-----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, ICxsoBx6Q9rAkkHUI7eWPAHKynhW6W02pvApp6ArIhym4Dinrv8HHrDnDFxtLnUm iw231DPfRnit8FisqIDNjA== 0000725813-96-000021.txt : 19960927 0000725813-96-000021.hdr.sgml : 19960927 ACCESSION NUMBER: 0000725813-96-000021 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960926 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHEMFAB CORP CENTRAL INDEX KEY: 0000725813 STANDARD INDUSTRIAL CLASSIFICATION: TEXTILE MILL PRODUCTS [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: 96634621 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 1996 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, 1996 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 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, 1996 was approximately $96.2 million. 8,069,574 shares of the Registrant's common stock, $.10 par value, were outstanding on August 8, 1996. DOCUMENTS INCORPORATED BY REFERENCE Proxy Statement for the 1996 Annual Meeting of Shareholders of the Registrant to be held on October 31, 1996. 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 woven 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. The Company is organized into three geographically focused business units: (1) the Americas Business Group (North America and South America), (2) the European Business Group (Europe, India, the Middle East and Africa), and (3) the Asia Pacific Business Group (the Far East). Each is principally responsible for all business operations conducted in its geographic territory, except that the Americas Business Group is responsible for architectural product sales worldwide. PRODUCTS The Company has two principal product groups: engineered products and architectural products. Sales of engineered products are reported separately for Americas 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. No Asia Pacific sourced sales are reported since the Company's marketing and manufacturing organization in that region was not materially operational as of year end. Engineered Products - Americas 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 fiberous 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 manufacturers and 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 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 continues 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), for the purpose of manufacturing and selling architectural and industrial products into the Japanese market. As a result of changes in economic conditions since the joint venture was established, and recent amendments to its governing agreements, Nitto Chemfab's business activities are now generally limited to purchasing architectural products, principally from the Company, for resale in Japan, promoting such products in the Japanese market, and providing related customer service and support. Nitto Chemfab is 39% owned by the Company, with the remainder owned 51% and 10% by Nitto Denko Corporation and Taiyo Kogyo Corporation, respectively (see Note 13 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 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- (in thousands) Engineered Products - Americas Sourced $41,436 $38,962 $34,008 $31,868 $29,916 Engineered Products - Europe Sourced 29,710 20,833 13,882 12,527 12,111 Architectural Products 12,736 8,185 4,261 6,541 8,011 ------- ------- ------ ------ ------ $83,882 $67,980 $52,151 $50,936 $50,038 ======= ======= ======= ====== =======
MAJOR PRODUCT SALES Sales of grilling release sheets and belting products used in the food processing industry accounted for 11%, 13% and 15% of the Company's fiscal 1996, 1995 and 1994 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, Schaumburg, Illinois, Kilrush, Ireland, 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, commercially available woven fiberglass reinforcements and fluoropolymers (principally PTFE). The fiberglass yarns are supplied principally by Owens Corning (OC) and PPG Industries, Inc. Alternative sources of supply are available for all the Company's key raw materials, except for certain specialty glass yarns used in the manufacture of structural membrane products which are presently supplied only by OC. For such specialty glass yarns, OC has agreed to give the Company at least two years advance notice prior to any discontinuance of production and supply. 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, -------------------------------- (in thousands) 1996 1995 1994 ---- ---- ---- Engineered Products - Americas Sourced $ 8,172 $ 6,157 $4,562 Engineered Products - Europe Sourced 3,117 2,880 926 Architectural Products 2,192 3,794 1,977 ------- ------- ------ $13,481 $12,831 $7,465 ======= ======= ====== Included in the June 30, 1996 backlog is approximately $4,165,000 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 1997 virtually all of its June 30, 1996 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 1996 expenditures for Company-sponsored research and development were $2,270,000, 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 1995 and 1994 were $2,047,000 and $1,965,000, respectively, which represented approximately 3% and 4% of consolidated net sales in those years. During fiscal 1996, 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 proprietary technologies and, accordingly, there is no significant competition worldwide which utilizes the same process technologies. These products do, however, compete with other valued products comprised of similar and dissimilar materials. In the area of high performance elastomeric closures, the Company has four major and several smaller competitors worldwide. None of the Company's competitors have the same breadth of offering in these specialty niches, and the Company believes it is the global leader in the principal markets 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, spherical radomes, and military shelters, compete favorably against products manufactured from other materials. The Company believes that its architectural membrane products, which are sold through supply agreements with Birdair, Nitto Chemfab, and 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(R) 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, covering manufacturing processes, product compositions and end-use applications. In addition, the Company has several patent applications on file, one of which involves a device using a coated fabric composite in the field of air handling and distribution. 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 numerous registered trademarks (three of which were acquired with the Tygaflor business and two of which were acquired with Canton Bio-Medical). As part of the Company's global expansion in Asia Pacific and South America the Company has, in fiscal 1996, initiated registrations of its most important trademarks in various countries in these new territories. 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, local, and foreign governmental 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, 1996 the Company had 557 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, Spain and China. The Company owns an aggregate of approximately 274,000 square feet of facilities, and leases approximately 138,000 square feet of additional space. In December 1993, the Company purchased, for approximately $5.3 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, 1996 is as follows: NO. OF PRIMARY USE LOCATIONS OWNED LEASED(1) Manufacturing and engineering 8 217,000 112,000 Research and development, 9(2) 57,000 26,000 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 1996, New York in 1999, England in 2000, Spain in 1997 and China in 1999. 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 notice from the Environmental Protection Agency (EPA) that it was 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 for other damages. In June 1991, while denying liability, the Company together with approximately 12 other Site 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. Upon completion of the Study, the EPA divided the remedy at the Site into two parts: Source Control and Management of Groundwater Migration. On July 24, 1995, the EPA issued notice to the Company and approximately 33 other parties of its intention to negotiate with them for their funding and performance of the Source Control part of the remedy. Subsequently, a group consisting of the Company and 16 other parties negotiated an agreement among themselves (the Proposed Settlement) pursuant to which they have been divided into 5 Performing Parties and 12 de minimis parties. Under the terms of the Proposed Settlement, which has now been presented to the EPA as a formal settlement offer, (1) the Company would be one of the de minimis parties and, as such, would pay a specified amount to the EPA, (2) as a de minimis party, the Company would receive a statutory release pursuant to which it would be protected from all further claims related to the cleanup actions at the Site, and (3) the 5 Performing Parties (of which the Company would not be one) would be responsible for all remaining costs of both parts of the remedy at the Site. The Proposed Settlement is now being reviewed by the EPA and the U.S. Department of Justice. On the basis of all information available to date, including the amount specified to be paid by the Company as a de minimis party under the terms of the Proposed Settlement, and the results of the Company's past review of its purchasing and materials disposal records, the Company believes that the ultimate 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 1996. 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 47 President, Chief Executive Officer and Director John W. Verbicky 44 Executive Vice President and Chief Operating Officer James C. Manocchi 43 Vice President - Asia Pacific Business Group Moosa E. Moosa 39 Vice President - Finance and Administration, Treasurer, Chief Financial Officer and Secretary Gabriel P. O'Gara 52 Vice President - European Business Group Charles Tilgner III 61 Vice President and Director of U.S. Operations and Engineering Laurence E. Richard 43 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 general partner from October 1982 through December 1983. John W. Verbicky joined the Company in January 1993 as Vice President - Research & Development. In April 1994, Dr. Verbicky assumed the position of Vice President - U.S. Business Group, and in March 1996 he was promoted to the position of Executive Vice President and Chief Operating Officer. From November 1990 until the commencement of his employment with the Company, Dr. Vebicky was employed by General Electric as manager of the Environmental Technology Laboratory at GE's Research and Development Center. He previously served as 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. 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. Moosa E. Moosa joined the Company as Vice President - Finance and Administration & Chief Financial Officer in July 1996. Prior to joining the Company, Mr. Moosa was employed by Freudenberg Nonwovens LP as Vice President of Finance & Chief Financial Officer since 1992. Prior to that time, he worked for KPMG Peat Marwick, an international public accounting firm, since 1980. 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. 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. These figures have been adjusted to reflect the Company's three for two stock split in February 1996. FISCAL YEAR ENDED FISCAL YEAR ENDED JUNE 30, 1996 JUNE 30, 1995 HIGH LOW HIGH LOW First quarter 13 1/3 10 2/3 8 2/3 7 Second quarter 14 1/3 12 9 1/3 7 13/16 Third quarter 14 1/3 12 9 15/16 8 1/3 Fourth quarter 14 3/4 11 1/2 12 9 As of August 8, 1996, the number of record holders of the Company's stock was 480. 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, ---------------------------------------------- 1996 1995(1) 1994 1993 1992 ---- ---- ---- ---- ---- Net sales $83,882 $67,980 $52,151 $50,936 $50,038 Gross profit 28,109 21,856 16,717 16,890 15,914 Other expense (income) 51 (111) (251) (282) (2,492) Income before income taxes 11,154 7,480 5,218 4,632 7,509 Net income 7,714 5,310 3,895 3,502 4,568 Number of shares and share equivalents used to compute earnings per share 8,199 7,991 7,926 7,875 7,944 Net income per share $0.94 $0.66 $0.49 $0.45 $0.58 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) at June 30, ---------------------------------------------- 1996 1995(1) 1994 1993 1992 ---- ---- ---- ---- ---- Working capital $28,292 $25,501 $22,930 $25,970 $23,355 Net property, plant and equipment 20,540 19,833 17,889 12,851 13,044 Total assets 73,662 70,619 53,794 48,669 46,368 Long-term debt including current portion 2,377 8,132 --- --- --- Shareholders' equity 58,505 50,321 44,372 39,846 38,070 (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, 1996, 1995, and 1994, and the pertinent percentage changes in those items for the year. Percent of net sales Increase from for the years ended June 30, prior year ----------------------------- -------------------- 1996 1995 vs. vs. 1996 1995 1994 1995 1994 ---- ---- ---- ---- ---- Net sales 100.0% 100.0% 100.0% 23.4% 30.4% Gross profit 33.5% 32.2% 32.1% 28.6% 30.7% Income before income taxes 13.3% 11.0% 10.0% 49.1% 43.4% Net income 9.2% 7.8% 7.5% 45.3% 36.3% 1996 COMPARED TO 1995 SALES The Company's fiscal 1996 consolidated net sales increased 23% to $83,882,000 from $67,980,000 in 1995. Revenues in fiscal 1996 include the sales of the Tygaflor business which was acquired in February 1995. This growth was attributable to a strong market for the Company's architectural products, continued strength in the industrial products business in Europe and the U.S., and the full-year inclusion of Tygaflor sales compared to 4.5 months in fiscal 1995. Measured in constant foreign currency exchange rates, fiscal 1996 net sales would have increased 25% over fiscal 1995. The growth in revenues was primarily volume related. Engineered Products - Americas 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 6% to $41,436,000 from $38,962,000 in the prior year. This growth was principally attributable to strength in the Company's government related and fabricated products business. Government related sales are expected to remain strong in fiscal 1997 and demand for industrial products manufactured in the U.S. is expected to strengthen in fiscal 1997. Engineered Products - Europe Sourced sales (which include all product sales from the Company's European manufacturing plants; principal geographic markets are Europe, Africa and the Middle East) increased 43% to $29,710,000 from $20,833,000 in the prior year. Without the impact of the Tygaflor business (acquired February 1995) it is estimated that this increase would have been approximately 14%. This increase in revenues was broad based and extended across most of the Company's products manufactured in Europe. The outlook for 1997 is for continued growth of the business in Europe but at a lower rate reflective of the full year inclusion of Tygaflor sales in fiscal 1996. Architectural Product sales increased 56% to $12,736,000 from $8,185,000 in fiscal 1995 due primarily to strong demand for the Company's products in the Far East. Sales of architectural products for fiscal 1997 are expected to moderate somewhat in relation to fiscal 1996 sales levels due to the concentration of the large stadium projects for which the Company provided product in fiscal 1996. GROSS PROFIT MARGINS Gross profit margins as a percentage of net sales for fiscal 1996 increased to 34% from 32% in fiscal 1995. Consolidated gross margins benefited from significantly increased production volumes without a corresponding percentage increase in fixed manufacturing overhead costs. This operating leverage is expected to continue to be present in the business in fiscal 1997. In addition, the Company is working to improve manufacturing efficiencies for the purpose of further improving margins in fiscal 1997. SELLING, ADMINISTRATIVE, RESEARCH AND DEVELOPMENT EXPENSES Selling, general and administrative expenses increased to $14,157,000 in fiscal 1996 from $12,124,000 in fiscal 1995. This increase in spending was principally the result of added expenses relating to the full-year impact of owning the Tygaflor business versus the prior year, normal salary and wage increases, and increased performance based compensation versus the prior year. The percentage of selling, general and administrative expenses to sales decreased to 17% in fiscal 1996 from 18% in fiscal 1995. Research and development expenses increased to $2,270,000 in 1996 from $2,047,000 in 1995. R&D expenses, as a percentage of revenues, were approximately 3% in fiscal 1996 and 1995. Management believes that the current level of spending is sufficient to maintain new product and process development. INTEREST EXPENSE, EQUITY OPERATIONS AND OTHER INCOME In fiscal 1996, net interest expense was $477,000 compared to $95,000 in fiscal 1995. This change was caused by the full-year impact of the long-term debt incurred to acquire 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. For fiscal 1996, no amount was recorded since the Company's investment in this venture had been written down to zero as of the end of fiscal 1995. Other expense, net of other income, was $51,000 in fiscal 1996 compared to $111,000 of other income in fiscal 1995. Other expense in 1996 includes realized foreign exchange losses of $90,000. Other income in fiscal 1995 includes realized foreign exchange gains of $68,000. INCOME TAXES In fiscal 1996, the Company recorded $3,440,000 of income tax expense as compared to $2,170,000 in 1995. The Company's effective tax rate for 1996 was 31% as compared to 29% in the prior year. The increase in the effective tax rate is due primarily to the increased proportion of income from U.S. and U.K. 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 will continue to grow, giving rise to gradually increasing income tax rates. PROFITABILITY The Company earned net income before taxes of $11,154,000 for the year ended June 30, 1996 as compared to $7,480,000 in the prior year. This represents an increase in pre-tax income of 49% over the prior year on a 23% increase in revenues. Net income increased 45% to $7,714,000 or $0.94 per share for fiscal 1996 from $5,310,000 or $0.66 per share in 1995. 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 - Americas 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 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. 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. 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. 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. 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 has been fully written off. 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. 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 $0.66 per share for fiscal 1995 from $3,895,000 or $0.49 per share in 1994. 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. LIQUIDITY AND CAPITAL RESOURCES During fiscal 1996, the Company generated $9,489,000 of cash from operations and an additional $1,697,000 from the exercise of stock options. During this same period the Company spent $3,553,000 for capital additions, repaid $5,515,000 of long-term debt and used $917,000 for the acquisition of treasury shares (see Note 8 of Notes to Consolidated Financial Statements). Working capital increased to $28,292,000 at June 30, 1996 from $25,501,000 at June 30, 1995. Current assets increased from $36,116,000 in 1995 to $39,548,000 at June 30, 1996. Current liabilities increased to $11,256,000 at June 30, 1996 from $10,615,000 at June 30, 1995. The higher working capital levels were the result of higher levels of sales and profitability in fiscal 1996 as compared to fiscal 1995. As of June 30, 1996, the Company had approximately $6,550,000 of additional credit available under its domestic and international borrowing facilities. Management believes the cash on hand, the cash expected to be generated from operations and the credit facilities mentioned above, will be adequate to finance operations during fiscal 1997 and the foreseeable future and to deal with any liabilities or contingencies described in Note 16 of Notes to Consolidated Financial Statements. FORWARD-LOOKING STATEMENTS Statements in this report that are not historical facts may be forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to a variety of risks and uncertainties. There are a number of important factors that could cause actual results to differ materially from those expressed in any forward- looking statement made by the Company. These factors include, but are not limited to: - The level and timing of architectural product sales over the course of the fiscal year, considering the cyclical nature of demand for such products. - The level and timing of U.S. Government contract awards (either as prime contractor or as a sub-contractor) in particular for radome systems, and the completion (i.e., non-cancellation) of such contracts after award. - The financial operating performance of the Company's recently established China and Brazil subsidiaries during their respective start-up phases. - The uninterrupted availability, at reasonable prices, of key raw materials used in the production of the Company's products including, without limitation, fluoropolymer resins and fiberglass yarns in various fiber diameters, especially beta size fiber. - The strength of industrial economies around the world, in particular the economies of the United States, Germany and England. ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary data listed in Item 14 in Part IV on Page 21, 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 1996 Annual Meeting of Shareholders of the Company to be held on October 31, 1996, 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 1996 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 1996 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 1996 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 25 Consolidated Balance Sheets at June 30, 1996 and 1995 26-27 For the three years ended June 30, 1996, 1995 and 1994: Consolidated Statements of Income 28 Consolidated Statements of Shareholders' Equity 29 Consolidated Statements of Cash Flows 30 Notes to Consolidated Financial Statements June 30, 1996, 1995 and 1994 31-45 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. 3(a)(1) Certificate of Amendment to Certificate of Incorporation of the Company (effective November 6, 1991). 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. 10(a)(2) Forms of Stock Option Agreements under the Company's 1986 Stock Option Plan and for Non-Plan Options. 10(a)(3) 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)(4) Letter Agreement with Mr. James C. Manocchi dated June 4, 1991. 10(a)(5) Letter Agreement with Dr. John W. Verbicky, Jr. dated October 15, 1992 and effective January 11, 1993 filed as Exhibit 10(a)(6) to the Company's Annual Report on Form 10-K for the year ended June 30, 1993 is incorporated herein by reference. 10(a)(6) Second Amended and Restated Chemfab Corporation 1991 Stock Option Plan. 10(a)(7) Forms of Stock Option Agreements under the Company's 1991 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, 1995 is incorporated herein by reference. 10(a)(8) 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)(9) Stock Option Agreement between the Company and Mr. Manocchi dated October 21, 1994 filed as Exhibit 10(a)(10) to the Company's Annual Report on Form 10-K for the year ended June 30, 1995 is incorporated herein by reference. 10(a)(10) Amendment to 1991 Stock Option Plan Agreements between the Company and Mr. Manocchi dated October 21, 1994 filed as Exhibit 10(a)(11) to the Company's Annual Report on Form 10-K for the year ended June 30, 1995 is incorporated herein by reference. 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 Manufacturers 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. 10(b)(6) Supply Agreement, dated January 18, 1991, by and between Chemical Fabrics Europe and Aerovac Systems (Keighley) Limited. 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 None. 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 23rd day of September 1996 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 * ----------------------------- Moosa E. Moosa, 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 * ----------------------------- Robert E. McGill, III, 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 25 --------------------------------------------------------------------------- Consolidated Balance Sheets 26-27 --------------------------------------------------------------------------- Consolidated Statements of Income 28 --------------------------------------------------------------------------- Consolidated Statements of Shareholders' Equity 29 ---------------------------------------------------------------------------- Consolidated Statements of Cash Flows 30 --------------------------------------------------------------------------- Notes to Consolidated Financial Statements 31-45 --------------------------------------------------------------------------- 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, 1996 and 1995, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended June 30, 1996. Our audits also included the financial statement schedule listed in the Index at Item 14(a)(2). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule 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, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 1996, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. Boston, Massachusetts July 30, 1996 Ernst & Young LLP CONSOLIDATED BALANCE SHEETS CHEMFAB CORPORATION June 30, 1996 and 1995 (in thousands) ASSETS 1996 1995 - ------------------------------------------------------------------------------------------- CURRENT ASSETS CASH AND CASH EQUIVALENTS $ 5,017 $ 3,780 RECEIVABLES: TRADE, NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS OF $382 ($276 in 1995) 17,797 16,009 OTHER 185 472 COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS 886 692 INVENTORIES 13,622 13,110 PREPAID EXPENSES AND OTHER CURRENT ASSETS 1,246 901 DEFERRED TAX ASSETS 795 1,152 --------- -------- TOTAL CURRENT ASSETS 39,548 36,116 --------- -------- PROPERTY, PLANT AND LAND 571 571 EQUIPMENT, AT COST BUILDINGS 9,426 8,533 MACHINERY AND EQUIPMENT 29,104 26,981 LEASEHOLD IMPROVEMENTS 912 784 --------- -------- 40,013 36,869 LESS ACCUMULATED DEPRECIATION AND AMORTIZATION 19,473 17,036 --------- -------- NET PROPERTY, PLANT AND EQUIPMENT 20,540 19,833 --------- -------- GOODWILL, NET OF ACCUMULATED AMORTIZATION OF $1,819 ($940 IN 1995) 11,084 12,260 OTHER ASSETS 2,490 2,410 --------- -------- TOTAL ASSETS $73,662 $70,619 ========= ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS CHEMFAB CORPORATION June 30, 1996 and 1995 (in thousands, except shares and per share amounts) LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995 - --------------------------------------------------------------------------------------------------------- CURRENT LIABILITIES ACCOUNTS PAYABLE $ 5,172 $ 5,117 ACCRUED EXPENSES 4,330 3,640 ACCRUED INCOME TAXES 1,441 1,736 BILLINGS IN EXCESS OF COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS 313 122 ----------- ---------- TOTAL CURRENT LIABILITIES 11,256 10,615 ----------- ---------- LONG-TERM DEBT 2,377 8,132 DEFERRED TAX LIABILITIES 1,524 1,551 SHAREHOLDERS' PREFERRED STOCK, PAR VALUE $.50: AUTHORIZED - EQUITY 1,000,000, NONE ISSUED --- --- COMMON STOCK, PAR VALUE $.10: AUTHORIZED - 15,000,000; ISSUED - 8,085,607 IN 1996 AND 5,252,938 IN 1995 809 525 ADDITIONAL PAID-IN CAPITAL 18,314 16,634 RETAINED EARNINGS 40,998 33,551 TREASURY STOCK, AT COST, (95,938 SHARES IN 1996 AND 17,292 IN 1995) (943) (26) FOREIGN CURRENCY TRANSLATION ADJUSTMENT (673) (363) ----------- ---------- TOTAL SHAREHOLDERS' EQUITY 58,505 50,321 ----------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 73,662 $ 70,619 =========== ==========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME CHEMFAB CORPORATION For the years ended June 30, 1996, 1995 and 1994 (in thousands, except per share data) 1996 1995 1994 ------- ------- --------- Net Sales $83,882 $67,980 $52,151 Cost of sales 55,773 46,124 35,434 ------- -------- --------- Gross profit 28,109 21,856 16,717 ------- -------- --------- Selling, general and administrative expenses 14,157 12,124 10,019 Research and development expenses 2,270 2,047 1,965 Interest expense 611 395 33 Interest income (134) (300) (363) Results of equity operations --- 221 96 Other expense (income) 51 (111) (251) ------- -------- --------- Income before income taxes 11,154 7,480 5,218 Provision for income taxes 3,440 2,170 1,323 ------- -------- --------- Net income $ 7,714 $ 5,310 $ 3,895 ======= ======== ========= Weighted average common and common equivalent shares 8,199 7,991 7,926 Net Income per Share $ .94 $ .66 $ .49
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY CHEMFAB CORPORATION For the years ended June 30, 1996, 1995 and 1994 (in thousands) Common Stock --------------------- FOREIGN NUMBER ADDITIONAL CURRENCY OF PAID-IN RETAINED TREASURY TRANSLATION SHARES AMOUNT CAPITAL EARNINGS STOCK ADJUSTMENT TOTAL - ----------------------------------------------------------------------------------------------------------------- BALANCE AT JUNE 30, 1993 5,194.4 $519 $16,159 $24,346 $ (26) $ (1,152) $39,846 NET INCOME --- --- --- 3,895 --- --- 3,895 OPTIONS EXERCISED 26.4 3 237 --- --- --- 240 FOREIGN CURRENCY TRANSLATION ADJUSTMENT --- --- --- --- --- 391 391 -------- ------- ------- ------- ------- --------- ------- BALANCE AT JUNE 30, 1994 5,220.8 522 16,396 28,241 (26) (761) 44,372 NET INCOME --- --- --- 5,310 --- --- 5,310 OPTIONS EXERCISED 32.1 3 238 --- --- --- 241 FOREIGN CURRENCY TRANSLATION ADJUSTMENT --- --- --- --- --- 398 398 --------- -------- ------- ------- -------- --------- ------- BALANCE AT JUNE 30, 1995 5,252.9 525 16,634 33,551 (26) (363) 50,321 NET INCOME --- --- --- 7,714 --- --- 7,714 OPTIONS EXERCISED 172.0 17 1,680 --- --- --- 1,697 PURCHASE OF SHARES FOR TREASURY --- --- --- --- (917) --- (917) THREE-FOR-TWO STOCK SPLIT 2,660.7 267 --- (267) --- --- --- FOREIGN CURRENCY TRANSLATION ADJUSTMENT --- --- --- --- --- (310) (310) --------- -------- ------- ------- -------- --------- ------- BALANCE AT JUNE 30, 1996 8,085.6 $809 $18,314 $40,998 $ (943) $ (673) $58,505 ========= ======== ======== ======= ========= ========= =======
