 4.23
    ERISA                                        Section 2.10
    Event of Default                             Article V
    Facility Fee                                 Section 1.08
    "L/Cs"                                       Section 1.05(a)
    Maturity Date                                Section 1.02(a)
    Maximum Credit                               Section 1.02(a)
    Net Income                                   Section 4.22
    1985 Trust Agreement                         Section 4.12(b)
    Notes                                        Section 1.04
    Prime Rate                                   Section 1.04
    Proxy Statement                              Introduction
    Restricted Payments                          Section 4.24
    Revolving Credit                             Section 1.01
    Revolving Credit Note                        Section 1.02(c)
    SEC                                          Section 4.08(a)
    Security Agreement                           Section 3.01(c)

                                          4
<PAGE>


    Service Fee                                  Section 1.09
    Special Counsel                              Section 3.01(b)
    Stock                                        Section 4.24
    Subordinated Debt                            Section 4.20
    Subsidiaries                                 Section 2.02
    Tangible Assets                              Section 4.20
    Tangible Capital Base                        Section 4.20

    Section 1.05.  Letters of Credit.

    (a)  Issuance Procedures.  Each Borrower may request and Bank will issue 
standby letters of credit (such letters of credit together with any letters 
of credit outstanding on the date hereof and any renewal of any such 
outstanding letter of credit, collectively "L/Cs") for the account of such 
requesting Borrower.  With each request, the requesting Borrower shall 
deliver to Bank an L/C application and L/C agreement together with the 
proposed form of such L/C (which, together with all schedules and exhibits 
thereto, shall be in form and substance satisfactory to Bank and its counsel) 
and such other certificates, documents and other papers and information as 
Bank may reasonably request.  Any foreign beneficiary must be satisfactory to 
Bank.  All L/C's (other than letters of credit which are outstanding on the 
date hereof and any renewal of any such outstanding letter of credit) must 
expire at least one day prior to the Maturity Date.  Within five Banking Days 
following receipt of the above-described documents in satisfactory form, Bank 
shall, provided that no Event of Default exists and no event exists which, 
with the giving of notice or passage of time, or both, would constitute an 
Event of Default, issue such L/C.

    (b)  Reimbursement.  The Borrowers agree to pay Bank on each date that 
any amount is drawn under an L/C, a sum equal to the amount so drawn. The 
Borrowers agree to pay on demand any and all reasonable expenses incurred by 
Bank in enforcing any rights under this Section 1.05.  In the event any L/C 
is payable in foreign currency, the Borrowers shall reimburse Bank at Bank's 
selling rate of exchange on the date such reimbursement is made.

    (c)  Commission. The Borrowers agree to pay Bank in advance two percent 
(2%) per year (prorated based upon the number of days from the issue date to 
the expiration date) of the face amount of any L/C issued or renewed after 
the date hereof, together with any transactional fees at the Bank's customary 
rates.

    (d)  Method of Payment.  Bank is authorized to obtain reimbursement by 
making Advances under the Revolving Credit.  Bank may make such Advance even 
if it causes the outstanding balance to exceed the limits set forth in 
Section 1.02(a) and the making of such Advance shall be an Event of Default 
under Article V.

    (e)  Amount. The aggregate amount of L/Cs outstanding at any time shall 
not exceed $3,550,000.

                                          5
<PAGE>

    Section 1.06.  Payment by the Company.

    All payments and prepayments of principal and interest due with respect 
to the Credit and all other sums due hereunder shall be made by the Borrowers 
in immediately available funds deposited with Bank.  Payments received by 
Bank after 11:00 a.m. Boston time shall be deemed received on the next 
succeeding Banking Day.  Bank is authorized to make all such payments by 
Advances under the Revolving Credit.

    Section 1.07.  Credit for Uncollected Items.

    Bank will give the Borrowers credit for uncollected items deposited with 
Bank (a) the next Banking Day for purposes of computing availability under 
the Revolving Credit and (b) two Banking Days after deposit for purposes of 
computing interest and fees with respect to the Credit.

    Section 1.08.  Facility Fee.

    On the first day of each month (and upon the day of termination if the 
Credit is terminated), the Borrowers shall pay Bank a facility fee of 
one-half percent (1/2%) per year of the unused portion of the Revolving 
Credit for the preceding month.

    Section 1.09.  Audit Expenses.

    The Borrowers shall pay Bank on demand Bank's customary and reasonable 
fees and expenses for audit reviews by employees of Bank (currently $400 per 
man-day plus out-of-pocket expenses).

    Section 1.10.  Closing Fee.

    On the date hereof, Bank shall earn a one-time closing fee ("Closing 
Fee") of $0.00.

ARTICLE II.  REPRESENTATIONS AND WARRANTIES.

    The Borrowers jointly and severally represent and warrant as follows:

    Section 2.01.  Corporate Existence and Power.

    Each Borrower and its Subsidiaries (as defined in Section 2.02) are duly 
organized, validly existing and in good standing under the laws of the 
respective jurisdictions of their organization and have full corporate and 
other power and authority to conduct businesses and own their properties as 
now conducted and owned.  Each Borrower and its Subsidiaries are licensed or 
qualified as foreign corporations or limited liability corporations in each 

                                          6
<PAGE>

jurisdiction where the conduct of their respective businesses or the 
ownership of their respective properties require such licensing or 
qualification and where the failure to be so licensed or qualified would have 
a material adverse effect on the business, finances or operations of such 
Borrower or any of its Subsidiaries.

    Section 2.02.  Subsidiaries.

    Any corporation, business trust, partnership or other business entity in 
which any Borrower or any Subsidiary of such Borrower owns or has options to 
acquire 50% or more of the voting control shall constitute a Subsidiary.  The 
Borrowers currently have no Subsidiaries.  Powders, AeroCast, ComCast, NMI, 
CMI and Holdings are each 100% owned Subsidiaries of StarMet.

    Section 2.03.  Power and Authority Relative to Borrowing; Legal and 
Binding Nature; Compliance with Other Instruments.

    Each Borrower and its Subsidiaries has full power and authority and has 
taken all required corporate and other action necessary to permit such 
Borrower to execute and deliver and perform all of its obligations contained 
in this Agreement and all documents or instruments required hereby or 
incident or collateral hereto, and to borrow hereunder, and none of such 
actions will violate any provision of law applicable to, or of the 
organizational documents of, such Borrower or any such Subsidiary, or result 
in the breach of or constitute a default under any agreement or instrument to 
which such Borrower or any such Subsidiary is a party or by which any of them 
is bound.  This Agreement and all documents or agreements required hereby or 
incident hereto to which the Borrowers are a party are the valid and binding 
obligations of the Borrowers enforceable in accordance with their terms.  
Neither the execution, delivery nor performance by the Borrowers or any of 
their Subsidiaries of any of the obligations contained in this Agreement or 
in any document or instrument required hereby or incident or collateral 
hereto requires the consent, approval or authorization of any person or 
governmental authority.

    Neither the Borrowers nor any of their Subsidiaries is in violation of 
any term of its charter or by-laws, or any agreement, instrument, mortgage, 
indenture, contract, judgment, decree, order, statute, rule or governmental 
regulation applicable to the Borrowers or any of their Subsidiaries except 
for possible minor violations none of which could, either individually or in 
the aggregate, have any material adverse effect on the business, financial 
condition or assets of any Borrower or any of their Subsidiaries and except 
as otherwise disclosed on an Exhibit to this Agreement.  The execution, 
delivery and performance of this Agreement, all agreements incident or 
collateral hereto, and the Credit will not result in the creation of any 
security interest, lien, charge or encumbrance upon any of the properties or 
assets of the Borrowers or any of their Subsidiaries except in favor of Bank.

                                          7
<PAGE>

    Section 2.04.  Financial Condition.

