-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Tz61hfDFOessdhPZKLrU6Jd6gbwA/EKCudZeoddX0O2p5bSyoUWAgtvHMfaRzpbr olPgrtkQwU4ZvH+m1vp7lQ== 0000725813-95-000016.txt : 19951005 0000725813-95-000016.hdr.sgml : 19951005 ACCESSION NUMBER: 0000725813-95-000016 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950927 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHEMFAB CORP CENTRAL INDEX KEY: 0000725813 STANDARD INDUSTRIAL CLASSIFICATION: 2200 IRS NUMBER: 030221503 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12948 FILM NUMBER: 95576362 BUSINESS ADDRESS: STREET 1: 701 DANIEL WEBSTER HWY STREET 2: P O BOX 1137 CITY: MERRIMACK STATE: NH ZIP: 03054 BUSINESS PHONE: 6034249000 MAIL ADDRESS: STREET 1: 701 DANIEL WEBSTER HIGHWAY STREET 2: POST OFFICE BOX 1137 CITY: MERRIMACK STATE: NH ZIP: 03054 FORMER COMPANY: FORMER CONFORMED NAME: CHEMICAL FABRICS CORP DATE OF NAME CHANGE: 19911204 10-K 1 1995 ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1995 Commission File No. 0-12948 Chemfab Corporation (Exact name of registrant as specified in its charter) Delaware 03-0221503 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 701 Daniel Webster Highway P.O. Box 1137 Merrimack, New Hampshire 03054 (Address of principal executive offices) (Zip Code) Area Code (603) 424-9000 (Registrant's telephone number) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, $.10 par value Indicate by checkmark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (section229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of Registrant's voting stock held by non-affiliates of the Registrant at August 8, 1995 was approximately $82.3 million. 5,237,271 shares of the Registrant's common stock, $.10 par value, were outstanding on August 8, 1995. DOCUMENTS INCORPORATED BY REFERENCE Proxy Statement for the 1995 Annual Meeting of Shareholders of the Registrant to be held on October 26, 1995. Certain information therein is incorporated by reference into Part III hereof. PART I ITEM 1 BUSINESS CHEMFAB CORPORATION, together with its consolidated subsidiaries (hereinafter, the Company), is an international manufacturer and marketer of engineered products based on its expertise and technology in polymeric composite materials. Relative to alternative materials, the Company's polymer-based composite materials exhibit an outstanding range and combination of performance properties, including superior thermal, chemical, electrical and surface release properties, retention of flexibility-in-use, mechanical strength, and other performance properties depending on the requirements of particular applications. The majority of the Company's composite materials are made by embedding interlaced glass fiber into a fluoropolymer resin matrix. Worldwide end-use applications for the Company's products are in electronics, environmental, food processing, architectural, aerospace, communications, protective clothing, and other industrial markets. The Company operates in one business segment. The Company's principal executive offices are located at 701 Daniel Webster Highway, P.O. Box 1137, Merrimack, New Hampshire 03054; its telephone number is (603) 424-9000. Unless the context indicates otherwise, the term "Company" in this Form 10-K refers to Chemfab Corporation, a Delaware corporation, as well as its predecessor company incorporated in 1968, and its consolidated subsidiaries. PRODUCTS The Company has two principal product groups: engineered products and architectural products. Sales of engineered products are reported separately for U.S. sourced sales and Europe sourced sales (see "Comparative Sales by Product Group" on page 5) because they represent the activities of different marketing and manufacturing organizations within the Company; however, the products manufactured at each location are generally similar, and rely principally on the performance properties of the Company's fluoropolymer-containing composite materials, as described above and below, to create value-in- use. Engineered Products - U.S. Sourced sales include all non- architectural product sales from the Company's U.S. manufacturing plants. These sales are made primarily to customers in the Americas and the Far East. Engineered Products - Europe Sourced sales include all sales from the Company's European manufacturing plants and are made primarily to customers in Western Europe, Africa, the Middle East and the Far East. All architectural membrane products are manufactured in the United States and are reported as a separate component of revenue. ENGINEERED PRODUCTS. Engineered products, whether manufactured in the United States or Europe, consist of a broad range of polymer-based composite materials which are generally characterized by their exceptional ability to withstand high temperatures, corrosive chemicals and other harsh conditions, and by their excellent surface release properties. These products are generally used in industrial applications involving severe service environments, but some communications and protective systems products are sold to the U.S. Government and have their own unique performance properties. The majority of the engineered products sold by the Company are comprised of woven fiberglass or other high-strength reinforcements coated or laminated with formulations of polytetrafluoroethylene (PTFE) or other fluoropolymer resins. By designing variations in the reinforcements and the coatings, the Company has engineered many products with specific performance characteristics. The combination of fluoropolymer resins and reinforcing fibers provide the resultant composite materials with performance properties far surpassing those of the separate component materials contained therein. The Company's engineered products are sold into a number of specific markets and the polymer-based composite materials of which they are comprised are tailored accordingly to satisfy specific requirements of the product in-use. Selected examples of typical engineered products and their markets are described below: Energy/Environmental Market - The Company's Darlyn(R) Chemical Resistant Membrane is used as expansion joints at power generating stations and in chemical processing plants to provide extended life to flexible joints which are exposed to highly corrosive flue duct condensates and gases at varying temperatures. In addition, the Company manufactures a similar corrosion resistant composite which is fabricated into floating roof seals to retard evaporation from above-ground petroleum bulk storage tanks. Food Processing Market - The Company sells a broad range of high temperature conveyor belts and grilling release sheets used in commercial cooking applications and quick service restaurants. These products rely on the excellent release properties of PTFE required by the food processing industry for use in high-temperature cooking. Communications Market - The Company manufactures planar electromagnetic windows, utilizing its Raydel(R) Microwave Transmissive Composite, for commercial microwave communications. It also designs and manufactures spherical radomes for radar and high frequency satellite communications which are sold primarily under government prime and subcontracts. These products rely on Raydel's low signal loss over a wide range of frequencies, and outstanding hydrophobicity, which results in minimal signal loss even in adverse weather conditions. Lab Test/Biomedical Market - The Company manufactures a comprehensive product line of high performance elastomeric closures for use in gas and liquid chromatography, environmental testing and the packaging and storage of sterile biomedical culture media. The products, sold under the MICROSEP(R) and MICROLINK(R) trademarks, are based upon a combination of fluoropolymer and silicone elastomer processing technology. The performance of these products relies on the purity, inertness and physical integrity of the Company's multi-layer PTFE films, in combination with the elastomer properties of silicone, to create closures capable of containing the most sensitive chemicals and samples without risk of sample contamination or seal degradation. In addition to these specific examples of products which rely on the highly tailored performance properties of the Company's polymer-based composite materials, the Company sells fiber-reinforced composite materials primarily in the form of belting products, to customers in the packaging, textile, floor covering and other industries which use the products as consumable processing aids in their manufacturing processes. The Company also sells fiber-reinforced composite materials and fluoropolymer films in roll stock form to end users and distributors for use in a variety of industries where severe service environments exist. ARCHITECTURAL PRODUCTS. The Company has developed and markets a line of permanent architectural membrane products under the name SHEERFILL(R) Architectural Membrane. These materials are made of a PTFE coated fiberglass composite that is strong, translucent, fire resistant, self cleaning and long-lived. SHEERFILL(R) is typically used as a primary structural component in roof systems and large skylights for athletic facilities, walkways, entrance canopies, convention centers and specialty events structures. The most visible and cost effective applications for these products are as roofing and skylighting systems covering large domed stadiums and transportation terminals. An example of such a roofing application is the new Denver International Airport. The Company also manufactures and sells acoustical liner membrane under the name FABRASORB(R) Acoustical Membrane, which is used inside such structures as a sound dampener or decorative liner. Since the inception of the permanent membrane structures business in 1973, establishing and maintaining a reliable delivery system to install permanent membrane structures has been a key element of the Company's strategy to develop the market. Principally for this purpose, over the past twenty years, the Company has held equity positions in several companies that design, fabricate, and install permanent membrane structures. Throughout this period, however, the Company's primary focus has been on establishing itself as the world leader in the development, manufacture and sale of architectural membrane products. As part of the market development strategy described above, the Company has participated in two corporate joint ventures. In 1985, the Company formed a corporate joint venture, now named Birdair, Inc. (Birdair), to provide design/engineering, fabrication and installation support services related to permanent membrane structures. Effective March 27, 1992, the Company sold its 47.5% equity interest (and 50% voting interest) in this venture to Taiyo Kogyo Corporation (Taiyo) which owned the other 50% voting interest at that time. As part of the transaction, the Company and Taiyo entered into a ten (10) year supply agreement pursuant to which the Company will continue to be Birdair's exclusive supplier of architectural membrane products for permanent fabric structure projects undertaken by Birdair throughout the world. Also in 1985, the Company, together with Nitto Denko Corporation and Taiyo Kogyo Corporation, formed a joint venture company in Japan, Nitto Chemfab Co., Ltd. (Nitto Chemfab), which manufactures and sells architectural and industrial products into the Japanese market. Nitto Chemfab also purchases architectural and industrial products from the Company for resale in Japan. It is 39% owned by the Company, with the remainder owned 51% and 10% by Nitto Denko Corporation and Taiyo Kogyo Corporation, respectively (see Note 14 of Notes to Consolidated Financial Statements). SALES AND MARKETING The Company sells its engineered products primarily through direct sales efforts in the United States, supplemented by commissioned representatives and distributors as necessary in the United States and in the Far East. In Europe, the Company sells its products primarily through distributors in its major markets, except in the UK and Spain, where it maintains its own direct sales force. Architectural membrane products are sold pursuant to supply agreements with Birdair, Nitto Chemfab, and a customer in Australia. The Company's sales and marketing personnel attempt to understand its customers' businesses and respond to their specific applications needs by drawing from the Company's materials, weaving, coating, film manufacturing, laminating, design engineering, fabricating and installation capabilities and technologies. COMPARATIVE SALES BY PRODUCT GROUP 1991 - 1995 (in thousands) 1995 1994 1993 1992 1991 Engineered Products - U.S. Sourced $38,962 $34,008 $31,868 $29,916 $31,744 Engineered Products - Europe Sourced 20,833 13,882 12,527 12,111 11,572 Architectural Products 8,185 4,261 6,541 8,011 7,795 ------- ------- ------- ------- ------- $67,980 $52,151 $50,936 $50,038 $51,111 ======= ======= ======= ======= =======
MAJOR PRODUCT SALES Sales of grilling release sheets and belting products used in the food processing industry accounted for 13%, 15% and 13% of the Company's fiscal 1995, 1994 and 1993 sales, respectively. Also see Note 12 of Notes to Consolidated Financial Statements. MANUFACTURING The Company's manufacturing processes include the weaving of fibrous reinforcing materials, the application of formulated coatings to reinforcements, the production of multi-layer films, and the combination of such materials as multi-layer composites by lamination. The Company's manufacturing processes also include extrusion and precision calendering of silicone elastomer. Woven reinforcements are manufactured in widths up to fifteen feet as well as in narrower formats of specialty design. The mechanical performance of coated or laminated composites is substantially a function of the uniformity and quality of such reinforcements. The Company's Merrimack, New Hampshire facility is believed to be uniquely adapted to the manufacture of such fibrous reinforcements at the high level of quality required for their use in structural composite materials. Coatings are produced from aqueous formulations of fluoropolymer resins in the Company's North Bennington, Vermont, Merrimack, New Hampshire, Kilrush, Ireland and Littleborough, England facilities, employing equipment and control systems substantially designed and installed by the Company. Specialty fluoropolymer films are produced at the Company's Merrimack, New Hampshire facility utilizing the Company's proprietary casting process and other related processes. Lamination of fluoropolymer containing materials is performed in the Merrimack facility and in the Company's Kilrush, Ireland facility. High performance elastomeric closures (septa and cap liners) are produced in the Company's Poestenkill, New York facility. Precision calendered extrusions of silicone elastomers, often laminated to specialty fluoropolymer films, are fabricated into a wide variety of closure parts. Thermal welding of liners into plastic caps is performed utilizing the Company's proprietary MICROLINK(R) technology. Design/engineering and fabrication of end-use articles is primarily carried out at the Company's Merrimack, New Hampshire facility. Light fabrication of conveyor belts, food processing release sheets and other products is also performed at the Company's North Bennington, Vermont, Kilrush, Ireland, Schaumburg, Illinois, Littleborough, England, and Valencia, Spain facilities. The Company designs and builds substantially all of the jigs, fixtures, heat sealing machinery and other equipment required for fabrication. RAW MATERIALS The primary raw materials used by the Company in its weaving, coating and film manufacturing operations are fiberglass yarns and fluoropolymers (principally PTFE). The fiberglass yarns are supplied principally by Owens-Corning Fiberglas Corporation (OCF) and PPG Industries, Inc. Alternative sources of supply are available for all the Company's key raw materials, except for specialty glass yarns used in the manufacture of certain structural membrane products which are presently supplied only by OCF. In order to ensure the ongoing availability of the specialty glass yarns used in structural membrane products, the Company has entered into an agreement with OCF, whereby OCF has committed to provide the Company with two years advance notice if it decides to discontinue production of these yarns. The Company believes that it maintains adequate inventories and close working relationships with its suppliers to provide for a continuous and adequate supply of raw materials for production. The Company has not experienced any serious interruptions in production due to a shortage of raw materials. BACKLOG The Company's backlog, comprised of firm orders or unfilled portions thereof, at the dates indicated were as follows: AT JUNE 30, 1995 1994 1993 Engineered Products - U.S. Sourced $ 6,157,000 $4,562,000 $3,815,000 Engineered Products - Europe Sourced 2,880,000 926,000 2,067,000 Architectural Products 3,794,000 1,977,000 381,000 ----------- ---------- ---------- $12,831,000 $7,465,000 $6,263,000 =========== ========== ==========