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF CASH FLOWS CHEMFAB CORPORATION Years ended June 30, 1996, 1995 and 1994 (in thousands) 1996 1995 1994 - ----------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME $ 7,714 $ 5,310 $ 3,895 ADJUSTMENTS TO RECONCILE NET INCOME DEPRECIATION AND AMORTIZATION 3,952 3,267 2,618 TO NET CASH PROVIDED RESULTS OF EQUITY OPERATIONS --- 221 96 BY OPERATING ACTIVITIES DEFERRED GAIN ON SALE/LEASEBACK --- --- (80) CHANGE IN ASSETS AND LIABILITIES: RECEIVABLES (1,658) (2,342) (2,049) COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS, NET (2) (320) 222 INVENTORIES (630) (1,668) (916) PREPAID EXPENSES AND OTHER CURRENT ASSETS (350) (95) (96) OTHER ASSETS (431) (430) (571) ACCOUNTS PAYABLE AND ACCRUED EXPENSES 844 1,139 202 ACCRUED INCOME TAXES (280) 431 165 DEFERRED TAX ASSETS AND LIABILITIES 330 (112) (39) --------- ------- ------- TOTAL ADJUSTMENTS 1,775 91 (448) --------- ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 9,489 5,401 3,447 --------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES CAPITAL EXPENDITURES (3,553) (1,826) (2,349) PURCHASE OF TYGAFLOR --- (16,252) --- PURCHASE OF N.H. REAL ESTATE --- --- (5,263) PURCHASE OF CANTON BIO-MEDICAL --- --- (3,382) PROCEEDS FROM SALE OF N.Y. REAL ESTATE --- --- 1,038 --------- ------- -------- NET CASH USED IN INVESTING ACTIVITIES (3,553) (18,078) (9,956) --------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES REPAYMENT OF LONG-TERM DEBT (5,515) (2,928) --- PROCEEDS FROM THE ISSUANCE OF LONG-TERM DEBT --- 11,060 --- PROCEEDS FROM EXERCISE OF STOCK OPTIONS 1,697 241 240 PURCHASE OF TREASURY SHARES (917) --- --- --------- -------- -------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (4,735) 8,373 240 --------- -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 36 161 168 --------- -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,237 (4,143) (6,101) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,780 7,923 14,024 --------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,017 $ 3,780 $ 7,923 ========= ======== ======== INTEREST PAID $ 604 $ 310 $ 33 INCOME TAXES PAID $ 2,924 $ 1,763 $ 1,207
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CHEMFAB CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS: The Company is an international manufacturer and marketer of polymer-based engineered products for use in harsh conditions such as high temperature and/or corrosive chemical environments. The majority of the Company's products, which are also characterized by their retention of flexibility-in-use and by their excellent surface release properties, are made by embedding interlaced glass fiber reinforcement into a fluoropolymer resin matrix. The Company also makes and sells specialty fluoropolymer films and high performance elastomeric closure products. Worldwide end-use applications are in communications, food processing, architectural, aerospace, electronics, environmental, protective clothing, and other industrial markets. 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 elimi- nated in consolidation. Certain balance sheet amounts at June 30, 1995 have been reclassified to conform to the current year's presentation. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Such estimates include, but are not limited, to allowances for doubtful accounts and returns, provisions for slow-moving or obsolete inventory, provisions for environmental matters, and various other accruals. Actual results could differ from those estimates. 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 three months or less when purchased. Commercial paper classified as cash equivalents totals approximately $0 and $1,000,000 at June 30, 1996 and 1995, 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. 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. Goodwill is reviewed periodically for impairment by comparing the carrying amount to the estimated future undiscounted cash flows of the business acquired. PROPERTY, PLANT AND EQUIPMENT: Depreciation is computed using the straight-line method over the estimated useful 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. 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. The carrying value of these contracts at June 30, 1996 and 1995, which approximated fair value based on exchange rates at June 30, 1996 and 1995, was not significant. 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. On February 1, 1996, the Company's Board of Directors authorized a three-for-two stock split in the form of a dividend to shareholders of record as of February 12, 1996. The split resulted in the issuance of 2,660,713 new shares of common stock. All references in the financial statements to average numbers of shares outstanding and related prices, per share amounts, and Stock Option Plan data have been restated to reflect the split. RECENT ACCOUNTING PRONOUNCEMENTS: In March 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", which establishes criteria for the recognition and measurement of impairment loss associated with long-lived assets. The Company will be required to adopt this standard in the first quarter of 1997. Based on the Company's initial evaluation, adoption is not expected to have a material impact on the Company's financial position or results of operations. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 123 "Accounting for Stock-Based Compensation" ("SFAS No. 123"). This statement establishes financial accounting and reporting standards for stock-based employee compensation plans. While the Company is reviewing the adoption and impact of SFAS No. 123, it expects to continue to account for its stock-based compensation under APB 25 and to adopt the disclosure only alternative of SFAS No. 123 and, accordingly, this standard will have no impact on the Company's results of operations or its financial position. 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 7,000,000) from a commercial bank in Ireland (see Note 6). The following unaudited pro forma 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 $0.71, and $0.47. The pro forma 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: 1996 1995 ---- ---- (in thousands) Finished goods $5,112 $ 3,953 Work in process 4,602 5,089 Raw materials 3,908 4,068 -------- -------- $13,622 $13,110 ======= ======= NOTE 6 - DEBT In connection with its acquisition of the Tygaflor business (see Note 2), the Company borrowed $11,060,000 (Pounds 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 437,500 are required. One half of the original loan amount (currently $2,377,000) carries a 3 year fixed interest rate of 10.14%; and the balance (currently $0) carries an interest rate of 1 1/2% over LIBOR. In conjunction with this loan, the Company also established a $1,550,000 (Pounds 1,000,000) short-term credit facility in Europe. Borrowings under this facility are at 1 1/2% over the bank's base rate (approximately 6.75% at June 30, 1996). At June 30, 1996 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, 1996, the Company had paid all but $2,377,000 (Pounds 1,531,000) of the loan. Under the terms of the loan, $1,359,000 (Pounds 875,000) and $1,018,000 (Pounds 656,000) are required to be repaid in fiscal years 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 1995, the Company has available a $5,000,000 unsecured credit facility until December 31, 1996. 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 (8.25% at June 30, 1996), 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, 1996 and 1995 there were no borrowings outstanding under the U.S. loan facility. NOTE 7 - INCOME TAXES The components of the income tax provision for the years ended June 30, consisted of the following: 1996 1995 1994 --------- -------- -------- (in thousands) Current: Federal $1,830 $1,474 $ 729 State 447 379 183 Foreign 833 429 450 ------ ------ ------ 3,110 2,282 1,362 ------ ------ ------ Deferred: Federal (85) (192) 12 State (22) (39) (12) Foreign 437 119 (39) ----- ------ ------- 330 (112) (39) ----- ------ ------- Total income taxes $3,440 $2,170 $1,323 ====== ====== ====== The components of income before income taxes were as follows: 1996 1995 1994 ---- ---- ---- (in thousands) United States $5,984 $3,989 $2,932 Foreign 5,170 3,491 2,286 ----- ------ ------ Total $11,154 $7,480 $5,218 ======= ====== ====== The U.S. statutory federal income tax rate is reconciled to the Company's consolidated effective tax rate as follows: 1996 1995 1994 ----- ---- ---- Statutory tax rate 35.0% 35.0% 35.0% Earnings of foreign subsidiaries taxed at rates less than the U.S. statutory rate (7.3) (10.0) (9.7) Non-deductible goodwill amortization relating to foreign acquisitions 1.9 1.4 .8 FSC benefit (0.5) (.7) (1.1) Tax rate exemption (1.0) (1.0) (1.0) State income taxes, net of federal income tax benefit 2.8 2.8 2.4 Equity in joint ventures, net of tax --- 1.0 .6 Research & development credit --- --- (.8) Other, net (.1) .5 (.8) ----- ----- ----- Effective tax rate 30.8% 29.0% 25.4% ===== ===== ===== 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, 1996 and 1995 are as follows: Domestic Foreign June 30, 1996 Operations Operations Total - ---------------------------------- ------------ ---------- ------- (in thousands) Deferred Tax Liabilities: - ------------------------- Plant & equipment $ 851 $ 248 $1,099 Intangibles --- 335 335 Other (1) 91 90 ------ ----- ------- Total deferred tax liabilities 850 674 1,524 ------ ----- ------- Deferred Tax Assets: - -------------------- Inventories (314) --- (314) Valuation reserves on current assets (229) --- (229) Other (277) 25 (252) ----- ------- ------ Total deferred tax assets (820) 25 (795) ----- ------- ------ Net deferred tax liabilities $ 30 $ 699 $ 729 ======= ====== ====== Domestic Foreign June 30, 1995 Operations Operations Total - ---------------------------------- ------------- ---------- ------ (in thousands) Deferred Tax Liabilities: - ------------------------- Plant & equipment $929 $ 272 $1,201 Intangibles --- 222 222 Other 34 94 128 ----- ------ ------ Total deferred tax liabilities 963 588 1,551 ----- ------ ------ Deferred Tax Assets: - -------------------- Inventories (368) --- (368) Valuation reserves on other current assets (204) --- (204) Net operating loss carryforward of international subsidiary --- (296) (296) Other (256) (28) (284) ------ ----- ------ Total deferred tax assets (828) (324) (1,152) ------ ----- ------ Net deferred tax liabilities $135 $264 $ 399 ====== ===== ======= 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 $18,394,000 at June 30, 1996. 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 750,000 shares (adjusted for the Company's three for two stock split) of common stock for issuance upon exercise of option grants to key employees, directors, and consultants. The shareholders ratified the adoption of the increase in the maximum number of shares available for option under the 1991 plan to 1,050,000 in fiscal 1993 and up to 1,500,000 in fiscal 1996. 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 75,000 (adjusted for the Company's three for two stock split) 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, 1996 there were 38,100 options outstanding under this plan, held by 254 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 1,125,000 shares (adjusted for the Company's three for two stock split) 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 1,500,000 from 1,125,000. 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, adjusted for the Company's 3 for 2 stock split, related to all of the Company's plans for fiscal 1994, 1995 and 1996 is as follows: Options Option Price --------- ------------------ June 30, 1993 Outstanding 1,376,415 $ 1.58 - $16.67 Granted 193,050 6.83 - 9.33 Cancelled (151,725) 6.83 - 16.67 Exercised (39,525) 1.58 - 7.67 June 30, 1994 Outstanding 1,378,215 1.58 - 15.00 Granted 170,550 7.00 - 8.17 Cancelled (110,343) 7.00 - 13.83 Exercised (48,245) 1.58 - 7.83 June 30, 1995 Outstanding 1,390,177 1.58 - 15.00 Granted 305,388 7.67 - 14.75 Cancelled (39,282) 7.00 - 13.83 Exercised (206,232) 1.58 - 12.17 June 30, 1996 Outstanding 1,450,051 $ 1.58 - $15.00 As of June 30, 1996, options to purchase 994,390 shares were exercisable at option prices ranging from $1.58 to $15.00 per share. The Company does not intend to grant any further options or stock appreciation rights under the 1986 Plan. At June 30, 1996, there were 466,062 shares available for grant under the 1991 Stock Option Plan and 36,900 shares available under the 1991 Employee Stock Option Plan. In May 1996, Chemfab Corporation's Board of Directors authorized the repurchase, at management's discretion, of up to 400,000 shares of the Company's common stock during any one fiscal year. 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 ("U.S. Plan") provides pension benefits for the Company's domestic employees. The "Irish Pension Plan" provides benefits to employees of the Company's subsidiary in Ireland and the "Tygaflor Pension Plan" provides pension benefits to employees of the Company's U.K. subsidiary. 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. plan is non-contributory while the Irish and Tygaflor plans require employee contributions of 5% and 6% respectively of pensionable salary. Net pension expense for the domestic plans for fiscal 1996, 1995 and 1994 consisted of the following: 1996 1995 1994 ---- ---- ---- (in thousands) Service Cost: benefits earned during the period $ 318 $ 327 $ 368 Interest cost on projected benefit obligation 312 292 295 Return on assets (406) (422) (13) Amortization of prior service cost 96 96 76 Amortization of loss (gain) 114 182 (205) ----- ----- ----- Net pension expense $ 434 $ 475 $ 521 ===== ===== ===== The following table sets forth the funded status of the Company's domestic defined benefit pension plans at June 30: 1996 1995 ---- ---- (in thousands) Actuarial present value of: Vested benefit obligation $3,216 $2,819 Non-vested benefit obligation 110 160 ------ ------ Accumulated benefit obligation 3,326 2,979 Additional amount related to projected wage increases 1,419 1,479 ------ ------ Projected benefit obligation 4,745 4,458 Plan assets at fair value (primarily U.S. Government Securities and publicly traded stocks and bonds) 4,593 3,823 ------ ------ Plan assets less than projected benefit obligation (152) (635) Unrecognized prior service costs 549 645 Unrecognized net gain (642) (269) ------ ------ Accrued pension liability recognized on Consolidated Balance Sheets $ (245) $ (259) ====== ====== Assumptions used in determining actuarial present value of plan benefit obligations: 1996 1995 1994 ---- ---- ---- Discount rate 7.50% 7.50% 8.00% Average rate of increase in compensation levels 5.50% 5.50% 6.50% Expected long-term rate of return on plan assets 7.50% 7.50% 8.75% Net pension expense for the Irish Plan in fiscal 1996, 1995 and 1994 was $106,000, $67,000 and $82,000, respectively. Tygaflor employees were covered by the seller's pension plan until September 1995. In September 1995, a new plan was established, the cost of which was $141,000 in fiscal 1996. Information concerning the components of net pension expense and the funded status of the Company's Irish Plan and Tygaflor Plan have not been provided since the amounts are not significant. 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, 1996, 1995 and 1994 were as follows: (in thousands) 1996 . . . . . . . . . . $226 1995 . . . . . . . . . . $186 1994 . . . . . . . . . . $189 NOTE 10 - LEASE COMMITMENTS The Company incurred rent expense for office and manufacturing facilities, vehicles and office equipment of $811,000, $762,000 and $728,000, in fiscal 1996, 1995 and 1994, respectively, under various operating leases expiring through 2000. Future minimum rental commitments at June 30, 1996 under existing, non-cancellable operating leases with initial terms of one year or more are as follows: (in thousands) 1997 . . . . . . . . . .$773 1998 . . . . . . . . . .$455 1999 . . . . . . . . . .$275 2000 . . . . . . . . . .$ 77 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. $655,000) 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, 1996, 1995 and 1994 were as follows: (in thousands) 1996 . . . . . . . . . .$6,216 1995 . . . . . . . . . .$2,146 1994 . . . . . . . . . .$1,463 BUSINESS SEGMENT AND FOREIGN OPERATIONS SALES BY GEOGRAPHIC AREA (in thousands) United Elimi- Consol- 1996 States Europe nations idated ---- ------ ------ ------- ------ Sales to unaffiliated customers $54,172 $29,710 $ --- $83,882 Transfers between geographic areas 2,546 362 (2,908) --- ------- ------- --------- ------- Net sales $56,718 $30,072 $(2,908) $83,882 ======= ======= ========= ======== Income from operations $ 5,727 $ 5,904 $ --- $11,631 ======== ======= ========= ======== Identifiable assets $47,056 $26,606 $ --- $73,662 ======== ======= ========= ======== 1995 ---- 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 ======= ====== ======= ======= 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, 1996, 1995 and 1994 were as follows: 1996 1995 1994 ---- ---- ---- (in thousands) Far East $10,746 $ 7,694 $ 3,600 Canada 695 899 966 Mexico 741 616 660 Australia 1,156 883 532 Europe and other 770 556 268 Central and South America 176 365 251 ------- ------- ------- $14,284 $11,013 $ 6,277 ======= ======= ======= NOTE 13 - 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: 1996 1995 1994 ---- ---- ---- (in thousands) Purchases from Company $9,748 $6,677 $2,670 Amount due to Company 3,282 1,708 1,080 Company's 39% equity investment in subsidiary --- --- 221 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 Company's U.K. and Irish subsidiaries, and owns the site on which the U.K. subsidiary operates. The Company's transactions and balances with FEF for the year ended and as of June 30, 1996 and five months ended and as of June 30, 1995 were as follows: 1996 1995 ---- ---- (in thousands) Sales to Company $1,552 $704 Payments for shared services 450 75 Amount due from Company 365 424 NOTE 14 - FINANCIAL INSTRUMENTS At June 30, 1996 and 1995, the carrying value of financial instruments such as cash and cash equivalents and foreign currency contracts approximated their fair values based on the short-term maturities of these instruments and contracts. Additionally, the carrying value of long-term debt approximated its fair values. Fair value is estimated using discounted cash flow analysis, based on the Company's current incremental borrowing rate. It was not practicable to estimate the fair value of the Company's investment in preferred stock of Birdair, Inc. (a customer for its architectural products) because of the lack of a quoted market price and the inability to estimate fair value without incurring excessive costs. The $533,000 carrying amount at June 30, 1996 represents the original cost of the investment, which management believes is not impaired. Dividends received for the years ended June 30, 1996, 1995 and 1994 were $45,000, $45,000 and $33,000, respectively. NOTE 15 - ACCRUED LIABILITIES Accrued liabilities at June 30, 1996 and 1995 consisted of the following: 1996 1995 ---- ---- (in thousands) Accrued payroll and related expenses $2,199 $1,463 Other accrued expenses 2,131 2,177 ------- ------- $4,330 $3,640 ======= ======= NOTE 16 - LEGAL PROCEEDINGS In March 1991, the Company received notice from the Environmental Protection Agency (EPA) that it was 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 for other damages. In June 1991, while denying liability, the Company together with approximately 12 other Site 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. Upon completion of the Study, the EPA divided the remedy at the Site into two parts: Source Control and Management of Groundwater Migration. On July 24, 1995, the EPA issued notice to the Company and approximately 33 other parties of its intention to negotiate with them for their funding and performance of the Source Control part of the remedy. Subsequently, a group consisting of the Company and 16 other parties negotiated an agreement among themselves (the Proposed Settlement) pursuant to which they have been divided into 5 Performing Parties and 12 de minimis parties. Under the terms of the Proposed Settlement, which has now been presented to the EPA as a formal settlement offer, (1) the Company would be one of the de minimis parties and, as such, would pay a specified amount to the EPA, (2) as a de minimis party, the Company would receive a statutory release pursuant to which it would be protected from all further claims related to the cleanup actions at the Site, and (3) the 5 Performing Parties (of which the Company would not be one) would be responsible for all remaining costs of both parts of the remedy at the Site. The Proposed Settlement is now being reviewed by the EPA and the U.S. Department of Justice. On the basis of all information available to date, including the amount specified to be paid by the Company as a de minimis party under the terms of the Proposed Settlement, and the results of the Company's past review of its purchasing and materials disposal records, the Company believes that the ultimate 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 1996 Data (a) ---- Net Gross Net Net Quarter Sales Profit Income Income ----- ------ ------ ------ First $18,466 $ 5,899 $1,359 $ 0.17 Second 20,885 6,942 1,821 0.22 Third 21,814 7,337 2,013 0.24 Fourth 22,717 7,931 2,521 0.31 ------- ------- ------ Year $83,882 $28,109 $7,714 $ 0.94 ======= ======= ====== Per Share 1995 Data (a) ---- Net Gross Net Net Quarter Sales Profit Income Income ----- ------ ------ ------ First $13,722 $ 4,363 $ 823 $ 0.10 Second 15,501 4,755 1,144 0.14 Third 17,510 5,632 1,317 0.16 Fourth 21,247 7,106 2,026 0.25 ------- ------- ------- Year $67,980 $21,856 $5,310 $ 0.66 ======= ======= ======= (a) Computations of earnings per share for each quarter are independent and do not necessarily equal the amount computed for the year. Amounts have been adjusted to reflect the Company's three-for-two stock split in February 1996. CHEMFAB CORPORATION VALUATION AND QUALIFYING ACCOUNTS SCHEDULE II YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (in thousands) Balance at Charges Balance at beginning to Deductions end of year Expense and Other(1) of year ----------- ------- ------------ --------- 1996 - ---- Allowance for doubtful accounts $276 $201 $ (95) $382 ==== ==== ======= ==== 1995 - ---- Allowance for doubtful accounts $154 $119 $ 3(2) $276 ==== ==== ======= ==== 1994 - ---- Allowance for doubtful accounts $200 $109 $(155) $154 ==== ==== ===== ==== (1) Uncollectible accounts written off, net of recoveries. (2) Adjusted for valuation accounts acquired as part of the Tygaflor acquisition. EX-3.A 2 Exhibit 3(a) CERTIFICATE OF INCORPORATION OF CHEMICAL FABRICS CORPORATION FIRST: The name of the Corporation is CHEMICAL FABRICS CORPORATION. SECOND: The address of the Corporation's registered office in the State of Delaware is 306 South State Street, in the City of Dover, County of Kent. The name of its registered agent at such address is United States Corporation Company. THIRD: The nature of the business or purposes to be conducted or promoted are to engage in manufacturing and sales, including but not limited to the coating and application of fabrics with chemicals, and to do all other matters related thereto, and to engage in any other lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 16,000,000, of which 1,000,000 shares of the par value of $.50 each are to be of a class designated Preferred Stock and 15,000,000 shares of the par value of $.10 each are to be of a class designated Common Stock. Shares of stock of any class now or hereafter authorized may be issued by the Corporation from time to time for such consideration not less than the par value thereof as shall be fixed from time to time by the Board of Directors of the Corporation. Any and all shares of stock so issued for which the consideration so fixed has been paid or delivered to the Corporation shall be declared and taken to be fully paid stock and shall not be liable to any further call or assessments thereon, and the holders of such shares shall not be liable for any further payments in respect of such shares. Subscriptions to, or the purchase price of, shares of stock of the Corporation may be paid for, wholly or partly, by cash, by labor done, by personal property, or by real property or leases thereof. In the absence of actual fraud in the transaction, the judgment of the Directors as to the value of such labor, property, real estate or leases thereof shall be conclusive. Authority is hereby vested in the Board of Directors to issue the Preferred Stock from time to time in one or more subsequent series, with such voting powers or without voting powers, and with such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, and with such dividend rights, rights on dissolution or distribution of assets, and conversion or exchange rights, and subject to redemption at such time or times and price or prices, as shall be stated and expressed in the resolution or resolutions providing for the issue of such stock adopted by the Board of Directors. FIFTH: The name and mailing address of the sole incorporator is as follows: Name Mailing Address Christopher G. Karras 30 Rockefeller Plaza New York, New York 10112 SIXTH: The Board of Directors is authorized to adopt, amend or repeal the By-Laws of the Corporation. SEVENTH: Any one or more directors may be removed, with or without cause, by the vote or written consent of the holders of a majority of the shares entitled to vote at an election of directors. EIGHTH: Meetings of stockholders shall be held at such place, within or without the State of Delaware, as may be designated by or in the manner provided in the By-Laws, or, if not so designated or provided, at the registered office of the Corporation in the State of Delaware. Elections of directors need not be by ballot unless and to the extent that the By-Laws so provide. NINTH: The Corporation shall have the power, to the full extent permitted by Section 145 of the Delaware General Corporation Law, as amended from time to time, to indemnify all person whom it may indemnify pursuant thereto. TENTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders of class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. ELEVENTH: The Corporation reserves the right to amend, alter or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by statute, and all rights of stockholders herein are subject to this reservation. THE UNDERSIGNED, being the sole incorporator above named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, has signed this instrument on the 5th day of July, 1983 and does thereby acknowledge that it is his act and deed and that the facts stated therein are true. /s/Christopher G. Karras ------------------------ Christopher G. Karras Sole Incorporator CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION * * * * CHEMICAL FABRICS CORPORATION, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That by vote of the Board of Directors of Chemical Fabrics Corporation, at a duly called Regular Meeting of the Board, a resolution was duly adopted setting forth a proposed amendment to the Certificate of Incorporation of said corporation and directing the holders of Common Stock of said corporation to consider said amendment at the Annual Meeting of Stockholders. The resolution setting forth the proposed amendment is as follows: RESOLVED: that the Corporation's Certificate of Incorporation in the State of Delaware be, and it hereby is, amended by the addition of the following Article Twelfth, subject to the approval of the Shareholders at the Annual Meeting: TWELFTH: A director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) under Section 174 of the Delaware General Corporation Law, as the same exists or hereafter may be amended, or (iv) for any transaction from which the director derived an improper benefit. If the Delaware General Corporation law hereafter is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the corporation, in addition to the limitation on personal liability provided herein shall be limited to the fullest extent permitted by the amended Delaware General Corporation Law. Any repeal or modification of this paragraph by the shareholders of the corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the corporation existing at the time of such repeal or modification. SECOND: That thereafter at the Annual Meeting of Stockholders, pursuant to said resolution of the Board of Directors, by vote of the holders of record of at least a majority of the issued and outstanding shares of Common Stock, par value $.10 per share, of said corporation, representing not less than the minimum number of votes necessary to authorize and take the actions set forth therein, said amendment was duly adopted. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, Chemical Fabrics Corporation has caused this certificate to be signed by Duane C. Montopoli, its President, and attested by John D. Masters, its Secretary, as of this 21st day of October, 1986. CHEMICAL FABRICS CORPORATION By: /s/ Duane C. Montopoli --------------------------- President ATTEST: By: /s/ John D. Masters ---------------------- Secretary EX-3.A(1) 3 Exhibit 3(a)(1) CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION CHEMICAL FABRICS CORPORATION, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That by vote of the Board of Directors of Chemical Fabrics Corporation, at a duly called Regular Meeting of the Board, a resolution was duly adopted setting forth a proposed amendment to the Certificate of Incorporation of said Corporation and directing the holders of Common Stock of said Corporation to consider said amendment at the Annual Meeting of Stockholders. The resolution setting forth the proposed amendment is as follows: RESOLVED, That it is deemed advisable and in the best interest of the Corporation to amend Article FIRST of its Certificate of Incorporation (as previously amended) to read in its entirety as follows: "The name of the Corporation is CHEMFAB CORPORATION." RESOLVED, That the proposed amendment to the Corporation's Certificate of Incorporation as set forth in the immediately preceding resolution shall be submitted to the shareholders of the Corporation for their consideration and approval at the Corporation's 1991 Annual Meeting, and that, upon approval by the holders of a majority of the shares of Common Stock of the Corporation issued and outstanding as of the record date for such meeting, the Corporation be and it hereby is authorized and directed to amend its Certificate of Incorporation as set forth in the immediately preceding resolution, and the officers of the Corporation be and they hereby are authorized and directed to execute and deliver any and all documents and certificates deemed necessary to effectuate the proposed amendment set forth above, including a Certificate of Amendment to the Certificate of Incorporation for filing with the Secretary of State of the State of Delaware. SECOND: That thereafter at the Annual Meeting of Stockholders, pursuant to said resolution of the Board of Directors, by vote of the holders of record of at least a majority of the issued and outstanding shares of Common Stock, par value $.10 per share, of said corporation, representing not less than the minimum number of votes necessary to authorize and take the actions set forth therein, said amendment was duly adopted. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, Chemical Fabrics Corporation has caused this certificate to be signed by Duane C. Montopoli, its President, and attested by William H. Everett, its Secretary, this 31st day of October, 1991. CHEMICAL FABRICS CORPORATION By: /s/ Duane C. Montopoli --------------------------- President Attest: /s/ William H. Everett - ------------------------- Secretary EX-10.A(1) 4 Exhibit 10(a)(1) Chemical Fabrics Corporation 1986 STOCK OPTION PLAN 1. Definitions. As used in this 1986 Stock Option Plan of Chemical Fabrics Corporation, the following terms shall have the following meanings: Code means the Federal Internal Revenue Code of 1954, as amended. Committee means a committee comprised of three or more directors of the Company, appointed by the Board of Directors of the Company, appointed by the Board of Directors of the Company, responsible for the administration of the Plan, as provided in Section 4; provided, that the Board of Directors itself may at any time, in its sole discretion, exercise any or all functions and authority of the Committee. Company means Chemical Fabrics Corporation, a Delaware corporation. Grant Date means the date on which an Option is granted, as specified in Section 7. Market Value means the closing price for a share of the Stock on any date. Option means the an option to purchase shares of the Stock granted under the Plan. Option Agreement means an agreement between the Company and an Optionee, setting forth the terms and conditions of an Option. Optionee means a person eligible to receive an Option, as provided in Section 6, to whom an Option shall have been granted under the Plan. Plan means this 1986 Stock Option Plan of the Company. Stock means the common stock, par value $.10 per share, of the Company. 2. Purpose. The Plan is intended to encourage ownership of the Stock by key employees and directors of, and consultants to, the Company and its subsidiaries and to provide additional incentive for them to promote the success of the Company's business. The Plan is not intended to be an incentive stock option plan within the meaning of Section 422A of the Code. 3. Term of the Plan. Options under the Plan may be granted not later than October 20, 1996. 4. Administration. The Plan shall be administered by the Committee. Subject to the provisions of the Plan, the Committee shall have complete authority, in its discretion, to make the following determinations with respect to each option to be granted by the Company: (a) the key employee, director or consultant to receive the Option; (b) the time of granting the Option; (c) the number of shares subject to the Option; (d) the option price, which need not be Market Value of the optioned shares; (e) the vesting schedule, if any, over which the option shall become exercisable; (f) the expiration date of the option (which may not be more than ten (10) years after the date of grant thereof); and (g) the restrictions, if any, to be imposed upon transfer of shares of the Stock purchased by the Optionee upon the exercise of the Option. The Committee shall have complete authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of the respective option agreements (which need not be identical), and to make all other determinations necessary or advisable for the administration of the Plan. The Committee's determination on the matters referred to in this Section 4 shall be conclusive. 5. Stock Subject to the Plan. The Plan covers 1,000,000 shares of Stock, subject, however, to the provisions of Section 11 of the Plan. The number of shares purchased pursuant to the exercise of options granted under the Plan and the number of shares subject to outstanding options granted under the Plan shall be charged against the shares covered by the Plan; but shares subject to options which terminated without being exercised shall not be so charged. Shares to be issued upon the exercise of options granted under the Plan may be either authorized but unissued shares or shares held by the Company in its treasury. If any option expires or terminates for any reason without having been exercised in full, the shares not purchased thereunder shall again be available for options thereafter to be granted. 6. Eligibility. An Option may be granted only to a key employee, director or consultant of the Company or one or more of its subsidiaries. A member of the Committee may be granted an Option only by the vote of a majority of the Board of Directors. 7. Time of Granting Options. The granting of an Option shall take place at the time specified by the Committee. Only if expressly so provided by the Committee shall the Grant Date be the date on which an Option Agreement shall have been duly executed and delivered by the Company and the Optionee. 8. Exercise of Option. Unless the Committee otherwise determines, all Options granted hereunder shall permit the Optionee to exercise, cumulatively, 25% of the option shares on each of the first four anniversary dates of the Grant Date. The Optionee shall give written notice of exercise to the Company. The notice shall specify the number of shares of the Stock which the Optionee elects to purchase. For shares which the Optionee elects to purchase, the Optionee shall enclose a personal check equal to the option 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. 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 the 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. Each outstanding Option shall be reduced by one shares for each share of the Stock purchased upon exercise of the option. 9. Transferability of Options. Options shall not be transferable, otherwise than by will or the laws of descent and distribution, and may be exercised during the life of the Optionee only by the Optionee. 10. Termination of Employment. If an Optionee ceases to be an employee, director or consultant of the Company for any reason other than retirement of an employee or death of an Optionee, any Option held by that Optionee may be exercised by the Optionee at any time within three months after the termination of such relationship, but only to the extent exercisable at termination. If an Optionee enters retirement from employment or dies, any Option held by that Optionee may be exercised by the Optionee or the Optionee's executor or administrator at any time within the shorter of the option period or 12 months after the date of retirement or death, but only to the extent exercisable at retirement or death. Options which are not exercisable at the time of termination of such relationship or which are so exercisable but are not exercised within the same time periods described above shall terminate. Military or sick leave shall not be deemed a termination under this Section 10 provided that it does not exceed the longer of 90 days or the period during which the rights of the absent employee, director or consultant are guaranteed by statute or by contract. 11. Adjustment of Number of Shares. Each Option Agreement shall provide that 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 the agreement and prior to the exercise in full of the Option, the number and kind of shares for which the Option may thereafter by exercised shall be proportionately and appropriately adjusted. Each Option Agreement shall further provide that 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 (if at the time an employee, director or consultant of the Company, or any of its subsidiaries, as appropriate) 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. In the event of changes in the outstanding Common Stock by reason of any stock dividend, split-up, contraction, reclassification, or change of outstanding shares of the Stock of the nature contemplated by this Section 11, the number of shares of the Stock available for the purpose of the Plan as stated in Section 5, and the exercise price per share of each Option, shall be correspondingly adjusted. 12. Stock Reserved. The Company shall at all times during the term of the Options reserve and keep available such number of shares of the Stock as will be sufficient to satisfy the requirements of this Plan and shall pay all other fees and expenses necessarily incurred by the Company in connection therewith. 13. Limitation of Rights in Option Stock. The Optionee shall have no rights as stockholder in respect of shares as to which his or her Option shall not have been exercised, certificates issued and delivered and payment as herein provided made in full, and shall have no rights with respect to such shares not expressly conferred by this Plan. 14. Purchase for Investment. The Optionee shall make such representations with respect to investment intent and the method of disposal of optioned shares as the Board of Directors of the Company may deem advisable in order to assure compliance with the applicable securities law. 15. Termination and Amendment of Plan. The Board of Directors of the Company may at any time terminate the Plan or make such modifications of the Plan as it shall deem advisable, provided, however, that, except as provided in Section 11, the Board may not, after ratification of the adoption of the Plan by the shareholders and without approval by the holders of a majority of the shares represented and voting within twelve (12) months after the adoption of such amendment by the Board, increase the maximum number of shares available for option under the Plan or extend the period during which options may be granted or exercised. No termination or amendment of the Plan may, without the consent of the Optionee to whom any Option shall theretofore have been granted, adversely affect the rights of that Optionee under that Option; provided, that if the adoption of the Plan is not approved by vote of a majority of the shares represented and voting at a meeting of shareholders on or before the date of the Company's 1987 Annual Meeting of Shareholders, then all Options theretofore granted under the Plan shall be null, void and without effect. 16. Effective Date. The Plan shall be effective as of October 20, 1986, the date of its approval by the Board, but shall be subject to approval by the stockholders of the Company as aforesaid. Options may be granted prior to such approval of the stockholders but shall be conditioned upon, and shall not be exercisable until after, such approval of the stockholders is obtained. CHEMFAB CORPORATION AMENDMENT TO 1986 STOCK OPTION PLAN This AMENDMENT (this "Amendment") to the 1986 Stock Option Plan, as heretofore amended (the "Plan"), of Chemfab Corporation, a Delaware corporation (the "Company"), is being adopted by the Board of Directors of the Company at a meeting held on this 1st day of February, 1996. 1. Amendment of Section 8 of the Plan. Section 8 of the Plan is hereby amended to read in its entirety as follows: "8. Exercise of Option. (a) Unless the Committee otherwise determines, all Options shall permit the Optionee to exercise, cumulatively, 25% of the option shares on each of the first four anniversary dates of the Grant Date. The Optionee shall give written notice of exercise to the Company. The notice shall specify the number of shares of the Stock which the Optionee elects to purchase. For shares of the Stock which the Optionee elects to purchase, the Optionee shall, except as otherwise permitted by Section 8(c) below, enclose a personal check equal to the aggregate option price payable with respect to such shares. Subject to, and promptly after, the Optionee's compliance with all of the provisions of this Section 8(a), the Company shall deliver or cause to be delivered to the Optionee a certificate for the number of shares of the Stock 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 the Optionee to take any action in connection with shares of the Stock being purchased upon exercise of the Option, exercise of the Option and delivery of the certificate or certificates for such shares (including, without limitation, any exercise of the Option and delivery of the certificate or certificate for such shares in accordance with the procedures set forth in Section 8(c) below) shall be postponed until completion of the necessary action, which shall be taken at the Company's expense. Each outstanding Option shall be reduced by one share for each share of the Stock purchased upon exercise of the Option. (b) The Company's obligation to deliver shares of Stock upon exercise of an Option shall be subject to the Optionee's satisfaction of all applicable federal, state and local income and employment tax withholding obligations. The Optionee shall satisfy such obligations by making a payment of the requisite amount in cash or by check, unless the Optionee is entitled to and has elected to effect such payment through a "cashless" exercise in accordance with Section 8(c) below. (c) In lieu of enclosing a personal check together with the written notice of exercise as described in Section 8(a) above, an Optionee that is not subject to the provisions of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (a "Qualified Optionee"), may, unless prohibited by applicable law, elect to effect payment by including with the written notice of exercise referred to in Section 8(a) above irrevocable instructions to deliver for sale to a registered securities broker acceptable to the Company a number of shares of Stock subject to the Option being exercised sufficient, after brokerage commissions, to cover the aggregate option price payable with respect to such shares and, if the Qualified Optionee further elects, the Qualified Optionee's withholding obligations under Section 8(b) with respect to such exercise, together with irrevocable instructions to such broker to sell such shares and to remit directly to the Company such aggregate option price and, if the Qualified Optionee has so elected, the amount of such withholding obligations. The Company shall not be required to deliver to such securities broker any stock certificate for such shares until it has received from the broker such aggregate option price and, if the Qualified Optionee has so elected, the amount of such withholding obligations." 2. Ratification, etc.. Except to the extent amended by this Amendment, all of the terms, provisions and conditions set forth in the Plan are hereby ratified and confirmed and remain in full force and effect. The Plan and this Amendment shall be read and construed together as a single instrument. 3. Effective Date. This Amendment shall become effective on this 1st day of February, 1996. EX-10.A(2) 5 Exhibit 10(a)(2) [Form for Non-Officers] CHEMICAL FABRICS CORPORATION 1986 STOCK OPTION PLAN AGREEMENT AGREEMENT dated August 16, 1990 between Chemical Fabrics 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 non-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 continuously (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 Corporations 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 or one or more 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 August 9, 1989 (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"). On each of the following dates, but only if the Optionee remains an employee of the Company or a Related Corporation at that date, the stated number of shares shall become purchasable hereunder: Date Number of Shares ------------------------------------------------ August 16, 1991 ___ (25%) August 16, 1992 ___ (25%) August 16, 1993 ___ (25%) August 16, 1994 ___ (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 retirement, 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 three months 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 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 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 employment 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 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 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 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 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. The option granted hereunder is subject to all the terms and conditions set forth in the Company's 1986 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. CHEMICAL FABRICS CORPORATION By _______________________________________________ _______________________________________________ Optionee [Form for Officers] CHEMICAL FABRICS CORPORATION 1986 STOCK OPTION PLAN AGREEMENT AGREEMENT dated August 16, 1990 between Chemical Fabrics 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 non-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 continuously (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 Corporations 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 or one or more 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 August 9, 1989 (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"). On each of the following dates, but only if the Optionee remains an employee of the Company or a Related Corporation at that date, the stated number of shares shall become purchasable hereunder: Date Number of Shares ---- ---------------- August 16, 1991 ___ (25%) August 16, 1992 ___ (25%) August 16, 1993 ___ (25%) August 16, 1994 ___ (25%) Notwithstanding the foregoing, if, before August 16, 1991, August 16, 1992, August 16, 1993 or August 16, 1994, as the case may be, 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 any or all of the dates August 16, 1991, August 16, 1992, August 16, 1993 and August 16, 1994 in the above schedule as may be the same as or later than the date of the Sellout Event. 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 retirement, 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 three months 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 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 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 employment 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 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 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 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 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. The option granted hereunder is subject to all the terms and conditions set forth in the Company's 1986 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. CHEMICAL FABRICS CORPORATION By _______________________________________________ _______________________________________________ Optionee [Non-Plan Option Agreement] Chemical Fabrics Corporation STOCK OPTION AGREEMENT AGREEMENT dated _________ between Chemical Fabrics Corporation (the "Company"), and __________ presently residing at _____________________ (the "Optionee"). WHEREAS, 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, during his employment by the Company or one or more of its Related Corporations, devote his 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 Corporations 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. 2. Grant of Option. Subject to the terms and conditions set forth herein, the Company has granted to the Optionee on ___________ (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"), such option to be exercisable in whole or in part at any time on or after the Grant Date in accordance with the terms hereof. 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 retirement, the Option may be exercised by the optionee at any time within three months after termination, but only before the tenth anniversary of the Grant Date. If the Optionee dies or retires, the Option may be exercised 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 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 employment 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 or shares of the Stock which at such time have been held by the Optionee for at least six (6) months, duly endorsed for transfer, so equal as valued at the composite closing price on the date of delivery, or a combination so equal of a check and such shares of the Stock. 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 the 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 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 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, in each case before the tenth anniversary of the Grant Date, the Option shall terminate, but the Optionee shall have the right, immediately prior to such event, to exercise the Option, to the extent 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 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 in the employment of the Company and its subsidiaries nor interferes in any way with the right of the Company and its subsidiaries 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. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. CHEMICAL FABRICS CORPORATION By___________________________________________ ___________________________________________ __________, Optionee EX-10.A(4) 6 Exhibit 10(a)(4) Chemical Fabrics Corporation Daniel Webster Highway, P.O. Box 1137 Merrimack, New Hampshire 03054 U.S.A. Telephone: 603-424-9000 Telex: 6817377 CHEMFAB UW Telefax: 603-424-9028 May 30, 1991 Mr. James C. Manocchi 58 Prendiville Way Marlborough, MA 01752 Dear Jim: I am pleased to confirm our offer to you (subject, of course, to the conditions contained in this letter) to join CHEMFAB as Vice President - Marketing. Please review the attached documents: Attachment #1 Offer of Employment #2 Description of Officer Bonus Plan #3 Summary of Officers Fringe Benefit Package #4 Level A Employee Agreement #5 Group Insurance Benefit Handbook #6 Group Long Term Disability Insurance Handbook #7 Form I-9 #8 CHEMFAB Policy Statement on Drug-Free Workplace #9 CHEMFAB Policy Statement on Pre-Employment Drug Screening. Several points require clarification: (1) Regarding Attachment #4 - This offer of employment is contingent upon your entering into a Level A Employee Agreement with the Company. We would appreciate your signing and returning this agreement to us as soon as possible. If you would like to discuss it, please do not hesitate to call me. (2) Vacations accrue on a daily basis throughout the year from date of employment. Therefore with 15 days annual vacation, you accrue 0.29 days per week. Mr. James C. Manocchi May 30, 1991 Page 2 (3) This offer is contingent upon successfully completing CHEMFAB's Pre- Employment Medical Evaluation. It is also contingent upon passing urine drug screening which will be conducted as part of CHEMFAB's Pre-Employment Medical Evaluation given to all prospective employees. If confirming medical evaluation establishes the use of an illegal controlled substance, employment will be denied. (4) This offer is also contingent on CHEMFAB Board of Directors approval. We expect to have a telephone Board meeting over the next few days to address this matter. We, of course, expect no difficulty in this regard. (5) On your first day of employment, which I understand will be July 1, 1991, you should be prepared to present appropriate evidence of citizenship or other proof of legal employability. Please refer to the enclosed Form I-9 for details regarding what is considered appropriate evidence of employability. Jim, we are truly excited about having you head-up our marketing team. We believe you possess all the qualities needed to be successful, and to help us move forward with our ambitious growth plans. If you have any questions regarding the content of this letter, please do not hesitate to call me. If these terms and conditions are acceptable to you, please confirm same by signing one copy of this letter and returning it to me not later than June 14, 1991. Very truly yours, /s/ Jim L. James Newman Senior Vice President Corporate Operations LJN/jea Mr. James C. Manocchi May 30, 1991 Page 3 Enclosures I hereby acknowledge that I have read (and understand) and will abide by the terms and conditions of the attached "addendum", "CHEMFAB Policy Statement on Drug-Free Workplace" and "CHEMFAB Policy Statement on Pre-Employment Drug Screening". As a condition of employment, I hereby give my consent to CHEMFAB to disclose to group health insurance carriers (or their agents) information regarding any pre- existing medical conditions discovered or diagnosed during (or as a result of) CHEMFAB's pre-Employment Medical Evaluation. I hereby accept this offer of employment in its entirety as described above. 6/4/91 /s/ James C. Manocchi - ------------------------ ------------------------------- Date Signature May 30, 1991 Attachment #1 OFFER OF EMPLOYMENT Page 1 Position: Vice President - Marketing. Reporting directly to you will be CHEMFAB's marketing and product management personnel located at our Merrimack, NH headquarters. The Company's remaining marketing and product management personnel at other sites will have an indirect (dotted line) reporting relationship to you. You will report directly to Jim Newman. Cash Compensation: $110,000 per annum base salary with an annual review on or about September 1st (starting in 1992). You will be eligible to participate in CHEMFAB's Officer Bonus Plan for FY 1992 and thereafter. Attachment #2 describes the plan for FY 1991. We expect a similar plan for FY 1992. Please note the bonus is discretionary, based on performance, and is subject to CHEMFAB Board approval. Equity: Effective on your first day of employment at CHEMFAB, you will be granted non-qualified stock options on 40,000 shares of CHEMFAB common stock at an exercise price equal to the closing price on that day. These options will vest (ie. become exercisable) as follows: One year from date of employment 10,000 shares Two years from date of employment 10,000 shares Three years from date of employment 10,000 shares Four years from date of employment 10,000 shares ------------- TOTAL.....................................40,000 Benefits: See attachment #3, Summary outline. The life insurance benefit will be modified to provide you with coverage equal to three (3) times salary. The first $50,000 of coverage will be provided by the routine group insurance program and the balance will be provided by a company paid term insurance contract. CHEMFAB will reimburse you for any medical insurance premiums you personally incur in order to insure continuity of coverage from the point your current employer terminates coverage until CHEMFAB's medical insurance commences. Termination: In the unexpected circumstance that your employment is terminated by CHEMFAB, you will qualify for salary continuation (ie. severance pay) during the six-month period following termination, subject to dollar-for-dollar reduction for cash amounts received and accrued during that period from any successor employer or other business entity which pays you for services rendered. Moving Expenses: At the time of your family's move to the Merrimack, NH area, provided the move is made while employed by CHEMFAB and within 24 months after commencement thereof, CHEMFAB will reimburse you for all reasonable costs of moving your family and your household possessions. In addition, CHEMFAB will pay you an amount equal to one months' starting base pay to cover incidental expenses in connection with the move. We will also reimburse you for travel expenses incurred in house hunting. Non-Compete: Prior to or concurrent with the commencement of your employment by CHEMFAB, you will enter into a LEVEL A Employee Agreement with the Company (attachment #4). EX-10.A(6) 7 Exhibit 10(a)(6) CHEMFAB CORPORATION SECOND AMENDED AND RESTATED 1991 STOCK OPTION PLAN 1. Definitions. As used in this Second Amended and Restated 1991 Stock Option Plan of Chemfab Corporation, the following terms shall have the following meanings: Annual Shareholders Meeting shall have the meaning ascribed to it in Section 6. As Adjusted means as appropriately adjusted for stock dividends payable in the Stock, split-ups and contractions of the Stock, reclassifications of the Stock, or similar changes of the outstanding shares of the Stock which occur after the date of adoption of this Second Amended and Restated 1991 Stock Option Plan by the Board of Directors. Automatic Grant Date shall have the meanings ascribed to it in Section 6(a) and (b), as applicable. Board of Directors means the Company's board of directors. Code means the Federal Internal Revenue Code of 1986, as amended. Committee means a committee comprised of two or more Nonemployee Directors, appointed by the Board of Directors, responsible for the administration of the Plan, as provided in Section 4; provided, that the Board of Directors itself may at any time, in its sole discretion, exercise any or all functions and authority of the Committee, except that the Committee shall have exclusive authority to exercise its functions and authority in respect of selection of officers and directors who are not Nonemployee Directors for participation in and decisions concerning a grant or award of an Option to any of such persons and the matters set forth in clauses (b) through (h) of Section 4 (and any other matters concerning the timing, pricing and amount of a grant or award) in respect of any such persons. Company means Chemfab Corporation, a Delaware corporation. Grant Date means the date on which an Option is granted, as specified in Section 8 or, as applicable, in Section 6. Incentive Option means an Option which by its terms is to be treated as an "incentive stock option" within the meaning of Section 422 of the Code. Market Value means the closing price for a share of the Stock on any date. Nonemployee Director means a director of the Company who is not an officer or employee of the Company. Nonstatutory Option means any Option that is not an Incentive Option. Option means an option to purchase shares of the Stock granted under the Plan. Option Agreement means an agreement between the Company and an Optionee, setting forth the terms and conditions of an Option. Option Price means the price paid or to be paid by an Optionee for a share of Stock upon exercise of an Option. Optionee means a person eligible to receive an Option, as provided in Section 7, to whom an Option shall have been granted under the Plan. Plan means this Second Amended and Restated 1991 Stock Option Plan of the Company. Stock means common stock, par value $.10 per share, of the Company. Ten Percent Owner means a person who owns, or is deemed within the meaning of Section 422(b)(6) of the Code to own, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (or its parent or subsidiary corporations). Whether a person is a Ten Percent Owner shall be determined with respect to each Option based on the facts existing immediately prior to the Grant Date of such Option. Vesting Year for any portion of any Incentive Option means the calendar year in which that portion of the Option first becomes exercisable. 