    The audited financial statement dated September 30, 1996 previously 
delivered to Bank (the "Base Financial Statement") has been prepared with due 
diligence and in accordance with generally accepted accounting principles and 
practices.  The Base Financial Statement fairly presents the financial 
condition of the Borrowers and their Subsidiaries as of the date of such 
statement and the results of their operations for the period then ending.  
The Borrowers and their Subsidiaries have no material contingent liability 
(including, without limitation, contingent tax and environmental liability) 
nor any burdensome agreement or commitment which could have a material 
adverse effect on its business or financial condition except as disclosed in 
the Base Financial Statement and the Proxy Statement.

    Section 2.05.  No Material Adverse Change.

    Since the date of the Base Financial Statement, there has been no 
material adverse change in the condition (financial or otherwise), properties 
or business operations of any Borrower or any of their Subsidiaries and 
neither any Borrower nor any of their Subsidiaries has paid any dividends or 
made any distributions on or purchased or otherwise acquired any shares of 
the capital stock of any Borrower or any of their Subsidiaries.

    Section 2.06.  Litigation.

    Except as set forth in Exhibit 2.06 hereto, there are no suits or 
proceedings pending or, to the best knowledge of the Borrowers, threatened 
against or affecting them or any of their Subsidiaries which could have a 
material adverse effect on the business, assets or financial condition of 
either of the Borrowers or any of their Subsidiaries.  Moreover, there are no 
suits or proceedings pending or, to the knowledge of the Borrowers, 
threatened with respect to the transactions contemplated by this Agreement.

    Section 2.07.  Title.

    Except as set forth in Exhibit 2.07, the Borrowers and their Subsidiaries 
have good and marketable title to all of the properties and assets reflected 
in the Base Financial Statement or acquired since such date (except for 
materials used, inventory sold, accounts receivable collected and other items 
disposed of, all in the ordinary course of business), free and clear of all 
mortgages, liens and encumbrances except liens permitted by Section 4.14; 
easements, restrictions and minor defects in title which do not, either 
individually or in the aggregate, materially detract from the value or 
materially limit the use of any real property; and certain assets listed on 
Exhibit 2.14 which are not owned but which are reflected on the balance sheet 
as capitalized leases.

                                          8
<PAGE>


    Section 2.08.  Tax Returns and Payments.

    Except as set forth on Exhibit 2.08 attached hereto, all of the tax 
returns and tax reports relating to taxes on income and, to the best 
knowledge of the Borrowers, all other tax returns and reports of each 
Borrower and their Subsidiaries required by law to be filed have been duly 
filed, or extensions of the time for filing have been duly obtained, and, 
except as set forth in Exhibit 2.08 hereto, the Borrowers and their 
Subsidiaries have paid all taxes shown due thereon.  Except as set forth in 
Exhibit 2.08 attached hereto, the federal income tax returns of the Borrowers 
and their Subsidiaries have never been audited by the Internal Revenue 
Service.  Except as set forth on Exhibit 2.08 attached hereto, there are in 
effect no waivers of the applicable statutes of limitations for federal taxes 
for any period.  No deficiency assessment or proposed adjustment of the 
federal income taxes of any Borrower or of any of their Subsidiaries is 
pending except as set forth in Exhibit 2.08 and the Borrowers have no 
knowledge of any proposed liability of a substantial nature for any tax to be 
imposed upon any of their properties or assets, for which there is not an 
adequate reserve reflected in the Base Financial Statement.

    Section 2.09.  Compliance with Law.

    The Borrowers and their Subsidiaries have all necessary franchises, 
permits, licenses and other rights to allow them to conduct their businesses 
as presently conducted, and are not in default with respect to any order or 
decree of any court, or under any law, order or regulation of any 
governmental authority, or under the provisions of any contract or agreement 
to which any of them is a party or by which they may be bound, which default 
would have a material adverse effect on the business, finances or operations 
of any of them.

    Section 2.10.  Pension Matters.

    Neither the Borrowers nor any of their Subsidiaries has incurred (a) any 
material accumulated funding deficiency within the meaning of the Employee 
Retirement Income Security Act of 1974, as amended ("ERISA"), or (b) any 
material liability to the Pension Benefit Guaranty Corporation in connection 
with any employee benefit plan established or maintained by it; nor has any 
Borrower or any of their Subsidiaries had any tax assessed against it by the 
Internal Revenue Service for any alleged violation under Section 4975 of the 
Internal Revenue Code.  Neither the Borrowers nor any of their Subsidiaries 
has any material unfunded liability under a pension plan or a contingent 
liability for withdrawal from a multi-employer pension plan except as 
disclosed in the Base Financial Statement.

    Section 2.11.  Environmental Matters.

    Except as set forth on Exhibit 2.11, neither the Borrowers nor any of 
their Subsidiaries has (a) been named as a potentially responsible party or 
received notice of an investigation that could lead to such designation under 
any proposed environmental cleanup; (b) incurred any 

                                          9
<PAGE>

unsatisfied liability (contingent or otherwise) in connection with the 
release, spill, generation, use, storage, treatment, transportation, 
manufacture, handling, production or disposal of hazardous materials, toxic 
substances or solid waste under any state or federal environmental law; or 
(c) occupied in the past or currently occupies any site designated as 
environmentally contaminated. The Borrowers and their Subsidiaries have all 
licenses, permits, certificates and similar authorizations required to 
conduct its business under applicable environmental laws and is not subject 
to any pending investigation or proceeding to revoke, limit or terminate such 
authorizations.

    Section 2.12.  Compliance with Regulation U.

    None of the proceeds of the Credit will be used to purchase, carry or 
refinance any borrowing the proceeds of which were used to purchase or carry 
any "margin securities" within the meaning of Regulation U of the Board of 
Governors of the Federal Reserve System.

    Section 2.13.  Credit Agreements.

    Set forth on Exhibit 2.13 is a complete and correct list of all existing 
loan agreements, indentures, purchase agreements, leases, guarantees or other 
instruments relating to extensions of credit or money borrowed for an amount 
in excess of $25,000 under which any Borrower or any of their Subsidiaries is 
or may become directly or indirectly obligated.

    Section 2.14.  Leases and Options to Purchase.

    Set forth on Exhibit 2.14 is a complete and correct list of all existing 
leases with respect to, or options to purchase any, real estate or any 
equipment involving a commitment or potential commitment in excess of $25,000 
under which any Borrower or any of their Subsidiaries is or may become 
directly or indirectly obligated. 

    Section 2.15.  Real Estate Owned.

    Set forth on Exhibit 2.15 is a complete and correct list of all real 
estate owned by each Borrower or any of their Subsidiaries.

    Section 2.16.  Fiscal Year.

    The fiscal year end for each Borrower is September 30.

                                          10
<PAGE>


ARTICLE III.  CONDITIONS.

    Section 3.01.  Conditions to the First Advance.

    The obligation of Bank to make the first Advance is subject to the 
fulfillment of the following conditions:

    (a)  The Note.  The Borrowers shall have executed and delivered to Bank 
the Revolving Credit Note.

    (b)  Legal Opinions from Counsel for the Company.  Bank shall have 
received the written opinion of Peabody & Arnold, counsel for the Borrowers, 
in form satisfactory to Goodwin, Procter & Hoar  LLP special counsel to Bank 
(said special counsel and any successor counsel shall be hereinafter referred 
to as "Special Counsel").

    (c)  The Security Agreement.  The Borrowers shall have executed and 
delivered to Bank an amended and restated security agreement in a form 
approved by Special Counsel (the "Security Agreement"), granting to Bank a 
first priority security interest in all accounts, inventory and general 
intangibles of the Borrowers and all financing statements and other documents 
in connection therewith shall have been duly filed or recorded.