Included in the June 30, 1995 backlog is approximately $2,470,000 attributable to United States Government prime contracts and subcontracts. All United States Government contracts, whether funded or unfunded, can be terminated or curtailed at the convenience of the Government. The Company expects to recognize as revenue in fiscal 1996 virtually all of its June 30, 1995 backlog. OTHER In addition to normal business risks, operations outside the United States are subject to other risks including: the political, economic and social environment; governmental laws and regulations; and currency revaluations and fluctuations. RESEARCH AND DEVELOPMENT Fiscal 1995 expenditures for Company-sponsored research and development were $2,047,000, representing approximately 3% of consolidated net sales, an amount which management believes is sufficient to support continuing new product and process development. Comparable expenditures in 1994 and 1993 were $1,965,000 and $2,151,000, respectively, which represented approximately 4% of consolidated net sales in those years. During fiscal 1995, the Company's research efforts were devoted primarily to developing the technology necessary to combine the desirable properties of fluoropolymers with those of other polymeric materials. The targets of such efforts are applications that require a different balance of performance properties and/or lower market pricing than may be achievable with solely fluoropolymer-containing materials. Resources were also committed to improvements in the area of pressure-sensitive adhesive tapes and the development of new laminates and fabrication technology for industrial belting and food processing applications. COMPETITION The Company believes that the integration of its materials and processing technologies represents a significant factor in its competitive position. The Company also competes on the basis of technological suitability, quality and price of its products, its ability to meet individual customer specifications, and the quality of technical assistance and service furnished to customers. The majority of the Company's engineered products are comprised of the Company's fluoropolymer-containing composite materials and specialty fluoropolymer films. These materials are manufactured through the application of a number of different production processes, including custom fiber reinforcement weaving, fluoropolymer coating, fluoropolymer film casting, and fluoropolymer film lamination. In the area of fluoropolymer coated composites, the Company has three major and several smaller competitors worldwide in a relatively mature marketplace. The Company believes that it is the market leader in both the United States and Europe in the majority of product lines based on this production methodology. The Company's multi-layer fluoropolymer films and products made from fluoropolymer film laminates are based on the Company's proprietary technology and there is no significant competition worldwide which utilizes the same materials and technology. These products do, however, compete with other valued products in their markets. In the area of high performance elastomeric closures, the Company has four major and several smaller competitors in a relatively high growth worldwide marketplace. None of the Company's competitors have the same breadth of offering in these specialty niches, and the Company believes it is the global market leader in the segments where it competes. The Company's fluoropolymer-containing composite materials are also fabricated into end-use products. The Company believes that these fabricated articles, which include chemical protective suits, chemical liners, containers, and military shelters, compete favorably against products manufactured from other materials. The Company believes that its architectural membrane products, which are sold through Birdair, Nitto Chemfab, and under a supply agreement to a customer in Australia, have a worldwide leadership position in the market for permanent membrane structures. The Company believes its leadership position in this field is the result of its expertise in wide-width weaving and coating, coupled with the expertise of its joint venture partners and other customers in the design/engineering and installation of permanent membrane structures. SHEERFILL permanent architectural membrane products compete with alternative construction materials, and with permanent architectural membrane materials manufactured by other companies. PATENTS AND TRADEMARKS The Company holds numerous patents, and has several pending patent applications, covering manufacturing processes, product compositions and end-use applications. In fiscal year 1993, the Company was issued a U.S. patent covering certain multi-layer film products and manufacturing processes. During fiscal year 1995, the Company was issued a U.S. patent for a structural fluoropolymer laminate and a European patent for an improved fluoropolymer/polyimide film useful as high temperature wire insulation. The Company acquired one patent and one patent application as part of the February, 1995 purchase of the Tygaflor business (see Note 2 of Notes to Consolidated Financial Statements). As part of the April, 1994 purchase of Canton Bio-Medical (see Note 3 of Notes to Consolidated Financial Statements), the Company acquired two patents related to cap and closure applications. The Company holds twenty-nine registered trademarks (three of which were acquired with the Tygaflor business and two of which were acquired with Canton Bio-Medical). U.S. patents and trademarks, and their foreign counterparts, are key elements in the Company's strategy to maintain and extend its competitive position in its markets. The Company also relies on trade secrets and proprietary know-how in the design and manufacture of its products. ENVIRONMENTAL CONTROLS Federal, state and local requirements relating to the discharge of materials into the environment, the disposal of hazardous wastes and other factors affecting the environment have had, and will continue to have, an impact on the manufacturing operations of the Company (see Item 3 Legal Proceedings). Thus far, the Company believes compliance with such provisions has been accomplished without material effect on the Company's capital expenditures, earnings and competitive position, and it is expected that this will continue to be the case. EMPLOYEES At June 30, 1995 the Company had 503 full-time employees. ITEM 2 PROPERTIES The sales, marketing, administrative, research and development, manufacturing and distribution facilities used by the Company and its subsidiaries are located in four different states within the U.S., and in Ireland, England, and Spain. The Company owns an aggregate of approximately 274,000 square feet of facilities, and leases approximately 128,000 square feet of additional space. In December 1993, the Company purchased, for approximately $5.2 million in cash, its Merrimack, New Hampshire headquarters site. The property, which previously had been occupied under lease, consists of a 170,000 square foot building and 21 acres of land. At the time of the purchase, the Company also acquired a 10 year right to purchase an additional 32 acres of adjacent undeveloped land. In the opinion of the Company, its properties have been well maintained, are in sound operating condition, and contain all equipment and facilities necessary to conduct its business at present levels. A summary of the square footage of floor space currently being utilized at the Company's facilities at June 30, 1995 is as follows: NO. OF PRIMARY USE LOCATIONS OWNED LEASED(1) Manufacturing and engineering 7 217,000 98,000 Research and development, 9(2) 57,000 30,000 sales and administrative office facilities (1) The lease in the Republic of Ireland is a tenant-at-will lease; leases in Illinois expire in 1998, Vermont in 1995, New York in 1996 and 1999, England in 2008 and Spain in 1996. Principal manufacturing facilities in New Hampshire, Vermont and Ireland are owned by the Company. Leased space in these locations is primarily used for storage and/or sales and administrative functions. (2) Of the Company's nine research and development, sales and administrative office facilities, eight are located together with manufacturing and engineering facilities. ITEM 3 LEGAL PROCEEDINGS In March 1991, the Company received a notice from the Environmental Protection Agency (EPA) that it has been identified as one of a number of potentially responsible parties (PRP's) under the Comprehensive Environmental Response, Compensation & Liability Act (CERCLA) and related laws concerning the disposal of hazardous waste at the Bennington Landfill Superfund Site in Bennington, Vermont (the Site). Under these statutes, PRP's may be jointly and severally liable for the cost of cleanup actions at the Site and other damages. In June 1991, while denying liability, the Company together with other PRP's entered into an Administrative Consent Order with the EPA to undertake and fund a Remedial Investigation/Feasibility Study (the Study) to evaluate the condition of the Site and to study the remediation alternatives available for cleanup. The Study is now complete and the EPA has divided the remedy at the Site into two parts: Source Control and Management of Groundwater Migration. A specific Source Control remedy has been selected by EPA in the form of a cap over the landfill. On July 24, 1995, EPA issued notice to the Company and approximately 33 other parties of its intention to negotiate an agreement with those parties to fund and perform the Source Control remedy. The Company is working cooperatively with 16 other parties in an effort to negotiate an agreement and settlement with EPA, and expects those negotiations will be completed during the fourth quarter of calendar 1995. EPA has not indicated a time frame for selection of the second part of the remedy, which will be directed at management of the migration of groundwater. Despite the statutory liability provisions, on the basis of information available to date, including a review of the Company's purchasing and materials disposal records, the Company believes that the resolution of this matter is not likely to have a material adverse effect on its financial condition or results of operations. The Company is involved in a number of other lawsuits as either a defendant or a plaintiff. Although the outcome of such matters cannot be predicted with certainty, and some law suits or claims may be disposed of unfavorably to the Company, management believes that the disposition of its current legal proceedings, to the extent not covered by insurance, will not have a material adverse effect on the Company's Consolidated Financial Statements. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of fiscal 1995. ITEM 4A OFFICERS OF THE COMPANY The name, age, positions and offices held with the Company and principal occupations and employment during the past five years of each of the Officers of the Company are as follows: NAME AGE POSITION OR OFFICE HELD -------- --- ------------------------- Duane C. Montopoli 46 President, Chief Executive Officer and Director William H. Everett 44 Vice President-Finance and Administration, Treasurer, Chief Financial Officer and Secretary James C. Manocchi 42 Vice President - Asia Pacific Business Group Gabriel P. O'Gara 51 Vice President - European Business Group Charles Tilgner III 60 Vice President and Director of U.S. Operations and Engineering John W. Verbicky 43 Vice President - U.S. Business Group Laurence E. Richard 42 Corporate Controller Duane C. Montopoli was elected President and Chief Executive Officer in January 1987; he had been serving as interim President since June 1986. He joined the Company as Chief Financial Officer in February 1986. Until January 1990, he was also a partner in Oak Grove Ventures, Menlo Park, California, which he joined in December 1983. Prior to that time, Mr. Montopoli was employed by Arthur Young & Company (now Ernst & Young LLP) where he was a partner from October 1982 through December 1983. William H. Everett joined the Company in September 1987 as Vice President - Finance, Treasurer and Chief Financial Officer, and continues to hold these positions. In January 1988, he assumed the additional positions of Vice President - Administration and Secretary. Prior to his employment with the Company, Mr. Everett was employed by Epsilon Data Management, Inc. (Epsilon) where he served as Vice President - Finance and Treasurer from June 1987. Prior to joining Epsilon, he was a Senior Audit Manager at Price Waterhouse, where he worked from 1977 to 1984. James C. Manocchi joined the Company in July 1991 as Vice President - Marketing. In April 1994 he assumed the position of Vice President - Corporate Development and in September 1995 he became Vice President - Asia Pacific Business Group. Prior to his employment with the Company, he was employed by Arthur D. Little, Inc. (ADL) as a Director of the firm's North American Management Consulting Group and as Manager, Chemicals & Plastics Management Consulting from August 1989. He joined the firm as a Senior Consultant in 1986. Prior to joining ADL, Mr. Manocchi was employed in various positions by Stauffer Chemical Company and Air Products and Chemicals, Inc., including positions in marketing and new business development. Gabriel P. O'Gara joined the Company in October 1980 as General Manager of its European Manufacturing facility at Kilrush, Ireland. He became Managing Director of its European operations in 1987. In October 1990, Mr. O'Gara was named Vice President - European Business Group. Prior to joining the Company, he worked in a marketing capacity with the Irish Industrial Development Authority. Charles Tilgner, III, joined the Company in January 1978 as the Company's Manager of Engineering. In January 1984 he was named Site Manager, Buffalo Operations. In May 1985, Mr. Tilgner became Director of Technical Operations. He was named Vice President - Manufacturing in October, 1986 and became Vice President - Engineering in September 1990. In September, 1994, while retaining his office of Vice President, he was named Director of U.S. Operations and Engineering. John W. Verbicky joined the Company in January 1993 as Vice President - Research & Development. In April 1994, Mr. Verbicky assumed the position of Vice President - U.S. Business Group. Prior to his employment with the Company, he was employed by General Electric as the manager of the Environmental Technology Laboratory from November 1990 at GE's Research and Development Center. He previously served as the manager of the Chemical Synthesis Laboratory after joining GE in 1979. In this role, he led a series of research and development teams focused on product and process development efforts in the area of engineering thermoplastics and composites supporting the GE Plastics and Silicones businesses. Laurence E. Richard joined the Company as Corporate Controller in January 1992. Prior to joining the Company, Mr. Richard was employed by Homebank, FSB and its parent company Numerica Savings Bank in various consulting capacities from May 1991. Prior to that time, he served as Chief Financial Officer, Senior Vice President and Treasurer of Eliot Savings Bank from May 1989 until June 1990 after having served as its Vice President - Controller from July 1987. Prior to joining Eliot, he was employed as Corporate Controller of New Hampshire Ball Bearings Inc., from 1985 until 1987. All Officers are elected annually. PART II ITEM 5 MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The common stock of the Company is traded on the Nasdaq National Market under the symbol "CMFB". The following table sets forth, for the periods indicated, the high and low sale prices per share of the Company's common stock as reported on the Nasdaq National Market. FISCAL YEAR ENDED FISCAL YEAR ENDED JUNE 30, 1995 JUNE 30, 1994 HIGH LOW HIGH LOW First quarter 13 10 1/2 14 1/4 10 Second quarter 14 11 3/4 15 1/8 12 3/4 Third quarter 14 15/16 12 1/2 14 10 7/8 Fourth quarter 18 13 1/2 12 1/4 10 1/4 As of August 8, 1995, the number of record holders of the Company's stock was 490. At the present time, the Company intends to follow a policy of not paying any dividends and retaining all earnings to finance the development and growth of the business. ITEM 6 SELECTED FINANCIAL DATA (in thousands except per share data) For the Year Ended June 30, --------------------------------------------- 1995(1) 1994 1993 1992 1991 Net sales $67,980 $52,151 $50,936 $50,038 $51,111 Gross profit 21,856 16,717 16,890 15,914 17,256 Other income (111) (251) (282) (2,492) (1,281) Income before income taxes 7,480 5,218 4,632 7,509 8,242 Net income 5,310 3,895 3,502 4,568 5,792 Number of shares and share equivalents used to compute earnings per share 5,327 5,284 5,250 5,296 5,111 Net income per share $1.00 $0.74 $0.67 $0.86 $1.13
The Company has never paid a cash dividend. (1) See also Note 2 of Notes to Consolidated Financial Statements. ITEM 6 SELECTED FINANCIAL DATA (CONTINUED) (in thousands except for per share data) at June 30, ------------------------------------------- 1995(1) 1994 1993 1992 1991 Working capital $25,501 $22,930 $25,970 $23,355 $16,386 Net property, plant and equipment 19,833 17,889 12,851 13,044 11,167 Total assets 70,619 53,794 48,669 46,368 39,038 Long-term debt including current portion 8,132 ---- ---- ---- ---- Shareholders' equity 50,321 44,372 39,846 38,070 30,732
(1) See also Note 2 of Notes to Consolidated Financial Statements. ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table indicates the percentage relationships of selected financial items included in the Consolidated Statements of Income for the three fiscal years ended June 30, 1995, 1994, and 1993, and the pertinent percentage changes in those items for the year. Increase Percent of net sales (Decrease) from for the year ended June 30, prior period --------------------------- ------------------- 1995 1994 vs. vs. 1995 1994 1993 1994 1993 ----- ----- ----- ----- ----- Net sales 100.0% 100.0% 100.0% 30.4% 2.4% Gross profit 32.2% 32.1% 33.2% 30.7% (1.0%) Income before income taxes 11.0% 10.0% 9.1% 43.4% 12.7% Net income 7.8% 7.5% 6.9% 36.3% 11.2%