2. Purpose. The Plan is intended to encourage ownership of the Stock by key employees and directors of, and consultants to, the Company and its subsidiaries and to provide additional incentive for them to promote the success of the Company's business. The Plan is intended to qualify as an incentive stock option plan within the meaning of Section 422 of the Code and to provide for the grant of Incentive Options and Nonstatutory Options. 3. Term of the Plan. Options under the Plan may be granted not later than August 27, 2001. 4. Administration. The Plan shall be administered by the Committee. Subject to the provisions of the Plan (including, without limitation, the provisions of Sections 6, 9 and 10), the Committee shall have complete authority, in its discretion, to make the following determinations with respect to each Option to be granted by the Company: (a) the key employee, director or consultant to receive the Option; (b) whether the Option (if granted to an employee) will be an Incentive Option or a Nonstatutory Option; (c) the time of granting the Option; (d) the number of shares of the Stock subject to the Option; (e) the Option Price; (f) the vesting schedule, if any, over which the Option shall become exercisable; (g) the expiration date of the Option (which may not be more than ten (10) years after the date of grant thereof); and (h) the restrictions, if any, to be imposed upon transfer of shares of the Stock purchased by the Optionee upon the exercise of the Option. Subject to the provisions of Section 6, the Committee shall have complete authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of the respective Option Agreements (which need not be identical), and to make all other determinations necessary or advisable for the administration of the Plan. The Committee's determination on the matters referred to in this Section 4 shall be conclusive. 5. Stock Subject to the Plan. The Plan covers 1,500,000 shares of the Stock, subject, however, to the provisions of Section 12 of the Plan. The number of shares of the Stock purchased pursuant to the exercise of Options and the number of shares of the Stock subject to outstanding Options shall be charged against the shares covered by the Plan; but shares of the Stock subject to Options which terminated without being exercised shall not be so charged. Shares of the Stock to be issued upon the exercise of Options may be either authorized but unissued shares or shares held by the Company in its treasury. If any Option expires or terminates for any reason without having been exercised in full, the shares not purchased thereunder shall again be available for Options thereafter to be granted. 6. Automatic Grants of Options to Nonemployee Directors. (a) Directors Elected or Re-Elected at Annual Shareholders Meeting or Special Meeting in Lieu of Annual Meeting. Each individual who is not an officer or employee of the Company who is elected or re-elected to the Board of Directors at an annual shareholders meeting or special meeting in lieu of annual meeting (an "Annual Shareholders Meeting"), or continues to serve as a director after such Annual Shareholders Meeting, is hereby granted, on the date of such meeting (as used in or with reference to this Section 6(a), an "Automatic Grant Date"), a Nonstatutory Option to purchase 6,000 shares of the Stock (As Adjusted). Each Nonstatutory Option granted to an Optionee under this Section 6(a) shall (1) have an exercise price equal to 100% of the Market Value of the Stock on the Automatic Grant Date, and (2) become exercisable in four (4) equal installments as follows: 25% on the Automatic Grant Date, an additional 25% on the last day of the fiscal quarter which includes the Automatic Grant Date (unless the Automatic Grant Date is itself the last day of a fiscal quarter, in which case this second 25% portion shall become exercisable on the last day of the immediately subsequent fiscal quarter), and an additional 25% on the last day of each of the next two fiscal quarters, if the Optionee remains a director of the Company on such dates. (b) Directors Elected at Other Times. Each individual who is not an officer or employee of the Company who is elected to the Board of Directors on a date other than the day of an Annual Shareholders Meeting (as used in or with reference to this Section 6(b), such date being an "Automatic Grant Date") is hereby granted, on the Automatic Grant Date, a Nonstatutory Option to purchase the number of shares of the Stock set forth below, based on the number of quarters remaining in the fiscal year during which he or she is so elected, which option shall become exercisable if the Optionee remains a director of the Company as set forth below: (1) If such individual is elected after the day of an Annual Shareholders Meeting but on or before December 31, he or she is hereby granted a Nonstatutory Option to purchase 4,500 shares of the Stock (As Adjusted), 33 1/3% of which shall become exercisable on each of December 31, March 31 and June 30 of the fiscal year of such director's election if he or she remains a director on such dates. (2) If such individual is elected on or after January 1 but on or before March 31, he or she is hereby granted a Nonstatutory Option to purchase 3,000 shares of the Stock (As Adjusted), 50% of which shall become exercisable on each of March 31 and June 30 of the fiscal year of such director's election if he or she remains a director on such dates. (3) If such individual is elected on or after April 1 but on or before June 30, he or she is hereby granted a Nonstatutory Option to purchase 1,500 shares of the Stock (As Adjusted) which shall become fully exercisable on June 30 of the fiscal year of such director's election if he or she remains a director on such date. Each Option granted to a director under this Section 6(b) shall have an exercise price equal to 100% of the Market Value of the Stock on the Automatic Grant Date. (c) Limitation on Number of Options. Notwithstanding anything else herein contained, no individual, in his or her capacity as a member of the Board of Directors who is not an officer or employee of the Company, shall receive grants of Options under this Section 6 to purchase an aggregate number of shares in excess of 60,000 shares of Stock (As Adjusted). 7. Eligibility. An Option may be granted only to a key employee, director or consultant of the Company or one or more of its subsidiaries, provided that no Options may be granted to any Nonemployee Director except pursuant to the provisions of Section 6, and provided, further, that Incentive Options may be granted only to a key employee of the Company or one or more of its subsidiaries. 8. Time of Granting Options. Subject to the provisions of Section 6, the granting of an Option shall take place at the time specified by the Committee. Only if expressly so provided by the Committee shall the Grant Date be the date on which an Option Agreement shall have been duly executed and delivered by the Company and the Optionee. 9. Option Price. The Option Price under each Incentive Option shall be not less than 100% of the Market Value of the Stock on the Grant Date, or not less than 110% of the Market Value of the Stock on the Grant Date if the Optionee is a Ten Percent Owner. The Option Price under each Nonstatutory Option shall not be so limited by reason of this Section 9, and need not be fair market value. 10. Option Period. No Incentive Option may be exercised later than the fifth anniversary of the Grant Date if the Optionee is a Ten Percent Owner. The option period under any Nonstatutory Option shall not be so limited by reason of this Section 10. 11. Limit on Incentive Option Characterization. No Incentive Option shall be considered an Incentive Option to the extent that pursuant to its terms it would permit the Optionee to purchase for the first time in any Vesting Year under that Incentive Option more than the number of shares of Stock calculated by dividing the current limit by the Option Price. The current limit for any Optionee for any Vesting Year shall be $100,000 minus the aggregate Market Value at the date of grant of the number of shares of Stock available for purchase for the first time in the Vesting Year under each other Incentive Option granted to the Optionee under the Plan and each other incentive stock option granted to the Optionee after December 31, 1986 under any other incentive stock option plan of the Company (and any parent and subsidiary corporations). 12. Exercise of Option. (a) Unless the Committee otherwise determines, and except as otherwise provided in Section 6, all Options shall permit the Optionee to exercise, cumulatively, 25% of the option shares on each of the first four anniversary dates of the Grant Date. The Optionee shall give written notice of exercise to the Company. The notice shall specify the number of shares of the Stock which the Optionee elects to purchase. For shares of the Stock which the Optionee elects to purchase, the Optionee shall, except as otherwise permitted by Section 12(c) below, enclose a personal check equal to the aggregate option price payable with respect to such shares. Subject to, and promptly after, the Optionee's compliance with all of the provisions of this Section 12(a), the Company shall deliver or cause to be delivered to the Optionee a certificate for the number of shares of the Stock 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 the Optionee to take any action in connection with shares of the Stock being purchased upon exercise of the Option, exercise of the Option and delivery of the certificate or certificates for such shares (including, without limitation, any exercise of the Option and delivery of the certificate or certificate for such shares in accordance with the procedures set forth in Section 12(c) below) shall be postponed until completion of the necessary action, which shall be taken at the Company's expense. Each outstanding Option shall be reduced by one share for each share of the Stock purchased upon exercise of the Option. (b) The Company's obligation to deliver shares of Stock upon exercise of an Option shall be subject to the Optionee's satisfaction of all applicable federal, state and local income and employment tax withholding obligations. The Optionee shall satisfy such obligations by making a payment of the requisite amount in cash or by check, unless the Optionee is entitled to and has elected to effect such payment through a "cashless" exercise in accordance with Section 12(c) below. (c) In lieu of enclosing a personal check together with the written notice of exercise as described in Section 12(a) above, an Optionee that is not subject to the provisions of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (a "Qualified Optionee"), may, unless prohibited by applicable law, elect to effect payment by including with the written notice of exercise referred to in Section 12(a) above irrevocable instructions to deliver for sale to a registered securities broker acceptable to the Company a number of shares of Stock subject to the Option being exercised sufficient, after brokerage commissions, to cover the aggregate option price payable with respect to such shares and, if the Qualified Optionee further elects, the Qualified Optionee's withholding obligations under Section 12(b) with respect to such exercise, together with irrevocable instructions to such broker to sell such shares and to remit directly to the Company such aggregate option price and, if the Qualified Optionee has so elected, the amount of such withholding obligations. The Company shall not be required to deliver to such securities broker any stock certificate for such shares until it has received from the broker such aggregate option price and, if the Qualified Optionee has so elected, the amount of such withholding obligations. 13. Transferability of Options. Options shall not be transferable, otherwise than by will or the laws of descent and distribution, and may be exercised during the life of the Optionee only by the Optionee. 14. Termination of Employment, Etc. If an Optionee ceases to be an employee, director or consultant of the Company for any reason other than retirement of an employee or death of an Optionee, any Option held by that Optionee may be exercised by the Optionee at any time within 90 days after the termination of such relationship, but only to the extent exercisable at termination and in no event after the option period. If an Optionee enters retirement from employment or dies, any Option held by that Optionee may be exercised by the Optionee or the Optionee's executor or administrator at any time within the shorter of the option period or 12 months after the date of retirement or death, but only to the extent exercisable at retirement or death. Options which are not exercisable at the time of termination of such relationship or which are so exercisable but are not exercised within the time periods described above shall terminate. Military or sick leave shall not be deemed a termination under this Section 14 provided that it does not exceed the longer of 90 days or the period during which the rights of the absent employee, director or consultant are guaranteed by statute or by contract. 15. Adjustment of Number of Shares; Fractional Shares. Each Option Agreement shall provide that 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 such Option 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 shall be proportionately and appropriately adjusted. Each Option Agreement shall further provide that 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 (if at the time an employee, director or consultant of the Company, or any of its subsidiaries, as appropriate) 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 of the Stock shall be purchasable or deliverable, but in the event any adjustment of the number of shares of the Stock 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. In the event of changes in the outstanding Stock by reason of any stock dividend, split-up, contraction, reclassification, or change of outstanding shares of the Stock of the nature contemplated by this Section 15 after the date of adoption of this Plan by the Board of Directors, the number of shares of the Stock available for the purpose of the Plan as stated in Section 5 and the exercise price per share of each Option shall be correspondingly adjusted. 16. Stock Reserved. The Company shall at all times during the term of the Options reserve and keep available such number of shares of the Stock as will be sufficient to satisfy the requirements of this Plan and shall pay all other fees and expenses necessarily incurred by the Company in connection therewith. 17. Limitation of Rights in Option Stock. The Optionee shall have no rights as stockholder in respect of shares of the Stock as to which his or her Option shall not have been exercised, certificates issued and delivered and payment as herein provided made in full, and shall have no rights with respect to such shares not expressly conferred by this Plan. 18. Purchase for Investment. The Optionee shall make such representations with respect to investment intent and the method of disposal of optioned shares of the Stock as the Board of Directors may deem advisable in order to assure compliance with applicable securities laws. 19. Termination and Amendment of Plan. The Board of Directors may at any time terminate the Plan or make such modifications of the Plan as it shall deem advisable, provided, that the Board of Directors may not (a) except as provided in Section 15, without approval by the holders of a majority of the shares represented within twelve (12) months after the adoption of such amendment by the Board of Directors, increase the maximum number of shares available for option under the Plan or extend the period during which Options may be granted or exercised or (b) more than once in any six (6) month period, amend the Plan so as to (1) modify Section 6 or (2) otherwise provide for or permit the grant of Options to Nonemployee Directors, provided, however, that the Board of Directors may make a modification of the type set forth in clause (b)(1) or (b)(2) above which is made to comport with changes in the Code, the Employee Retirement Income Security Act of 1974, as amended, or the rules and regulations under either such statute. No termination or amendment of the Plan may, without the consent of the Optionee to whom any Option shall theretofore have been granted, adversely affect the rights of that Optionee under that Option. 20. Effective Date. The Company's 1991 Stock Option Plan was initially adopted by the Board of Directors on August 28, 1991, and was approved by the stockholders of the Company on October 31, 1991. The Company's Amended and Restated 1991 Stock Option Plan was approved by the Board of Directors on September 8, 1993, and was approved by the stockholders of the Company on October 27, 1993. The First Amendment to the Company's Amended and Restated 1991 Stock Option Plan was approved by the Board of Directors on August 3, 1995, and was approved by the stockholders of the Company on October 26, 1995. The addition of Section 6(c), which did not require shareholder approval, was approved by the Board of Directors on October 27, 1993. The 3-for-2 stock split of the Stock (effected on February 22, 1996) and the Second Amendment to the Company's Amended and Restated 1991 Stock Option Plan, neither of which required shareholder approval, were approved by the Board of Directors on February 1, 1996. EX-10.B(5) 8 Exhibit 10(b)(5) DATED 18 January 1991 ------------------------- HOWARD THOMAS GIBSON - and - JOAN GIBSON (1) CHEMFAB HOLDINGS U.K. LIMITED (2) CHEMICAL FABRICS EUROPE (3) _____________________________________ SHARE PURCHASE AGREEMENT relating to Fluorocarbon Fabrications Limited _____________________________________ Withers 20 Essex Street London WC2R 3AL Tel: 071-836 8400 Tlx: 24213 WITHER G Fax: 071-240 2278 Ref: CAS CONTENTS Page No. PARTIES RECITALS 1. Interpretation 1 2. Sale of Shares 2 3. Consideration 3 4. Completion Accounts 3 5. Escrow Account 5 6. Completion 6 7. Loans 8 8. Restriction on Vendors 8 9. Warranties 11 10. Limitation of Liability 12 11. Nature of obligations 16 12. Confidentiality and Announcements 17 13. Further Assurance 17 14. Employees 17 15. Costs 18 16. Waiver of Pre-emption Rights 18 17. Notices 18 18. Miscellaneous 18 Schedule 1 - Vendors 22 Schedule 2 - Definitions 23 Schedule 3 - Directors 26 Schedule 4 - Representations and Warranties 27 Schedule 5 - Deed of Indemnity 50 Schedule 6 - Fixed Assets 57 THIS AGREEMENT is made the 18 of January 1991 PARTIES:- (1) The Persons whose names and addresses are set out in the first column of Schedule 1 (together called "the Vendors"); and (2) CHEMFAB HOLDINGS U.K. LIMITED ("the Purchaser") a company registered in England under number 2560118 with its registered office at 20 Essex Street, London WC2R 3AL (3) CHEMICAL FABRICS EUROPE ("the Guarantor") a company registered in Ireland with its registered office at Kilrush, County Clare, Republic of Ireland. RECITALS:- (A) The Vendors and Chemical Fabrics Corporation ("Chemfab") entered into Heads of Agreement on 5th November 1990 ("the Heads of Agreement") pursuant to which the Vendors agreed subject to contract to sell all of the issued and allotted shares of the Company to Chemfab or its Affiliate as therein defined (B) The Vendors are the beneficial owners of the whole of the issued and allotted shares of the Company (as defined in Schedule 2) in the respective amounts set out opposite their names in Schedule 1. (C) The Vendors have the right, power and authority to sell and procure the transfer of such shares free from any claims, charges, liens, encumbrances of equities. (D) The Purchaser is an affiliate of Chemfab and wishes to purchase and the Vendors wish to sell the issued and allotted shares of the Company owned by the Vendors on the terms and conditions and on the basis of the representations, warranties, undertakings, agreements and indemnities hereinafter mentioned. NOW IT IS HEREBY AGREED:- 1. INTERPRETATION 1.1 In this Agreement and in the Schedules except where the context otherwise requires the words and expressions defined in Schedule 2 shall have the meanings respectively there given to them. 1.2 Subject to Clause 1.1, words and phrases the definitions of which are contained or referred to in Part XXVI Companies Act 1985 shall be construed as having the meaning thereby attributed to them. 1.3 References to statutory provisions shall be construed as references to those provisions as re-enacted or as their application is modified by other provisions (whether before or after the date hereof but not so as to increase or impose any liability upon the Vendors under the Warranties or Indemnities) from time to time and shall include references to any provisions of which they are re-enactments (whether with or without modification) and shall also include statutory instruments or orders from time to time made pursuant to them. 1.4 Any document expressed to be "in the approved form" means a document approved by (and for the purpose of identification signed by or on behalf of) the parties hereto. 1.5 References to clauses and schedules are references to clauses and schedules in this Agreement and references to sub-clauses are, unless otherwise stated, references to sub-clauses of the clause in which the references appear. 1.6 The headings in this Agreement and the Schedules are inserted for convenience only and shall not affect the construction of this Agreement. 2. SALE OF SHARES 2.1 Subject to the terms of this Agreement each of the Vendors as beneficial owner shall sell and the Purchaser shall purchase, free from all liens, charges, adverse claims and encumbrances and together with all rights now or hereafter attaching thereto the number of ordinary shares in the capital of the Company set opposite his name in the second column of Schedule 1. 2.2 The Purchaser shall not be obliged to complete the purchase of any of the Shares unless the purchase of all the Shares is completed simultaneously. 3. CONSIDERATION 3.1 Subject to Clauses 3.2 and 4 below, the price payable to the Vendors for the Sale Shares ("the Purchase Price") will be TWO HUNDRED THOUSAND POUNDS (Pounds 200,000). 3.2 The Purchase Price will be satisfied by payments in cash as follows: 3.2.1 The sum of Pounds 175,000 by telegraphic transfer to the Vendors' Solicitors designated bank at Completion; 3.2.2 The sum of Pounds 25,000 into an interest bearing deposit account in the joint names of the Purchaser's Solicitors and the Vendors' Solicitors ("the Escrow Account") on the terms set out in Clause 5. 4. Completion Accounts 4.1.1 As soon as practicable and in any event within 45 days of Completion the Vendors' Accountants (at the cost of the Vendor or (so far as may be lawful so to do) as a cost accrued to the Company) will prepare a balance sheet of the Company as at the date of Completion and a profit and loss account of the Company for the period from 1 November 1990 to the close of business on the day before the date of Completion ("the Completion Accounts") and a certificate of the Net Asset Value of the Company as at Completion (the "NAV Certificate") using the same accounting policies as used in the Accounts and deliver the Completion Accounts and the NAV Certificate to the Purchaser. 4.1.2 At its election and at its own cost the Purchaser will either carry out its own audit or review the work of the Vendors' Accountants and within 45 days of delivery of the NAV Certificate notify the Vendors as to whether or not it approves the NAV Certificate. 4.1.3 In the event that the Purchaser shall not within such period of 45 days agree the Net Asset Value then the Vendors and the Purchaser shall together attempt to resolve any such written queries and observations that have been raised by the Purchaser with regard thereto. If no such resolution has been agreed between the parties within a further period of 14 days of notification to the Vendors by the Purchaser, the matter shall be referred to an independent firm of chartered accountants as may be appointed by agreement between the Vendors and the Purchaser or, failing such agreement within 7 days, by the President of the Institute of Chartered Accountants in England and Wales for the time being. The decision of such chartered accountants (acting as experts and not as arbitrators) shall, in the absence of manifest error, be final and binding upon the parties and shall be incorporated in or otherwise dealt with in the NAV Certificate. The fee of such chartered accountants shall be borne as such independent firm shall determine, or, in the absence of any such determination, equally by the Vendors and the Purchaser. 4.1.4 In the event that the Purchaser does not raise any queries or observations in respect of the Completion Accounts and the N.A.V. Certificate within 45 days of their delivery to it or if they shall agree the Completion Accounts and the N.A.V. Certificate then (and in either such case) the Net Asset Value shall be as stated in the N.A.V. Certificate and the Purchaser shall be deemed to have agreed for all purposes of this Agreement the Net Asset Value of the Company. 4.1.5 IT IS HEREBY AGREED that in preparing the Completion Accounts and the N.A.V. Certificate, the Vendors' Accountants shall not be required to re-circulate any of the debtors of the Company in respect of debts in respect of which contact was made in the preparation of the Accounts but the Purchasers may, if they so decide and to the extent that time permits in accordance with Clause 4.1.2, re-circulate such debtors in carrying out their review under such Clause. 4.2 In the event that the Net Asset Value is agreed, certified or determined to be more or less than SEVENTY SIX THOUSAND POUNDS (Pounds 76,000) sterling as at Completion, the Purchase Price shall be accordingly increased or decreased respectively on a pound for pound basis. 4.3 For the purposes of the NAV Certificate, the Fixed Assets of the Company, being those listed in Schedule 6, shall be deemed to have an aggregate fair value of TWELVE THOUSAND SIX HUNDRED AND TEN POUNDS (Pounds 12,610) sterling. In addition stock will be valued on the same basis as in the accounts for the periods ended 31 October 1989 and 31 October 1990 using the same accounting principles consistently applied. 4.4 For the purposes of this Agreement, Fixed Assets shall be defined as only the property, plant and equipment owned by the Company at Completion shown in Schedule 6. 4.5 Immediately following completion of the Completion Accounts and agreement or adjudication of the NAV Certificate the Purchaser shall procure the resignation of the Vendors Accountants as Auditors of the Company, together with their acknowledgment that no monies are owed to them by the Company and a statement in accordance with Section 394 of the Companies Act 1985. 5. Escrow Account Upon agreement or adjudication of the NAV Certificate:- 5.1 if the Net Asset Value is greater than Pounds 76,000, an amount equal to the excess over Pounds 76,000 will be paid in cash to the Vendors together with the amount (including interest) in the Escrow Account within five (5) working days. 5.2 if the Net Asset Value is found to be less than Pounds 76,000 but not less than Pounds 51,000, the difference below Pounds 76,000 will be paid out of the Escrow Account to the Purchaser within five (5) working days together with interest accrued on that amount from Completion until the date of payment; 5.3 if the Net Asset Value is found to be less than Pounds 51,000, in addition to the payment out of the Escrow Account pursuant to Clause 5.2, the Vendors will pay the balance of the Purchaser within five (5) working days; 5.4 the remaining balance in the Escrow Account after the application of Clause 5.2 above, together with accrued interest, will then be immediately paid out to the Vendors as the balance of the Purchase Price; 5.5 if the Net Asset Value is found to be exactly Pounds 76,000, the balance in the Escrow Account (including interest) will be paid to the Vendors within five (5) working days. 5.6 any sums which are not paid to the other party as required under Clause 5.1 or 5.3 or Clause 7 shall bear interest (which shall accrue from day to day after as well as before any judgment for the same) at the rate of 4% per annum over the base rate of the National Westminster Bank Plc from that date up to and including the date of actual payment of such sums. 6. COMPLETION 6.1 Subject to the provisions of this clause Completion shall take place on 17 January 1991 whereupon: 6.1.1 The Vendors shall deliver to the Purchaser: 6.1.1.1 duly executed transfers of the Shares by the registered holders thereof in favour of the Purchaser or its nominees together with the relevant share certificates; 6.1.1.2 statements in respect of all bank accounts of the Company as at a date not more than 2 working days before Completion and all cheque books and bankers' cards in respect thereof; 6.1.1.3 such waivers or consents in the approved form as the Purchaser may require to enable the Purchaser or its nominees to be registered as holders of the Shares; and 6.1.1.4 the Supply Agreement in the approved form signed by Aerovac Systems (Keighley) Ltd; 6.1.2 The Vendors shall deliver to the Purchaser: 6.1.2.1 the Deed of Indemnity duly executed by the covenantors named therein; 6.1.2.2 all the statutory and other books (duly written up to but excluding the date of Completion) of the Company and its certificate of incorporation and common seal; 6.1.3 The Vendors shall procure: 6.1.3.1 a board meeting to be held at which such persons as the Purchaser shall before completion have nominated to be appointed as directors and as new secretary of the Company be appointed and, upon such appointment, forthwith cause the Directors and the secretary or secretaries of the Company to retire from their respective offices and as employees each delivering to the Purchaser a letter under seal in the approved form acknowledging that the person so retiring has no claim or right of action outstanding of whatever nature against the Company excluding sums due to them pursuant to Clause 7 but including but not limited to claims or rights of action for breach of contract wrongful dismissal, compensation for loss of office, unfair dismissal or redundancy; 6.1.3.2 amendment of all authorities to the bankers of the Company relating to bank accounts to give authority to such persons as the Purchaser may prior to Completion have nominated to operate the same; 6.1.3.3 the repayment of all loans due to the Company from and all loans due from the Company to every other company in the issued share capital of which the Vendors have directly or indirectly an interest; 6.1.3.4 save as provided in Clause 7 below, the repayment of all loans due from the Company to and all loans due to the Company from directors or employees of the Company including repayment of the loan from the directors' pension scheme by the Company; 6.1.3.5 the payment up to Completion of all directors' fees, expenses, pensions configurations and bonuses (if any) of all directors in the amounts disclosed in the Disclosure Letter; 6.1.4 The Purchaser shall: 6.1.4.1 pay the amount of Pounds 175,000 as provided by Clause 3 (payment to be made by way of banker's draft or telegraphic transfer to the Vendors' whose receipt shall be an absolute discharge and the Purchaser shall not be concerned with the allocation or distribution amongst the Vendors of any sum paid by way of consideration hereunder); and 6.1.4.2 deliver to the Vendors a counterpart of the Deed of Indemnity duly executed by the Purchaser and the Company; 6.1.4.3 deliver to the Vendors the Supply Agreement in the approved form signed by its affiliate Chemical Fabrics Europe. 