    (d)  Patents and Trademarks.  The Borrowers shall have delivered to Bank 
a current list of all patents, trademarks and applications therefor and shall 
have executed and delivered to the Bank agreements in a form approved by 
Special Counsel granting the Bank a first priority interest in all patents, 
trademarks and applications thereof.

    (e)  Insurance.  Each Borrower shall have delivered to Bank an executed 
Certificate of Insurance in the form of Exhibit 3.01(e) hereto.

    (f)  Compliance Certificate.  The Borrowers shall have delivered to Bank 
an executed Compliance Certificate dated the date of the first Advance.

    (g)  Closing Certificate.  Each Borrower shall have delivered to Bank an 
executed Officer's Closing Certificate in substantially the form of Exhibit 
3.01(g)(1) hereto or a Member/Manager Closing Certificate in substantially 
the form of Exhibit 3.01(g)(2) hereto, as appropriate.

    (h)  No Default.  No Event of Default and no event which, with the giving 
of notice or the lapse of time, or both, would become an Event of Default, 
has occurred and is continuing.

    (i)  Closing Fee.  Bank shall have received payment of the Closing Fee.

                                          11
<PAGE>


    Section 3.02.  Conditions to Subsequent Advances.

    Each request for a subsequent Advance shall be deemed to be a 
representation by the Borrowers to Bank that all representations and 
warranties contained in Article II hereof or in any Exhibit, Schedule or 
Certificate attached hereto or delivered to Bank in connection herewith were 
true and correct when made, and continue to be true and correct except those 
items which relate to a specific date and except as disclosed to Bank by the 
Borrowers, and that no Event of Default, and no event which, with the giving 
of notice or the lapse of time, or both, would become an Event of Default, 
has occurred and is then continuing.

ARTICLE IV.  COVENANTS OF THE COMPANY

    The Borrowers jointly and severally covenant that:

    Section 4.01.  Payment of Amounts Due.

    The Borrowers will make all payments of principal and interest on the 
Credit in accordance with the terms hereof and thereof and will observe, 
perform and comply with each and every one of the covenants, terms and 
conditions contained herein, in the Credit or in any other document or 
instrument required hereby or incident or collateral hereto to be observed, 
performed or complied with by them.

    Section 4.02.  Corporate Existence.

    The Borrowers and each of their Subsidiaries will maintain and preserve 
in full force and effect their respective corporate existences and, insofar 
as reasonable and practicable, will maintain and preserve in full force and 
effect all material rights, licenses, patents and franchises, and comply with 
all applicable regulations in all jurisdictions necessary for the conduct of 
their businesses.

    Section 4.03.  Maintenance of Properties.

    The Borrowers and each of their Subsidiaries will maintain, preserve, 
protect and keep all properties used or useful in the conduct of their 
businesses in good repair, working order and condition, and from time to time 
make such repairs, renewals, replacements, betterments and improvements 
thereto as are necessary to permit such businesses to be properly and 
advantageously conducted at all times.

    Section 4.04.  Payment of Taxes.

    The Borrowers and each of their Subsidiaries will pay and discharge all 
lawful taxes, assessments and governmental charges or levies imposed upon 
them or upon their income or profits, or upon any property belonging to them 
before the same shall become past due, as well 

                                          12
<PAGE>

as all lawful claims for labor, materials and supplies, which, if not paid 
when due, might become a lien or charge upon such property or any part 
thereof; provided, however, that neither the Borrowers nor any of their 
Subsidiaries shall be required to pay and discharge any such tax, assessment, 
charge, levy or claim so long as the validity thereof shall be contested in 
good faith by appropriate proceedings and an adequate reserve for the payment 
thereof is established on the books of the appropriate Borrowers or the 
appropriate Subsidiary in accordance with generally accepted accounting 
principles.

    Section 4.05.  Compliance with ERISA.

    The Borrowers and their Subsidiaries will satisfy, or cause to be 
satisfied, the minimum annual funding standard required by ERISA for any 
employee benefit plan established or maintained by it which is subject to 
ERISA and the Borrowers and their Subsidiaries will not permit any tax or 
penalty to be incurred by it as a result of any failure to satisfy any such 
minimum funding requirement or as a result of any violation of the provisions 
of Section 4975 of the Internal Revenue Code or any regulation issued 
thereunder.

    Section 4.06.  Compliance with Laws.

    The Borrowers and their Subsidiaries at all time in all material respects 
will comply with applicable provisions of laws, rules, regulations, licenses, 
permits, approvals and orders and observe all requirements of federal, state, 
local and other governmental authorities including, without limitation, all 
provisions of the Fair Labor Standard Rules of 1938, the Occupational Safety 
and Health Act of 1970 and all applicable environmental laws; provided, 
however, that neither the Borrowers nor any of their Subsidiaries shall be 
required to comply with such requirements so long as the validity or 
applicability thereof shall be contested in good faith by appropriate 
proceedings and an adequate reserve is established on the books of such 
Borrower or any such Subsidiary in accordance with generally accepted 
accounting principles.

    Section 4.07.  Insurance.

    The Borrowers and their Subsidiaries will keep their insurable properties 
insured by financially sound and reputable insurers satisfactory to Bank 
against such risks and in such amounts as are deemed prudent by the Borrowers 
and are reasonably acceptable to Bank and will name Bank as a Loss Payee 
under all insurance policies maintained with respect to insurable properties 
subject to a security interest or lien in favor of Bank.  The Borrowers and 
their Subsidiaries will maintain in full force and effect public liability 
insurance against claims for bodily injury, death or physical property 
damages occurring upon, in, about, or in connection with the use of any 
properties occupied or controlled by them, or through the operation of any 
motor vehicles by their agents or employees or arising in any manner out of 
the businesses carried on by them in such amounts and with such coverages as 
are deemed prudent by the Borrowers and are reasonably acceptable to Bank.    
    
                                          13
<PAGE>


    Section 4.08.  Accounts and Reports.

    The Borrowers will furnish or cause to be furnished to Bank the following 
reports:

    (a)  Annual Reports.  As soon as available, and in any event within 
ninety (90) days after the end of each fiscal year of the Borrowers, 
consolidated and consolidating audited financial statements of the Borrowers, 
of the Borrowers, together with all notes thereto, prepared in reasonable 
detail and in accordance with generally accepted accounting principles 
consistently applied (except there will be no required notes to the 
consolidating balance sheet) such consolidated (but not consolidating) 
statements to be duly certified by Arthur Anderson & Co., SC or other 
certified, independent public accountants selected by the Borrowers and 
acceptable to Bank.  Such statements shall be accompanied by a statement of 
such certified, independent public accountants that the examination made in 
certifying such statements did not disclose the existence of any condition or 
event which constitutes an Event of Default under this Agreement or which, 
after notice or lapse of time or both, would constitute such an Event of 
Default, or a statement specifying the nature and period of existence of any 
such condition or event disclosed by such examination; provided, however, 
that in issuing such statement, such accountants shall not be required to 
exceed the scope of normal accounting procedures conducted in connection with 
their audit opinion. Notwithstanding the foregoing, delivery within the 
period specified above of a copy of the Annual Report on Form 10-K of StarMet 
filed with the Securities and Exchange Commission (the "SEC"), shall be 
deemed to satisfy the requirements of this Section 4.08(a) so long as the 
Form 10-K contains all of the information required by this Section 4.08(a), 
or, is otherwise supplemented so that such Form, together with such 
supplemental information, satisfies the requirements hereof. 