1995 COMPARED TO 1994 SALES The Company's fiscal 1995 consolidated net sales increased 30% to $67,980,000 from $52,151,000 in 1994. Revenues in fiscal 1995 include the sales of Canton Bio-Medical which was acquired in the fourth quarter of fiscal 1994, and the sales of Tygaflor which was purchased in February 1995. Without the benefit of the sales of these two recently acquired businesses, revenues for the year would have increased approximately 15% over the prior year. This growth was attributable to continued strength in the industrial products business in Europe and the U.S. and a strong market for the Company's architectural membrane products. Measured in constant foreign currency exchange rates, fiscal 1995 net sales would have increased 28% over fiscal 1994. The growth in revenues was primarily volume related. Engineered Products - U.S. Sourced sales (which included all non- architectural product sales from the Company's U.S. manufacturing plants; principal geographic markets are the Americas and the Far East) increased 15% to $38,962,000 from $34,008,000 in the prior year. This growth, which includes the impact of a full year of Canton Bio- Medical sales, was broad-based and extends over most of the Company's line of industrial products as well as the Company's government related business. Engineered Products - Europe Sourced sales (which include all product sales from the Company's European manufacturing plants; principal geographic markets are Western Europe, Africa and the Middle East) increased 50% to $20,833,000 from $13,882,000 in the prior year. Without the impact of the Tygaflor business (acquired in February 1995) this increase would have been 20%. This increase in revenues was broad based and extended across most of the Company's products manufactured in Europe. The outlook for 1996 is for continued growth of the base business in Europe but at a somewhat lesser rate; 1996 will, however, realize the full-year benefit of the addition of the Tygaflor business. Architectural Product sales increased 92% to $8,185,000 from $4,261,000 in fiscal 1994 due primarily to strong demand for the Company's products in the Far East. Sales of architectural products in fiscal 1996 are expected to increase further due to a number of large stadium projects in Japan for which the Company expects to receive orders. GROSS PROFIT MARGINS Gross profit margins as a percentage of net sales for fiscal 1995 were essentially unchanged from fiscal 1994 at 32%. Consolidated gross margins benefited from increased production volumes without corresponding fixed cost increases; however this operating leverage was largely offset by manufacturing inefficiencies experienced at Canton Bio-Medical and, to a lesser extent, slightly lower margins generated by the Tygaflor business through June 30. The Company is working to improve manufacturing efficiencies at Canton Bio-Medical in fiscal 1996 and expects to realize some margin improvements as a result. SELLING, ADMINISTRATIVE, RESEARCH AND DEVELOPMENT EXPENSES Selling, general and administrative expenses increased to $12,124,000 in fiscal 1995 from $10,019,000 in fiscal 1994. This increase in spending was principally the result of added expenses relating to the full-year impact of owning Canton Bio-Medical versus the prior year and the impact of purchasing the Tygaflor business in February 1995. The percentage of selling, general and administrative expenses to sales decreased to 18% in fiscal 1995 from 19% in fiscal 1994. Research and development expenses increased to $2,047,000 in 1995 from $1,965,000 in 1994. R&D expenses, as a percentage of revenues, declined to 3% in 1995 from 4% in 1994. Management believes that the current level of spending is sufficient to maintain new product and process development. INTEREST EXPENSE (INCOME), EQUITY OPERATIONS AND OTHER INCOME In 1995 net interest expense was $95,000 compared to $330,000 of net interest income in 1994. This change was caused by the use of $4.7 million of previously invested cash as well as the issuance of long-term debt to finance the acquisition of the Tygaflor business (See Notes 2 and 6 of Notes to Consolidated Financial Statements). Results of equity operations for fiscal 1995 was a loss of $221,000 compared to a loss of $96,000 for 1994. These losses are attributable to the Company's Japanese joint venture, which continues to be adversely affected by a soft economy in Japan. Other income, net of other expense, was $111,000 in 1995 compared to $251,000 in 1994. Other income in 1995 includes realized foreign exchange gains of $68,000. Other income in fiscal 1994 includes the recovery of $180,000 in insurance proceeds covering legal costs incurred by the Company in prior years and $182,000 resulting from the reversal of costs accrued in fiscal 1993 in excess of the amount required to relocate the Company's manufacturing operations from Buffalo, NY to Merrimack, NH. INCOME TAXES In fiscal 1995, the Company recorded $2,170,000 of income tax expense as compared to $1,323,000 in 1994. The Company's effective tax rate for 1995 was 29% as compared to 25% in the prior year. The increase in the effective tax rate is due primarily to the increased proportion of income from U.S. operations as compared to income from operations in lower tax jurisdictions. The Company expects that in the future, the mix of income derived in higher-taxed jurisdictions, including the U.K., will continue to grow, giving rise to slightly higher tax rates. PROFITABILITY The Company earned net income before taxes of $7,480,000 for the year ended June 30, 1995 as compared to $5,218,000 in the prior year. This represents an increase in pre-tax income of 43% over the prior year on a 30% increase in revenues. Net income increased 36% to $5,310,000 or $1.00 per share for fiscal 1995 from $3,895,000 or $0.74 per share in 1994. 1994 COMPARED TO 1993 SALES The Company's fiscal 1994 consolidated net sales increased 2% to $52,151,000 from $50,936,000 in fiscal 1993. This worldwide sales performance resulted from a 9% increase in industrial product sales that was offset, in significant part, by the combined effects of lower U.S. government contract revenues, lower architectural membrane product sales, and unfavorable foreign currency exchange rates compared with the prior year. Measured in constant foreign currency exchange rates, fiscal 1994 consolidated net sales would have increased 4% over fiscal 1993. The growth in industrial product sales was primarily volume related. Engineered Products - U.S. Sourced sales (which include all non- architectural product sales from the Company's U.S. manufacturing plants; principal geographic markets are the Americas and the Far East) increased 7% to $34,008,000 from $31,868,000 in the prior year. This revenue growth resulted primarily from sales gains into food processing, lab test/biomedical and processor markets, net of sales declines of wire insulation materials and other products sold into the aerospace market. Engineered Products - Europe Sourced sales (which include all product sales from the Company's European manufacturing plants; principal geographic markets are Western Europe, Africa and the Middle East) increased 11% to $13,882,000 from $12,527,000 in the prior year. Measured in constant foreign currency exchange rates, the fiscal 1994 sales increase would have been 19%. This revenue growth resulted primarily from sales gains into food processing, energy/environmental and general distributor markets in Europe, and the sales performance of the Company's Spanish subsidiary which commenced operations during fiscal 1994. Architectural Product sales decreased 35% to $4,261,000 in fiscal 1994 from $6,541,000 in fiscal 1993 due primarily to continued worldwide weakness in commercial real property construction activity. GROSS PROFIT MARGINS Gross profit margins as a percentage of net sales for fiscal 1994 decreased to 32% from 33% in fiscal 1993. This decline is primarily attributable to greater fiscal 1994 inefficiencies in the Company's U.S. manufacturing operations and higher production yield losses than occurred in the preceding year. The Company's ability to maintain and increase gross profit margins on product sales is dependent on various factors including factory production volumes, product sales mix and pricing, and the efficiency of its manufacturing operations. SELLING, ADMINISTRATIVE, RESEARCH AND DEVELOPMENT EXPENSES Selling, general and administrative expenses decreased 2% to $10,019,000 in fiscal 1994 from $10,261,000 in fiscal 1993. These expenses decreased to 19% of net sales in fiscal 1994, from 20% in fiscal 1993, primarily as a result of cost containment measures undertaken by the Company over the course of the fiscal year. Research and development expenses decreased 9% to $1,965,000 in fiscal 1994 from $2,151,000 in fiscal 1993. In fiscal 1993, the Company conducted an unusually high number of pilot production runs as part of its product development efforts. Comparable pilot production activity during fiscal 1994 was at a more normal level. R&D expenses as a percentage of consolidated net sales were approximately 4% in both fiscal 1994 and fiscal 1993. INTEREST INCOME, EQUITY OPERATIONS, AND OTHER INCOME In fiscal 1994, interest income, net of interest expense, was $330,000 as compared to $423,000 in fiscal 1993. Net interest income was lower in fiscal 1994 as a result of having less cash invested as compared to the prior year. Lower cash balances resulted from cash consumed in the purchase of the Company's Merrimack, NH headquarters site (see Note 4 of Notes to Consolidated Financial Statements), and in the acquisition of Canton Bio-Medical (see Note 3 of Notes to Consolidated Financial Statements). Results of equity operations was a $96,000 loss in fiscal 1994, as compared to a $1,000 loss in fiscal 1993. The fiscal 1994 loss is attributable to the Company's Japanese joint venture company, which was adversely affected by economic recession in Japan. Other income, net of other expense, was $251,000 in fiscal 1994 as compared to $282,000 in fiscal 1993. Other income in fiscal 1994 includes a recovery of $180,000 in insurance proceeds covering legal costs incurred by the Company in prior years in connection with its classification, under U.S. federal law, as a potentially responsible party (PRP) with respect to a U.S. superfund site, and $182,000 resulting from the reversal of costs accrued in fiscal 1993 in excess of the amount required to relocate the Company's manufacturing operations from Buffalo, NY to its Merrimack, NH facility (see below). Other income for fiscal year 1993 includes $270,000 of real estate tax abatements received by the Company for its Merrimack, NH facility. PLANT CONSOLIDATION COSTS In the fourth quarter of fiscal 1993, the Company recorded a $550,000 pre-tax charge for plant consolidation costs ($337,000 after taxes) to cover the estimated cost of consolidating its Buffalo, NY manufacturing operations into an existing Company facility in Merrimack, NH. A continuing decline in the Company's government contract business due to cutbacks in military spending necessitated the consolidation of manufacturing operations. The consolidation was completed in the second quarter of fiscal 1994 at a total cost somewhat lower than originally estimated (see above). INCOME TAXES In fiscal 1994, the Company recorded $1,323,000 of income tax expense compared to $1,130,000 in fiscal 1993. The Company's effective tax rate for fiscal 1994 was 25% as compared with 24% in fiscal 1993. The Company's low income tax rate, relative to the U.S. corporate statutory income tax rate, is due principally to the proportion of consolidated profits earned in low-taxed jurisdictions outside the United States. The Company's ability to maintain this relatively low tax rate is dependent upon several factors including its ability to reinvest profits in productive assets within low-tax jurisdictions. In February 1992, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes" which the Company implemented as of July 1, 1993. The implementation did not have a material impact on the Company's consolidated financial statements. PROFITABILITY The Company earned net income of $3,895,000, or $0.74 per share, for the year ended June 30, 1994, compared with $3,502,000, or $0.67 per share, in fiscal 1993. Fiscal 1993 net income was reduced by $337,000, or $0.06 per share, as a result of the Buffalo, NY plant consolidation described above. EFFECTS OF INFLATION Inflation rates over the past three years have remained relatively low and as a result have not had a material impact on the financial results of the Company. The Company's Consolidated Financial Statements reflect historical depreciation which is lower than replacement cost depreciation. LIQUIDITY AND CAPITAL RESOURCES During fiscal 1995, the Company generated $5,401,000 of cash from operations and an additional $241,000 from the exercise of stock options. During this same period the Company purchased the Tygaflor business for $16,252,000 (of which $11,060,000 was financed through the issuance of long-term debt) and repaid $2,928,000 of related long- term debt as of June 30, 1995. Working capital increased to $25,501,000 at June 30, 1995 from $22,930,000 at June 30, 1994. Current assets increased from $31,201,000 in 1994 to $36,116,000 at June 30, 1995. Current liabilities increased to $10,615,000 at June 30, 1995 compared to $8,271,000 at June 30, 1994. The higher working capital levels were the result of higher levels of sales and profitability in fiscal 1995 as compared to fiscal 1994. As of June 30, 1995, the Company had approximately $6,600,000 of additional credit available under its domestic and international borrowing facilities. Management believes that the cash on hand, the cash expected to be generated from operations and the credit facilities described above, will be adequate to finance operations during fiscal 1996 and the foreseeable future and to deal with any liabilities or contingencies described in Note 16 of Notes to Consolidated Financial Statements. ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary data listed in Item 14 in Part IV on Page 22, are filed as part of this report. ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10 DIRECTORS AND OFFICERS OF THE REGISTRANT See the information under the captions "Nominees for Election As Directors" and "Information As To Directors and Nominees For Director" on pages 3 and 4, of the Proxy Statement for the 1995 Annual Meeting of Shareholders of the Company to be held on October 26, 1995, which information is incorporated herein by reference. See also the information with respect to officers of the Company under Item 4a of Part I hereof. ITEM 11 EXECUTIVE COMPENSATION See the information under the caption "Executive Compensation" beginning on page 7 of the Proxy Statement for the 1995 Annual Meeting of Shareholders of the Company, which information is incorporated herein by reference. ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT See the information under the captions "Principal Shareholders" and "Ownership of Equity Securities by Management" on pages 2 and 6 of the Proxy Statement for the 1995 Annual Meeting of Shareholders of the Company, which information is incorporated herein by reference. ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See the information under the caption "Certain Transactions" on page 15 of the Proxy Statement for the 1995 Annual Meeting of Shareholders of the Company, which information is incorporated herein by reference. PART IV ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) LISTED BELOW ARE ALL OF THE DOCUMENTS FILED AS PART OF THE REPORT: Page (1) FINANCIAL STATEMENTS OF CHEMFAB CORPORATION Report of Ernst & Young LLP Independent Auditors 27 Consolidated Balance Sheets at June 30, 1995 and 1994 28-29 For the three years ended June 30, 1995, 1994 and 1993: Consolidated Statements of Income 30 Consolidated Statements of Shareholders' Equity 31 Consolidated Statements of Cash Flows 32 Notes to Consolidated Financial Statements June 30, 1995, 1994 and 1993 33-46 Quarterly Financial Data (unaudited) 46 (2) FINANCIAL STATEMENT SCHEDULES OF CHEMFAB CORPORATION II- Valuation and Qualifying Accounts S-1 All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the Consolidated Financial Statements or the notes thereto. (3) EXHIBITS 3(a) Certificate of Incorporation of the Company filed as Exhibit 3(a) to the Company's Registration Statement on Form S-1 (File No. 2-85949) filed November 10, 1983, as amended by an amendment filed as Exhibit 3(a) to the Company's Form 8 filed on November 5, 1987, is incorporated herein by reference. 3(a)(1) Certificate of Amendment to Certificate of Incorporation of the Company (effective November 6, 1991) as filed as Exhibit 3(a)(1) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 29, 1992, is incorporated herein by reference. 3(b) By-Laws of the Company filed as Exhibit 3(b) to the Company's Registration Statement on Form S-1 (File No. 2-85949) filed November 10, 1983 is incorporated herein by reference. 4(a) Specimen Common Stock Certificate filed as Exhibit 4(a) to the Company's Registration Statement on Form S-1 (File No. 2-85949) filed November 10, 1983 is incorporated herein by reference. 4(b) See Exhibit 3(a) above. 4(c) See Exhibit 3(b) above. 10(a)(1) The Company's 1986 Stock Option Plan filed as Exhibit 10(a)(8) to the Company's Annual Report on Form 10-K for the year ended June 30, 1989 is incorporated herein by reference. 10(a)(2) Forms of Stock Option Agreements under the Company's 1986 Stock Option Plan and for Non-Plan Options filed as Exhibit 10(a)(9) to the Company's Annual Report on Form 10-K for the year ended June 30, 1989 is incorporated herein by reference. 10(a)(3) Employment Agreement with Mr. William H. Everett dated September 8, 1987 filed as Exhibit 10(a)(10) to the Company's Annual Report on Form 10-K for the year ended June 30, 1988 is incorporated herein by reference. 10(a)(4) Employment Agreement with Mr. Duane C. Montopoli, dated May 29, 1992 and effective July 1, 1992, filed as Exhibit 10(a)(9) to the Company's Annual Report on Form 10-K for the year ended June 30, 1992 is incorporated herein by reference. 10(a)(5) Letter Agreement with Mr. James C. Manocchi dated June 4, 1991, filed as exhibit 10(a)(12) to the Company's Annual Report on Form 10-K for the year ended June 30, 1991 are incorporated herein by reference. 10(a)(6) Letter Agreement with Mr. John W. Verbicky, Jr. dated October 15, 1992 and effective January 11, 1993. 10(a)(7) Amended and Restated Chemfab Corporation 1991 Stock Option Plan as filed as Exhibit 10(a) 9 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 26, 1993 is incorporated herein by reference. 10(a)(8) Forms of Stock Option Agreements under the Company's 1991 Stock Option Plan. 10(a)(9) Form of Amendment to 1986 and/or 1991 Stock Option Plan Agreements, filed as exhibit 10(a)(10) to the Company's Annual report on Form 10-K for the year ended June 30, 1994 is incorporated herein by reference. 10(a)(10) Stock Option Agreement between the Company and Mr. Manocchi dated October 21, 1994. 10(a)(11) Amendment to 1991 Stock Option Plan agreements between the Company and Mr. Manocchi dated October 21, 1994. 10(b)(1) $5,000,000 Revolving Credit Note, dated December 28, 1990 by and between Chemical Fabrics Corporation, CHEMFAB New York Inc., Hi-Temp Materials, Inc. and Birdair Structures, Inc. as borrowers and the Manufacturers and Traders Trust Company as lender filed as Exhibit 10(b)(15) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 30, 1990 is incorporated herein by reference. 10(b)(2) Credit Agreement, dated December 28, 1990, by and between Chemical Fabrics Corporation, CHEMFAB New York Inc., Hi-Temp Materials, Inc. and Birdair Structures, Inc. as borrowers and the Manufacturers and Traders Trust Company as lender filed as Exhibit 10(b)(16) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 30, 1990 is incorporated herein by reference. 