7. LOANS 7.1 The Vendors agree to provide the Company an interest free loan of Pounds 54,231 representing part of the ACT paid on 14 November 1990 on the pre-sale dividend of Pounds 200,000 declared in the period ended 31 October 1990. The Purchaser hereby undertakes to procure the Company to repay the loan on the date and to the extent the Company receives the ACT refund or any part thereof without set-off or any reduction in mainstream corporation tax attributable thereto. The Vendors acknowledge that in respect of Pounds 47,543 of the loan the Purchaser's undertaking is limited to taking no action to prevent collection or remittance to the Vendors by the Vendors' Accountants in accordance with a letter of instruction by the Company to the Vendors' Accountants dated 14 December 1990. The Purchaser undertakes to file its 1991 Corporation Tax Return at the earliest possible date once the audited figures are available to complete such calculation and further undertakes itself and undertakes to procure that the Company and all of its holding and subsidiary companies take no steps which will cause a delay or reduction in the ACT refund or the said reduction in mainstream corporation tax. 7.2 In addition the Vendors will maintain a loan to the Company in an amount sufficient at the date of Completion to ensure that the Company does not have an overdraft in its bank account being the sum of Pounds NIC. The Purchaser hereby undertakes to procure the Company to repay the loan referred to under this Clause 7.2 as soon as funds are available but in any event within 90 days of Completion. 8. RESTRICTIONS ON VENDORS 8.1 The Vendors hereby undertake with the Purchaser and the Company that except with the written consent of the Purchaser they, either separately or together will not: 8.1.1 for the period of five (5) years from Completion, directly or indirectly, on their own account or jointly with or for any other person, firm or company be engaged or concerned or interested in any business, firm or company carrying on business in the area comprising the United Kingdom and France which is competitive with any business carried on by the Company within 2 years prior to Completion, provided that nothing in this clause shall prevent any of the Vendors from being the holder of or from being beneficially interested in any class of securities in any company if such class of securities is listed on The Stock Exchange, traded in the Unlisted Securities Market or any other recognised stock exchange where the relevant Vendor neither holds nor is beneficially interested in more than a total of 5 per cent of all the issued securities of that class; or 8.1.2 for a period of five (5) years from Completion either personally or by their agent or by letters, circulars or advertisements and whether for themselves or on behalf of any person, firm or company, canvass or solicit orders for goods [of similar type to those being manufactured or dealt in or for services similar to those being provided by the Company within 2 years prior to Completion] from any person, firm or company who or which is at Completion or has been at any time within eighteen months prior to Completion a customer of the Company; or 8.1.3 at any time hereafter make use of or disclose or divulge to any third party (other than to officers or employees of the Company while it remains under the ownership and control of the Purchaser and whose province it is to know the same or to the Purchaser, or except insofar as they shall have a statutory duty so to do) any information of a secret or confidential nature relating to any business of the Company. This restriction shall cease to apply to any information or knowledge which may come into the public domain other than through the act or default of either of the Vendors; or 8.1.4 at any time hereafter in relation to a business competitive with any business carried on by the Company in the period 2 years prior to Completion use or (insofar as they can reasonably do so) allow to be used any trade name (save for "Fluorovac") used by the Company at Completion or any other name intended or likely to be confused therewith; or 8.1.5 at any time during the period of 3 years hereafter solicit or induce, or endeavour to solicit or induce, anyone other than the Vendors who is an employee of the Company at the date hereof or at Completion to leave the employment or service of the Company save with the prior written consent of the Purchaser. 8.2 The reference to the Company in clause 8.1 shall include its successors in business. 8.3 Each of the covenants contained clause 8.1 shall be enforceable by the Purchaser independently of each of such other covenants and shall not be affected by any unenforceability or invalidity of any or such other covenants. 8.4 The Vendors hereby acknowledge and agree that having obtained professional advice, the covenants contained in this clause are fair and reasonable in the context of this Agreement as a whole. 8.5 If any of the restrictions contained in this clause shall be found to be void but would be valid if some part thereof were deleted, or the period or area of application reduced, such restriction shall apply with such modification as may be necessary to make it valid and effective. 8.6 Nothing contained in this Agreement shall prevent the Vendors, either separately or together, from directly or indirectly, on their own account or jointly with or for any other person, firm or Company be engaged or concerned or interested in and may either personally or by their agent or by letters, circulars or advertisements and whether for themselves or on behalf of any person, firm or Company canvass or solicit orders for goods in relation to:- 8.6.1 any business engaged in the cutting and forming of PTFE glass cloth shapes for sale into the composite fibre reinforced resin, electronic/PCB and glass laminated industries; and 8.6.2 vacuum/pressure composite film lamination. 9. WARRANTIES 9.1 The vendors jointly and severally warrant to the Purchaser in the terms of Schedule 4 as at Completion and it is hereby declared that the Purchaser has entered into this Agreement in reliance on the Vendors so warranting. 9.2 The Warranties are given subject to matters expressly disclosed in the Disclosure Letter and to the other provisions of this Agreement but no other information relating to the Company of which the Purchaser has knowledge (actual, imputed or constructive) shall prejudice any claim made by the Purchaser under the Warranties or operate to reduce any amount recoverable. 9.3 The Warranties set out in each sub-paragraph or paragraph of Schedule 4 shall be separate and independent, and save as expressly provided, shall not be limited by reference to any other sub-paragraph or anything in this Agreement or the Schedules. 9.4 The Vendors hereby acknowledge to and agree with the Purchaser (as trustee for the Company) that, in making the Warranties and preparing the Disclosure Letter, the Vendors have not relied on any information or advice supplied or given by the Company or its officers and employees and hereby waive any rights which they may have against them in respect of any misrepresentation, inaccuracy or omission in or from any such information and advice. 9.5 Where any of the Warranties is qualified by the words "to the best of the knowledge, information and belief of the Vendors" or "as far as the Vendors are aware" or any similar expression there shall be deemed to be included (save where expressly stated) an additional warranty that the Vendors have made due and careful enquiry in respect of such matters. 9.6 The Vendors hereby warrant to the Purchaser (for itself and as trustee for and for the benefit of the Company that they will at all times keep the Purchaser and the Company indemnified from and against all costs, claims, damages, demands, expenses, losses and liabilities which the Purchaser and/or the Company may sustain incur or pay by reason of any breach or non-fulfillment of any of the Warranties numbered 3, 5, 7, 8, 9, 18.2, 18.4, 24, 25, 27 and 40. 10. LIMITATION OF LIABILITY 10.1 The liability of the Vendors under this Agreement (which for the avoidance of doubt for the purposes of this Clause shall be deemed to include the Schedules thereto) and under the Deed of Indemnity shall be limited in accordance with the following provisions of this Clause notwithstanding any other provision of this Agreement or the Deed of Indemnity and where any such other Provisions appear to be in conflict or inconsistent with this Clause the provisions hereof shall prevail. 10. 2 The liability of the Vendors under this Agreement and under the Deed of Indemnity shall in respect of matters relating to Tax cease six years from the Completion Date and in relation to all other matters shall cease on 31st January 1993 unless as regards any alleged specific breach of any of the warranties or any Tax Claim notice in writing (containing details of the circumstances giving rise to such breach or claim, the nature thereof and the total amount or alleged liability therefor), shall have been served on the Vendors within the respective periods aforementioned and further provided that proceedings shall have been commenced and served on the Vendors within six months of the giving of the notice as aforesaid. 10.3 The liability of the Vendors under this Agreement and under the Deed of Indemnity including for this purpose all reasonable costs and expenses of or incidentals to the negotiation, presentation and settlement of any claim which the Vendors agree to pay shall not in aggregate exceed Pounds 200,000 subject to adjustment following the Completion Audit. 10.4 The Purchaser shall not be entailed to make any claim under the Warranties or under the Deed of Indemnity until the aggregate of all claims has reached Pounds 5,000 when the whole of such claims shall be presented by the Purchaser to the Vendors for payment. 10.5 The Vendors shall have no liability under this Agreement in respect of any loss if and to the extent that the same is covered by any policy of insurance effected by the Company at the date hereof under which the Purchaser is able to recover its loss. 10.6 The Purchaser shall have no claim against the Vendors under the provisions of this Agreement to the extent of the amount of any specific provision or reserve in the Completion Accounts or note in the Accounts for any liabilities (including but not limited to contingent unqualified and disputed liabilities and including provisions for Tax) which would otherwise have been the subject of such claim. 10.7 The Vendors shall have no liability under this Agreement for any claim which would not have arisen but for some voluntary act or transaction carried out by or on behalf of the Purchaser and/or the Company after Completion. 10.8 The Purchaser shall have no claim against the Vendor under this Agreement to the extent that such claim arises as a result only of any provision or reserve in respect thereof being insufficient by reason of an increase in rates of Tax made after the Accounting Date. 10.9 The Purchaser (which shall for this purpose include the Company) shall not be entitled to recover from the Vendors under this Agreement and under the Deed of Indemnity more than once in respect of the same damage suffered. 10.10 In the event of the Purchaser becoming aware of any claim under this Agreement (as opposed to a claim under the Deed of indemnity) it shall as soon as reasonably practicable procure that notice of such claim and circumstances giving rise thereto is given to the Vendors. Subject to being fully indemnified by the Vendors to its reasonable satisfaction the Purchaser or the Company as appropriate will at the request and cost of the Vendors take such action as the Vendors may reasonably request to enforce any claim which either the Purchaser or the Company may have against any third party in respect of such claim under this Agreement and shall account to the Vendors for any amount recovered. 10.11 If any provision for any liabilities including contingent unquantified and disputed liabilities and including provisions for Tax or in respect of any assets (including debts) reflected in the Accounts or the Completion Accounts proves to have been unnecessary or if the Company recovers any debts or parts thereof which have been treated as doubtful or bad for the purposes of the Accounts or the Completion Accounts the amounts of such provision or recovery as the case may be shall be set off against the liability (if any) of the Vendors under this Agreement or under the Deed of indemnity. 10.12 Any amount paid by the Vendors to the Purchaser under this Agreement or under the Deed of Indemnity shall be treated as a reduction in the Purchase Price payable to the Vendors hereunder and any sum subsequently received or benefit received by the Purchaser or the Company from third parties in respect of any amount paid by the Vendors under this Agreement or under the Deed of Indemnity shall forthwith be paid to the Vendors. 10.13 The Purchaser hereby warrants and represents, to the Vendors that, at the date hereof, Purchaser is not aware of any matters fact or thing as may be inconsistent with any of the Warranties or that may give rise to any liability on the part of the Vendors hereunder. 10.14 If any breach or claim arising under the Warranties or under the Indemnities shall arise by reason of some liability of the Company which, at the time the breach is notified to the Vendors, is contingent only, the Vendors shall not to be under any obligation to make any payment to the Company or the Purchaser thereunder until such time as the contingent liability shall become an actual liability. 10.15 No liability shall attach to the Vendors under the Warranties to the extent that (a) the Net Asset Value (after making allowance for Taxation or adjustments to capital allowances and other consequential adjustments) of the Company is increased by reason that:- (i) any assets held at Accounts Date were not included in the Accounts or the value of any such assets shall have been understated in the Accounts; (ii) any losses or other allowable sums previously unutilised become available for set off against Tax; (b) the subject matter thereof is fully taken into account in determining the Net Asset Value of the Company. 10.16 No breach of the Warranties or claim under the Indemnities shall in any event give rise to a right on the part of the Purchaser to rescind or terminate this agreement following Completion. The sole remedy of the Purchaser in respect of any breach of the Warranties shall be in damages. 10.17 Nothing herein or in the Warranties or the Indemnities shall be deemed to relieve the Purchaser or the Company from any common law duty to mitigate any loss or damage incurred by either of them. 10.18 The Purchaser hereby acknowledges that no reliance has been placed nor will at any time hereafter be placed by the Purchaser on any representation or warranty (whether expressed or implied and whether written or oral) relating to the Company other than the Warranties and accordingly all representations and warranties (whether expressed or implied, statutory or otherwise) on the part of the Vendors other than the Warranties are hereby excluded. 10.19 The Purchaser shall not be entitled to make any claim under or pursuant to the Warranties or the Deed of Indemnity in relation to: 10.19.1 any matter where the claim arises as a result of, or would not have arisen but for, legislation not in force at the date of this Agreement, or any change in legislation with retrospective effect after the date of this Agreement; 10.19.2 any claim which has been made good or is otherwise compensated for otherwise than by the Company or the Purchaser. 10.20.1 Within 30 days after circumstances have come to the notice of the Purchaser or the Company which will, or are likely to, or may give rise to a claim under the Warranties or the Deed of Indemnity give to the Vendors written notice of such claim and in particular (but without prejudice to the generality of the foregoing) shall give such written notice of any claim by or against, or any liability of or to any third party (or of circumstances which become known to the Purchaser and/or the Company likely or capable of giving rise to any such claim or liability) in consequence of which the Vendors will or may become liable for a claim under the Warranties or the Deed of Indemnity, and further shall not settle or compromise any such claim or liability without the prior written consent of the Vendors (such consent not to be unreasonably withheld or delayed); and 10.20.2 at all times allow the Vendors and its professional advisers and other agents access to and to inspect and take copies of, all necessary books, and files and records of the Company for the purpose of assessing and dealing with any such claim or liability. 10.21 If the Purchaser is entitled to make a claim both under the Warranties and under the Deed of Indemnity, the claim shall be made first under the Warranties, and any amount payable under the Deed of Indemnity shall be reduced to the extent such claim. 11. NATURE OF OBLIGATIONS 11.1 Each of the Obligations shall be binding on the respective successors, estates and personal representatives of the Vendors. 11.2 If any shares in the Company shall at any time be sold or transferred the benefit of each of the Obligations shall be assignable to the purchaser or transferee of such shares without the consent of the Vendors if the purchaser or transferee is an associated company of the Purchaser and with the consent of the Vendors (such consent not to be unreasonably withheld) in any other case. Such purchaser or transferee shall be entitled to enforce each of the Obligations against the Vendors as if he were named herein as the Purchaser. 11.3 Save as aforesaid none of the rights or obligations hereunder may be assigned or transferred to any other person. 11.4 Warranties representations indemnities covenants agreements and obligations given or entered into by more than one person are given or entered into jointly and severally. 12. CONFIDENTIALITY AND ANNOUNCEMENTS The terms of the letter agreement dated 2nd July 1990 remain in full force and effect save that from and after the execution of this Agreement the Purchaser may make any disclosure or public announcement it thinks fit or is required to make to comply with the requirements of state or federal regulations or laws or the requirements of any stock exchange provided that the Purchaser shall consult with the Vendors if a proposed announcement refers to the Vendors or to Aerovac Systems (Keighley) Limited. 13. FURTHER ASSURANCE The Vendors (at the Purchaser's reasonable request and expense) and the Purchaser shall do and execute and perform all such further deeds, documents, assurances, acts and things as either of them may reasonably require by notice in writing to give effect to the terms of this Agreement. 14. EMPLOYEES 14.1 The Vendors shall for a period of 6 months after Completion endeavour to cause R. A. Knox to remain in the employment or as a consultant or adviser to the Company after Completion. 14. 2 The parties acknowledge that other employees of the Company will be made redundant or dismissed on or after Completion. The Purchaser agrees to consult with the Vendors in connection with such matters and contribute up to Pounds 2,500 in relation thereto. Any additional liability to such employees for compensation for termination of employment or redundancy shall be borne by the Vendors and not by the Company. 15. COSTS Save as for the costs of the Vendors' Accountants referred to in Clause 4.1, each party to this Agreement shall pay its own costs of and incidental to this Agreement and the sale and purchase hereby agreed to be made. 16. WAIVER OF PRE-EMPTION RIGHTS Each of the Vendors hereby waives all rights (if any) which he may have under the articles of association of the Company or in any other way to have any of the Shares offered to him for purchase before such Shares may be offered to any other person. 17. NOTICES Any notice required to be given by any of the parties hereto to any of the others shall be deemed validly served by prepaid registered or recorded delivery letter sent through the post to its address given herein and in the case of the Purchaser copied simultaneously to the Purchaser's solicitor and in the case of the Vendors copied to the Vendors' Solicitor and any notice so served shall be deemed to have been served 48 hours after the time at which it was posted and in proving such service it shall be sufficient to prove that the notice was properly addressed and posted. 18. MISCELLANEOUS 18.1 This Agreement (together with any documents referred to herein) constitutes the whole agreement between the parties hereto and it is expressly declared that no variations hereof shall be effective unless made in writing and executed by the parties hereto or their duly authorised representatives. 18.2 This Agreement shall be governed by English law and the parties hereby submit to the jurisdiction of the English Courts. 18.3 In consideration of the Vendors entering into this Agreement and the Deed of Indemnity, the Guarantor hereby covenants with the Vendors and each of them as primary obligations of the Guarantor:- 18.3.1 to procure that the Purchaser shall duly perform all its respective obligations under this Agreement and the Deed of Indemnity (including all variations, extensions and renewals thereof); 18.3.2 if and whenever the Purchaser shall be in default in the payment when due of any amount payable under any such Agreement, within 5 days after being given notice to that effect by the Vendors to pay all amounts then payable by the Purchaser as though the Guarantor instead of the Purchaser was expressed to be principal debtor; and 18.3.3 to indemnify the Vendors and each of them against-all costs and expenses (including legal fees) which they or either of them may pay or incur in collecting any amounts payable by the Purchaser or the Guarantor and referred to in sub-clause 18.3.2 above. 18.4 Where the Purchaser has failed to pay any amounts due and owing under this Agreement and/or the Deed of Indemnity but the Vendors are unable to recover the same under the Guarantee by reason of any legal limitation, disability or incapacity or any other matter or thing whether known to the Vendors or not, the Vendors shall nevertheless be entitled to recover such amounts from the Guarantor on the basis of an indemnity. 18.5 The Guarantor acknowledges that the liability of the Guarantor under this clause shall not be discharged or affected in any way by time being given to the Purchaser or by any other indulgence or concession being granted to the Purchaser, or by any variation, extension or renewal of this Agreement or the Deed of Indemnity or by any other act, omission, dealing, matter or thing whatsoever (including, without limitation, any change in the Memorandum or Articles of Association of the Purchaser of the Guarantor or the liquidation, dissolution, reconstruction or amalgamation of the Purchaser or the Guarantor) which but for this provision might operate to release the Guarantor from its obligations under this clause. 18.6 This Guarantee is a continuing guarantee and shall remain in force until all obligations of the Purchaser hereby guaranteed have been discharged in full. It is in addition to and shall not prejudice nor be prejudiced by any other guarantee, indemnity or other security or a right against any third party which the Vendors or either of them may have for the due performance of the obligations concerned provided always that the Vendors will use all reasonable efforts to mitigate their losses and in no circumstances shall they be entitled to recover more than once in respect of the same claim or loss. SIGNED by HOWARD THOMAS ) /s/ Howard Thomas Gibson GIBSON in the presence of: ) ------------------------ SIGNED by JOAN GIBSON ) /s/ Joan Gibson in the presence of: ) --------------- SIGNED by ) for and on behalf of ) CHEMFAB HOLDINGS U.K. LIMITED ) in the presence of: ) SIGNED by ) /s/ Gabriel O'Gara for and on behalf of ) ------------------ CHEMICAL FABRICS EUROPE ) LIMITED in the presence of: ) SCHEDULE 1 THE VENDORS (1) (2) Name and Addresses of Vendors Shares ----------------------- ------ Howard Thomas Gibson 5,000 of Aireville, Greenhead Lane, Utley, Keighley, Yorkshire Joan Gibson 5,000 (as above) --------- 10,000 SCHEDULE 2 DEFINITIONS "the Accounting Date" means 31st October 1990; "the Accounts" means the audited balance sheets of the Company, as at the Accounting Date and the audited profit and loss account of the Company for the year ending on the Accounting Date and any notes, reports and documents contained therein or annexed thereto; "CGTA 1979" means the Capital Gains Tax Act 1979; "the Company" means Fluorocarbon Fabrications Limited a company registered in England under number 1300643 and incorporated on 4th April 1977 as a private company limited by shares under the Companies Acts 1948 to 1967; " Completion " means completion of the sale and purchase of the Shares; "the Completion Accounts" has the meaning given in Clause 4.1.1; "the Deed of Indemnity" means a deed of today's date in the form set out in Schedule 5; "the Directors" means the persons listed in Schedule 3; "the Disclosure Letter" means the letter including all attachments thereto and documents expressly referred to therein of even date herewith from the Vendors' Solicitors to the Purchaser's Solicitors; "the Indemnities" the indemnities contained in the Deed of Indemnity; "the Net Asset Value" the aggregate of the capital and reserves of the Company as at Completion as shown by the Completion Accounts including Fixed Assets as defined in Clause 4.4 but excluding any prepaid rent or insurance premiums; "the Obligations" means each of the obligations, warranties and undertakings undertaken or given by the Vendors or either of them in or pursuant to this Agreement; "the Purchase Price" means the consideration for the Shares determined in accordance with Clauses 3.1, 3.2 and 4; "the Purchaser's Accountants" means Messrs. Ernst & Young of Commercial Union House, Albert Square, Manchester M2 6LP "the Purchaser's Solicitors" means Messrs. Withers of 20 Essex Street, London, WC2R 3AL Reference PWD/CAS; "the Records" means all lists of customers, books, accounts, ledgers, financial and other records and other documents of whatever kind relating to the Company and whether electronically or magnetically or otherwise stored or recorded; "the Shares" means the shares to be bought and sold pursuant to Clause 2.1; "the Supply Agreement" means the supply agreement of even date herewith relating to PTFE glass cloth, skived PTFE film products and all other fluoro-polymer containing products supplied by Chemical Fabrics Europe to Aerovac Systems (Keighley) Limited "Tax" includes all forms of tax, charge, impost, duty, levy, liability or sum of whatever kind payable in respect of income, profits, distributions, assets, gains and receipts of all kinds or otherwise at the instance of the Revenue, Customs, fiscal, governmental or local authorities of the United Kingdom or elsewhere and all penalties, charges and interest relating to any claim for taxation, including (without limitation) income tax, the investment income surcharge, corporation tax, capital gains tax, development land tax, rates, value added tax, customs and other import duties, stamp duty, stamp duty reserve tax, estate duty, capital transfer tax, inheritance tax, capital duty, the special charge, petroleum revenue tax, poll tax, payments to be made by the Company under the Pay As You Earn system, National Insurance Contributions and any interest penalty or fine in connection therewith; "the Taxes Act" means the Income and Corporation Taxes Act 1988; "the Taxes Act 1970" means the Income and Corporation Taxes Act 1970; "the Vendors Accountants" means Clark Whitehall Josolyne of Holly House, Spring Gardens Lane, Keighley, West York BD20 6LE "the Vendors' Solicitors" means Hammond Suddards of Empire House, 10 Piccadilly, Bradford BD1 3LR (ref: SXK/RMS); "the VATA 1983" means the Value Added Tax Act 1983; "the Warranties" means the warranties set out in Schedule 4 given by the Vendors under sub-clauses 9.1, 9.5 and 9.6; SCHEDULE 3 THE DIRECTORS Name of Director - ---------------- Howard Thomas Gibson Joan Gibson SCHEDULE 4 THE WARRANTIES 1. Accuracy of Information The facts set out in the recitals B and C and schedules 1 and 3 to this Agreement are true and accurate in all respects. 