    (b)  Quarterly Reports.  As soon as available, and in any event within 
forty-five (45) days after the end of each quarterly accounting period in 
each fiscal year of the Borrowers, unaudited consolidated and consolidating 
financial statements of the Borrowers prepared in reasonable detail and in 
accordance with generally accepted accounting principles consistently applied 
(except that such statements need not contain notes thereto) certified by the 
chief financial officers of the Borrowers, which statements shall contain 
balance sheets as of the end of such accounting period and statements of 
profit and loss for the period from the beginning of such fiscal year to the 
end of such accounting period.  Notwithstanding the foregoing, delivery 
within the period specified above of a copy of the Quarterly Report on Form 
10-Q of StarMet filed with the SEC, shall be deemed to satisfy the 
requirements of this Section 4.08(b) so long as the Form 10-Q contains all of 
the information required by this Section 4.08(b), or, is otherwise 
supplemented so that such Form, together with such supplemental information, 
satisfies the requirements hereof.

    (c)  Monthly Reports.  As soon as available, and in any event within 
thirty (30) days after the end of each monthly accounting period in each 
fiscal year, consolidated and consolidating unaudited financial statements of 
the Borrowers prepared in reasonable detail and 

                                          14
<PAGE>

in accordance with generally accepted accounting principles consistently 
applied (except that such statements need not contain notes thereto and 
except as may be otherwise required hereby) certified by their respective 
chief financial officers, which statements shall contain balance sheets as of 
the end of such accounting period and statements of profit and loss for the 
period from the beginning of such fiscal year to the end of such accounting 
period.

    (d)  Periodic Reports.  With the monthly financial statements furnished 
pursuant to subsection (c) hereof, (i) summary of all Advances and L/C's 
outstanding at the end of such period, (ii) consolidated and consolidating 
accounts receivable aging based on invoice date, (iii) a backlog sales 
report, (iv) an updated Compliance Certificate, and (v) such other reports as 
Bank shall reasonably request.  With the quarterly financial statements 
furnished pursuant to subsection (b) hereof, a list of the names and 
addresses of the respective customers of each Borrower.

    (e)  Auditor's Management Letter.  Promptly after receipt by any 
Borrower, copies of the management letter, if any,  provided by the 
independent certified public accountants who audit the annual financial 
statements.

    (f)  Public Information.  Promptly, copies of all reports and financial 
statements which any Borrower sends to its stockholders as a class or which 
any Borrower, or any of their Subsidiaries, file with the Securities and 
Exchange Commission or any other public body.

    (g)  Projections.  At least thirty (30) days prior to the end of each 
fiscal year of the Borrowers, projections for the next fiscal year indicating 
the Borrowers' expected operating results (on a consolidated and 
consolidating basis) and proposed capital expenditures.  Such projections 
shall be made on a month-by-month basis.

    (h)  Accounting Principles.  Reports furnished under this Agreement shall 
be prepared in accordance with generally accepted accounting principles 
except that unaudited statements shall be subject to normal year end 
adjustments and there shall be no requirement for notes thereto.  Any 
accounting terms not otherwise defined shall have the same meaning provided 
by generally accepted accounting principles.  Compliance with the covenants 
set forth in this Agreement will be determined on the basis of accounting 
principles used in the preparation of the Base Financial Statements.  In the 
event that any subsequent reports shall have been prepared in accordance with 
accounting principles different than those used in the Base Financial 
Statements, the Borrowers shall inform Bank of such changes in accounting 
principles and shall provide to Bank, with such subsequent reports, such 
supplemental reconciling financial information as may be required to 
ascertain performance by the Borrowers and their Subsidiaries with the 
covenants contained in this Agreement.

                                          15
<PAGE>


    Section 4.09.  Information and Inspection.

    At all reasonable times and as often as Bank shall reasonably request on 
one (1) day's written notice, the Borrowers will furnish to Bank from time to 
time with reasonable promptness full information pertinent to any covenant, 
provision or condition hereof or to any matter in connection with their 
business and permit any authorized representative designated by Bank to visit 
and inspect any of their properties and those of their Subsidiaries, 
including their books (and to make extracts therefrom), and to discuss their 
affairs, finances and accounts with their officers.  The Borrowers and their 
Subsidiaries, will, in addition, furnish to Bank with reasonable promptness 
such financial information as Bank shall reasonably request.  Without 
limiting the generality of the foregoing, Bank shall be entitled to conduct 
field audits of the accounts receivable and inventory of the Borrowers and 
their Subsidiaries, and subject to the limitations set forth in Section 1.09 
hereof, the Borrowers shall pay on demand Bank's out-of-pocket expenses and 
reasonable field audit fees.

    Section 4.10.  Additional Advice.

    The Borrowers will promptly advise Bank of (i) any material casualty loss 
whether or not insured; (ii) the threat of or commencement of any material 
litigation; (iii) the assertion by any governmental authority or private 
party of a material violation of or material liability arising under any 
environmental law; (iv) any change which constitutes or, after notice or 
lapse of time or both, would constitute an Event of Default as defined in 
Article V of this Agreement; and (v) each waiver, consent or amendment 
granted or made with respect to instruments or agreements relating to 
borrowed money in excess of $100,000 and each request by any Borrower 
therefor.

    Section 4.11.  Payment of Bank Expenses.

    The Borrowers will bear all reasonable expenses incurred by Bank in 
connection with the negotiation, preparation, execution, amendment, 
interpretation, administration, termination or enforcement of this Agreement 
(whether or not the Credit is consummated) and the making and collection of 
the Credit, including without limitation, the reasonable fees and 
disbursements of Special Counsel and appraisers employed by Bank.

    Section 4.12.  Limitation on Indebtedness.

    Neither the Borrowers nor any of their Subsidiaries will create, incur, 
assume, or become, be or remain liable in any manner in respect of, or allow 
to exist, any indebtedness (which term includes all indebtedness, obligations 
and liabilities which in accordance with generally accepted accounting 
principles would be reflected on the balance sheet of any Borrower or any of 
their Subsidiaries as a liability and any negative cash balance; all 
indebtedness, obligations and liabilities, whether or not assumed by any 
Borrower or any of their Subsidiaries, secured by any mortgage, pledge or 
lien existing on property owned by any 

                                          16
<PAGE>

Borrower or any of their Subsidiaries; and all amounts representing rental 
payments which, in accordance with generally accepted accounting principles, 
would be classified as a liability on its balance sheet), except for:

    (a)  the Credit and any other obligations owed to Bank in connection with 
this Agreement or otherwise;

    (b)  the obligations to Barnwell County, South Carolina and the 
Massachusetts Industrial Finance Agency and Bank related to those certain 
industrial revenue notes or bonds (collectively "Bonds") issued pursuant to 
that certain (i) Indenture dated as of September 27, 1984 between Barnwell 
County, South Carolina and Bank, and (ii) Security and Trust Agreement dated 
as of June 1, 1985 ("1985 Trust Agreement") between StarMet, the 
Massachusetts Industrial Finance Agency and Bank;

    (c)  indebtedness representing trade debt, wages, employee benefits and 
similar indebtedness incurred in the ordinary course of business;

    (d)  indebtedness secured by liens to the extent permitted by Section 
4.14;

    (e)  liabilities for taxes, assessments, governmental charges, liens or 
claims to the extent that payment thereof is not required by Section 4.04;

    (f)  indebtedness in respect of final judgments for the payment of money 
not in excess of $50,000 in the aggregate at any time outstanding (excluding 
sums covered by insurance) which has been in force for less than the 
applicable appeal period or less than sixty (60) days, whichever is sooner, 
provided that such indebtedness may remain outstanding if the appropriate 
Borrower or the appropriate Subsidiary at the time shall in good faith be 
prosecuting an appeal, or proceedings for review or pending and in respect of 
which a stay shall have been obtained pending such appeal or review; 

    (g)  Subordinated Debt;
 
    (h)  indebtedness of any Borrower to any other Borrower, provided, that 
if such indebtedness is represented by a note or other negotiable instrument, 
such note or negotiable instrument shall be delivered to the Bank as 
collateral under the Security Agreement;

    (i)  such other indebtedness of the Borrowers and their Subsidiaries 
which is specifically disclosed in Exhibit 4.12 attached hereto;

                                          17
<PAGE>

    Section 4.13.  Limitation on Liability for Obligations of Others.