10(b)(3) Continuing letter of Credit Agreement and Authorization and Agreement of Account Party, dated December 28, 1990 between Chemical Fabrics Corporation, CHEMFAB New York, Inc., Hi-Temp Materials, Inc. and Birdair Structures, Inc. and Manufactur- ers and Traders Trust Company filed as Exhibit 10(b)(20) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 30, 1990 is incorporated herein by reference. 10(b)(4) Amendment, dated December 9, 1993, to the Credit Agreement by and between Chemfab Corporation, CHEMFAB New York Inc., Hi- Temp Materials, Inc. and Birdair Structures, Inc. as borrowers and the Manufacturers and Traders Trust Company as lender as filed as Exhibit 10(b) 13 to the Company's Annual report on Form 10-K for the year ended June 30, 1992 are incorporated herein by reference. 10(b)(5) Share Purchase Agreement, dated January 18, 1991, relating to Fluorocarbon Fabrication Limited filed as Exhibit 10(b)(22) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1991 is incorporated herein by reference. 10(b)(6) Supply Agreement, dated January 18, 1991, by and between Chemical Fabrics Europe and Aerovac Systems (Keighley) Limited filed as Exhibit 10(b)(23) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1991 is incorporated herein by reference. 10(b)(7) Purchase and Sale Agreement, relating to Birdair, Inc. dated as of March 27, 1992 between Taiyo Kogyo Corporation and the Company, filed as Exhibit 10(b)(13) to the Company's Annual Report on Form 10-K for the year ended June 30, 1992 is incorporated herein by reference. 10(b)(8) Asset Purchase Agreement between Chemfab Corporation, Chemfab U.K. Ltd., Courtaulds plc and Courtaulds Aerospace Limited dated February 13, 1995 filed as exhibit 10(b)(8) to the Company's Quarterly Report on Form 10-Q for the quarter ended April 2, 1995 is incorporated herein by reference. 10(b)(9) Facilities Agreement between Chemfab Europe, Chemfab Holdings U.K. Ltd., Chemfab U.K. Ltd. and Bank of Ireland dated February 17, 1995 filed as exhibit 10(b)(9) to the Company's Quarterly Report on Form 10-Q for the quarter ended April 2, 1995 is incorporated herein by reference. 10(b)(10) Guarantee and Indemnity between Chemfab Corporation and the Bank of Ireland dated February 17, 1995 filed as exhibit 10(b)(10) to the Company's Quarterly Report on Form 10-Q for the quarter ended April 2, 1995 is incorporated herein by reference. 21 List of Subsidiaries of Chemfab Corporation. 23 Consent of Ernst & Young LLP, Independent Auditors, set forth at page S-2 of this Annual Report on Form 10-K. 24 Power of Attorney authorizing certain persons to sign this Annual Report on Form 10-K on behalf of certain directors and officers of this Company. (b) REPORTS ON FORM 8-K A report on Form 8-K\A (Amended Form 8-K) was filed by the Company on May 8, 1995 which described a transaction reportable under Item 2, Acquisition or Disposition of Assets. This filing described the acquisition of the Tygaflor business on February 17, 1995. Included as exhibits to this report were audited financial statements for the Tygaflor business for the periods ended March 31, 1994 and February 17, 1995 and an unaudited pro forma combined balance sheet of the Company and Tygaflor as of January 1, 1995 and unaudited pro forma statements of income for the year ended June 30. 1994 and the six months ended January 1, 1995. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on behalf of the Registrant and in the capacities indicated. CHEMFAB CORPORATION (Registrant) By /S/ Duane C. Montopoli ----------------------------------------- Duane C. Montopoli President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on the 22nd day of September 1995 by the following persons on behalf of the Registrant and in the capacities indicated. By /S/ Duane C. Montopoli ----------------------------------------------------- Duane C. Montopoli, President, Chief Executive Officer (principal executive officer) and Director By * ----------------------------------------------------- William H. Everett, Vice President Finance and Administration, Chief Financial Officer (principal financial officer) and Treasurer By * ----------------------------------------------------- Laurence E. Richard, Corporate Controller (principal accounting officer) By * ------------------------------------------------------ Paul M. Cook, Director By * ------------------------------------------------------ Warren C. Cook, Director By * ------------------------------------------------------ James E. McGrath, Director By * ------------------------------------------------------ Nicholas Pappas, Director *By /S/ Duane C. Montopoli Duane C. Montopoli, Attorney-In-Fact* *By authority of powers of attorney filed herewith. CHEMFAB CORPORATION ---------------------------------------------------------------------- Index to Consolidated Financial Statements Page ----------------------------------------------------------------------- Report of Ernst & Young LLP Independent Auditors 27 Consolidated Balance Sheets 28-29 Consolidated Statements of Income 30 Consolidated Statements of Shareholders' Equity 31 Consolidated Statements of Cash Flows 32 Notes to Consolidated Financial Statements 33-46 Quarterly Financial Data (unaudited) 46 ----------------------------------------------------------------------- REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS The Board of Directors and Shareholders Chemfab Corporation We have audited the accompanying consolidated balance sheets of Chemfab Corporation as of June 30, 1995 and 1994, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended June 30, 1995. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Chemfab Corporation at June 30, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 1995, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Note 7 to the Consolidated Financial Statements, in 1994 the Company changed its method of accounting for income taxes. Boston, Massachusetts August 1, 1995 CONSOLIDATED BALANCE SHEETS CHEMFAB CORPORATION June 30, 1995 and 1994 ASSETS 1995 1994 --------------------------------------------------------------------------------- CURRENT Cash and cash equivalents $ 3,780,000 $ 7,923,000 ASSETS Receivables: Trade, net of allowance for doubtful accounts of $276,000 ($154,000 in 1994) 16,009,000 10,804,000 Progress Billings --- 511,000 Retainages 148,000 253,000 Other 324,000 212,000 Costs and estimated earnings in excess of billings on uncompleted contracts 692,000 372,000 Inventories 13,110,000 9,683,000 Prepaid expenses and other current assets 901,000 803,000 Deferred tax assets 1,152,000 640,000 ----------- ---------- TOTAL CURRENT ASSETS 36,116,000 31,201,000 ----------- ---------- -------------------------------------------------------------------------------- PROPERTY, Land 571,000 571,000 PLANT AND EQUIPMENT, AT Buildings 8,533,000 7,465,000 COST Machinery and Equipment 26,981,000 23,145,000 Leasehold Improvements 784,000 1,283,000 ---------- ---------- 36,869,000 32,464,000 Less Accumulated Depreciation And amortization 17,036,000 14,575,000 ---------- ---------- Net Property, Plant and Equipment 19,833,000 17,889,000 Goodwill, net of accumulate amortization of $940,000 ($369,000 in 1994) 12,260,000 2,869,000 Investments in joint ventures and other assets 2,410,000 1,835,000 ----------- ----------- TOTAL ASSETS $70,619,000 $53,794,000 =========== ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS CHEMFAB CORPORATION June 30, 1995 and 1994 LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994 -------------------------------------------------------------------------------- CURRENT Accounts payable $ 5,117,000 $ 4,225,000 LIABILITIES Accrued expenses 3,640,000 2,662,000 Accrued Income Taxes 1,736,000 1,285,000 Billings in excess of costs and estimated earnings on uncompleted contracts 122,000 99,000 ---------- --------- TOTAL CURRENT LIABILITIES 10,615,000 8,271,000 ---------- --------- LONG-TERM DEBT 8,132,000 --- DEFERRED TAX LIABILITIES 1,551,000 1,151,000 SHAREHOLDERS' Preferred Stock, par value $.50: EQUITY authorized - 1,000,000, none issued --- --- Common Stock, par value $.10: authorized - 15,000,000; outstanding- 5,235,646 in 1995 and 5,203,483 in 1994 524,000 521,000 Additional paid-in capital 16,609,000 16,371,000 Retained Earnings 33,551,000 28,241,000 Foreign Currency Translation adjustment (363,000) (761,000) ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 50,321,000 44,372,000 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 70,619,000 $ 53,794,000 ========== ==========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME CHEMFAB CORPORATION For the years ended June 30, 1995, 1994 and 1993 1995 1994 1993 ---------------------------------------------------------------------------------- NET SALES $67,980,000 $52,151,000 $50,936,000 Cost of sales 46,124,000 35,434,000 34,046,000 ----------- ---------- ---------- Gross profit 21,856,000 16,717,000 16,890,000 ----------- ---------- ---------- Selling, general and administrative expenses 12,124,000 10,019,000 10,261,000 Research and development 2,047,000 1,965,000 2,151,000 expenses Interest expense 395,000 33,000 33,000 Interest income (300,000) (363,000) (456,000) Results of equity operations 221,000 96,000 1,000 Other income (111,000) (251,000) (282,000) Plant consolidation costs --- --- 550,000 --------- --------- ---------- Income before income taxes 7,480,000 5,218,000 4,632,000 Provision for income taxes 2,170,000 1,323,000 1,130,000 --------- --------- --------- Net income $ 5,310,000 $ 3,895,000 $ 3,502,000 ========= ========= ========= Weighted average common and common equivalent shares 5,327,000 5,284,000 5,250,000 NET INCOME PER SHARE $1.00 $ .74 $ .67
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY CHEMFAB CORPORATION For the years ended June 30, 1995, 1994 and 1993 Common Stock ----------------- Foreign Number Additional Currency of Paid-In Retained Translation Shares Amount Capital Earnings Adjustment Total ------------------------------------------------------------------------------------------------------------------- Balance a June 30, 1992 5,117,096 $512,000 $15,729,000 $20,844,000 $ 985,000 $38,070,000 Net Income --- --- --- 3,502,000 --- 3,502,000 Options exercised 60,037 6,000 405,000 --- --- 411,000 Foreign currency translation adjustment --- --- --- --- (2,137,000) (2,137,000) --------- --------- ---------- ---------- ---------- ---------- Balance at June 30, 1993 5,177,133 518,000 16,134,000 24,346,000 (1,152,000) 39,846,000 Net Income --- --- --- 3,895,000 --- 3,895,000 Options Exercised 26,350 3,000 237,000 --- --- 240,000 Foreign Currency translation adjustment --- --- --- --- 391,000 391,000 ---------- --------- ---------- ---------- ---------- ---------- Balance at June 30, 1994 5,203,483 521,000 16,371,000 28,241,000 (761,000) 44,372,000 Net Income --- --- --- 5,310,000 --- 5,310,000 Options exercised 32,163 3,000 238,000 --- --- 241,000 Foreign Currency translation adjustment --- --- --- --- 398,000 398,000 ---------- ---------- ----------- ----------- ----------- ----------- Balance at June 30, 1995 5,235,646 $524,000 $16,609,000 $33,551,000 $ (363,000) $50,321,000 ========== ========== =========== =========== =========== ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF CASH FLOWS CHEMFAB CORPORATION Years ended June 30, 1995, 1994 and 1993 1995 1994 1993 --------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING Net income $ 5,310,000 $ 3,895,000 $ 3,502,000 ACTIVITIES --------------------------------------------------------------------------------------------------- ADJUSTMENTS TO RECONCILE NET Depreciation and amortization 3,267,000 2,618,000 2,391,000 INCOME TO NET CASH Results of equity operations 221,000 96,000 1,000 PROVIDED BY OPERATING Deferred gain on --- (80,000) (208,000) ACTIVITIES sale/leaseback Change in assets and liabilities: Receivables (2,342,000) (2,049,000) 1,533,000 Costs and estimated earnings in excess of billings on uncompleted contracts, net (320,000) 222,000 (162,000) Inventories (1,668,000) (916,000) (197,000) Prepaid expenses and other current assets (95,000) (96,000) (1,000) Other Assets (430,000) (571,000) (312,000) Accounts Payable and accrued expenses 1,139,000 202,000 192,000 Accrued Income Taxes 431,000 165,000 543,000 Deferred Tax Liabilities 400,000 (170,000) 498,000 Deferred Tax Assets (512,000) 131,000 (771,000) ---------- --------- ---------- Total Adjustments 91,000 (448,000) 3,507,000 ---------- --------- ---------- Net Cash provided by operating activities 5,401,000 3,447,000 7,009,000 --------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING Purchase of Tygaflor (16,252,000) ACTIVITIES Capital Expenditures (1,826,000) (2,349,000) (2,446,000) Purchase of N.H. real estate --- (5,263,000) --- Purchase of Canton Bio-Medical --- (3,382,000) --- Proceeds from sale of N.Y. real estate --- 1,038,000 --- Net cash used investing ------------ ----------- ----------- activities (18,078,000) (9,956,000) (2,446,000) ---------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING Proceeds from the issuance of ACTIVITIES long-term debt 11,060,000 --- --- Repayment of lon-term debt (2,928,000) --- --- Proceeds form the exercise of stock options 241,000 240,000 411,000 --------- -------- -------- Net cash provided by financing activities 8,373,000 240,000 411,000 --------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash 161,000 168,000 (623,000) ---------- ---------- ---------- Net (decrease)increase in cash and cash equivalents (4,143,000) (6,101,000) 4,351,000 Cash and cash equivalents at beginning of year 7,923,000 14,024,000 9,673,000 ----------- ----------- ----------- Cash and cash equivalents at end of year $ 3,780,000 $ 7,923,000 $14,024,000 =========== =========== =========== Interest paid (net of capitalized interest) $ 310,000 $ 33,000 $ 33,000 Income taxes paid $ 1,763,000 $ 1,207,000 $ 624,000
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CHEMFAB CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The Company's investments in corporate joint ventures are accounted for under the equity method. All significant intercompany transactions and amounts have been eliminated in consolidation. CASH AND CASH EQUIVALENTS: Cash and cash equivalents consist of cash on hand, cash deposited in highly liquid money market accounts, and investments in high grade commercial paper having maturities of one month or less when purchased. Commercial paper classified as cash equivalents totals approximately $1,000,000 and $0 at June 30, 1995 and 1994, respectively. The commercial paper has been designated as held to maturity under the provisions of Statement of Financial Accounting Standard No. 115, "Accounting for Certain Investments in Debt and Equity Securities". Accordingly, the balances are stated at amortized cost which approximates fair value. LONG-TERM CONTRACTS: The Company recognizes revenues on most long-term contracts under the percentage of completion method. Under the percentage of completion method, profit on contracts is recognized based on the ratio of costs incurred to date to estimated final costs. Revisions in costs and estimated final profits are reflected in the accounting period in which the facts that require the revisions become known. At the time a loss on a contract becomes known, the entire amount of the estimated loss is accrued. Revenues on certain long-term contracts are recognized on a units of delivery basis. Unless noted otherwise, retainages are expected to be collected within one year. Each contract has a unique set of terms and conditions for the billing of unbilled amounts. INVENTORIES: Inventories are valued at the lower of cost or market. Cost is determined on a first-in, first-out basis. GOODWILL: Costs in excess of net assets acquired, which relate to the acquisition of the Tygaflor business in fiscal 1995 and the Canton Bio-Medical business in fiscal 1994, are being amortized over fifteen years. Costs in excess of net assets acquired related to the purchase of two distributor businesses in the U.K. in fiscal 1991 are being amortized over ten years. PROPERTY AND EQUIPMENT: Depreciation is computed using the straight- line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the lease term or the lives of the assets. INCOME TAXES: Effective July 1, 1993, the Company adopted Statement of Financial Accounting Standard (SFAS) No. 109, "Accounting for Income Taxes." Under SFAS No. 109, the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Prior to this adoption, income tax expense was determined using the deferred method. Under the deferred method, deferred taxes were provided for the tax effects arising from the timing differences between financial and tax reporting and were measured at the tax rate in effect in the year the difference originated. TRANSACTIONS IN FOREIGN CURRENCY: The Company enters into forward exchange contracts to reduce the impact of foreign currency fluctuations on certain sales and material purchase transactions. The gains or losses on these hedge contracts are included in income when the underlying purchase or sale transaction is recorded. In addition, the Company recognizes in current income gains or losses from the remeasurement of transactions denominated in currencies other than the Company's functional currencies. Translation adjustments arising from the consolidation of foreign subsidiaries have been included in shareholders' equity. EARNINGS PER SHARE: Per share amounts are based upon the weighted average number of common shares outstanding during each year, plus common stock equivalents. NOTE 2 - PURCHASE - TYGAFLOR BUSINESS On February 17, 1995, the Company purchased the Tygaflor fluoropolymer products business of the Advanced Materials Division of Courtaulds Aerospace Ltd. (Tygaflor) for approximately $16.3 million in cash, including associated transaction costs and anticipated severance costs. The acquisition was accounted for using the purchase method of accounting. Net assets acquired included working capital, machinery and equipment, goodwill and other intangibles. Tygaflor, based in Littleborough, Lancashire, England, manufactures and markets fluoropolymer-based composite materials and fabricated products for a broad range of industrial applications. The acquisition of the Tygaflor business resulted in the recognition of approximately $9.5 million of goodwill. In connection with the acquisition, the Company borrowed $11,060,000 (Pounds Stlg. 7,000,000) from a commercial bank in Ireland (see Note 6). The following unaudited proforma information is presented as if the acquisition had occurred at