2. Ownership of the Shares There is no option, right to acquire, right of first refusal, right of pre-emption other than in the Company's articles of association, mortgage, charge, pledge, lien or other form of security or encumbrance on over or affecting any shares in the capital of the Company and there is no agreement or commitment to give or create any of the foregoing and no claim has been made by any person to be entitled to any of the foregoing, and the Vendors are entitled to sell and transfer the full legal and beneficial ownership in the whole of the issued share capital of the Company to the Purchase on the terms set out in this Agreement nor do any Circumstances exist whereby any third party may properly claim entitlement or possession of any of the Shares. 3. No Subsidiaries, Associations or Branches 3.1 The Company: 3.1.1 is not the holder or beneficial owner of any class of any shares or other securities of any other company (whether incorporated in the United Kingdom or elsewhere); 3.1.2 is not a member of any partnership or other unincorporated association (other than recognised trade associations); and 3.1.3 has no branch or permanent establishment outside the United Kingdom; 3.1.4 does not control (within the meaning of Section 840 Taxes Act) any company. 4. Corporate Organisation 4.1 The register of members of the Company contains complete and accurate records of the members of the Company from time to time and the Company has not received any notice or application or notice of any intended application for the rectification thereof. 4.2 The statutory books of the Company are written up to date to the day before Completion and share certificates have been properly issued to the Vendors and the Company has recorded in duly signed minutes all resolutions and proceedings which ought to be so recorded. 4.3 All returns, particulars, resolutions and other documents required to be filed with the Registrar of Companies have been filed by the Company and the Company has not materially breached any provisions of the Companies Act 1985. 4.4 The Company has not exercised or purported to exercise or claimed any liens over any of its issued shares and no call on any shares is outstanding and all such shares are fully paid up or credited as fully paid up. 4.5 The Company has not at any time capitalised or agreed to capitalise (in the form of shares, debentures or other securities or in paying up any amounts unpaid on any shares, debentures or other securities) any profits or reserves of any class or description or passed or agreed to pass any resolution to do so. 4.6 No person has the right to call for the issue of any share or loan capital of the Company by reason of any conversion rights or under any option or other agreement. 4.7 The copy of the memorandum and articles of association of the Company which is annexed to the Disclosure Letter is true and up to date and incorporates all documents and information required to be annexed thereto or embodied therein and the Company has complied with all the provisions of its memorandum and articles of association and in particular (but without prejudice to the generality of the foregoing) has not entered into any ultra vires transaction. 4.8 As far as the Vendors are aware, all necessary records, deeds, agreements and documents relating to the Company, its assets and its business have been fully, properly and accurately prepared and maintained in accordance with the Companies Act 1985. All such records are in the possession of the Company or under its control. 5. Accounts 5.1 The Accounts and the audited balance sheet and profit and loss account of the Company for the financial years ended 31st October 1988, 1989 and 1990: 5.1.1 have been prepared in accordance with the Companies Act 1985 and other applicable statutes and regulations and statements of standard accounting practice and show a true and fair view of the affairs of the Company as at the respective dates to which they have been drawn up and of the results of the Company for the accounting reference periods ended on each of those dates and are not affected by any exceptional or extraordinary items; and 5.1.2 fully disclose all income and assets and make provision or reserve or disclosure for all its known liabilities (whether of a capital or income nature and whether or not quantified or disputed) and fully disclose by way of note any known prospective or contingent liability of the Company at the Accounting Date. 5.2 Book Debts So far as the Vendors are aware (having made enquiries only of the Company's employees and those responsible for its credit control function) the debts included in the Accounts owed to the Company (except as provided in the bad debt reserve) will be recoverable in full within six months of the date hereof. 5.3 The bases and policies of accounting of the Company adopted for the purpose of preparing the Accounts are the same as those adopted for the purpose of preparing the audited accounts for the last three accounting periods. 5.4 There were no commitments of a capital nature outstanding at the Accounting Date (save as disclosed in the Accounts) and since the Accounting Date the Company has not entered into nor agreed to enter into any such commitments in excess of Pounds 500. 6. Dividends or Distributions Other than the dividends referred to in the Disclosure Letter, no dividends or other distributions of profits or management charges or special bonuses have been or will be declared, made or paid by the Company after the Accounting Date and prior to Completion and all dividends or distributions of profits declared, made or paid since the date of incorporation of the Company have been declared, made or paid in accordance with law and its articles of association. 7. Borrowings 7.1 The total amount borrowed by the Company from its bankers does not exceed its overdraft facilities and the total amount borrowed by the Company from whatsoever source does not exceed any limitation on its borrowing contained in its articles of association or in any debenture stock deed or other deed or document executed by it. 7.2 The Company does not have any outstanding loan capital, nor has it factored its debts or borrowed (otherwise than from banks) any money which it has not repaid. 7.3 The Company has not lent any money which has not been repaid to it nor does it own the benefit of any debt (whether present or future) other than debts accrued to it in the ordinary course of its business. 8. Bank Accounts and Borrowing Facilities 8.1 A statement of all the bank and other money accounts of the Company and of the credit or debit balances thereon as at a date not more than two working days prior to the date hereof has been supplied to the Purchaser and the Company has no other bank or deposit accounts (whether in credit or overdrawn) not included in such statement. 8.2 In relation to such encumbrances (if any) as have been disclosed and in relation to such bank overdraft, borrowing or other financial facilities as are available to the Company: 8.2.1 the Vendors have supplied to the Purchaser full details thereof and true copies of all documents relating thereto; 8.2.2 there has been no contravention or non-compliance with any provision of any such document; 8.2.3 no steps for the enforcement of any encumbrances have been taken or threatened; 8.2.4 there has not been any alteration in the terms and conditions of any of the said arrangements; 8.2.5 the Vendors and the Company have not done anything (including, without limitation, entering into this Agreement) whereby the continuance of the said arrangements and facilities in full force and effect might be affected or prejudiced; and 8.2.6 none of the said arrangements is dependent on the guarantee of or on any security provided by the Vendors or a third party. 9. Tax Provisions 9.1 Full provision or reserve has been made in the Accounts (other than any amount of corporation tax wholly attributable to an increase in the rate of corporation tax made after the date thereof) for all Tax liable to be assessed on the Company or for which it is accountable or which is likely to be claimed in respect of income, profits or gains earned, accrued or received, or deemed to have been earned, accrued or received on or before the Accounting Date or any event or deemed event on or before the Accounting Date including distributions made down to such date or provided for in the Accounts and proper provision has been made in the Accounts for deferred Tax in accordance with generally accepted accountancy principles. 9.2 Returns The Company has properly and punctually made in all material respects all computations, payments and returns and provided all notices, accounts and information required for Tax purposes and all of such computations, payments and such notices, accounts, information and returns were when made (or subsequently amended) correct and made on a proper basis and none is or is known by the Vendors to be likely to be disputed by the Inland Revenue or any other authority concerned. 9.3 Payment of Tax The Company has duly and punctually paid all Tax which it has become liable to pay and is under no liability to pay any penalty or interest in connection with any claim for Tax. 9.4 PAYE The Company has properly operated the Pay As You Earn system, deducting Tax as required by law from all payments to or treated as made to employees and ex-employees of the Company and accounting to the Inland Revenue for all Tax so deducted and all Tax chargeable on benefit's provided for directors and employees of the Company. 9.5 Payments Under Deduction All payments by the Company to any person which ought to have been made under deduction of Tax have been so made and the Company has (if required by law to do so) accounted to the appropriate Tax authorities for the Tax so deducted. 9.6 Group Income The Company has at no time been a member of a group of companies (as defined in Section 272 Taxes Act 1970 or Section 29 VATA 1983) nor been owned by a consortium within the meaning of Section 247 (group income) or Section 413(6) (group relief) Taxes Act. 9.7 Advance Corporation Tax 9.7.1 The Disclosure Letter contains particulars of all arrangements and agreements to which the Company is or has been a party relating to the surrender of advance corporation tax made or received by the Company under Section 240 Taxes Act (setting off company's surplus advance corporation tax against subsidiary's liabilities) and: 9.7.2 the Company has not paid nor is liable to pay for the benefit of any advance corporation tax which is now known to be or may become incapable of set off against the Company's present or future anticipated liabilities to corporation tax; and 9.7.3 The Company has not made or received nor purported or agreed to make or receive any surrender of the benefit of advance corporation tax under Section 240 Taxes Act (setting off company's surplus advance corporation tax against subsidiary's liability). 9.7.4 The Company has no surplus advance corporation tax 9.7.5 Section 245 Taxes Act (treatment of Act on change of ownership of company) does not apply to the surplus advance corporation tax of the Company. 9.8 Close Company The Company is a close company within the meaning of Section 414 Taxes Act. 9.9 Capital Assets 9.9.1 If each of the Fixed Assets were disposed of for a consideration equal to the book value of that asset in or adopted for the purpose of the Accounts no liability to corporation tax on chargeable gains or balancing charge under the Capital Allowances Act 1968 or Finance Act 1971 would arise in excess of the deferred tax provision made or to be made in the Completion Accounts. 9.9.2 The Company has not appropriated any capital item to trading stock. 9.9.3 The Company has made no claim under Sections 115, 116 or 111A CGTA 1979 (roll-over relief). 9.9.4 The Company has not made a claim pursuant to Section 21 CGTA 1979 (compensation and insurance money). 9.9.5 No asset owned by the Company is subject to a deemed disposal and re- acquisition under Schedule 5 paragraphs 11, 14 or 16 CGTA 1979 (rules for assets acquired prior to 6th April 1965). 9.9.6 No gain chargeable to corporation tax will accrue to the Company on the disposal of any debt owing to the Company not being a debt on a security. 9.9.7 The Company has not acquired benefits under any policy of insurance or assurance otherwise than as original beneficial owner. 9.10 The Company is not entitled to any allowable losses (in accordance with the provisions of Section 345(1) Taxes Act (definition of chargeable gains)) to reduce any chargeable gains for corporation tax purposes accruing to the Company upon disposals by the Company which take place at any time after Completion. 9.11 Capital Allowances So far as the Vendors are aware (having made no enquiry) the Company has not engaged in any transaction to which Sections 157 and 75 of the Capital Allowances Act 1990 (anti avoidance provisions) applies. 9.12 Transaction not at Arm's Length The Company has not disposed of nor acquired any asset in circumstances such that the provisions of Section 29A CGTA 1979 (disposals and acquisitions treated as made at market value) could apply to such disposal or acquisition, nor entered into any transaction at an undervalue (as defined by Section 238 Insolvency Act 1986) or otherwise than by way of bargain at arm's length, nor given a preference (as defined by Section 239 Insolvency Act 1986) nor entered into any material transaction with a connected person (as defined by section 63 Capital Gains Tax Act 1979). 9.13 Trading Losses 9.13.1 There are no trading losses brought forward at the Accounting Date. 9.13.2 Any losses to which the Company claims entitlement in accordance with the provisions of Sections 338 (allowance or charges on income) and 393(9) (certain charges treated as losses) Taxes Act are in respect of payments made wholly and exclusively for the purpose of the trade of the Company. 9.13.3 Within the period of three years ended with the date hereof there has been no major change in the nature or conduct of any trade now carried on by the Company or change of ownership of the Company (within the meaning of Section 768 Taxes Act (disallowance of trading losses)) and the Company has not during that period taken over or acquired a trade or part of a trade hitherto carried on by some other person. 9.13. 4 No trade of the Company has ceased or become small or negligible. 9.13.5 No government investment in the Company has been written-off in circumstances such that Section 48 Finance Act 1981 or Section 400 Taxes Act (restriction of tax losses) will apply. 9.14 Withdrawal of Relief The Company is not liable so car as the Vendors are aware to the withdrawal of any form of relief against Tax and there is no information available to the Vendors from which it appears that the Company may be liable to such withdrawal. 9.15 Annual Payments All interest, rent, service charges, royalties, annuities and other annual payments paid or payable by the Company under any loan, lease, contract, agreement, covenant or other commitment or arrangement is or are or will be deductible for corporation tax purposes, whether in computing income from a particular source or in computing total profits or otherwise. 9.16 Gifts The Company is not liable to be assessed to corporation tax on chargeable gains or to inheritance tax or capital transfer tax as donor or donee of any gift or transferor or transferee of value. 9.17 Distributions 9.17.1 No distribution within the meaning of Sections 209, 210 or 418 Taxes Act (transactions amounting to distributions) has been made by the Company since 5th April 1965, except dividends shown in its audited accounts, nor is the Company bound to make any such distribution. 9.17.2 No security within the meaning of Section 254(l) Taxes Act issued by the Company and outstanding at the date hereof was issued in such circumstances or is of such a character that interest payable thereon falls to be treated as a distribution under Section 209 Taxes Act (transactions amounting to distributions). 9.17.3 The Company has not at any time after the 6th April 1965 repaid or agreed to repay any share capital or otherwise reduced or agreed to reduce its share capital or issued or agreed to issue any share capital or paid up or agreed to pay up any share capital otherwise than by the receipt of new consideration (as defined in Section 254(i) and (5) Taxes Act). 9.18 Payment to Employees 9.18.1 The Company has not made any payment whether gratuitous or otherwise to or provided any benefit for any officer or employee or ex-officer or ex-employee of the Company which is not allowable in full as a deduction in calculating the profits of the Company for taxation purposes. 9.18.2 The Company has not issued any shares in the circumstances described in Section 138 Taxes Act or Section 77(1) Finance Act 1988 (share incentive schemes). 9.19 National Insurance etc. The Company has paid all national insurance and graduated pension contributions for which it is liable and has properly accounted for all national insurance contributions deductible out of employees' remuneration and has kept proper books, records, invoices and other documents relating to the same and has available for reference all such records, invoices and other documents. 9.20 Pension Scheme The Company is not required to contribute to any pension scheme or insurance scheme and has no outstanding liabilities from any such schemes in place prior to Completion. 9.21 Value Added Tax 9.21.1 The Company has VAT Registration Number 287435621 and has complied with all statutory provisions and regulations relating to value added tax and has not been requested to give security under such legislation and has duly paid or provided for or will in the Completion Accounts provide for all amounts of value added tax for which the Company is liable. 9.21.2 All supplies made by the Company are taxable supplies or are exempt supplies within the applicable de minimis, limits and the Company is not and will not be denied credit for any input tax by reason of the operation of Section 15(l)(b) or (c) VATA 1983 (input tax allowable) and regulations made thereunder. 9.21.3 No supplies have been made to the Company to which the provisions of Section 7 VATA 1983 (reverse charge on supplies received from abroad) apply. 9.22 Stamp Duty and Capital Duty 9.22.1 All documents in the enforcement of which the Company may be interested have been properly stamped in accordance with applicable stamp duty legislation. 9.22.2 The Company has complied with the provisions of the Finance Act 1973 relating to capital duty and has duly paid all capital duty which it is liable to pay and has not made any claim for relief or exemption under Section 55 Finance Act 1927, Section 27 Finance Act 1967, Schedule 19 Finance Act 1973, Section 78 Finance Act 1985 or Sections 75, 76 or 77 Finance Act 1986 (provisions for relief from stamp and capital duty for companies). 9.22.3 The Company has not made any claim for relief or exemption under Section 42 Finance Act 1930 (relief from stamp duty for associated companies). 9.23 Tax Avoidance The Company has not been a party to or otherwise involved in any tax avoidance transaction scheme or arrangement whose principal purpose was tax avoidance and which had limited or no commercial benefit. 9.24 Share Capital The Company has not since its incorporation purchased or redeemed or agreed to purchase or redeem any of its share capital; or provided any financial assistance or, in breach of the companies Act 1985, agreed (whether contingently or otherwise) to provide any financial assistance for the purchase, subscription or other acquisition of its own shares. 9.25 Overseas Provisions 9.25.1 The Company has never been the equal or beneficial owner or controller (whether directly or indirectly through another company) of any share capital or securities in another company resident outside the UK for UK tax purposes. 9.25.2 The Company has not transferred a trade carried on by it outside the United Kingdom through a branch or agency to a company not resident in the UK for UK tax purposes in such circumstances that a chargeable gain may be deemed to arise at a date after such transfer under Sections 268 or 268A Taxes Act 1970 (postponement of charge on transfer of assets to non-resident company). 9.25.3 The Company does not own and has never owned a material interest in an offshore fund which is or has ever been a non-qualifying offshore fund as defined by Section 760 Taxes Act. 9.26 Corporation Tax Failing on Shareholder The Company has not received any capital distribution to which the provisions of Section 346 Taxes Act (recovery of corporation tax from shareholder) could apply. 10. Trading Matters 10.1 Since the Accounting Date: 10.1.1 the business of the Company has been continued in the ordinary and proper course; 10.1.2 the turnover, the financial and trading position of the Company has not deteriorated; 10.1.3 the average period of credit given. by the Company has not been longer than that shown by the Accounts; 10.1.4 no asset has been acquired by the Company on deferred payment terms in respect of which any part of the purchase price remains outstanding. 10.2 Since the Accounting Date as far as the Vendors are aware: 10.2.1 no supplier of the Company has ceased supplying the Company or substantially reduced its the supplies to the Company; and 10.2.2 no customer of the Company has terminated any contract with the Company or ceased or materially reduced its business with it; and to the best of the Vendors' knowledge information and belief (having made no external enquiries) after the date hereof, no supplier or customer will do so. 11. Licences and Consents The Company has all necessary licences (including statutory licences), consents and approvals for the proper carrying on of its business and none of the Vendors knows (having made no enquiries) of any factors that might in any way prejudice the continuance or renewal of any of those licences, consents or approvals and the Company is not restricted by contract from carrying on its present activities in any part of the world. 12. Material Contracts 12.1 All contracts which are material (which shall mean contracts of kinds referred to in the following sub-paragraph) have been disclosed in the Disclosure Letter. 12.2 The Company is not a party to any contract, transaction, obligation, commitment, arrangement or liability which: 12.2.1 is of an onerous nature; or 12.2.2 is for a fixed term of more than 6 months; or 12.2.3 is incapable of complete performance in accordance with its terms within 6 months after the date on which it was entered into or undertaken; or 12.2.4 not being for a fixed term is incapable of termination in accordance with its terms by the Company on 60 days' notice or less; or 12.2.5 is known will result in a loss to the Company on completion of performance; or 12.2.6 cannot readily be fulfilled or performed by the Company on time and without undue or unusual expenditure of money and effort; or 12.2.7 involves or will involve obligations, expenditure or receipts of an unusual or exceptional nature and not in the ordinary and proper course of the Company's business; or 12.2.8 involves payment by the Company by reference to fluctuations in the index of retail prices published by the Department of Employment or any other similar index; or 12.2.9 requires an aggregate consideration payable by the Company in excess of Pounds 10,000; or 12.2.10 involves the supply of goods the aggregate sale value of which will be in excess of 10 per cent of the turnover for the current financial year of the Company; or 12.2.11 contains currency or commodity renegotiation or re-determination clauses; or 12.2.12 is so far as the Vendors are aware (having made no enquiry) in any way otherwise than in the ordinary and proper course oil the Company's business; or 12.2.13 is in breach of any statutory or delegated legislative provision; or 12.2.14 is a contract by which the obligations of the Company to a party are sub-contracted to a third party. 13. Other Contracts 13.1 Compliance with the terms of this Agreement does not and will not: 13.1.1 conflict with or result in the breach of or constitute a default under any of the terms, conditions or provisions of: 13.1.1.1 any agreement or instrument to which the Company is now a party; or 13.1.1.2 the Company's memorandum or articles of association; or 13.1.1.3 any loan to or mortgage, guarantee or charge created or entered into by the Company or any lien, lease, order, judgment, award, injunction, decree, ordinance or regulation or any other restriction of any kind or character to which any property of the Company is subject or by which the Company is bound; or 13.1. 2 relieve any other party to a contract with the Company of its obligations thereunder, or enable it to terminate its obligations thereunder; or 13.1.3 result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever on any of the Company's property or assets. 14. Outstanding Offers Save in the ordinary course of the Company's business no offer, tender or the like is outstanding which is capable of being converted into an obligation of the Company by an acceptance or other act of some other person. 15. Defective Products So far as the Vendors are aware (having made no enquiry), the Company has not prior to the date hereof manufactured or sold products which are or have or will become in any material respect faulty or defective or which do not comply in any material respect with any warranties or representations expressly or impliedly made by the Company nor has the Company expressly accepted any liability or obligation to service, repair, maintain, take back or otherwise do or not do anything in respect of any articles or stock that would apply after any such article or stock has been delivered by it. 16. Other Parties' Defaults No person with whom the Company has entered into any contract is known to be in material default thereunder. 17. Ownership of Assets 17.1 The Company owned at the Accounting Date and (except for current assets subsequently sold or realised in the ordinary and proper course of business) still owns at the date hereof all the assets included in the Accounts and none of such assets is the subject of an agreement for payment on deferred terms or has been acquired by the Company in circumstances which render such asset liable to cancellation or avoidance under any statute or other rule of law. 17.2 The Company has not disposed of or agreed to disclose of, or granted or agreed to grant any option, right of pre-emption or right of first refusal in respect of, or offered for sale, its estate or interest in any of the Fixed Assets. 17.3 None of the property, assets, undertaking, goodwill or uncalled capital of or used by the Company is subject to any debentures, mortgages charges, liens, deposits by way of security, bills of sale, hire purchase, credit or conditional sale or other agreements for payment on deferred terms or any other encumbrance of any nature or any agreement or commitment to give or create any of the foregoing but the same are the sole, unencumbered absolute property or the Company free from encumbrances. 17.4 No charge of any description by the Company has crystallised, nor has any event occurred which, with the passage of time, will or could cause any charge to crystallise, over all or any the assets or property (including, without limitation, the Properties) of the Company. 18. Plant in Working Order 18.1 The Fixed Assets are, having regard to their values, age and condition, capable, and will (having regard as aforesaid and subject to fair wear and tear) be capable, over the period of time during which they will be written down to a nil value in the accounts of the Company, of doing the work for which they were purchased. 18.2 do not (if correctly used) contravene any law or requirement or restriction having the force of law. 19. Compliance with-Laws As far as the Vendors are aware (having made no enquiry), neither the Company nor any of its officers, agents or employees (during the course of their duties in relation to the Company) has committed or omitted to do any act or thing the commission or omission of which in contravention of any Act, order, regulation, decree, judgment, ruling, law (whether created by statute or otherwise) or the like made in any country by any government, government agency, court or other body giving rise to any fine, penalty, default proceedings or other liability on the part of, or which could have a material adverse effect upon the assets or business of, the Company including, without limitation, such legislation or regulations relating to the administration of companies, employment, health and safety, environmental protection, pollution. 20. Insurance Brief details of all the Company's insurance policies have been disclosed to the Purchaser and all such insurance is currently in full force and effect and nothing has been done or omitted to be done which could make any policy of insurance void or voidable and there are no claims outstanding, pending or threatened against the Company by any employee or third party in respect of any accident or injury which are not fully covered by insurance. 21. No Bonus Schemes There are no schemes in operation whereunder any employee of the Company or so far as the Vendors are aware any other person is entitled to a commission or remuneration of any other sort calculated by reference to the whole or part of the turnover profits or sales of the Company. 22. Remuneration of Senior Executives 22.1 Since the Accounting Date no change has been made in the rate of remuneration or the emoluments or pension or other benefits of any director, ex-director or senior executive of the Company (a senior executive being a person in receipt of remuneration in excess of Pounds 30,000 per annum) and no change has been made in the terms of the engagement of any director or senior executive of the Company and no additional directors have been appointed. 22.2 No money other than in respect of remuneration or emoluments for employment is payable to or for the benefit of any director or senior executive of the Company. 23. Contracts of Service Terminable on Three Months' Notice All subsisting contracts of service to which the Company is a party are terminable on three months' notice or less without compensation (other than compensation in accordance with the Employment Protection (Consolidation) Act 1978). 