    Neither the Borrowers nor any of their Subsidiaries will assume, 
guarantee, endorse or otherwise be or become liable, contingently or 
otherwise, for the obligations of any other corporation, firm or entity or 
other person, except:

    (a)  guarantees in favor of the Bank in connection with the Bonds;
    
    (b)  for the endorsement of negotiable instruments for deposit or 
collection in the normal course of its business;

    (c)  guarantees and other contingent liabilities which are disclosed on 
Exhibit 4.13; and

    (d)  guarantees by any Borrower of the obligations of any other Borrower, 
provided, that such obligations are permitted under Section 4.12.

    Section 4.14.  Limitation on Liens.

    Neither the Borrowers nor any of their Subsidiaries will create, incur, 
assume or allow to be created, incurred or assumed, or to exist, any pledge 
of, or any mortgage, lien, charge or encumbrance of any kind on, any of its 
property or assets, or subject any of such assets to prior payments of any 
other indebtedness whether by subordination agreement, transfer of assets or 
otherwise, or own or acquire or agree to acquire any property of any 
character subject to or upon any mortgage, conditional sale agreement or 
other title retention agreement except:

    (a)  liens in favor of Bank;

    (b)  any lien securing the purchase price of any fixed asset to be used 
in the business of any Borrower or any of their Subsidiaries, but not any 
renewal, extension or refunding of any such lien or the indebtedness secured 
thereby, provided that (i) each such lien shall at all times be confined 
solely to the item of property so acquired, and (ii) the aggregate 
indebtedness secured by all such liens does not exceed $500,000 at any one 
time or if such indebtedness so exceeds $500,000, Bank has consented in 
writing in advance of the subject transaction;

    (c)  liens for taxes, assessments, governmental charges and levies or for 
claims to the extent that payment thereof is not then required by such 
Section 4.04;

    (d)  liens in respect of judgments which had been in force for less than 
the applicable appeal period or less than sixty (60) days, whichever is 
sooner, so long as execution is not levied thereunder, or in respect of which 
the appropriate Borrower or the appropriate 

                                          18
<PAGE>

Subsidiary at the time shall in good faith be prosecuting an appeal, or 
proceedings for review are pending and in respect of which a stay of 
execution shall have been obtained pending such appeal or review;

    (e)  liens on deposits made in connection with, or to secure payment of, 
workmen's compensation, unemployment insurance or similar programs; liens, 
charges or encumbrances imposed by law, such as carriers', warehousemen's and 
mechanics' liens and similar involuntary liens arising in the ordinary course 
of business which do not, individually or in the aggregate, materially 
detract from the value or limit the use of any property subject thereto; 
landlords' liens in respect of rent not in default; and liens on deposits 
made to secure the performance of bids, appeal bonds and surety bonds; and

    (f)  liens and encumbrances which are disclosed on Exhibit 4.14.

    Section 4.15.  Sale of Accounts Receivable.

    Neither the Borrowers nor any of their Subsidiaries will sell or transfer 
any of its accounts receivable, whether with or without recourse.

    Section 4.16.  Loans and Investments.

    Neither the Borrowers nor any of their Subsidiaries will purchase or 
otherwise acquire or retain any stock, partnership interest, or obligations 
of, or make any loans or advances to, or investments in any corporation or 
other entity or person, including loans or advances to or investments in any 
Borrower by StarMet other than:

    (a)  the present investment of StarMet in its Subsidiaries;

    (b)  open account transactions between the Borrowers and between 
Subsidiaries in the ordinary course of business;

    (c)  loans or advances for reimbursable expenses to employees not 
exceeding $50,000 outstanding in the aggregate at any time;

    (d)  obligations of the United States of America, or any agency thereof, 
maturing not more than one (1) year from the date of issue thereof, provided 
that Bank shall acquire a perfected first security interest in such 
obligation simultaneously with its purchase or acquisition; 

    (e)  certificates of deposit or other obligations maturing not more than 
one (1) year from the date of issue thereof issued by a bank, provided that 
Bank have a perfected first security interest in such obligation;

                                          19
<PAGE>


    (f)  indebtedness of any Borrower to any other Borrower permitted 
pursuant to Section 4.12(h); and

    (g)  loans or advances by StarMet to any other Borrower.

    Section 4.17.  Transactions With Affiliated Persons.

    Except as set forth on Exhibit 4.17, neither the Borrowers nor any of 
their Subsidiaries will enter into any transaction with any Affiliate, except 
on terms no less favorable to either such Borrower or any such Subsidiary 
than would be available in a bona fide arm's length transaction with a 
non-affiliated person or entity.  "Affiliate" means any officer, director or 
shareholder who owns ten percent (10%) or more of any class of securities of 
StarMet or any Subsidiary of StarMet; any entity where any Borrower owns 
directly or indirectly ten percent (10%) or more of any class of securities 
or interest issued by such entity; or any entity that controls, is controlled 
by or under common control with any Borrower or any of their Subsidiaries.

    Section 4.18.  Consolidation, Merger and Disposition of Assets.

    Neither the Borrowers nor any of their Subsidiaries will consolidate with 
or merge into or with another corporation, partnership or other entity; 
directly or indirectly issue, sell, assign, pledge or otherwise encumber or 
dispose of any shares of its capital stock or the capital stock of any such 
Subsidiary; sell, lease or otherwise dispose of all or any material portion 
of its properties or assets (other than in the ordinary course of its 
business) to any firm, person or corporation; or acquire any material portion 
of the properties or assets of any other corporation, partnership or entity, 
whether in one or a series of related transactions, except:

    (a)  any Subsidiary may merge into or consolidate with its respective 
parent Borrower (provided that such Borrower shall be the surviving 
corporation);

    (b)  any Borrower may transfer equipment to any other Borrower;

    (c)  StarMet may issue capital stock for cash and may issue options or 
warrants to any person for cash or to employees for services;

provided that in each case no Event of Default as set forth in Article V 
hereof, and no condition or event which after notice or lapse of time, or 
both, would constitute an Event of Default, would exist immediately after any 
such transaction or series of related transactions.

    Section 4.19.  Changes in Business.

    Neither the Borrowers nor any of their Subsidiaries will materially alter 
the nature of its business.

                                          20
<PAGE>


    Section 4.20.  Debt-Tangible Capital Base.

    The ratio of Debt to Tangible Capital Base of the Borrowers on a 
consolidated basis shall not exceed at any time 1.20 to 1.0.  

    "Debt" shall mean the sum of consolidated liabilities (including all 
liabilities to Bank), both short-term and long-term, of the Borrowers and all 
of their Subsidiaries, but excluding stockholders equity and Subordinated 
Debt.

    "Subordinated Debt" means the outstanding principal amount of any debt of 
any Borrower which is subordinated to the obligations of the Borrowers to 
Bank in form and substance satisfactory to Bank and its Special Counsel. 

    "Tangible Assets" shall mean the consolidated assets of the Borrowers and 
all Subsidiaries, less intangible assets such as goodwill, organization 
expenses, patents, trademarks, copyrights, research and development costs, 
training costs, unamortized debt discount and similar items deemed to be 
intangible by Bank.

    "Tangible Capital Base" shall mean Tangible Assets, less Debt, plus 
Subordinated Debt.

    Section 4.21.  Tangible Capital Base.

    The Tangible Capital Base of the Borrowers shall be not less than 
$25,000,000 at any time.