the beginning of each of fiscal years 1995 and 1994, respectively: sales $74,241,000 and $61,109,000; net income $5,713,000 and $3,700,000; and earnings per share $1.07, and $.70. The proforma information is provided for informational purposes only and does not reflect the actual results that would have occurred nor is it indicative of the future results of operations of the combined enterprises. NOTE 3 - PURCHASE - CANTON BIO-MEDICAL, INC. In April 1994, the Company purchased selected assets (principally inventory, equipment and intangibles) of the Canton Bio-Medical Division of Loctite VSI, Inc. for approximately $3.4 million in cash. Canton Bio-Medical, which is operated as a wholly-owned subsidiary, manufactures a comprehensive product line of high performance elastomeric closures for use in gas and liquid chromatography, environmental testing and the packaging and storage of sterile biomedical culture media. The acquisition of Canton Bio-Medical resulted in the recognition of goodwill of approximately $2.1 million. NOTE 4 - PURCHASE - MERRIMACK, NEW HAMPSHIRE PROPERTY In December 1993, the Company purchased its Merrimack, New Hampshire headquarters site for $5.3 million in cash. The headquarters was previously leased as part of a sale leaseback transaction. The sale leaseback resulted in a $1,367,000 gain which was amortized into income over the lease term. NOTE 5 - INVENTORIES Inventories at June 30 consisted of the following: 1995 1994 ------- -------- Finished goods $ 3,953,000 $ 3,572,000 Work in process 5,089,000 3,569,000 Raw materials 4,068,000 2,542,000 ----------- ----------- $13,110,000 $ 9,683,000 =========== =========== NOTE 6 - DEBT In connection with its acquisition of the Tygaflor business (see Note 2), the Company borrowed $11,060,000 (Pounds Stlg. 7,000,000) from a commercial bank in Ireland. The loan has a five (5) year term and requires no principal repayments for the first year. After the first year, quarterly principal payments of approximately Pounds Stlg. 437,500 are required. One half of the original loan amount, approximately $5,580,000 carries a 3 year fixed interest rate of 10.14%; and the balance (currently $2,552,000) carries an interest rate of 8.125% (1 1/2% over LIBOR). In conjunction with this loan, the Company also established a $1,600,000 (Pounds Stlg. 1,000,000) short-term credit facility in Europe. Borrowings under this facility are at 1 1/2% over the banks base rate (approximately 8.45% at June 30, 1995). At June 30, 1995 there were no borrowings under this facility. The bank loan and credit facility, which is secured by substantially all of the Company's Europe-based assets (including the assets of Tygaflor) and by a U.S. parent company guarantee, requires compliance with certain company-wide restrictive covenants including maximum debt to tangible net worth ratios and limits on the pledging of assets. In addition, a sub-group consisting of the Company's European subsidiaries must maintain minimum net worth levels and are subject to separate maximum levels of debt to net worth. The European loan agreement permits prepayments of principal and credits any such prepayments against future scheduled principal repayments. At June 30, 1995, the Company had prepaid $2,928,000 of the loan. Annual maturities for the next five years, net of the aforementioned prepayments, are; $1,156,000 (Pounds Stlg. 725,000), $2,790,000 (Pounds Stlg. 1,750,000), $2,790,000 (Pounds Stlg. 1,750,000) and $1,396,000 (Pounds Stlg. 875,000) in fiscal years 1997, 1998, 1999 and 2000, respectively. In December 1990, the Company entered into a seven year revolving credit facility with a U.S. commercial bank. Under the terms of this agreement as amended in December 1994, the Company has available a $5,000,000 unsecured credit facility until December 31, 1995. Thereafter, the maximum availability under the facility decreases by $1,000,000 per annum. Borrowing under the facility is at the bank's prime lending rate (9% at June 30, 1995), and the Company is obligated to pay a 1/4% per annum facility fee on the unused portion of the line. The U.S. loan agreement contains financial covenants which require, among other things, minimum levels of working capital and tangible net worth. These covenants also limit the amount of loans and advances that the parent Company may make to its European subsidiaries and limit the net losses that the Company may incur over any twelve month period. At June 30, 1995 and 1994 there were no borrowings outstanding under the U.S. loan facility. NOTE 7 - INCOME TAXES Effective July 1, 1993, the Company changed its method of accounting for income taxes from the deferred method to the liability method as required by FASB Statement No. 109, "Accounting for Income Taxes". As permitted under the new rules, prior years' financial statements have not been restated. The cumulative effect of adopting Statement 109 was immaterial. The components of the income tax provision consisted of the following: Liability Liability Deferred Method Method Method 1995 1994 1993 --------- --------- -------- CURRENT Federal $1,474,000 $ 729,000 $ 694,000 State 379,000 183,000 199,000 Foreign 429,000 450,000 353,000 ---------- --------- -------- 2,282,000 1,362,000 1,246,000 DEFERRED Federal (192,000) 12,000 (53,000) State (39,000) (12,000) (14,000) Foreign 119,000 (39,000) (49,000) --------- --------- -------- (112,000) (39,000) (116,000) --------- --------- ---------- Total Income Taxes $2,170,000 $1,323,000 $1,130,000 ========== ========= ========== The components of income before income taxes were as follows: 1995 1994 1993 ---- ---- ---- United States $3,989,000 $2,932,000 $2,900,000 Foreign 3,491,000 2,286,000 1,732,000 ---------- ---------- ---------- Total $7,480,000 $5,218,000 $4,632,000 ========== ========== ========== The U.S. statutory federal income tax rate is reconciled to the Company's consolidated effective tax rate as follows: 1995 1994 1993 ---- ---- ---- Statutory tax rate 35.0% 35.0% 34.0% Earnings of foreign subsidiaries taxed at rates less than the U.S. statutory rate (8.6) (8.9) (8.3) FSC benefit (.7) (1.1) (1.3) Tax rate exemption (1.0) (1.0) --- State income taxes, net of federal income tax benefit 2.8 2.4 2.6 Equity in joint ventures, net of tax 1.0 .6 --- Research & development credit --- (.8) (2.0) Other, net .5 (.8) (.6) ---- ---- ----- Effective tax rate 29.0% 25.4% 24.4% ==== ==== ==== Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of June 30, 1995 and 1994 are as follows: Domestic Foreign June 30, 1995 Operations Operations Total --------------------------- ---------- ---------- ------ Deferred Tax Liabilities: Plant & equipment basis differences $929,000 $272,000 $1,201,000 Intangibles --- 222,000 222,000 Other 34,000 94,000 128,000 ------- ------- ---------- Total deferred tax liabilities 963,000 588,000 1,551,000 Deferred Tax Assets: Inventory (368,000) --- (368,000) Valuation reserves on other current assets (204,000) --- (204,000) Net operating loss carryforward of international subsidiary --- (296,000) (296,000) Other (256,000) (28,000) (284,000) -------- -------- --------- Total deferred tax assets (828,000) (324,000) (1,152,000) -------- ------- --------- Net deferred tax liabilities $135,000 $264,000 $399,000 ======== ======== ========
Domestic Foreign June 30, 1994 Operations Operations Total ------------------------------- ---------- ---------- ------ Deferred Tax Liabilities: ------------------------- Plant & equipment basis differences $ 935,000 $145,000 $1,080,000 Other 71,000 --- 71,000 --------- ------- --------- Total deferred tax liabilities 1,006,000 145,000 1,151,000 Deferred Tax Assets: -------------------- Inventory (316,000) --- (316,000) Valuation reserves on other current assets (164,000) --- (164,000) Other (160,000) --- (160,000) ---------- -------- --------- Total deferred tax assets (640,000) --- (640,000) ---------- -------- --------- Net deferred tax libalities $ 366,000 $ 145,000 $ 511,000 ========== ======== =========
The Company does not provide for federal income taxes on the undistributed earnings of its foreign subsidiaries. These earnings, which are deemed to be permanently reinvested, aggregated approximately $14,408,000 at June 30, 1995. Chemfab Europe, the Company's Irish subsidiary was exempt from Irish taxes on its income from manufacturing operations until April 1990. Manufacturing profits earned each year from April 1990 through April 2010 are subject to a 10% tax rate. NOTE 8 - COMMON STOCK AND STOCK OPTIONS During fiscal 1992, the Board of Directors adopted and the shareholders ratified the "1991 Stock Option Plan" which reserved 500,000 shares of common stock for issuance upon exercise of option grants to key employees, directors, and consultants. During fiscal 1993, the shareholders ratified the adoption of the increase in the maximum number of shares available for option under the 1991 plan to 700,000. Under this plan, options generally vest at the rate of 25% per year on the anniversary of the date of grant. During fiscal 1992, the Company also adopted the "1991 Employee Stock Option Plan" which reserved 50,000 shares of common stock for issuance upon exercise of grants to specific eligible employees with a minimum of two years of service on the date of the grant. At June 30, 1995 there were 24,600 options outstanding under this plan, held by 246 employees. During fiscal 1987, the Company's Board of Directors adopted and the shareholders subsequently ratified a non-qualified stock option plan (the 1986 Plan). The 1986 Plan at the time of adoption reserved 750,000 shares of common stock for issuance upon exercise of option grants under this plan to employees, directors and consultants. During fiscal 1990, the shareholders ratified the adoption of an increase in the maximum number of shares available for option under the 1986 Plan to 1,000,000 from 750,000. The options under the 1986 Plan generally vest at the rate of 25% per year on the anniversary of the grant. A summary of stock option activity related to all of the Company's plans for 1993, 1994 and 1995 is as follows: Options Option Price ------- ------------ June 30, 1992 Outstanding 857,147 $ 1.66 -$25.00 Granted 161,300 10.50 - 12.50 Cancelled (40,800) 9.25 - 22.50 Exercised (60,037) 1.66 - 9.25 --------------------------------------------------------------- June 30, 1993 Outstanding 917,610 2.38 - 25.00 Granted 128,700 10.25 - 14.00 Cancelled (101,150) 10.25 - 25.00 Exercised (26,350) 2.38 - 11.50 --------------------------------------------------------------- June 30, 1994 Outstanding 918,810 2.38 - 22.50 Granted 113,700 10.50 - 12.25 Cancelled (73,562) 10.50 - 20.75 Exercised (32,163) 2.38 - 11.75 --------------------------------------------------------------- June 30, 1995 Outstanding 926,785 $ 2.38 -$22.50 As of June 30, 1995, options to purchase 661,499 shares were exercisable at option prices ranging from $2.38 to $22.50 per share. The Company does not intend to grant any further options or stock appreciation rights under the 1986 Plan. At June 30, 1995, there were 189,812 shares available for grant under the 1991 Stock Option Plan and 25,400 shares available under the 1991 Employee Stock Option Plan. The outstanding shares of common stock are net of 17,292 treasury shares at June 30, 1995 and 1994. NOTE 9 - RETIREMENT PLANS DEFINED BENEFIT PLANS The Company has three defined benefit pension plans covering substantially all of its employees. The Retirement Plan for Employees of Chemfab Corporation ("Non-union Plan") provides pension benefits for the Company's domestic non-union employees. The CHEMFAB New York, Inc. Bargaining Employees Retirement Plan ("Union Plan") covers the domestic union employees of the Company and the "Irish Pension Plan" provides benefits to employees of the Company's subsidiary in Ireland. The plans provide pension benefits that are based on the employee's compensation and service. The Company's funding policy is to fund amounts required by applicable government regulations. The U.S. plans are non-contributory while the Irish plan requires employee contributions of 5% of pensionable salary. Net pension expense for the domestic plans for 1995, 1994 and 1993 consisted of the following: 1995 1994 1993 ---- ---- ---- Service Cost: benefits earned during the period $ 327,000 $ 368,000 $ 355,000 Interest cost on projected benefit obligation 292,000 295,000 274,000 Return on assets (422,000) (13,000) (174,000) Amortization of prior service cost 96,000 76,000 115,000 Amortization of loss (gain) 182,000 (205,000) (73,000) --------- --------- --------- Net pension expense $ 475,000 $ 521,000 $ 497,000 ========= ========= ========= The following table sets forth the funded status of the Company's domestic defined benefit pension plans at June 30: 1995 1994 ---- ---- Actuarial present value of: Vested benefit obligation $2,819,000 $2,554,000 Non-vested benefit obligation 160,000 149,000 ---------- ---------- Accumulated benefit obligation 2,979,000 2,703,000 Additional amount related to projected wage increases 1,479,000 1,668,000 --------- --------- Projected benefit obligation 4,458,000 4,371,000 Plan assets at fair value (primarily U.S. Government Securities, publicly traded stocks and bonds and group annuity contracts) 3,823,000 3,182,000 Plan assets less than projected benefit obligation (635,000) (1,189,000) Unrecognized prior service costs 645,000 788,000 Unrecognized net gain (269,000) 73,000 -------- --------- Accrued pension liability recognized on Consolidated Balance Sheets $ (259,000) $ (328,000) ======== ======== Assumptions used in determining actuarial present value of plan benefit obligations: 1995 1994 1993 ---- ---- ---- Discount rate 7.50% 8.00% 8.00% Average rate of increase in compensation levels 5.50% 6.50% 6.50% Expected long-term rate of return on plan assets 7.50% 8.75% 8.75% Due to the plant consolidation which resulted in the closure of the Buffalo facility, the Company curtailed the Union Plan during fiscal year 1994. The curtailment resulted in an immaterial loss which was previously accrued as part of the plant consolidation accrual. Net pension expense for the Irish Plan in fiscal 1995, 1994 and 1993 was $67,000, $82,000 and $64,000, respectively. Information concerning the components of net pension expense and the funded status of the Company's Irish Plan have not been provided since the amounts are not significant. Tygaflor employees will continue to be covered by the seller's pension plan until September 1995. DEFINED CONTRIBUTION PLAN The Company sponsors a Savings and Security Plan and Trust (the Savings Plan) for its eligible U.S. employees. Subject to certain limitations, eligible employees may elect to contribute a percentage of their salaries ranging from 2% to 12%. The Savings Plan also contains an employer contribution formula equal to 25% of the first 6% of compensation that each participant defers under the Savings Plan. In addition, the Savings Plan provides that the Company may make an annual supplemental discretionary contribution to the Savings Plan based on its profitability. The discretionary contributions are allocated to eligible U.S. employees employed by the Company at the end of the relevant plan year based upon years of service and employee contributions made during the plan year. Total employer contributions made to this plan for the fiscal years ended June 30, 1995, 1994 and 1993 were as follows: 1995 . . . . . . $ 186,000 1994 . . . . . . . $ 189,000 1993 . . . . . . . $ 198,000 NOTE 10 - LEASE COMMITMENTS The Company incurred rent expense for office and manufacturing facilities, vehicles and office equipment of $762,000, $728,000, and $1,144,000, in 1995, 1994 and 1993, respectively, under various operating leases expiring through 2008. Future minimum rental commitments at June 30, 1995 under existing, non-cancellable operating leases with initial terms of one year or more are as follows: 1996 . . . . . . . . . . $781,000 1997 . . . . . . . . . . $501,000 1998 . . . . . . . . . . $347,000 1999 . . . . . . . . . . $195,000 2000 . . . . . . . . . . $ 79,000 2001 to 2008 . . . . $293,000 NOTE 11 - CONTINGENCIES In connection with obtaining incentive grants from the Industrial Development Authority of Ireland to subsidize investments in plant and equipment in Ireland, the Company's Irish subsidiary, Chemfab Europe, has agreed to restrict repatriation of 410,000 Irish Pounds (U.S. $673,000) of its retained earnings to fund repayment of the grants in the event of default under the agreement. Chemfab Corporation has also provided a parent company guarantee in the event that the subsidiary's equity, so restricted, is not sufficient to repay any amounts due. NOTE 12 - BUSINESS SEGMENT AND FOREIGN OPERATIONS The Company operates in one business segment which focuses on the development, manufacture and marketing of high-performance flexible composite materials. SALES TO MAJOR CUSTOMERS Sales to the United States Government under prime contracts and subcontracts for the fiscal years ended June 30, 1995, 1994 and 1993 were as follows: 1995 . . . . . . . . . . $2,146,000 1994 . . . . . . . . . . $1,463,000 1993 . . . . . . . . . . $1,898,000 BUSINESS SEGMENT AND FOREIGN OPERATIONS SALES BY GEOGRAPHIC AREA (in thousands) United Elimi- Consol- 1995 States Europe nations idated ---- ------ ------ ------- ------- Sales to unaffiliated customers $47,147 $20,833 $ --- $67,980 Transfers between geographic areas 2,793 623 (3,416) --- ------- ------- ------- ------- Net sales $49,940 $21,456 $(3,416) $67,980 ======= ======= ======= ======= Income from operations $ 4,137 $ 3,659 $ --- $ 7,796 ======= ======= ======= ======= Identifiable assets $42,966 $27,653 $ --- $70,619 ======= ======= ======= ======= 1994 ---- Sales to unaffiliated customers $38,269 $13,882 $ --- $52,151 Transfers between geographic areas 2,216 649 (2,865) --- ------- ------ ------- ------- Net sales $40,485 $14,531 $ (2,865) $52,151 ======= ======= ======== ======= Income from operations $ 2,881 $ 2,103 $ --- $ 4,984 ======= ======= ======== ======= Identifiable assets $39,882 $13,912 $ --- $53,794 ======= ======= ======== ======= 1993 ---- Sales to unaffiliated customers $38,409 $12,527 $ --- $50,936 Transfers between geographic areas 2,093 283 (2,376) --- ------- ------- ------- ------- Net sales $40,502 $12,810 $(2,376) $50,936 ======= ======= ======= ======= Income from operations $ 2,669 $ 1,541 $ --- $ 4,210 ======= ======= ======= ======= Identifiable assets $37,522 $11,147 $ --- $48,669 ======= ======= ======= =======