24. Directors No person other than the Directors is a director or shadow director of the Company. No director is or has been disqualified from acting as a company director under any rule of law. 25. Particulars of Employees The particulars shown in the schedule of employees annexed to the Disclosure Letter are true and complete and show all remuneration payable and other benefits provided and which the Company is bound to provide (whether now or in the future) together with the dates of birth and commencement of employment with the Company of each officer and employee of the Company. 26. Future Pay Increases The Company is not under any obligation to increase the remuneration of or to make any bonus or incentive payments to any of its employees or officers at any future date. 27. Social Arrangements The company is not a party to (i) any consultancy or management agreements; or (ii) any arrangement or contract with a trade union, or other body representing employees of the Company or any trade Organisation of employers. 28. Insider Contracts 28.1 There is not outstanding and there has not at any time during the last six years been outstanding any contract or legally binding arrangement to which the Company is a party and in which either of the Vendors or any director or employee of the Company is or has been interested, whether directly or indirectly, and the Company is not a party to, nor have its profits or financial position during such period been affected by, contract or arrangement which is not of an entirely arm's length nature. 28.2 There are no agreements or understandings (whether legally enforceable or not) between (i) the Company and (ii) any person who is a shareholder or the beneficial owner of any interest in the Company or any company in which such a person is interested relating to (a) the management of the Company's business; or (b) the appointment or removal of its directors; or (c) the ownership or transfer of ownership or the letting or possession of any of its assets; or (d) the provision of finance, goods, services or other facilities to or by the Company; or (e) otherwise howsoever relating to the Company or its affairs. 29. Litigation 29.1 The Company is not engaged in or threatened by any litigation or arbitration proceedings (save for routine debt collection) as plaintiff, defendant or third party. 29.2 The Company is not involved in any industrial or trade dispute or any other dispute regarding any claim with any of its employees or any trade union or trade Organisation and to the best of the knowledge, information and belief of the Vendors there are no facts or circumstances which might give rise to such industrial action or dispute. 29.3 The Company is not a party to any collective agreement, dismissal procedures agreement or union membership agreement whether such agreement is binding in law or not. 30. Agencies, Licences etc. The company is not a party to any agency, distributorship, marketing, purchasing, manufacturing or licensing agreement or any restrictive trading or other agreement pursuant to which any part of its business is carried on, or which in any way restricts its freedom to carry on the whole or any part of its business in any part of the word, in such manner as it thinks fit or which in any way infringes, or which has or should have been registered or notified under, the Restrictive Trade Practices Acts, the Monopolies and Mergers Acts, the Fair Trading Act 1973, Articles 85 or 86 Treaty of Rome or any other anti- trust, anti-monopoly or anti-cartel legislation and the Company has not pursued and is not pursuing any course of conduct which -amounts to an anti-competitive practice within the meaning of Section 2(l) Competition Act 1980. 31. No Disclosure of Trade Secrets No disclosure has been made by the Company or the Vendors to any person other than the Purchaser and its advisers of any of the industrial know-how or the financial or trade secrets of the Company save in the ordinary and proper course of business of the Company and upon the Company having secured as far as practicable the confidential nature of any such disclosure. 32. Know-how Patents etc. 32.1 Full details of all know-how, patents, trade marks (whether registered or not), registered and unregistered designs, or other industrial or commercial monopoly rights used by the Company in its business in the 2 years prior to Completion ("the Intellectual Property Rights") have been disclosed in the Disclosure Letter to the Purchaser's Solicitors 32.2 The Company is the sole registered proprietor and is entitled beneficially to the Intellectual Property Rights and the applications made respectively therefor. 32.3 The Vendors have received no written notice that any goods or articles manufactured by the Company or method or process employed by the Company (or by any licensees under any licence granted by the Company) infringe any patents, trade marks, registered or unregistered designs or other industrial or commercial monopoly rights or rights relating to confidentiality of information of any third party or that any claim has been made against the Company or any such licensee in respect of such infringement. 32.4 Full details of all licence agreements relating to the Intellectual Property Rights confidential information or the like to which the Company is a party (whether as licensor or licensee) have been disclosed to the Purchaser in the Disclosure Letter and all such agreements are valid and subsisting and nothing has been done or omitted to be done by the Company which would enable any such agreement to be terminated or which would in any way constitute a breach of the terms of any such agreement. 33. Business Names The Company does not carry on nor has carried on business under or used a name other than its corporate name. 34. Fees No one is entitled to receive any finders' fee, brokerage or other commission from the Company nor has the Company paid or promised to pay any fees incurred in connection with this transaction. 35. No Powers of Attorney There are no powers of attorney in force given by the Company nor have the directors of the Company given any express or implied authority to any person to act on behalf of or represent the Company. 36. Investment Grants The Company has not done or failed to do any act or thing which could result in all or any part of an investment grant or other similar payment or allowance made or due to be made to it becoming repayable or being forfeited by it and full particulars of all claims by the Company to any investment grant or other similar payment or allowance which have been made during the last 6 years have been disclosed in the Disclosure Letter to the Purchaser. 37. Guarantees, Joint Ventures etc. The Company is not a party to any contract for guarantee, indemnity or suretyship or any partnership, joint venture or consortium agreement. 38. Properties There are no outstanding liabilities or residual obligations under any agreements relating to freehold or leasehold property held by the Company prior to Completion and the Company holds no current interest in any such property. 39. Environmental Matters The Company itself has complied with and the Vendors are aware of no previous breach of any legislation (including regulations, codes of practice, circulars and guidance notes made thereunder) relating to environmental matters, including (but without limitation) waste, contaminated land, discharges to land, ground and surface water and sewers, emissions to air, noise, dangerous, hazardous or toxic substances and materials, nuisance, health and safety and neither the Company nor the Vendors is aware of any action, claims or proceedings (whether actual or potential) nor has any other reason to believe that the Company has or is likely to have any liability in relation to such matters. 40. Inter-company sales The value of inter-company sales between the Company and Aerovac Systems (Keighley) Limited in the periods ended 31 October 1988, 1989 and 1990 have been Pounds 86,316, Pounds 148,970 and Pounds 73,522 respectively. 41. Shipments The Company has shipped goods since the Accounting Date in accordance with normal or requested delivery dates from customers. SCHEDULE 5 DEED OF INDEMNITY THIS DEED is made the [ ] day of [ ] 19 [ ] PARTIES:- (1) HOWARD THOMAS GIBSON and JOAN GIBSON (together "the Covenantors"); (2) FLUOROCARBON FABRICATIONS LIMITED ("the Company") incorporated in England with registered number 1306643 whose registered office is at Bradford Road, Sandbeds, Keighley, West Yorkshire; and (3) CHEMFAB HOLDINGS U.K. LIMITED ("the Purchaser") RECITALS:- This Deed is entered into pursuant to an Agreement of even date herewith ("the Agreement") and made between the Covenantors of the one part and the Purchaser of the other part whereby the Purchaser has agreed to purchase the whole of the issued share capital of the Company. NOW THIS DEED WITNESSES AND IT IS HEREBY AGREED AND DECLARED as follows:- 1. Interpretation 1.1 In this Deed unless the context otherwise requires: 1.1.1 words and expressions defined in the Agreement shall have the same meaning herein and any provisions in the Agreement concerning matters of construction or interpretation shall also apply in this Deed; 1.2 For the purposes of this Deed a payment of Tax shall be deemed to have been made by the Company if a payment of Tax would properly have been made by it but for the utilisation of any losses, allowances, credits, reliefs, deductions or set-offs by the Company for its own benefit (other than losses, allowances, credits, reliefs, deductions or set-offs which relate to any period or arose to the benefit of the Company prior to Completion and without prejudice to the generality of the foregoing, and by way of example only, a payment of Tax shall be deemed to have been made if such a payment would have been made but for the availability to the Company of losses arising after completion and carried back to a period ending on or before that date under the provisions of Section 393(2) Taxes Act (losses other than terminal losses). 1.3 For the purposes of this Deed a payment of Tax deemed to have been made in accordance with the provisions of sub-clause 1.2 hereof shall be deemed to have been made on the date on which such payment of Tax would have been made (assuming that no appeal had been made against the assessment or other notification in respect of any such Tax) but for the availability of the losses, allowances, credits, reliefs, deductions or set-offs concerned. 2. Indemnity 2.1 The Covenantors (for themselves and their respective estates and personal representatives) hereby jointly and severally covenant with the Purchaser and persons to whom the Purchaser has assigned or may assign the benefit of the Purchaser's rights under this Deed and (as a separate covenant) with the Company that subject as herein and in Clause 10 of the Agreement provided the Covenantors will, as directed by the Purchaser, pay to the Purchaser or to the Company an amount equal to: 2.1.1 any payment of Tax made or hereunder deemed to be made by the Company as a direct or indirect result of any act, omission, event, transaction or series of transactions (excluding the entering into and/or completion of the Agreement or any transactions contemplated thereby) occurring wholly or partly on or before the date hereof 2.1.2 any Tax the right to a repayment of which has been taken into account in the Accounts and which right is lost or cancelled, in whole or in part; 2.1.3 any payment of Tax or deemed payment of Tax by the Company resulting from the receipt by the Purchaser or the Company of any payment under the provisions of this Deed provided that if it shall be finally determined (whether by agreement or on appeal) that any payment ("the original payment") made under this sub-clause is itself liable to Tax such payment shall be increased to such sum as after allowing for Tax or deemed payment of Tax thereon is equal to the original payment; and 2.1.4 any reasonable costs or expenses reasonably incurred by the Company in connection with any such payment or deemed payment of Tax or loss or cancellation of a right to a repayment of Tax as is referred to in sub-clauses 2.1.1, 2.1.2 or 2.1.3 hereof or in connection with any action reasonably taken in avoiding, resisting or settling any such payment or claim for payment or in connection with the recovery of payment from the Covenantors under this Deed, such payment to be made, where the same relates to a payment of Tax by the Company, on the day on which such payment of Tax is due and payable, where the same relates to a deemed payment of Tax, on the date on which such payment is deemed to have been made under the provisions of sub-clause 1.3 hereof and where the same relates to a lost right of repayment under sub-clause 2.1.2 above on the date of notification to the Company that such repayment shall not be made or, if later, the date on which such repayment was due for the purpose of being taken into account in the Accounts. 3. Interest If the Covenantors shall fail to pay any sum due from them hereunder on the due date for payment in accordance herewith the Covenantors shall pay interest thereon from such date until payment in full (after as well as before any judgment) compounded with half yearly rests on 1st January and 1st July of each year such interest being computed at the rate of four per cent per annum above the base rate for the time being of National Westminster Bank plc. 4. Limitations 4.1 The covenants contained in Clause 2 hereof shall not apply to a payment or deemed payment of Tax: 4.1.1 to the extent to which in calculating the provision for Tax in the Accounts or Completion Accounts an amount was included in respect of that Tax or that payment or discharge of such Tax has specifically been taken into account in the Accounts; or 4.1.2 which arises as a result of transactions in the ordinary course of business since the Accounting Date both before and after the Purchaser has completed the purchase of the Company; or 4.1.3 which arises or to the extent that any such Tax is increased as a result only of an increase in rates of Tax or change in the law relating to Tax made after the date hereof with retrospective effect; or 4.1.4 to the extent that the subject matter of the payment of Tax is disclosed in the Disclosure Letter as a potential tax liability; or 4.1.5 to the extent that the Covenantors are liable to the Purchaser under the Warranties in respect of or arising from the same claim for Tax. 4.1.6 in respect of value added tax and duties relating to supplies made and imports received the liability for which has been incurred in the ordinary course of business of the Company; or 4.1.7 to the extent that such claim would not have arisen but a cessation of trading or change in the nature or conduct of the trade carried on by the Company on or after the date hereof; or 4.1.8 if the Purchaser or the Company fails after due warning to act in accordance with the reasonable instructions of the Covenantors in conducting any dispute in respect of that claim as set out in Clause 5 hereof. 5. Claims 5.1 If the Purchaser or the Company receives any notice, demand, assessment or other document whereby it appears that the Company may be required to make or suffer an actual or deemed payment of Tax or loss of a right to the repayment of Tax which may result in the Purchaser and/or the Company having a claim against the Covenantors under this Deed (referred to in this clause as a "Tax Claim"), the Purchaser shall give or procure that notice in writing is given to the Covenantors as soon as is reasonably practicable. 5.2. If the Covenantors shall indemnify and secure the Company and the Purchase to their reasonable satisfaction against all losses, costs, interest, damages and expenses which may be incurred thereby the Company shall take such action as the Covenantors may reasonably and promptly by written notice request to avoid, resist, appeal or compromise any Tax Claim. 5.3 If within 30 days of the receipt by them of the aforesaid notice the Covenantors fail to notify the Purchaser in writing of their intention, to request the Company to avoid, resist, appeal or compromise the Tax Claim and fail to indemnify and secure the Company to their satisfaction the Purchaser and the Company shall be free to settle the Tax Claim on such terms as they in their absolute discretion think fit and without prejudice to their rights and remedies under this Deed. 5.4 The Company shall make a repayment to the Covenantors to the extent that and on the date on which the Company receives any repayment of any amount paid in respect of any claim for Tax pursuant to this Deed. 5.5 For the purpose of this Deed the Company shall be deemed to receive a payment for any Tax:- (a) on the date on which the Company receives a repayment of Tax; or (b) if and when the Company would have received such a repayment but for a liability to any Tax in respect of which the Company is not entitled to be indemnified hereunder 5.6 Upon making any repayment to the Covenantors pursuant to this Deed the Company shall also pay to the Covenantors any repayment supplement pursuant to Section 825 of the Taxes Act 1988 attributable to that repayment and any interest (less tax) awarded in respect thereof. 6. Miscellaneous 6.1 The Purchaser or the Company may release or compromise in whole or in part the liability of either of the Covenantors under this Deed or grant any time or other indulgence but any such release, compromise or grant shall not affect the liability of the other of the Covenantor. 6.2. This Deed shall be governed by and construed in accordance with English law. 6.3 This Deed shall not be assignable without the consent of all parties save that the Purchaser shall be entitled to assign. this Deed to an associated company of the Purchaser without consent and to any other party with the consent of the Covenantors (not to be unreasonably withheld). 6.4 A claim may only be made pursuant to this Deed by the Company to the extent that the Purchaser (or its lawful assigns) shall not be entitled to make a full and effective recovery from the Vendors or either of them in respect of that claim. 7. Notices 7.1 Any notice or other document to be given hereunder may be delivered or sent by first class recorded delivery post or telex to the party to be served at that party's address appearing in this Deed or at such other address as that party shall notify in accordance herewith. Any such notice or document shall be deemed to have been served: 7.2 if delivered, at the time of delivery; or 7.3 if posted, at the expiration of 48 hours after the envelope containing the same shall have been put into the post; or 7.4 if sent by telex at the expiration of 12 hours after the same shall have been despatched. In proving such service it shall be sufficient to prove that delivery was made or that the envelope containing such notice or document was properly addressed and posted as prepaid first class recorded delivery letter or that the telex was properly addressed and despatched as the case may be. IN WITNESS whereof the parties hereto have executed this Deed the day and year first above written. SCHEDULE 6 FIXED ASSETS Item Description Agreed Value (Pounds stg) - ---- ----------- ------------ 1. Rule dies for cut shapes 400 2. Heat sealing press 1,000 3. Heat sealing bar 150 4. 5 of fusion irons 500 5. Clipper joint press 1,972 6. Hayssen belt punch 200 7. Heat sealing bar (cantilevered) 80 8. Press and bar controllers 246 9. Car BX19 Citroen 7,962 --------- TOTAL Pounds 12,610 EX-10.B(6) 9 Exhibit 10(b)(6) DATED 18 January 1991 ------------------------------------------- CHEMICAL FABRICS EUROPE (1) AEROVAC SYSTEMS (KEIGHLEY) LIMITED (2) JOAN GIBSON (3) HOWARD THOMAS GIBSON (4) SUPPLY AGREEMENT SUPPLY AGREEMENT THIS AGREEMENT is made the 18th day of January 1991 BETWEEN CHEMICAL FABRICS EUROPE whose registered office is at Kilrush, Co Clare, Republic of Ireland ("Chemfab Europe") and AEROVAC SYSTEMS (KEIGHLEY) LIMITED whose registered officer is at Bradford Road, Sandbeds, Keighley, West Yorkshire BD20 5LN and HOWARD THOMAS GIBSON both of Aireville Greenhead Lane Keighley West Yorkshire B020 6EX ("the Gibsons") W H E R E A S : A. The Gibsons are shareholders of Aerovac Systems (Keighley) Limited whose registered office is at Bradford Road, Sandbeds, Keighley, West Yorkshire BD20 5LN B. Aerovac as hereinafter defined wishes to purchase quantities of the Products and Chemfab Europe have agreed to supply such Products on the following terms: A G R E E M E N T : Interpretation "The Products" means the products of Chemfab Europe listed in Schedule 1 hereto. "The New Products" means any new products of Chemfab Europe referred to in Clause 6. 1. The Agreement will commence on the date hereof and will be in force for a period of three (3) years subject to Clause 10 hereof. 2. The Gibsons agree, to the extent that it is lawful to do so, that they will procure that Aerovac Systems (Keighley) Limited and any other company owned and or controlled by one or both of the Gibsons (hereinafter collectively referred to as "Aerovac") will purchase from Chemfab Europe and Chemfab Europe hereby agrees to supply to Aerovac 100% of their requirements for PTFE glass cloth, skived PTFE film products and all other fluoropolymer containing products (excluding fluoropolymer-containing films manufactured by a process other than skiving) a that Chemfab Europe (and/or Chemfab Europe's affiliates) manufactures and is willing and able to supply to Aerovac during the term of this Agreement and in accordance herewith. 3. Aerovac Systems (Keighley) Limited agrees to purchase from Chemfab Europe as their sole supplier 100% of their requirements for PTFE glass cloth, skived PTFE film products and all Chemfab Europe's other fluropolymer containing products that Chemfab Europe manufactures and is willing and able to supply to Aerovac Systems (Keighley) Limited during the term of this Agreement and in accordance herewith. 4.1 Notwithstanding the terms of Clauses 2 and 3 above, Aerovac shall be free to purchase its requirements for PTFE coated glass lacing tape and self- adhesive low-elongation PTFE film from any third party without restriction and the same shall not be construed to be a breach of this Agreement. 4.2 Notwithstanding the terms of Clauses 2 and 3 above, Chemfab Europe's obligation to supply fluoropolymer containing products to Aerovac shall be limited to uses by Aerovac in connection with composite molding operations within the aircraft and spacecraft industries and all other industries using similar composite moulding processes for applications related thereto. 5.1 During the term of this Agreement, Chemfab Europe's base price to Aerovac for each of the Products will be the unit price set out in column 3 of Schedule 1 subject to increase on 1st September 1991 and thereafter not more than once in every 12 month period on 1st September. Notwithstanding anything to the contrary in Chemfab Europe's Standard Terms and Conditions, Chemfab Europe's prices will only be increased to the extent that Chemfab Europe's actual costs have increased and selling price increases will be limited to a maximum of 5% of the previous year's base price. If required, Chemfab Europe will explain its cost increases, but Chemfab Europe shall not be required to disclose confidential actual cost data to Aerovac. 5.2 Any price increase shall not take effect in respect of orders already placed by Aerovac scheduled for delivery within 30 days of the effective date of the price increase but which remain unfulfilled at the date of the price review and in any event any price increase shall not take effect until 30 days have elapsed from the date of written notification to Aerovac of any such price increase. 5.3 Notwithstanding the provisions of Clauses 5.1 and 5.2, no increase in price shall take effect if it exceeds 5% of the then current price for the Product or if the increase would result in the price to Aerovac exceeding the highest price in respect of the Product charged to any other customer of Chemfab Europe (provided the Product or New Product is in fact sold to other customers of Chemfab Europe). 6. In respect of products of a type described in Clause 2 but not currently listed in Schedule 1 which Aerovac wishes to commence purchasing from Chemfab Europe ("New Products") Chemfab Europe will sell the New Products to Aerovac at prices which are the same as Chemfab Europe is then currently offering to its other customers buying in similar quantities at that time. This price will become the base price for the New Products and the provisions relating to price increases set out in Clause 5 above will apply mutatis mutandis. 7.1 Aerovac shall order from Chemfab Europe and Chemfab Europe shall accept all such orders for Products and New Products and shall supply the same in accordance with Chemfab Europe's Standard Terms and Conditions, as appended in Schedule 2. In the event of any inconsistency or conflict between the Standard Terms and Conditions and this Agreement, this Agreement shall prevail. 7.2 The following clauses of the Standard Terms and Conditions of Sale appended in Schedule 2 shall not apply to orders placed by Aerovac: Clauses 3.5, 5.4, 6.4, 9.3, 11.2, 11.3 and 14.3. The following clauses shall only take effect as amended and set out below: (a) Clause 5.1 provided that "without any deduction" is deleted from lines 9 and 10 thereof (b) Clause 5.3(c) provided that the words "(a part of a month being treated as a full month for the purpose of calculating interest)" be deleted from the first line and that the last line thereof be deleted; (c) Clause 5.5 provided that the words "agreed to be be" inserted after the word "expenditures in line eleven thereof, and that the words "shall also provide for partial availments against partial deliveries and" be deleted from the last line thereof; (d) Clause 7.9 provided that the words "(if any)" be inserted after the word "right" in the second line; (e) Clause 9.2 provided that the number "7" be replaced with "15" in the fourth line; (f) Clause 13.3 provided that the words "of or produced by the Seller" be inserted after the word "documents" in the second line thereof. 7.3 Orders placed by Aerovac and accepted by Chemfab Europe during the term of this Agreement will be fulfilled by Chemfab Europe as soon as practicable but in the event that Chemfab Europe becomes aware that it will be or is likely to be unable to satisfy any such order within the period stated in the order and accepted by Chemfab Europe, Chemfab Europe shall so notify Aerovac in writing of such inability and Aerovac will be free to purchase similar products from an alternative supplier and for the purposes of Clause 2 above any such products shall be deemed to have been purchased from Chemfab Europe. 7.4 Where Chemfab Europe is unable to satisfy Aerovac's requirements for a particular order, Chemfab Europe shall have no liability whatsoever to Aerovac for any increased costs or expenses whatsoever. 7.5 Chemfab Europe's inability to satisfy any particular order shall not relieve Aerovac from its obligations to place its future orders for that product and its current and future orders for other Products and the New Products with Chemfab Europe during the term of this Agreement. 8. Chemfab Europe shall not cease to manufacture or sell or modify in any substantial way the Products or New Products without giving to Aerovac 90 days' written notice of its intention and details of any such cessation and/or any proposed modification provided always that any outstanding orders for the Product or New Product in question shall not be affected by the same and shall be fulfilled in accordance therewith. 9. Chemfab Europe shall be entitled to assign in whole or in part the benefit and/or burden of this Agreement to an affiliate of Chemfab Europe but it shall not be entitled to assign to any third party without the prior written consent of Aerovac. 10.1 Without prejudice to Clause 1 above each party shall be entitled by giving notice in writing to the other party to terminate this Agreement forthwith if at any time: 10.1.1 the other party has breached this Agreement in any material respect and has further failed to remedy such breach within 30 days of written notice requiring such remedy; or 10.1.2 the other party becomes insolvent or makes any arrangement with or assignment for the benefit of creditors or has a receiver or distributor appointed over or having execution of judgment or distress levied upon the whole or part of its assets; or 10.1.3 an order is made or resolution passed for winding up or liquidation of the other party (except where any such event is only for the purposes of bona fide amalgamation or bona fide reconstruction and the resultant company emerging is or agreed to be bound by the terms hereof) 10.2 Termination shall operate without prejudice to the rights and obligations of either party in relation to the other which have accrued prior to or on termination or expiry of the Agreement. 10.3 Chemfab Europe shall fulfill any orders receive during any period of notice of termination whether given by Chemfab Europe or Aerovac save in the event that Chemfab Europe has given such notice and stating that the reason for termination is that Aerovac has failed to make any payments due hereunder. 11. Notices pursuant to or in respect of this Agreement shall be in writing in English and may be: (a) delivered by hand or sent by prepaid Recorded Delivery post to the registered office or main place of business of the receiving party in which case they shall be effective from the actual date and time of delivery; or (b) sent by telex or facsimile transmission to the actual telex or facsimile facility of the receiving party in which case they shall be deemed to be effective on the commencement of business of the next usual business day after the time of transmission and for the above purposes the following shall until further notice be the addresses to which such notices shall be sent: For Chemfab Europe: Kilrush, County Clare, Republic of Ireland Facsimile: 353 655 1423 Telex: 70673 -CHEME1 (Telephone: 353 655-1421) For Aerovac: Bradford Road, Sandbeds, Keighley, West Yorkshire, BD20 5LN Facsimile: 0535 609754 Telex: 517430 VACBAG G (Telephone: 0535 607457) 12. Warranty 12.1 Chemfab Europe hereby warrants that all Products and New Products supplied to Aerovac hereunder shall be of merchantable quality, and in the event that any of the same are found to be defective Chemfab Europe shall at the option of Aerovac replace such defective items or refund the purchase price in respect thereof. 