    Section 4.22.  Net Income.  

    The Net Income of the Borrowers for the periods set forth below shall not
be less than the amounts set forth opposite such periods:

                       Period                         Net Income
                       ------                         ----------
         each consecutive three month period           $300,000

"Net Income" shall mean the consolidated net income of the Borrowers before
interest and taxes.

    Section 4.23.  Capital Expenditure.

    In any fiscal year, unless Bank otherwise consents in writing, the 
Borrowers and their Subsidiaries on a consolidated basis shall not make or 
incur expenditures which are properly 

                                          21
<PAGE>

chargeable to capital account under generally accepted accounting principles 
(including leases which are capitalized) in an aggregate amount in excess of 
$1,000,000. 

    Section 4.24.  Restricted Payments.

    Neither the Borrowers nor any of their Subsidiaries will, directly or 
indirectly, declare, order, pay or make any Restricted Payment (as 
hereinafter defined), except the Borrowers may prior to the occurrence of an 
Event of Default or an event which with notice or the passage of time will 
constitute an Event of Default, and provided that such Restricted Payment 
will not constitute an Event of Default or such an event:

    (a)  declare and pay dividends on its Stock payable solely in Stock;

    (b)  make exchanges of one or more classes of Stock provided that no cash 
or other property is distributed in such exchange; or

    (c)  retire Stock out of the net proceeds of the simultaneous sale of 
other Stock; and

    (d)  pay principal and interest on Subordinated Debt to extent permitted 
by Bank pursuant to a subordination agreement or agreements in form and 
substance satisfactory to Bank.

    For the purposes of this Section 4.24, the following terms shall have the 
following respective meanings:

    (i)  Restricted Payments shall mean:

         (a)  any payment or declaration of any dividend on any class of Stock
              of StarMet or any other distribution on account of any class of
              Stock;

         (b)  any redemption, purchase or other acquisition by StarMet,
              directly or indirectly, of any shares of its Stock; and

         (c)  any payments of principal or interest made by any Borrower in
              respect of any Subordinated Debt.

    (ii) "Stock" shall mean capital stock and warrants or options to purchase 
stock.

    Section 4.25.  Restriction on Use of Proceeds.

    None of the proceeds of the Credit shall be used by the Borrowers to 
purchase commodities except for use in the ordinary course of the Borrowers' 
business or for the purpose of purchasing or carrying, or refinancing any 
borrowing the proceeds of which were 

                                          22
<PAGE>

used to purchase or carry any "margin securities" within the meaning of 
Regulation U of the Board of Governors of the Federal Reserve System.

    Section 4.26.  Controlling Interest.  

    StarMet will at all times own 100% of the issued and outstanding capital 
stock or membership interests, as appropriate, of each of the Borrowers.

    Section 4.27.  Bank Accounts.

    The Borrowers shall maintain at all times their principal operating 
accounts with Bank and other operating accounts with other banks approved by 
Bank.  A complete list of all existing banks, mutual fund, brokerage or other 
accounts containing cash, cash equivalents or marketable securities for the 
Borrowers and all of their Subsidiaries is set forth on Exhibit 4.27.  
Neither the Borrowers nor any of their Subsidiaries will open any further 
account of the type required to be listed on Exhibit 4.27 without prior 
notice in writing to Bank.

    Section 4.28.  Further Security.

    The Borrowers agree to provide Bank with such security interest or liens 
as Bank may hereafter reasonably request with respect to their assets or 
assets of any of their Subsidiaries.

    Section 4.29.  Fiscal Year.

    The Borrowers shall (a) maintain the same fiscal year end, and (b) not 
change such fiscal year end without prior written consent of Bank.

    Section 4.30.  Amendments to Documents.

    No Borrower shall agree to any amendment or modification to any 
instrument or agreement executed by any Borrower in connection with any 
Subordinated Debt or any of the Bonds, nor shall any Borrower request, or 
consent to, any waiver of any provision contained in any of the foregoing.

    ARTICLE V.  EVENTS OF DEFAULT.

    If, while any part of the principal of or interest on the Credit remains 
unpaid or while this Agreement shall be in effect, any one of the following 
"Event of Default" shall occur:

    (a)  nonpayment of principal of the Revolving Credit when due; 

                                          23
<PAGE>


    (b)  failure to pay any Advances in excess of the Maximum Credit as 
required by Section 1.02(b); 

    (c)  failure to pay any amounts due with respect to letters of credit 
issued by Bank when due;

    (d)  nonpayment of interest on the Advances when due;

    (e)  any Borrower shall (i) apply for or consent to the appointment of a 
receiver, trustee or liquidator of it or of all or a substantial part of its 
assets; (ii) admit in writing its inability to pay its debts as they mature; 
(iii) make a general assignment for the benefit of creditors; (iv) be 
adjudicated a bankrupt or insolvent; (v) file a voluntary petition in 
bankruptcy or a petition or an answer seeking reorganization or an 
arrangement with creditors to take advantage of any insolvency law; (vi) file 
any answer admitting the material allegations of a petition filed against it 
in any bankruptcy, reorganization or insolvency proceeding or fail to dismiss 
such petition within thirty (30) days after the filing thereof; or (vii) take 
any corporate action for the purpose of effecting any of the foregoing;

    (f)  an order, judgment or decree shall be entered, without the 
application, approval or consent of any Borrower by any court of competent 
jurisdiction, approving a petition seeking reorganization or liquidation of 
such Borrower or appointing a receiver, trustee or liquidator of any Borrower 
or of all or a substantial part of its assets;

    (g)  any representation or warranty made by the Borrowers herein or 
hereunder or in any certificate, document or instrument furnished pursuant 
hereto shall prove to have been false or incorrect in any material respect 
when made;

    (h)  default by the Company in the performance of any covenant or 
agreement contained in Sections 4.01 through 4.19 or Sections 4.23 through 
4.30;

    (i)  except as otherwise set forth herein, default by the Company in the 
performance of any other covenant or agreement contained herein or in any 
document or instrument required hereby or incidental or collateral hereto 
which shall not have been remedied within thirty (30) days after written 
notice thereof shall have been given to the Borrowers by Bank;

    (j)  default by any Borrower in the performance of any covenant or 
agreement contained in any other agreement to which it is a party or by which 
it is bound involving a liability in excess of $100,000 which shall not be 
remedied within the period of time (if any) within which such other agreement 
permits such default to be remedied without the consent or waiver of the 
other party thereto, unless such default is waived or excused as a matter of 
law;

    (k)  failure by any Borrower to make any payment of principal or interest 
beyond the period of grace contained in the respective instrument or 
agreement evidencing any 

                                          24
<PAGE>

indebtedness for money borrowed in excess of $100,000 to which it is a party 
or by which it may be bound (unless such default is the result of a good 
faith dispute arising under such agreement or instrument), or default by any 
Borrower in the performance of any other covenant or agreement contained in 
any such agreement or instrument which results in the acceleration of the 
maturity of any indebtedness to others of such Borrower under such agreement 
or instrument;

    (l)  default by any Borrower in the performance of any covenant or 
agreement contained in the Security Agreement or other documents in favor of 
Bank executed in connection with this Agreement which continues beyond any 
grace period provided therein;

    (m)  all or any substantial part of the property of any Borrower shall be 
condemned, seized or otherwise appropriated by any governmental authority or 
any officer or instrumentally thereof; 

    (n)  a judgment or judgments for the payment of money in excess of the 
sum of $100,000 in the aggregate (not covered by insurance) shall be rendered 
against any Borrower and such judgment or judgments shall remain unsatisfied 
and in effect for any period of sixty (60) days without a stay of execution;

    (o)  there shall occur any material adverse change in the financial 
condition of any Borrower;

    (p)  (i) George Matthews shall cease, for any reason, to be the Chairman 
and Chief Executive Officer of StarMet and a successor to Mr. Matthews 
reasonably satisfactory to Bank, shall not have become Chairman and Chief 
Executive Officer within ninety (90) days of the date of cessation, or (ii) 
Robert Quinn shall cease, for any reason, to be the President of StarMet and 
a successor to Mr. Quinn reasonably satisfactory to Bank, shall not have 
become President within ninety (90) days of the date of cessation, provided, 
however, that in either event, an Event of Default shall not arise until 
sixty (60) days after Bank has given the Borrowers written notice thereof;
 
then and in every such event, while such event shall be continuing, Bank may, 
by written notice to the Borrowers, declare the Credit (and any Notes issued) 
to be forthwith due and payable, whereupon the Credit shall forthwith become 
due and payable and the right to borrow hereunder shall terminate; provided, 
however, that upon the happening of any event under Subsections (e) or (f) of 
this Article V, then the Credit shall, without the taking of any action by 
Bank, immediately become due and payable and the right to borrow hereunder 
shall immediately terminate.