Transfers between geographic areas are accounted for at cost plus a reasonable profit. Income from operations excludes interest expense, interest income and results of equity operations. EXPORT SALES The Company's export sales from the United States for the fiscal years ended June 30, 1995, 1994 and 1993 were as follows: 1995 1994 1993 ---- ---- ---- Far East $ 7,694,000 $ 3,600,000 $ 4,498,000 Canada 899,000 966,000 906,000 Mexico 616,000 660,000 646,000 Australia 883,000 532,000 1,488,000 Europe and other 556,000 268,000 65,000 Central and South America 365,000 251,000 145,000 ---------- ---------- ---------- Total export sales $11,013,000 $ 6,277,000 $ 7,748,000 NOTE 13 - PLANT CONSOLIDATION In the fourth quarter of fiscal 1993, the Company recorded a pre-tax charge of $550,000 to reflect the estimated net cost to consolidate its manufacturing operations located in Buffalo, NY into its existing facility in Merrimack, NH. The Buffalo facility was primarily engaged in government contract activities and had been significantly impacted by the downturn in recent years in government and defense related spending. This consolidation of operations was designed to increase the overall manufacturing efficiency of the Company by reducing overhead costs and improving manufacturing logistics. The $550,000 charge ($337,000 after tax) included provisions for severance pay and related benefits, employee relocation and training costs, and the cost of relocating production equipment, and was reduced by the amount of the expected gain from the sale of real estate in Buffalo which was no longer needed in the business. NOTE 14 - RELATED PARTIES The Company's transactions and balances with Nitto Chemfab Co., Ltd. for the year ended and as of June 30 were as follows: NITTO CHEMFAB CO., LTD. 1995 1994 1993 ---- ---- ---- Purchases from Company $6,677,000 $2,670,000 $3,850,000 Amount due to Company 1,708,000 1,080,000 515,000 Company's 39% equity investment in subsidiary --- 221,000 317,000 Amounts due to the Company are principally trade receivables and carry standard trade terms. In February 1995 two employees, one of whom is an officer of the Company, acquired an ownership interest in Fothergill Engineered Fabrics ("FEF"), which is a commercial weaver of specialty fibers in England. FEF is also a raw material supplier to the Tygaflor business ("Tygaflor") and owns the site on which the Tygaflor business operates. During the five months ended June 30, 1995, Tygaflor purchased $704,000 of woven materials from FEF and paid $75,000 for rent and shared services. At June 30, 1995, the amount payable to FEF for material purchases and services was $424,000. NOTE 15 - ACCRUED LIABILITIES Accrued liabilities at June 30, 1995 and 1994 consisted of the following: 1995 1994 ---- ---- Accrued payroll and related expenses $1,463,000 $ 936,000 Other accrued expenses 2,177,000 1,726,000 ---------- ---------- $3,640,000 $2,662,000 ========== ========== NOTE 16 - LEGAL PROCEEDINGS In March 1991, the Company received a notice from the Environmental Protection Agency (EPA) that it has been identified as one of a number of potentially responsible parties (PRP's) under the Comprehensive Environmental Response, Compensation & Liability Act (CERCLA) and related laws concerning the disposal of hazardous waste at the Bennington Landfill Superfund Site in Bennington, Vermont (the Site). Under these statutes, PRP's may be jointly and severally liable for the cost of cleanup actions at the Site and other damages. In June 1991, while denying liability, the Company together with other PRP's entered into an Administrative Consent Order with the EPA to undertake and fund a Remedial Investigation/Feasibility Study (the Study) to evaluate the condition of the Site and to study the remediation alternatives available for cleanup. The Study is now complete and the EPA has divided the remedy at the Site into two parts: Source Control and Management of Groundwater Migration. A specific Source Control remedy has been selected by EPA in the form of a cap over the landfill. On July 24, 1995, EPA issued notice to the Company and approximately 33 other parties of its intention to negotiate an agreement with those parties to fund and perform the Source Control remedy. The Company is working cooperatively with 16 other parties in an effort to negotiate an agreement and settlement with EPA, and expects those negotiations will be completed during the fourth quarter of calendar 1995. EPA has not indicated a time frame for selection of the second part of the remedy, which will be directed at management of the migration of groundwater. Despite the statutory liability provisions, on the basis of information available to date, including a review of the Company's purchasing and materials disposal records, the Company believes that the resolution of this matter is not likely to have a material adverse effect on its financial condition or results of operations. The Company is involved in a number of other lawsuits as either a defendant or a plaintiff. Although the outcome of such matters cannot be predicted with certainty, and some law suits or claims may be disposed of unfavorably to the Company, management believes that the disposition of its current legal proceedings, to the extent not covered by insurance, will not have a material adverse effect on the Company's Consolidated Financial Statements. CHEMFAB CORPORATION QUARTERLY FINANCIAL DATA (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) Per Share 1995 Data (a) ---- --------- Net Gross Net Net Quarter Sales Profit Income Income ----- ------ ------ ------ First $13,722 $ 4,363 $ 823 $ 0.16 Second 15,501 4,755 1,144 0.22 Third 17,510 5,632 1,317 0.25 Fourth 21,247 7,106 2,026 0.38 ------- ------- ------ Year $67,980 $21,856 $5,310 $1.00 ======= ======= ====== Per Share 1994 Data (a) ---- --------- Net Gross Net Net Quarter Sales Profit Income Income ----- ------ ------ ------ First $11,441 $ 3,628 $ 718 $ 0.14 Second 12,836 4,142 980 0.19 Third 12,502 3,949 945 0.18 Fourth 15,372 4,998 1,252 0.24 ------- ------- ------ Year $52,151 $16,717 $3,895 $ 0.74 ======= ======= ====== (a) Computations of earnings per share for each quarter are independent and do not necessarily equal the amount computed for the year. CHEMFAB CORPORATION VALUATION AND QUALIFYING ACCOUNTS SCHEDULE II YEARS ENDED JUNE 30, 1995, 1994 AND 1993 Balance at Charges Balance at beginning to Deductions end of year Expense and Other(1)(2) of year 1995 ---- Allowance for Doubtful Accounts $154,000 $119,000 $ 3,000 $276,000 ======== ======== ========= ======== 1994 ---- Allowance for Doubtful Accounts $200,000 $109,000 $(155,000) $154,000 ======== ======== ========= ======== 1993 ---- Allowance for Doubtful Accounts $188,000 $ 89,000 $ (77,000) $200,000 ======== ========= ========= ======== (1) Uncollectible accounts written off, net of recoveries. (2) Adjusted for valuation accounts acquired as part of the Tygaflor acquisition. EX-10.A(8) 2 Chemfab Corporation 1991 STOCK OPTION PLAN AGREEMENT AGREEMENT dated as of , 19 (this "Agreement"), by and between Chemfab Corporation (the "Company"), and presently residing at (the "Optionee"). WHEREAS, the Company's 1991 Stock Option Plan (the "Plan") provides that whenever a director is re-elected to the Board of Directors at an annual shareholders meeting or special meeting in lieu of an annual meeting, or continues to serve as a director after such meeting, that director is automatically granted certain nonstatutory stock options; WHEREAS, the Optionee has been re-elected as a director of the Company at an annual meeting of shareholders held on ; NOW, THEREFORE, the parties agree as follows: 1. Optionee's Continued Service. Nothing herein contained shall be deemed to confer upon the Optionee any right to continue as a director of the Company nor to interfere in any way with the right of the Company to terminate its relationship with the Optionee at any time. 2. Grant of Option. Subject to the terms and conditions set forth herein, the Company has granted to the Optionee on , 19 (the "Grant date") an option (the "Option") to purchase from the Company shares (the "Optioned Shares") of the Company's common stock, par value $.10 per share (the "Stock"). The Option shall become exercisable in four (4) equal installments, of 25% each, on each of the following dates, but only if the Optionee remains a director of the Company at that date: Date Number of Shares , 199 . (25%) , 199 . (25%) , 199 . (25%) , 199 . (25%) The Option must be exercised, if ever, before the tenth (10th) anniversary of the Grant Date or within such shorter period as may result from the operation of Section 4. 3. Exercise Price. The exercise price to be paid for the Optioned Shares shall be $ per share. 4. Termination of Option. If the Optionee ceases to serve as a director of the Company for any reason, other than death, the Option may be exercised, to the extent exercisable on the date of such termination, by the Optionee at any time within three (3) months after such termination, but only before the tenth (10th) anniversary of the Grant Date. If the Optionee dies, the Option may be exercised, to the extent exercisable on the date of death, at any time by the Optionee's executor or administrator, but only before the earlier of the first (1) anniversary of the date of death or the tenth (10th) anniversary of the Grant Date. Options which are not exercisable at the time of termination of the Optionee's relationship with the Company or which are exercisable but not exercised within the time periods described above shall terminate. A leave of absence for military service, illness or other bona fide purpose shall not be deemed a termination for purposes of this Section 4 provided that it does not exceed the longer of ninety (90) days or the period during which the rights of the absent director are guaranteed by statute or by contract. If the Optionee does not so return, his relationship with the Company shall be deemed to have ended on the next day of such leave of absence. 5. Exercise of Option. The Optionee may exercise this Option by giving written notice in the manner provided in Section 11. The notice shall specify the number of shares of the Stock which the Optionee elects to purchase. For all shares which the Optionee elects to purchase, the Optionee shall deliver to the Company a personal check equal to the exercise price. The Company shall deliver or cause to be delivered to the Optionee a certificate for the number of shares then being purchased by him or her. If any law or applicable regulation of the Securities and Exchange Commission or other body having jurisdiction in the premises shall require the Company or Optionee to take any action in connec- tion with shares being purchased upon exercise of the Option, exercise of the Option and delivery of the certificate or certificates for such shares shall be postponed until completion of the necessary action, which shall be taken at the Company's expense. The Option shall be reduced by one share for each share of the Stock purchased upon exercise of the Option. 6. Transfer of Option. During the lifetime of the Optionee, the Option may be exercised only by the Optionee and then, except as otherwise provided in Section 4, only if the Optionee has continuously served as a director of the Company from the Grant Date until the date three (3) months before the date of exercise. Except by will or by the laws of descent and distribution, the Option and all rights granted hereunder may not be transferred, assigned, pledged, or hypothecated (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, attachment, pledge, hypothecation or other disposition of the Option or of such rights contrary to the provisions hereof and the levy of any attachments or similar process upon the Option or such rights, shall be void. 7. Capital Changes. In the event of any stock dividend payable in the Stock or any split-up or contraction in the number of shares of the Stock, or any reclassification or change of outstanding shares of the Stock, in each case occurring after the date of this Agreement and prior to the exercise in full of the Option, the number and kind of shares for which the Option may thereafter be exercised and the exercise price shall be proportionately and appropriately adjusted. Upon any consolidation or merger of the Company with or into another company, or any sale or conveyance to another company or entity of the property of the Company as a whole, or the dissolution or liquidation of the Company, the Option shall terminate, but the Optionee shall have the right, immediately prior to such event, to exercise the Option, to the extent then exercisable by its terms and not theretofore exercised. No fraction of a share shall be purchasable or deliverable, but in the event any adjustment of the number of shares covered by the Option shall cause such number to include a fraction of a share, such fraction shall be adjusted to the nearest smaller whole number of shares. 8. Reservation of Shares. The Company shall at all times during the term of this Agreement reserve and keep available such number of shares of the Stock as will be sufficient to satisfy the requirements of this Agreement and shall pay all taxes, fees and expenses necessarily incurred by the Company in connection with this Agreement and the issuance of Optioned Shares. 9. Limitation of Rights in Optioned Shares. The Optionee shall have no rights as a stockholder of the Company with respect to any of the Optioned Shares except to the extent that the Option shall have been exercised, payment as herein provided shall have been made in full, and a stock certificate shall have been issued and delivered to the Optionee. Any stock issued pursuant to the Option shall be subject to all restrictions upon the transfer thereof which may be now or hereafter imposed by the Certificate of Incorporation or By-laws of the Company. 10. Company's Powers. The existence of the Option shall not diminish the right of power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Stock or the rights thereof, or dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceedings, whether of a similar character or otherwise. The Option confers upon the Optionee no right to continue as director of the Company nor interferes in any way with the right of the Company to terminate its relationship with Optionee at any time. 11. Notices. Any communication or notice required to or permitted to be given under this Agreement shall be in writing, and mailed by registered or certified mail or delivered in hand, if to the Company, to its Treasurer at Daniel Webster Highway, P.O. Box 1137, Merrimack, New Hampshire 03054 and, if to the Optionee, to the address set forth on the first page of this Agreement, or such other address, in each case, as the addressee shall last have furnished to the communicating party. 12. Terms and Conditions of Plan. The option granted hereunder is subject to all the terms and conditions set forth in the Plan, receipt of a copy of which is hereby acknowledged by the Optionee. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. CHEMFAB CORPORATION By_________________________ Duane C. Montopoli ___________________________ Optionee Chemfab Corporation NONSTATUTORY STOCK OPTION AGREEMENT UNDER AMENDED AND RESTATED 1991 STOCK OPTION PLAN OFFICER FORM NONSTATUTORY STOCK OPTION AGREEMENT, dated , 199 (this "Agreement"), between Chemfab Corporation (the "Company"), and presently residing at , (the "Optionee"). WHEREAS, the Stock Option Committee of the Board of Directors of the Company has determined that it is to the advantage and interest of the Company and its stockholders to grant to the Optionee the nonstatutory stock option provided for herein as an inducement to remain in the service of the Company and its subsidiaries and as an incentive for increased effort during such service; and WHEREAS, the Optionee is engaged in the service of the Company and/or its subsidiary corporations ("Related Corporations"); NOW, THEREFORE, the parties agree as follows: 1. Optionee's Continued Service. The Optionee shall remain continuously (subject to the exception in Section 4) in the service of the Company or one or more of its Related Corporations in the capacity of employee, director and/or consultant for a period of at least one year from the Grant Date and shall, during such service, devote his or her time, energy and skill to the service of the Company or one or more of its Related Corporations. Nothing herein con- tained shall be deemed to confer upon the Optionee any right to continue in the service of the Company or one or more of its Related Corporations in any particular capacity or in general, nor to interfere in any way with the right of the relevant corporation or corporations to terminate any employment, consultan- cies and/or directorship of the Optionee at any time. If the Optionee's service as an employee, consultant and director with the Company and all its Related Corporations shall terminate within one year from the Grant Date, the Optionee shall have no rights whatsoever under this Agreement. 2. Grant of Option. Subject to the terms and conditions set forth herein, the Company has granted to the Optionee on , 199 (the "Grant Date") an option (the "Option") to purchase from the Company shares (the "Optioned Shares") of the Company's common stock, par value $.10 per share (the "Stock"). The Option is not intended to be treated as an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), but as a nonstatutory stock option within the meaning of the Code. On each of the following dates, but only if the Optionee remains an employee, director or consultant of the Company or one or more Related Corporations at that date (with the status of any corporation as a Related Corporation to be determined as of that date), the stated number of shares shall become purchasable hereunder: Date Number of Shares , 199 . (25%) , 199 . (25%) , 199 . (25%) , 199 . (25%) The Option must be exercised, if ever, before the tenth anniversary of the Grant Date or within such shorter period as may result from the operation of Section 4. 3. Exercise Price. The exercise price to be paid for the Optioned Shares shall be $ per share. 