ARTICLE VI.  MISCELLANEOUS.


                                          25
<PAGE>


    Section 6.01.  Term of Agreement.

    This Agreement shall terminate whenever all of the following conditions 
shall have been met:  (i) all principal of and interest of the Credit and all 
other amounts due and payable under this Agreement have been paid and 
discharged in full, (ii) all letters of credit or other financial 
accommodation provided by Bank shall have been terminated or an indemnity 
provided in a form acceptable to Bank, (iii) the Borrowers shall have 
provided indemnity by cash or other collateral satisfactory to Bank for any 
projected fees, expenses and other contingent liabilities, and (iv) the 
Borrowers shall have no further right to borrow under the Credit.

    Section 6.02.  Indemnity.  

    The Borrowers agree to indemnify and hold harmless Bank and each of their 
directors, officers, agents, employees and counsel, from and against any and 
all losses, claims, damages, liabilities or expenses imposed on or incurred 
by any of them in connection with the lending relationship reflected in this 
Agreement except as a result of such indemnified parties' negligence or 
willful misconduct.  This indemnity shall survive termination of the 
Agreement.

    Section 6.03.  Consent to Jurisdiction.  

    Each Borrower irrevocably consents and submits to the non-exclusive 
jurisdiction of the Superior Court in the Commonwealth of Massachusetts and 
the United States District Court for the Eastern District of Massachusetts in 
connection with any action, proceeding or claim arising out of or relating to 
this Agreement or other document executed in connection with this Agreement.  
In any such litigation, each Borrower waives personal service and agrees that 
service may be made in the manner specified for Notices under this Agreement.

    Section 6.04.  Waiver of Jury Trial.  

    Each Borrower waives trial by jury in any action or proceeding of any 
kind arising out of or relating to this Agreement or other document executed 
in connection with this Agreement.

    Section 6.05.  Notices.

    Except as otherwise specifically provided in this Agreement, all notices 
hereunder shall be deemed to have been given when delivered in person or, if 
mailed, when actually received by the party to whom addressed; provided, 
however, that any written notice given pursuant to Article V hereof shall be 
deemed to be effective when mailed, so long as such notice is mailed by 
registered or certified mail, addressed 

                                          26
<PAGE>

to any party at its address set forth below or at any other address notified 
in writing to the other parties hereto.  Actual receipt shall be conclusively 
presumed if such notice shall be mailed by registered or certified mail, 
addressed to any party at its address set forth below or at any other address 
notified in writing to the other parties hereto by notice pursuant to this 
Section, and if the sender shall have received back a return receipt.

    To Bank:            State Street Bank and Trust Company
                        225 Franklin Street
                        Boston, Massachusetts  02110
                        Attention:  William R. Dewey IV

    With a copy to:     Goodwin, Procter & Hoar  LLP
                        Exchange Place
                        Boston, Massachusetts  02109
                        Attention:  Jon D. Schneider, P.C.

    To the Borrowers:   c/o StarMet Corporation
                        2229 Main Street
                        Concord, MA  01742
                        Attn:  James M. Spiezio

    With a copy to:     Peabody & Arnold
                        50 Rowes Wharf
                        Boston, Massachusetts  02110
                        Attention: Thomas A. Wooters, Esq.

    Section 6.06.  No Waiver.

    No failure to exercise, and no delay in exercising, on the part of Bank, 
any right, power or privilege hereunder shall operate as a waiver thereof; 
nor shall any single or partial exercise of any right, power or privilege 
hereunder preclude any other or further exercise thereof or the exercise of 
any other right, power or privilege.  The rights and remedies herein provided 
are cumulative and not exclusive of any rights or remedies provided by law.

    Section 6.07.  Setoff.

    Any sums due from Bank to any Borrower, any property in the possession of 
Bank and any balance in the Borrower's accounts with Bank may be held and 
treated as collateral security for the payment of the obligations of the 
Borrowers to Bank and, after the occurrence of an Event of Default, may be 
applied to the payment of such obligations regardless of the adequacy of 
other collateral.  Any sums due from any financing institution that may 
participate in the Credit or property of the Borrowers in the possession of 
such institution may be held as collateral security for the payment of the 
obligations of the Borrowers to Bank as if such institution had extended the 
Credit directly to the Borrowers and, after the occurrence of an 

                                          27
<PAGE>




Event of Default, may be applied to the payment of such obligations 
regardless of the adequacy of other collateral.

    Section 6.08.  Construction.

    This Agreement shall be deemed to be a contract made under the laws of 
the Commonwealth of Massachusetts, and shall be construed in accordance with 
the laws of the Commonwealth of Massachusetts.  The descriptive headings of 
the several Sections hereof are for convenience only and shall not control or 
affect the meaning or construction of any of the provisions hereof.

    Section 6.09.  Amendments, Waivers and Consents.

    Compliance by the Borrowers with any term, covenant or condition of this 
Agreement may be omitted or waived (either generally or in a particular 
instance and either retroactively or prospectively) only by a consent or 
consents in writing signed by Bank.

    Section 6.10.  Counterparts.  

    This Agreement may be executed in any number of counterparts which 
together shall constitute one Agreement.

    Section 6.11.  Joint and Several Obligations.

    The obligations of the Borrowers hereunder and under any agreement or 
instrument executed in connection herewith, including the Notes, shall be 
joint and several; provided, however, that the obligations of any Borrower 
shall be limited to the maximum amount that can be incurred without rendering 
such liability void under applicable law.

    Section 6.12.  Prior Facilities.

    The Credit is in substitution for the $6,550,000 line of credit facility 
that was previously made available by Bank to StarMet and CMI under the 
Original Credit Agreement and each of the Borrowers and Bank acknowledge and 
agree that all rights and claims under or relating to the Original Credit 
Agreement have been terminated and waived and (i) Bank has no further 
obligations to StarMet and CMI thereunder, and (ii) StarMet and CMI have no 
further obligations to Bank thereunder, provided, however, that Section 6.02 
of the Original Credit Agreement shall survive termination of the Original 
Credit Agreement and nothing in this Section 6.12 shall be deemed a waiver by 
the Bank of its rights and claims under Section 6.02 of the Original Credit 
Agreement.

    Section 6.13.  Guarantees.

                                          28
<PAGE>


    Each Borrower irrevocably and unconditionally guarantees the payment and 
performance of the obligations to Bank of the other Borrower under, arising 
from or relating to any L/C which is outstanding as of the date hereof and 
each of the Borrowers, other than StarMet, guarantees the payment and 
performance of the obligations of StarMet to Bank under, arising from or 
relating to the Bonds issued in connection with the 1985 Trust Agreement, 
including without limitation, any guaranty of such Bonds by StarMet in favor 
of Bank.  The above guarantees are of payment and not collection.