4. Termination of Option. If all the Optionee's service to the Company and all its Related Corporations as employee, consultant and/or director terminates for any reason, other than death or retirement from employment (but including termination of affiliation between the Company and the Related Corporation with which Optionee is serving as employee, consultant or director), after the first anniversary of the Grant Date, the Option, to the extent exercisable on the date of such termination, may be exercised by the Optionee at any time within 90 days after termination, but only before the tenth anniversary of the Grant Date. If the Optionee dies or retires from employment after the first anniversary of the Grant Date, the Option may be exercised, to the extent exercisable on the date of such retirement or death, at any time by the Optionee or his executor or administrator, as the case may be, but only before the earlier of the first anniversary of the date of death or retirement or the tenth anniversary of the Grant Date. Options which are not exercisable at the time of termination of the Optionee's relationship with the Company and all its Related Corporations as an employee, director and/or consultant or which are so exercis- able but are not exercised within the time periods described above, shall terminate. Leave of absence for military service, illness or other bona fide purpose shall not be deemed a termination for purposes of this Section 4 provided that it does not exceed the longer of 90 days or the period during which the absent Optionee's rights are guaranteed by statute or by contract. If the Optionee does not so return, his relationship with the Company and all its Related Corporations as an employee, director and/or consultant shall be deemed to have ended on the next day of such leave of absence. 5. Exercise of Option. The Optionee may exercise the Option by giving written notice in the manner provided in Section 11. The notice shall specify the number of shares of the Stock which the Optionee elects to purchase. For all shares which the Optionee elects to purchase, the Optionee shall deliver to the Company a personal check equal to the exercise price. The Company shall deliver or cause to be delivered to the Optionee a certificate for the number of shares then being purchased by him or her. If any law or applicable regulation of the Securities and Exchange Commission or other body having jurisdiction in the premises shall require the Company or Optionee to take any action in connection with shares being purchased upon exercise of the Option, exercise of the Option and delivery of the certificate or certificates for such shares shall be postponed until completion of the necessary action, which shall be taken at the Company's expense. Whenever shares are to be issued in satisfaction of an Option granted hereunder, the Company shall have the right to require the Optionee to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such shares, if and to the extent required by law. The Option shall be reduced by one share for each share of the Stock purchased upon exercise of the Option. 6. Transfer of Option. During the lifetime of the Optionee, the Option may be exercised only by the Optionee and then, except as otherwise provided in Section 4, only if the Optionee has been continuously in the service as an employee, director or consultant of the Company and/or one or more of its Related Corporations from the Grant Date until the date 90 days before the date of exercise. Except by will or by the laws of descent and distribution, the Option and all rights granted hereunder may not be transferred, assigned, pledged, or hypothecated (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, attachment, pledge, hypothecation or other disposition of the Option or of such rights contrary to the provisions hereof and the levy of any attach- ment or similar process upon the Option or such rights, shall be void. 7. Capital Changes. In the event of any stock dividend payable in the Stock or any split-up or contraction in the number of shares of the Stock, or any reclassification or change of outstanding shares of the Stock, in each case occurring after the date of this Agreement and prior to the exercise in full of the Option, the number and kind of shares for which the Option may thereafter be exercised and the exercise price shall be proportionately and appropriately adjusted. Upon any consolidation or merger of the Company with or into another company, or any sale or conveyance to another company or entity of the property of the Company as a whole, or the dissolution or liquidation of the Company, the Option shall terminate, but the Optionee shall have the right, immediately prior to such event, to exercise the Option, to the extent then vested and not theretofore exercised. No fraction of a share shall be purchasable or deliver- able, but in the event any adjustment of the number of shares covered by the Option shall cause such number to include a fraction of a share, such fraction shall be adjusted to the nearest smaller whole number of shares. 8. Reservation of Shares. The Company shall at all times during the term of this Agreement reserve and keep available such number of shares of the Stock as will be sufficient to satisfy the requirements of this Agreement and shall pay all taxes, fees and expenses necessarily incurred by the Company in connec- tion with this Agreement and the issuance of Optioned Shares. 9. Limitation of Rights in Optioned Shares. The Optionee shall not be deemed for any purpose to be a stockholder of the Company with respect to any of the Optioned Shares except to the extent that the Option shall have been exercised and, in addition, a stock certificate shall have been issued and delivered to the Optionee. Any stock issued pursuant to the Option shall be subject to all restrictions upon the transfer thereof which may be now or hereafter imposed by the Certificate of Incorporation or By-laws of the Company. 10. Company's Powers. The existence of the Option shall not diminish the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Stock or the rights thereof, or dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceedings, whether of a similar character or otherwise. The Option confers upon the Optionee no right to continue in the service of the Company or its Related Corporations, nor interferes in any way with the right of the Company and its Related Corporations to terminate the employment, directorships and/or consultancies of the Optionee at any time. 11. Notices. Any communication or notice required or permitted to be given under this Agreement shall be in writing, and mailed by registered or certified mail or delivered in hand, if to the Company, to its Treasurer at Daniel Webster Highway, P.O. Box 1137, Merrimack, New Hampshire 03054 and, if to the Optionee, to the address set forth on the first page of this Agreement, or such other address, in each case, as the addressee shall last have furnished to the communicating party. 12. Terms and Conditions of Plan. The option granted hereunder is subject to all the terms and conditions set forth in the Company's Amended and Restated 1991 Stock Option Plan, receipt of a copy of which is hereby acknowledged by the Optionee. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. CHEMFAB CORPORATION By_________________________ Duane C. Montopoli ___________________________ Optionee Chemfab Corporation NONSTATUTORY STOCK OPTION AGREEMENT UNDER AMENDED AND RESTATED 1991 STOCK OPTION PLAN NONSTATUTORY STOCK OPTION AGREEMENT dated , 199 (this "Agree- ment"), between Chemfab Corporation (the "Company"), and presently residing at , (the "Optionee"). WHEREAS, the Stock Option Committee of the Board of Directors of the Company has determined that it is to the advantage and interest of the Company and its stockholders to grant to the Optionee the nonstatutory stock option provided for herein as an inducement to remain in the service of the Company and its subsidiaries and as an incentive for increased effort during such service; and WHEREAS, the Optionee is engaged in the service of the Company and its subsidiary corporations ("Related Corporations"); NOW, THEREFORE, the parties agree as follows: 1. Optionee's Continued Employment. The Optionee shall remain continuous- ly (subject to the exception in Section 4) in the employ of the Company or one or more of its Related Corporations for a period of at least one year from the Grant Date and shall, during such employment, devote his or her time, energy and skill to the service of the Company or one or more of its Related Corporations. Nothing herein contained shall be deemed to confer upon the Optionee any right to continue in the employ of the Company or one or more of its Related Corpora- tions nor to interfere in any way with the right of the employing corporation or corporations to terminate the employment of the Optionee at any time. If the Optionee's employment with the Company and all of its Related Corporations shall terminate within one year from the Grant Date, the Optionee shall have no rights whatsoever under this Agreement. 2. Grant of Option. Subject to the terms and conditions set forth herein, the Company has granted to the Optionee on , 199 (the "Grant Date") an option (the "Option") to purchase from the Company shares (the "Optioned Shares") of the Company's common stock, par value $.10 per share (the "Stock"). The Option is not intended to be treated as an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), but as a nonstatutory stock option within the meaning of the Code. On each of the following dates, but only if the Optionee remains an employee of the Company or a Related Corporation at that date (with the status of any Corpora- tion as a Related Corporation to be determined as of that date), the stated number of shares shall become purchasable hereunder: Date Number of Shares , 199 . (25%) , 199 . (25%) , 199 . (25%) , 199 . (25%) The Option must be exercised, if ever, before the tenth anniversary of the Grant Date or within such shorter period as may result from the operation of Section 4. 3. Exercise Price. The exercise price to be paid for the Optioned Shares shall be $ per share. 4. Termination of Option. If the Optionee's employment by the Company and its Related Corporations terminates for any reason, other than death or retire- ment (but including termination of affiliation between the Company and the Related Corporation with which Optionee is serving as an employee), after the first anniversary of the Grant Date, the Option, to the extent exercisable on the date of such termination, may be exercised by the Optionee at any time within 90 days after termination, but only before the tenth anniversary of the Grant Date. If the Optionee dies or retires after the first anniversary of the Grant Date, the Option may be exercised, to the extent exercisable on the date of retirement or death, at any time by the Optionee or his executor or adminis- trator, as the case may be, but only before the earlier of the first anniversary of the date of death or retirement or the tenth anniversary of the Grant Date. Options which are not exercisable at the time of termination of the Optionee's employment or which are so exercisable but are not exercised within the time periods described above shall terminate. Leave of absence for military service, illness or other bona fide purpose shall not be deemed a termination of employ- ment provided that it does not exceed the longer of 90 days or the period during which the absent employee's reemployment rights are guaranteed by statute or by contract. If the Optionee does not so return, his employment shall be deemed to have ended on the next day of such leave of absence. 5. Exercise of Option. The Optionee may exercise the Option by giving written notice in the manner provided in Section 11. The notice shall specify the number of shares of the Stock which the Optionee elects to purchase. For all shares which the Optionee elects to purchase, the Optionee shall deliver to the Company a personal check equal to the exercise price. The Company shall deliver or cause to be delivered to the Optionee a certificate for the number of shares then being purchased by him or her. If any law or applicable regulation of the Securities and Exchange Commission or other body having jurisdiction in the premises shall require the Company or Optionee to take any action in connection with shares being purchased upon exercise of the Option, exercise of the Option and delivery of the certificate or certificates for such shares shall be postponed until completion of the necessary action, which shall be taken at the Company's expense. Whenever shares are to be issued in satisfaction of an Option granted hereunder, the Company shall have the right to require the Optionee to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such shares, if and to the extent required by law. The Option shall be reduced by one share for each share of the Stock purchased upon exercise of the Option. 6. Transfer of Option. During the lifetime of the Optionee, the Option may be exercised only by the Optionee and then, except as otherwise provided in Section 4, only if the Optionee has been continuously in the full time employ of the Company and/or one or more of its Related Corporations from the Grant Date until the date 90 days before the date of exercise. Except by will or by the laws of descent and distribution, the Option and all rights granted hereunder may not be transferred, assigned, pledged, or hypothecated (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, attachment, pledge, hypothecation or other disposition of the Option or of such rights contrary to the provisions hereof and the levy of any attachment or similar process upon the Option or such rights, shall be void. 7. Capital Changes. In the event of any stock dividend payable in the Stock or any split-up or contraction in the number of shares of the Stock, or any reclassification or change of outstanding shares of the Stock, in each case occurring after the date of this Agreement and prior to the exercise in full of the Option, the number and kind of shares for which the Option may thereafter be exercised and the exercise price shall be proportionately and appropriately adjusted. Upon any consolidation or merger of the Company with or into another company, or any sale or conveyance to another company or entity of the property of the Company as a whole, or the dissolution or liquidation of the Company, the Option shall terminate, but the Optionee shall have the right, immediately prior to such event, to exercise the Option, to the extent then vested and not theretofore exercised. No fraction of a share shall be purchasable or deliver- able, but in the event any adjustment of the number of shares covered by the Option shall cause such number to include a fraction of a share, such fraction shall be adjusted to the nearest smaller whole number of shares. 8. Reservation of Shares. The Company shall at all times during the term of this Agreement reserve and keep available such number of shares of the Stock as will be sufficient to satisfy the requirements of this Agreement and shall pay all taxes, fees and expenses necessarily incurred by the Company in connec- tion with this Agreement and the issuance of Optioned Shares. 9. Limitation of Rights in Optioned Shares. The Optionee shall not be deemed for any purpose to be a stockholder of the Company with respect to any of the Optioned Shares except to the extent that the Option shall have been exercised and, in addition, a stock certificate shall have been issued and delivered to the Optionee. Any stock issued pursuant to the Option shall be subject to all restrictions upon the transfer thereof which may be now or hereafter imposed by the Certificate of Incorporation or By-laws of the Company. 10. Company's Powers. The existence of the Option shall not diminish the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Stock or the rights thereof, or dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceedings, whether of a similar character or otherwise. The Option confers upon the Optionee no right to continue in the employment of the Company and its Related Corporations or interferes in any way with the right of the Company and its Related Corporations to terminate the employment of the Optionee at any time. 11. Notices. Any communication or notice required or permitted to be given under this Agreement shall be in writing, and mailed by registered or certified mail or delivered in hand, if to the Company, to its Treasurer at Daniel Webster Highway, P.O. Box 1137, Merrimack, New Hampshire 03054 and, if to the Optionee, to the address set forth on the first page of this Agreement, or such other address, in each case, as the addressee shall last have furnished to the communicating party. 12. Terms and Conditions of Plan; Shareholder Approval. The option granted hereunder is subject to all the terms and conditions set forth in the Company's Amended and Restated 1991 Stock Option Plan, receipt of a copy of which is hereby acknowledged by the Optionee. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. CHEMFAB CORPORATION By_____________________________ Duane C. Montopoli _______________________________ Optionee EX-10.A(10) 3 Chemfab Corporation NONSTATUTORY STOCK OPTION AGREEMENT UNDER AMENDED AND RESTATED 1991 STOCK OPTION PLAN OFFICER FORM NONSTATUTORY STOCK OPTION AGREEMENT, dated October 21, 1994 (this "Agreement"), between Chemfab Corporation (the "Company") and James C. Manocchi presently residing at 32 Pembroke Way, Bedford, New Hampshire 03110, (the "Optionee"). WHEREAS, the Stock Option Committee of the Board of Directors of the Company has determined that it is to the advantage and interest of the Company and its stockholders to grant to the Optionee the nonstatutory stock option provided for herein as an inducement to remain in the service of the Company and its subsidiaries and as an incentive for increased effort during such service; and WHEREAS, the Optionee is engaged in the service of the Company and/or its subsidiary corporations ("Related Corporations"); NOW, THEREFORE, the parties agree as follows: 1. Optionee's Continued Service. The Optionee shall remain continuously (subject to the exceptions in Sections 2 and 4) in the service of the Company or one or more of its Related Corporations in the capacity of employee, director and/or consultant for a period of at least one year from the Grant Date and shall, during such service, devote his or her time, energy and skill to the service of the Company or one or more of its Related Corporations. Nothing herein contained shall be deemed to confer upon the Optionee any right to continue in the service of the Company or one or more of its Related Corporations in any particular capacity or in general, nor to interfere in any way with the right of the relevant corporation or corporations to terminate any employment, consultancies and/or directorship of the Optionee at any time. If the Optionee's service as an employee, consultant and director with the Company and all its Related Corporations shall terminate prior to the earlier of the first anniversary of the Grant Date or the date that the Option represented hereby shall become exercisable pursuant to Section 2(b) below, the Optionee shall have no rights whatsoever under this Agreement. 2. Grant of Option. (a) Subject to the terms and conditions set forth herein, the Company has granted to the Optionee on October 21, 1994 (the "Grant Date") an option (the "Option") to purchase from the Company 10,000 shares (the "Optioned Shares") of the Company's common stock, par value $.10 per share (the "Stock"). The Option is not intended to be treated as an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), but as a nonstatutory stock option within the meaning of the Code. On each of the following dates (each a "Vesting Date" and collectively the "Vesting Dates"), but only if the Optionee remains an employee, director or consultant of the Company or one or more Related Corporations at such Vesting Date (with the status of any corporation as a Related Corporation to be determined as of such Vesting Date), the stated number of shares shall become purchasable hereunder: Date Number of Shares October 21, 1995 2,500 (25%) October 21, 1996 2,500 (25%) October 21, 1997 2,500 (25%) October 21, 1998 2,500 (25%) (b) Notwithstanding anything in Section 2(a) to the contrary, the Option shall be exercisable for all of the Optioned Shares as follows: (i) If, before any Vesting Date, substantially all of the outstanding voting stock or substantially all of the assets of the Company is or are acquired by any person or group of persons, or the Company is party to a merger or consolidation of which the Company is not in economic substance the predominant surviving entity, then the day one day before the date of such acquisition, merger or consolidation (the "Sellout Event") shall be substituted for such of the Vesting Dates as may be the same as or later than the date of the Sellout Event. (ii) In the event that the Company terminates the Optionee's employment with the Company and all Related Corporations, other than for Cause (as defined in that certain Level A Employee Agreement, dated June 4, 1991, between the Company and the Optionee), at any time prior to December 31, 1996, then the Option, to the extent it has not expired or otherwise terminated on or prior to the effective date of the termination of the Optionee's employment (the "Effective Date") and to the extent it would not otherwise be exercisable in full on the Effective Date, shall become exercisable in full on the day immediately preceding the Effective Date. (c) The Option must be exercised, if ever, before the tenth anniversary of the Grant Date or within such shorter period as may result from the operation of Section 4. 3. Exercise Price. The exercise price to be paid for the Optioned Shares shall be $12.00 share. 4. Termination of Option. If all the Optionee's service to the Company and all its Related Corporations as employee, consultant and/or director terminates for any reason, other than death or retirement from employment (but including termination of affiliation between the Company and the Related Corporation with which Optionee is serving as employee, consultant or director), the Option, to the extent exercisable on the date of such termination (after giving effect to the provisions of Section 2(b) hereof, if applicable), may be exercised by the Optionee at any time within ninety (90) days after termination, but only before the tenth anniversary of the Grant Date. If the Optionee dies or retires from employment, the Option may be exercised, to the extent exercisable on the date of such retirement or death (after giving effect to the provisions of Section 2(b) hereof, if applicable), at any time by the Optionee or his executor or administrator, as the case may be, but only before the earlier of the first anniversary of the date of death or retirement or the tenth anniversary of the Grant Date. Options which are not exercisable at the time of termination of the Optionee's relationship with the Company and all its Related Corporations as an employee, director and/or consultant or which are so exercisable but are not exercised within the time periods described above, shall terminate. Leave of absence for military service, illness or other bona fide purpose shall not be deemed a termination for purposes of this Section 4 provided that it does not exceed the longer of 90 days or the period during which the absent Optionee's rights are guaranteed by statute or by contract. If the Optionee does not so return, his relationship with the Company and all its Related Corporations as an employee, director and/or consultant shall be deemed to have ended on the next day of such leave of absence. 5. Exercise of Option. The Optionee may exercise the Option by giving written notice in the manner provided in Section 11. The notice shall specify the number of shares of the Stock which the Optionee elects to purchase. For all shares which the Optionee elects to purchase, the Optionee shall deliver to the Company a personal check equal to the exercise price. The Company shall deliver or cause to be delivered to the Optionee a certificate for the number of shares then being purchased by him or her. If any law or applicable regulation of the Securities and Exchange Commission or other body having jurisdiction in the premises shall require the Company or Optionee to take any action in connection with shares being purchased upon exercise of the Option, exercise of the Option and delivery of the certificate or certificates for such shares shall be postponed until completion of the necessary action, which shall be taken at the Company's expense. Whenever shares are to be issued in satisfaction of an Option granted hereunder, the Company shall have the right to require the Optionee to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such shares, if and to the extent required by law. The Option shall be reduced by one share for each share of the Stock purchased upon exercise of the Option. 6. Transfer of Option. During the lifetime of the Optionee, the Option may be exercised only by the Optionee and then, except as otherwise provided in Section 4, only if the Optionee has been continuously in the service as an employee, director or consultant of the Company and/or one or more of its Related Corporations from the Grant Date until the date ninety (90) days before the date of exercise. Except by will or by the laws of descent and distribution, the Option and all rights granted hereunder may not be transferred, assigned, pledged, or hypothecated (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, attachment, pledge, hypothecation or other disposition of the Option or of such rights contrary to the provisions hereof and the levy of any attachment or similar process upon the Option or such rights, shall be void. 7. Capital Changes. In the event of any stock dividend payable in the Stock or any split-up or contraction in the number of shares of the Stock, or any reclassification or change of outstanding shares of the Stock, in each case occurring after the date of this Agreement and prior to the exercise in full of the Option, the number and kind of shares for which the Option may thereafter be exercised and the exercise price shall be proportionately and appropriately adjusted. Upon any consolidation or merger of the Company with or into another company, or any sale or conveyance to another company or entity of the property of the Company as a whole, or the dissolution or liquidation of the Company, the Option shall terminate, but the Optionee shall have the right, immediately prior to such event, to exercise the Option, to the extent then vested and not theretofore exercised. No fraction of a share shall be purchasable or deliverable, but in the event any adjustment of the number of shares covered by the Option shall cause such number to include a fraction of a share, such fraction shall be adjusted to the nearest smaller whole number of shares. 8. Reservation of Shares. The Company shall at all times during the term of this Agreement reserve and keep available such number of shares of the Stock as will be sufficient to satisfy the requirements of this Agreement and shall pay all taxes, fees and expenses necessarily incurred by the Company in connection with this Agreement and the issuance of Optioned Shares. 9. Limitation of Rights in Optioned Shares. The Optionee shall not be deemed for any purpose to be a stockholder of the Company with respect to any of the Optioned Shares except to the extent that the Option shall have been exercised and, in addition, a stock certificate shall have been issued and delivered to the Optionee. Any stock issued pursuant to the Option shall be subject to all restrictions upon the transfer thereof which may be now or hereafter imposed by the Certificate of Incorporation or By-laws of the Company. 10. Company's Powers. The existence of the Option shall not diminish the right or power of the Company or its stockholders or make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Stock or the rights thereof, or dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceedings, whether of a similar character or otherwise. The Option confers upon the Optionee no right to continue in the service of the Company or its Related Corporations, nor interferes in any way with the right of the Company and its Related Corporations to terminate the employment, directorships and/or consultancies of the Optionee at any time. 11. Notices. Any communication or notice required or permitted to be given under this Agreement shall be in writing, and mailed by registered or certified mail or delivered in hand, if to the Company, to its Treasurer at Daniel Webster Highway, P.O. Box 1137, Merrimack, New Hampshire 03054 and, if to the Optionee, to the address set forth on the first page of this Agreement, or such other address, in each case, as the addressee shall last have furnished to the communicating party. 12. Terms and Conditions of Plan. The option granted hereunder is subject to all the terms and conditions set forth in the Company's Amended and Restated 1991 Stock Option Plan, receipt of a copy of which is hereby acknowledged by the Optionee. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. CHEMFAB CORPORATION By ____________________________ James C. Manocchi EX-10.A(11) 4 CHEMFAB CORPORATION AMENDMENT TO 1991 STOCK OPTION PLAN AGREEMENTS This AMENDMENT, dated as of October 21, 1994 (this "Amendment"), is between Chemfab Corporation, a Delaware corporation (the "Company"), and James C. Manocchi (the "Optionee"). WHEREAS, the Optionee and the Company are parties to one or more 1991 Stock Option Plan Agreements, each dated as of a date prior to the date of this Amendment (such 1991 Stock Option Plan Agreements, as heretofore amended, the "Option Agreements"), which evidence the terms of one or more nonstatutory stock options granted by the Company to the Optionee (the "Options"), exercisable (now or in the future) for an aggregate of 61,000 shares of the Company's common stock, par value $.10 per share ("Common Stock"); WHEREAS, the Optionee and the Company desire to amend and modify the terms of some or all of the Option Agreements as set forth herein. NOW, THEREFORE, the parties hereto hereby agree as follows: 1. Amendment and Modification. To the extent the terms of the Option Agreements as now in effect (including without limitation any vesting schedule set forth therein) may be inconsistent with the following, the Option Agreements are hereby amended and modified to provide that, in the event that the Company terminates the Optionee's employment with the Company and its subsidiary corporations, other than for Cause (as defined in that certain Level A Employee Agreement, dated June 4, 1991, between the Company and the Optionee), at any time prior to December 31, 1996, then the Options, to the extent that they have not expired or otherwise terminated on or prior to the effective date of the termination of the Optionee's employment (the "Effective Date") and to the extent that they would not otherwise be exercisable in full on the Effective Date, shall become exercisable in full on the day immediately preceding the Effective Date. 2. Ratification. Except to the extent amended and modified by this Amendment, all of the terms, provisions and conditions of each of the Option Agreements are hereby ratified and confirmed and shall remain in full force and effect. 3. Entire Agreement. The Option Agreements and this Amendment contain the entire agreement among the parties with respect to the subject matter thereof and hereof. 4. Counterparts. This Amendment may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. IN WITNESS WHEREOF, the parties have executed and delivered this Amendment as of the date first above written. CHEMFAB CORPORATION By: Name: Title: _______________________________ James C. Manocchi EX-21 5 EXHIBIT 21 CHEMFAB CORPORATION SUBSIDIARIES WHOLLY-OWNED SUBSIDIARIES OF CHEMFAB CORPORATION Hi-Temp Materials, Inc., incorporated under the laws of the state of Illinois. Birdair Structures, Inc., incorporated under the laws of the state of New York. Canton Bio-Medical, Inc., incorporated under the laws of the state of New York. CHEMFAB Overseas Corporation, incorporated under the laws of the state of Delaware. CHEMFAB Holdings, organized under the laws of the Republic of Ireland. CHEMFAB Europe, organized under the laws of the Republic of Ireland. Chemical Fabrics Ireland, Ltd., organized under the laws of the Republic of Ireland. CHEMFAB International Corporation, incorporated under the laws of the state of Delaware. CHEMFAB FSC, Inc., incorporated under the laws of Barbados, West Indies. Advanced Facilities, Inc., incorporated under the laws of the state of New York. Chemical Fabrics Corporation of Japan, Ltd., incorporated under the laws of Japan. Fluorocarbon Fabrications Ltd., incorporated under the laws of the United Kingdom. CHEMFAB Holdings U.K. Ltd., incorporated under the laws of the United Kingdom. Tygaflor Ltd., (formerly CHEMFAB U.K. Ltd.) incorporated under the laws of the United Kingdom. Iberflon, S.A., Incorporated under the laws of Spain. Scanfluor, ApS., Incorporated under the laws of Denmark. EX-23 6 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Forms S-8 No. 2-89831 and No. 33-61946, and Form S-3 No. 33-18264) pertaining to the 1986 Stock Option Plan, the 1991 Stock Option Plan and the 1991 Chemfab Employee Stock Option Plan, and the 1986 Stock Option Plan and the 1983 Incentive Stock Option Plan of our report dated August 1, 1995, with respect to the consolidated financial statements and schedules of Chemfab Corporation included in this Annual Report (Form 10-K) for the year ended June 30, 1995. Boston, Massachusetts September 22, 1995 EX-24 7 POWER OF ATTORNEY I, the undersigned Director and/or Officer of Chemfab Corporation (the "Company"), hereby severally constitute and appoint Duane C. Montopoli, William H. Everett and David L. Engel, and each of them, my true and lawful attorney and agent to sign for me, and in my name and in the capacity or capacities indicated below (A) the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995 and (B) any and all amendments (including supplements and post-effective amendments) to (1) the Company's Registration Statement on Form S-8 (File No. 2-89831), dated as of March 8, 1984, registering under the Securities Act of 1933, as amended (the "Act"), shares of the Company's Common Stock issuable or transferable on the exercise of stock options and stock appreciation rights under the Company's 1983 Incentive Stock Option Plan (the "1983 Plan") and on the exercise of stock options under the Company's 1981 Incentive Stock Option Plan (the "1981 Plan") and the 1979 Non-Qualified Stock Option Plan (the "1979 Plan"), (2) the Company's Registration Statement on Form S-8 (File No. 33-18263), dated as of November 30, 1987, registering under the Act shares of the Company's Common Stock issuable or transferable on exercise of options under the 1983 Plan, the 1981 Plan and the 1986 Stock Option Plan (the "1986 Plan") (collectively, with the 1983 Plan, the 1981 Plan, and the 1979 Plan, the "Plans"), (3) the Company's Registration Statement on Form S-8, dated as of August 2, 1990, registering under the Act shares of the Company's Common Stock issuable or transferable on exercise of options under the 1986 Plan, (4) the Company's Registration Statement on Form S-3 (File No. 33-18264) registering under the Act for reoffer, shares of the Company's Common Stock issuable or transferable on exercise of options under the Plans or of certain Non-Plan options, and (5) the Company's Registration Statement on Form S-8 (File No. 33-61946), dated as of April 30, 1993, registering under the Act shares of the Company's Common Stock issuable or transferable on exercise of options under the Company's 1991 Stock Option Plan and the Company's 1991 Chemfab Employee Stock Option Plan. Signature Title Date _____________________ President, Chief September , 1995 Duane C. Montopoli Executive Officer and Director _____________________ Vice President-Finance, September , 1995 William H. Everett Chief Financial Officer and Treasurer (principal financial officer) ______________________ Controller (principal September , 1995 Laurence E. Richard accounting officer) ______________________ Director September , 1995 Paul M. Cook ______________________ Director September , 1995 Warren C. Cook ______________________ Director September , 1995 James E. McGrath ______________________ Director September , 1995 Nicholas Pappas EX-27 8
5 0000725813 DENISE DOUCETTE 12-MOS JUN-30-1995 JUN-30-1995 2780000 1000000 16285000 276000 13110000 36116000 36869000 17036000 70619000 10615000 0 524000 0 0 49797000 70619000 67980000 67980000 46124000 46124000 11466000 0 395000 7480000 2170000 5310000 0 0 0 5310000 1.00 1.00
-----END PRIVACY-ENHANCED MESSAGE-----