    Section 6.14.  Confidentiality, etc.

    The Bank agrees to use reasonable precautions to keep confidential, in 
accordance with safe and sound banking practices, any non-public information 
supplied to it by the Borrowers pursuant to this Agreement which is 
identified by the Borrowers as being confidential at the time the same is 
delivered to the Bank, provided that nothing herein shall limit the 
disclosure of any such information (i) to the extent required by statute, 
rule, regulation or judicial process, (ii) to counsel for the Bank, (iii) to 
bank examiners, auditors or accountants, (iv) in connection with any 
litigation to which the Bank is a party, (v) to any assignee or participant 
(or prospective assignee or participant) so long as such assignee or 
participant (or prospective assignee or participant) first executes and 
delivers to the respective Bank a confidentiality agreement, or (vi) to the 
extent it subsequently becomes public. The Bank may assign or sell 
participations in, all or any part of the Credit to another bank or other 
entity.          

    IN WITNESS WHEREOF, the parties hereto have executed this Agreement under 
seal as of the date first above written.

                                       STARMET CORPORATION


                                       By: /s/ James M. Spiezio
                                         --------------------------------
                                         Name:   James M. Spiezio
                                         Title:  Vice President Finance


                                       STARMET POWDERS, LLC


                                       By: /s/ James M. Spiezio
                                         ---------------------------------
                                         Name:   James M. Spiezio
                                         Title:  Treasurer


                                          29
<PAGE>


                                       STARMET AEROCAST, LLC


                                       By: /s/ James M. Spiezio
                                         ---------------------------------
                                         Name:   James M. Spiezio
                                         Title:  Treasurer


                                       STARMET COMCAST, LLC


                                       By: /s/ James M. Spiezio
                                         ---------------------------------
                                         Name:   James M. Spiezio
                                         Title:  Treasurer

                                       STARMET NMI CORPORATION


                                       By: /s/ James M. Spiezio
                                         ---------------------------------
                                         Name:   James M. Spiezio
                                         Title:  Treasurer


                                       STARMET CMI CORPORATION


                                       By: /s/ James M. Spiezio
                                         ---------------------------------
                                         Name:   James M. Spiezio
                                         Title:  Treasurer


                                       STARMET HOLDINGS CORPORATION


                                       By: /s/ James M. Spiezio
                                         ---------------------------------
                                         Name:   James M. Spiezio
                                         Title:  Treasurer



                                          30
<PAGE>



                                       NMI FOREIGN SALES CORPORATION


                                       By: /s/ James M. Spiezio
                                         ---------------------------------
                                         Name:   James M. Spiezio
                                         Title:  Treasurer


                                       STATE STREET BANK AND TRUST
                                       COMPANY


                                       By:  /s/ William R. Dewey IV
                                         ---------------------------------
                                         Name:   William R. Dewey IV
                                         Title:  Vice President



                                          31

<PAGE>


                                 Exhibit 2.02

                                 Subsidiaries

None.



                                      32
<PAGE>

                                 Exhibit 2.06

                                  Litigation

No pending or threatened litigation.



                                      33

<PAGE>


                                 Exhibit 2.07

                                    Title

None.

                                      34

<PAGE>


                                 Exhibit 2.08

                          Tax Returns and Payments

StarMet is not currently being audited by the Internal Revenue Service or any 
other taxing authority.  StarMet was audited for fiscal years ended 1993 and 
1994.  StarMet was also previously audited by the Internal Revenue Service 
for the fiscal years ended  1989, 1990, 1991 and 1992.

                                      35

<PAGE>

                                 Exhibit 2.10

                               Pension Matters

None.

                                      36

<PAGE>




                                 Exhibit 2.11

                            Environmental Matters

StarMet is named as a Potentially Responsible Party (PRP) in regard to the 
Maxey Flats, Kentucky, Superfund Site.

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.  StarMet 
has entered into a contract with Zhargrus Environmental, Inc. for the 
disposal of any hazardous waste at the basin facility.

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.

                                      37

<PAGE>


                                 Exhibit 2.13

                              Credit Agreements

-   $3,200,000 Barnwell County, South Carolina Industrial Development Revenue
    Note, September 27, 1984 (Carolina Metals, Inc.) (the "CMI IRB")

-   $500,000.00 Palmetto Federal Savings Bank of South Carolina, November 29,
    1995, and a separate letter of credit in the amount of $73,024 (Carolina
    Metals as Obligor and StarMet as Guarantor) (collectively, the "Palmetto
    Loan")

-   StarMet Corporation has issued subordinated debentures to the following
    individuals (collectively, the "Debentures"):


                        Date of   Maturity
    Name                Issue     Date                 Amount
    ----                -------   --------             ------

    Melvin Chrein       12-Jan-96 30-Sep-98      $     83,500
    WIAF Investors      12-Jan-96 30-Sep-98           334,000
    George Matthews     12-Jan-96 30-Sep-98            83,000
    Marshall Chrein     18-Sep-96 30-Sep-98            25,000
    Charles Alpert      18-Sep-96 30-Sep-98           225,000
    Meryl Chrein        18-Sep-96 30-Sep-98           100,000
    Roger Marino        09-Sep-97 22-Sep-00           500,000
                                                 ------------

                                                 $  1,350,500 
                                                 ------------
                                                 ------------

                                      38

<PAGE>


                                 Exhibit 2.14

                       Leases and Options to Purchase

<TABLE>

<S>            <C>                           <C>            <C>            <C>
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

</TABLE>

                                      39

<PAGE>

                                 Exhibit 2.15

                              Real Estate Owned

-    Concord, MA - Approximately 46.4 acres of land with a steel and masonry
     building which contains approximately 180,000 square feet, owned by StarMet
     NMI Corporation.

-    Barnwell, SC - Approximately 321 acres of land with a 109,000 square foot
     facility that contains two manufacturing units owned by StarMet CMI
     Corporation ("CMI").  Adjacent to the manufacturing facility is a 70,000
     square DU Recycle Technology Center.

                                      40

<PAGE>


                                Exhibit 4.12(i)
                                           
                           Permitted Indebtedness


1.   The Palmetto Loan.

2.   The Debentures.

                                      41

<PAGE>


                                 Exhibit 4.13

                 Permitted Liability for Obligations of Others


1.   CMI is the obliger and NMI is the guarantor under the Palmetto Loan.

                                      42

<PAGE>


                                 Exhibit 4.14

                               Permitted Liens

                             Limitations on Liens

1.   The CMI IRB is secured by a lien on the South Carolina real property.

2.   The Palmetto Loan is secured by a lien on CMI's assets subordinated to the
     CMI IRB lien and is subject to an Amended and Restated Subordination and
     Inter Creditor Agreement by and among Palmetto, CMI, StarMet and Bank dated
     April __, 1996.


                                      43

<PAGE>



                                 Exhibit 4.17

                         Transactions with Affiliates

     StarMet expects to license or assign various intellectual property that it
owns to its operating subsidiaries.

                                      44

<PAGE>


                                 Exhibit 4.27

                                Bank Accounts

Bank                                              Account #
----                                              ---------

BankBoston                                       396-976-9

BankBoston                                       1012-215-7

BankBoston                                       632-878-4

BankBoston                                       211-4624427

Rigg's National Bank                             08-538-374

Fidelity Investments                             0059-00080342702

Fidelity Investments                             349797399

Hudson National Bank                             20655

Palmetto Federal Savings Bank                    803304925

Palmetto Federal Savings Bank                    803304918

                                      45

<PAGE>

                                 Exhibit 2.01

                        Corporate Existence and Power


FSC is not in good standing in the U.S. Virgin Islands.


                                      46