12.2 The repair, replacement or refund of purchase price in respect of any Products or New Products which are found not to be of merchantable quality shall be Aerovac's sole and exclusive remedy in respect of such defective Products or New Products and in no event shall Chemfab Europe or its affiliates be liable to Aerovac or to any other person for damage, injury or loss of any kind whatsoever (including loss of profits and consequential damages) to any person, property or animals caused directly or indirectly by the Products or New Products supplied. 13. Neither party shall be liable for any delay or failure to meet its obligations under this Agreement or any particular order pursuant thereto as a direct or indirect result of any cause whatsoever beyond its control including without limitation, strike, war or act if war (whether an actual declaration thereof is made or not), insurrection, riot or civil commotion, act of God, act of any governmental authority. 14. Each party agrees to maintain as secret and confidential all information that it may acquire from the other party or the other party's affiliates during this Agreement and shall disclose the same only to those of its employees to whom and to the extent that such disclosure is reasonably necessary for the purpose of this Agreement provided always that the foregoing obligations shall not apply to information which: (a) prior to receipt thereof from one party as in the possession ofthe other and at its free disposal; or (b) is subsequently disclosed to the recipient party without any obligations of confidence by a third party who has not derived it directly or indirectly from the other; or (c) is or becomes generally available to the public through no act or default of the recipient party. 15.1 This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof and supersedes all prior understandings and agreements between the parties with respect to the subject matter. 15.2 No variation or amendment to this Agreement shall bind either party unless made in writing making reference to this Agreement and agreed in writing by duly authorized offices of both parties. 16. This Agreement and any contract entered into pursuant hereto shall be governed by and construed in accordance with English law and the parties hereby irrevocably agree to submit to the non-exclusive jurisdiction of the English courts. IN WITNESS whereof each of the parties hereto has caused this Agreement to be signed by himself or herself or on its behalf by its duly authorised representative as appropriate the day and year first above written SIGNED on behalf of CHEMICAL ) /s/ Gabrial O'Gara FABRICS EUROPE by ) ------------------------ SIGNED on behalf of ) /s/ Howard Thomas Gibson AEROVAC SYSTEMS (KEIGHLEY) ) ------------------------ LTD by ) /s/ Joan Gibson ------------------------ SIGNED by HOWARD THOMAS ) /s/ Howard Thomas Gibson GIBSON ) ------------------------ SIGNED by JOAN GIBSON ) /s/ Joan Gibson ------------------------- SCHEDULE 1 THE PRODUCTS Description Unit Price Style Width Price per Linear Metre STG Pounds - ---------------------------------------------------------------------- Chemglas 100-3 1000mm 4.32 Chemglas 100-5 1000mm 6.52 Chemglas 100-5 1270mm 9.41 Chemglas 100-6 1000mm 7.82 Chemglas 100-10 1000mm 10.60 Chemglas 100-10 1350mm 14.25 Chemglas 100-10 COND 1525mm 17.50 Chemglas 700-3 1000mm 3.68 Chemglas 700-5 1000mm 5.29 Chemglas 700-6 1000mm 6.47 Chemglas 400-3 M 1000mm 1.63 Chemglas 400-3 H 1525mm 3.74 Chemglas 400-3 M-108 1000mm 3.00 Chemstik 700-3S 1000mm 8.49 Chemstik 700-5S 1000mm 10.06 Chemstik 700-6S 1000mm 11.31 Chemstik 700-10S 1000mm 14.34 Chemstik 700-5S COND 1000mm 11.44 SPSA-3S 600mm 7.71 SPSA 5S 1000mm 11.26 SPSA 10S 1000mm 19.58 S-6006W 1000mm 5.20 SCHEDULE 2 CHEMFAB STANDARD TERMS & CONDITIONS [ATTACHED] CHEMICAL FABRICS EUROPE 1. INTERPRETATION 1.1 In these Conditions: "Acknowledgment" means the Acknowledgment on the face hereof and all documents incorporated in it; "Buyer" means the person, firm of Company whose Order for the Goods is accepted by Seller; "Conditions" means the standard terms and conditions of sale as hereinafter appearing and (unless the context otherwise requires) includes any special terms and conditions agreed in writing between Buyer and Seller; "Contract" means the contract between Seller and Buyer for the purchase and sale of the Goods; "Goods" means the products or materials specified on the face hereof (including any installment of the goods or any parts for them) referred to in an Order of Buyer accepted by Seller in accordance with these Conditions; "Order" means an order for Goods submitted by Buyer to Seller or the acceptance by Buyer of an Invoice for the sale of Goods submitted by Seller to Buyer; "Seller" means Chemical Fabrics Europe, Kilrush, County Clare, Ireland; "in writing" includes telex, cable, facsimile transmission and comparable means of communication; "the 1980 Act" means the Sale of Goods and Supply of Services Act 1980. "Invoice" means the Invoice on the face hereof and all documents incorporated in it. 2. GENERAL 2.1 These conditions shall govern the supply of Goods by Seller to Buyer and shall prevail over any inconsistent terms and conditions contained in or referred to in Buyer's order or in correspondence or elsewhere and all or any conditions or stipulations contrary to these are hereby excluded. No employee has authority to vary or add to or depart from these terms or make any representation about the Goods or the Contract made herein. No variation, waiver of, or addition to these conditions shall bind Seller unless agreed to by an authorised officer of Seller in writing. 2.2 Seller's employees or agents are not authorised to make any representations concerning the Goods unless confirmed by Seller in writing. In entering into the Contract, Buyer acknowledges that it does not rely on, and waives any claim for breach of, any such representations which are not so confirmed. 2.3 Any advice or recommendation given by Seller or its employees or agents to Buyer or its employees or agents as to the storage, application, or use of the Goods which is not confirmed in writing by Seller is followed or acted upon entirely at Buyer's own risk, and accordingly Seller shall not be liable for any such advice or recommendation which is not so confirmed. 2.4 Any typographical, clerical, or other error or omission in any sales literature, quotation, price list, acceptance of offer, invoice or other document or information issued by Seller shall be subject to correction without liability on the part of Seller. 3. ORDERS 3.1 An offer will be constituted by an Order on the basis of an Invoice, and Seller's acceptance of such Order will create a contract on the terms set out in such Invoice, and on the terms set out in these Conditions and on the terms set out in any communication from Seller prior to or accompanying the acceptance of the Order. Each Order from Buyer constitutes the basis of a separate contract. 3.2 Unless otherwise agreed by Seller in writing the quantity, quality and description of and any specification for the goods shall be those set out in Seller's Invoice and/or Acknowledgment or in the absence of an Invoice and/or Acknowledgment, in Seller's acceptance or confirmation of Order and Buyer shall be responsible to Seller for ensuring the accuracy of the terms of any Order and for giving Seller any necessary information relating to the Goods within a sufficient time to enable Seller to perform the Contract in accordance with its terms. 3.3 (a) If the Goods are to be manufactured, or any process is to be applied to the Goods by Seller in accordance with a specification submitted by Buyer, it shall be the responsibility of Buyer to ensure that the specification accurately sets out all the requirements of the Buyer, and Buyer shall indemnify Seller against all loss, damages, costs and expenses awarded against or incurred by Seller in connection with or paid or agreed to be paid by Seller in settlement of any claim for infringement of any patent, copyright, design, trademark or other industrial or intellectual property rights of any other person which results from Seller's use of Buyer's specifications. (b) In the case of any dispute and/or claim arising in connection with any such alleged infringements Seller reserves every right to cancel and make null and void this Contract at its discretion and to hold Buyer responsible for any loss caused thereby to Seller. Nothing herein contained shall be construed as transferring any patent, utility model, trade mark, design or copyright in the Goods; all such rights are expressly reserved to the true and lawful owners thereof. 3.4 Seller reserves the right to make any changes in the specification of the Goods which are required to conform with any applicable safety or other statutory requirements or, where the Goods are to be supplied to Seller's specification, which do not materially affect their quality or performance. 3.5 No order which has been accepted by Seller may be cancelled by Buyer except with the agreement in writing of Seller and on terms that Buyer shall indemnify Seller in full against all loss (including loss of profit), costs (including the cost of all labour and materials used), damages, charges and expenses incurred by Seller as a result of cancellation. 4. PRICES 4.1 The price of the Goods shall be the sum specified by Seller on the Invoice and/or Acknowledgment or where no sum has been specified (or where the price specified is no longer valid) the price listed in Seller's published price list current at the date of acceptance of the Order. All prices specified in the Seller's published price list are subject to variation without notice. Subject to clause 4.2 hereof all prices specified are valid for 30 days only or until acceptance by Buyer (whichever is the earlier). 4.2 Seller reserves the right to increase the prices specified on the Invoice and/or Acknowledgment should there be any increase in the cost of labour, materials, duties, taxes, rates of exchange, freight, or other charges, expenses or costs payable by Seller. All prices specified on the Invoice and/or Acknowledgment are exclusive of Value Added Tax or any other tax thereafter imposed or any other third party liabilities and any Value Added Tax or other tax payable in respect of Goods supplied will be borne by Buyer. 4.3 Any new or increased taxes, customs duties, import surcharges, or other governmental charges which become effective after the date of the Contract shall be for the account of Buyer even if the Goods are sold on terms such as delivered or duty paid terms. 4.4 Customs duties, consular fees and other taxes, dues or fees charged in accordance with any laws or regulations of the country of destination, as well as any costs connected therewith, shall be borne by Buyer. In the case of delivery including customs or other duties, the price quoted is based on the rates in force at the time of quoting. The actual expenses will be charged to Buyer. 4.5 The prices denotes the currency of payment to Seller, irrespective of what price Buyer may pay for foreign exchange, which shall be at the Buyer's risk. 4.6 Except as otherwise stated under the terms of any quotation or in any price list of Seller, and unless otherwise agreed in writing between Buyer and Seller, all prices are given by Seller on an ex works basis, and where Seller agrees to deliver the Goods otherwise than at Seller's premises, Buyer shall be liable to pay Seller's charges for transport, packaging and insurance. 5. TERMS OF PAYMENT 5.1 Seller shall be entitled to invoice Buyer for the price of the Goods on or at any time after delivery of the Goods unless the Goods are to be collected by Buyer or Buyer wrongfully fails to take delivery of the Goods, in which event Seller shall be entitled to invoice Buyer for the price at any time after Seller has notified Buyer that the Goods are ready for collection or as the case may be the Seller has tendered delivery of the Goods. All payments shall be made within thirty days of the end of the invoice month without any deduction free of charge to the address for payment prescribed by Seller unless otherwise agreed. 5.2 If a transfer of payments from the country from which payment has to be made should be impossible on the due date, Buyer shall nevertheless pay the equivalent of the amount owed into a bank in the said country within the stipulated time. In the case of deterioration of the rate of exchange for amounts paid in a currency not agreed upon. Buyer shall make good such deficiencies by additional payment. 5.3 If Buyer fails to make any payment on the due date then, without prejudice to any other right or remedy available to Seller, Seller shall be entitled to: (a) cancel the Contract or suspend any further deliveries to Buyer, (b) appropriate any payment made by Buyer to such of the Goods (or the goods supplied under any other contract between Buyer and Seller) as Seller may think fit (notwithstanding any purported appropriation by Buyer), and (c) charge Buyer interest (both before and after any judgment) on the amount unpaid, at a rate equal to that payable by Seller on overdraft borrowings until payment in full is made (a part of a month being treated as a full month for the purpose of calculating interest). A statement from Seller as to the rate of interest applicable under this clause 5.3 shall in the absence of manifest ever be conclusive. The Buyer shall be responsible for all costs legal or otherwise incurred by Seller in seeking payment of the sum due. 5.4 No payments may be withheld nor any counter-claim of Buyer be set-off against the payment without the consent of Seller. 5.5 If payment under the contract is to be made by letter of credit then unless otherwise mentioned on the face thereof, Buyer shall establish an irrevocable and confirmed letter of credit with a prime bank satisfactory to Seller which letter of credit shall be in a form and upon terms satisfactory to Seller, and shall be in favour of Seller, and shall provide that all payments shall be made only to the order of Seller. Any such letter of credit shall refer to the Contract by its sums, if any, as may be advanced by Seller for consular invoices, inspection fees, and other expenditures made by Seller for the account of Buyer. The letter of credit shall also provide for partial availments against partial deliveries and shall be maintained for a period of not less than 30 days after the latest shipment set forth on the face hereof. 6. DELIVERY 6.1 Delivery of the Goods shall be made by Buyer collecting the Goods at Seller's premises at any time after Seller has notified Buyer that the Goods are ready for collection or, if some other place for delivery is agreed by Seller, by Seller delivering the Goods to that place. If the Goods are to be delivered away from Seller's premises to the method or route of carriage from Seller's premises Seller shall have the option at the risk and expense of Buyer to nominate the method and route and Buyer shall have full responsibility for any loss or damage caused to the Goods once they have left Seller's premises. 6.2 All delivery dates mentioned by Seller are approximate only and not of contractual effect. Time of delivery is not of the essence of the Contract nor shall Seller be under any liability in respect of any delay in delivery for whatever reason. The Goods may be delivered by Seller in advance of the quoted delivery date upon giving reasonable notice to Buyer. 6.3 Where delivery of the Goods is to be made by Seller in bulk, Seller reserves the right to deliver up to 10 per cent more or 10 per cent less than the quantity ordered without any adjustment in the price, and the quantity so delivered shall be deemed to be the quantity ordered and the buyer shall be obliged to accept and pay the contract rate for the quantity of goods delivered. 6.4 Seller may complete an Order by installments and invoice the installments separately. Payment of any installment due is a condition precedent to starting further deliveries. Seller shall have the right to terminate the Contract when any installment or payment is in arrears. The losses of Seller resulting from withholding deliveries of Goods due to non-payment by Buyer shall be refunded by Buyer but Buyer shall not have any entitlement to compensate from Seller in respect of such termination or withholding. 6.5 If Buyer fails to take delivery of the Goods or fails to give Seller adequate delivery instructions at the time stated for delivery (otherwise than by reason of any cause beyond Buyer's reasonable control or by reason of Seller's fault) then, without prejudice to any other right or remedy available to Seller, Seller may: (a) store the Goods until actual delivery and charge the Buyer for the reasonable costs (including insurance) of storage; or (b) sell the Goods at the best price readily obtainable and (after deducting all reasonable storage and selling expenses) retain for its own account the excess over the price under the Contract or charge the Buyer for any shortfall below the price under the Contract. 7. RESERVATION OF OWNERSHIP 7.1 The title in the Goods supplied by Seller to Buyer shall remain the property of Seller until all debts owing to Seller or to be created in the future and arising from the business connection with Buyer have been paid in full. 7.2 Until property in the Goods passes to Buyer, Buyer shall keep the Goods as bailee and in a fiduciary capacity for Seller and shall ensure that the same remain at all times separately identifiable as the property of Seller (such storage to be in accordance with Seller's recommendations) and shall return them to Seller on request. 7.3 Buyer shall, while in possession of any Goods the property wherein rests in Seller, keep the Goods fully insured and any monies received by Buyer on foot of any insurance policy in respect of any damage, deterioration, loss or destruction of the Goods shall be held on trust for Seller. 7.4 Should Buyer, while in possession of any Goods the property wherein remains in Seller, sell or dispose of the Goods to any other person, such part of the proceeds of such sale or disposal as is attributable to the price due by Buyer to Seller in respect of such goods, shall be held by Buyer on trust for Seller said proceeds to be paid into a separate account and held on trust for Seller as the property of Seller. 7.5 Seller may at any time, give notice to Buyer requiring Buyer to re-deliver at Buyer's expense any Goods supplied by Seller in which Seller has property where Buyer is in default of payment for longer than thirty days from the date of the invoice or if any bill of exchange, cheque or other negotiable instrument drawn or accepted or endorsed by Buyer in favour of the Seller is dishonoured on presentation for payment. 7.6 Any servant, agent or contractor authorized by Seller shall be entitled to enter upon any premises of Buyer for the purpose of removing any Goods which are the property of Seller and which are in the possession of Buyer. 7.7 Where a cheque, bill of exchange or other negotiable instrument is offered as payment for any Goods, Seller shall not be deemed to have received payment until the cheque, bill of exchange or other negotiable instrument has been cleared and honoured. 7.8 In the event of Buyer selling or disposing to any person, goods, property wherein has not passed from Seller to Buyer, Buyer shall hold any rights or remedies in respect of such sale or disposal in trust for Seller and shall, if directed by Seller, exercise any such rights or remedies on behalf of Seller and for the benefit of Seller. 7.9 Nothing in these conditions shall prejudice Seller's right to payment of the price of the Goods damages, loss of profit and interest. 8. TRANSFER OF RISK 8.1 Notwithstanding the provisions of Condition 7 risk of damage to or loss of the Goods shall pass to Buyer: (a) In the case of Goods to be delivered at Seller's premises, at the time when Seller notifies Buyer that the Goods are available for collection; or (b) in the case of Goods to be delivered otherwise than at Seller's premises, at the time of delivery or, if Buyer wrongfully fails to take delivery of the Goods, the time when Seller has tendered delivery of the Goods. 9. EXCLUSION OF WARRANTY 9.1 (a) Subject to paragraph (b) hereof Seller makes no warranty or representation as to the quality of any Goods or their fitness for a particular purpose or their conformity with any description or sample unless such warranty or representation has been expressly stated in writing by Seller and Seller shall not be responsible to Buyer or to any other person for damage injury or loss of any kind whatsoever (including loss of profits and consequential damages) to any property persons or animals caused directly or indirectly by the Goods supplied, advice given or any act or omission by Seller; and Buyer shall indemnify Seller in respect of all claims made by any person against Buyer or Seller in respect of such damage injury or loss. (b) The exemptions from the provisions of Section 13, 14 and 15 of the Sale of Goods Act 1893 ("the 1893 Act") (as inserted by Section 10 of the Sale of Goods and Supply of Services Act 1980 ("the 1980 Act")) contained in paragraph (a) hereof shall, in all cases other than a contract for the international sale of goods (as defined in the 1980 Act) be subject to the restrictions on such exemptions contained in Section 55(4) of the 1893 Act (as inserted by Section 22 of the 1980 Act). 9.2 Any claim by Buyer which is based on any defect in the quality or condition of the goods or their failure to correspond with specification shall (whether or not delivery is refused by Buyer) be notified to Seller within 7 days from the date of delivery or (where the defect or failure was not apparent on reasonable inspection) within a reasonable time after discovery of the defect or failure. If delivery is not refused, and Buyer does not notify Seller accordingly, Buyer shall not be entitled to reject the Goods and Seller shall have no liability for such defect or failure, and Buyer shall be bound to pay the price as if the Goods had been delivered in accordance with the Contract. 9.3 Where any valid claim in respect of any of the Goods which is based on any defect in the quality or condition of the Goods or their failure to meet specification is notified to the Seller in accordance with these Conditions, Seller shall be entitled to replace the Goods (or the part in question) free of charge or, at Seller's sole discretion, refund to Buyer the price of the Goods (or a proportionate part of the price), but Seller shall have no further liability to the Buyer. 10. FORCE MAJEURE 10.1 Seller shall not be liable to Buyer or be deemed to be in breach of the Contract by reason of any delay in performing, or any failure to perform, any of Seller's obligations in relation to the Goods, if the delay or failure was due to any cause beyond Seller's reasonable control. [Without prejudice to the generality of the foregoing the following shall be regarded as causes beyond the Seller's reasonable control: (a) act of God, explosion, flood, tempest, fire or accident of any sort; (b) war or threat of war, sabotage, insurrection, civil disturbance or requisition; (c) acts, restrictions, regulations, by-laws, prohibitions or measures of any kind on the part of any governmental, parliamentary, local or other authority (including but without limited to naval or military authorities); (d) import or export regulations, embargoes or blockades; (e) strikes lockouts or other industrial actions or trade disputes whether actual or threatened and whether involving employees of Seller or of a third party; (f) difficulties in obtaining raw materials, labour, fuel, parts of machinery; (g) power failure or breakdown in machinery. 10.2 Any additional or increased freight or insurance premium or other charges relating to the sale, loading, delivery, storage and transportation of the Goods which shall be incurred as a result of or in consequence of any cause or causes specified in paragraph 10.1 hereof or otherwise howsoever arising shall be for the account of Buyer. 11. TERMINATION 11.1 If Buyer becomes bankrupt, or enters into an arrangement with his creditors or if execution is levied against him or (if a Company) a petition be presented or an order is made or resolution is passed for a winding up of Buyer or if a receiver is appointed over any property of Buyer or if Buyer becomes insolvent or if Buyer is in breach of any contract with Seller, Seller may stop any Goods in transit and suspend further deliveries and may determine the Contract with Buyer without prejudice to any existing claim of Seller and nothing in this condition shall prejudice any other right vested in Seller. 11.2 Seller may terminate the Contract at any time by giving to Buyer fourteen days notice of such termination and Seller shall not be liable to make any payment whatsoever on foot of such termination. 11.3 In the event that as a result of some material breach of the Contract by Seller, the Contract is cancelled by Buyer, Seller shall, without prejudice to any other rights which it may have against Buyer, be entitled to recover from Buyer payment for all Goods delivered hereunder as well as payment in respect of Goods manufactured or partly manufactured for Buyer under this or any other Contract but not delivered to Buyer at the date of cancellation. Any such cancellation by Buyer shall be effected by giving 21 days written notice thereof to Seller specifying the alleged breach of the Contract. 12. EXPORT TERMS 12.1 In these Conditions 'INCOTERMS' means the international rules for the interpretation of trade terms of the International Chamber of Commerce as in force at the date when the Contract is made. Unless the context otherwise requires, any term or expression which is defined in or given a particular meaning by the provision of INCOTERMS shall have the same meaning in these Conditions, but if there is any conflict between the provisions of INCOTERMS and these Conditions, the latter shall prevail. 12.2 Where the Goods are supplied for export from Ireland the provisions of Condition 9 and this 12 shall (subject to any special terms agreed in writing between Buyer and Seller) apply notwithstanding any other provision of these Conditions. 12.3 Buyer shall be responsible for complying with any legislation or regulations governing the importation of the Goods into the country of destination and for the payment of any duties thereon. 12.4 Unless otherwise agreed in writing between Buyer and Seller, the Goods shall be delivered from the air or sea port of shipment. 13. SAMPLES 13.1 All Goods are supplied subject to reasonable availability to Seller of suitable materials and Seller reserves the right without notice to substitute suitable materials other than those mentioned in the Contract. 13.2 All drawings, specifications, brochures, catalogues, labels, price lists and advertising matter are intended merely to present a general idea of the Goods or services described therein and are not intended thereby to constitute any sale or sale by description nor shall they form part of the Contract. 13.3 All drawings, designs, specifications and other documents are and shall remain the property of Seller who shall retain all copyrights therein and such drawings, designs, specifications or other documents must not be copied, reproduced or divulged either directly or indirectly to any other person without the prior written consent of Seller and shall be returned to Seller if so requested. 13.4 Samples are sent and inspected solely to enable Buyer to judge the visual appearance of the Goods and are not intended to constitute any sale a sale by sample. All samples remain the property of Seller and shall be returned by Buyer to Seller on request. 13.5 All information concerning quantities and designs, drawings, explanations, descriptions and illustrations submitted by Seller are to be considered as approximate and are not binding. 14. GENERAL 14.1 These Conditions shall be subject to and construed in accordance with the laws of Ireland. 14.2 The Buyer hereby irrevocably agrees to submit to the non exclusive jurisdiction of the Courts of Ireland. 14.3 Any dispute arising under or in connection with these Conditions or the sale of the Goods shall be referred to arbitration by a single arbitrator appointed by agreement or (in default) nominated on the application of either party by the President for the time being of the Incorporated Law Society of Ireland. Any such arbitration shall be governed by the provisions of the Arbitration Acts 1954-1980. 14.4 Even in the event of individual clauses of the Contract being invalid, its remaining parts shall continue to be binding. Should any clause be invalid wholly or in part, the contracting parties will endeavor without delay to attain the economic result aimed at the invalid clause in another legally admissible manner. 14.5 Any notice or written communication provided for in the Conditions shall be sufficiently given if: (a) personally delivered or sent by post to the address set forth herein of the party to which the notice or communication is being given, or to such other address as such party shall communicate to the party giving the notice or communication; or (b) transmitted by telex, facsimile or other means of visible electronic production to the correct transmission number of the party to whom it is being transmitted. 14.6 Any notice, or communication, given or sent by post hereunder, shall be sent by registered post. 14.7 Every notice or communication given in accordance with the provisions of this clause shall be deemed to have been received as follows: Means of Despatch Deemed Received ----------------- --------------- Personal Delivery On Delivery Post Two (2) business days after posting Telex, facsimile or One (1) business day other means of visible in the country of electronic reproduction receipt after trans- mission to the correct number. 14.8 Without prejudice to the validity of any notice or communication transmitted hereunder by telex, facsimile or other means of visible electronic reproduction, the party who has transmitted it shall: (a) forthwith confirm the fact of transmission by telephone to the party to whom such notice or communication has been transmitted, and (b) use its best endeavors to despatch, within seven (7) business days after the notice or communication is transmitted, a copy of the notice or communication by post to the party to which it has been transmitted. EX-21 10 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. 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. Chemfab (Suzhou) Co., Ltd., incorporated under the laws of the People's Republic of China. Chemfab do Brasil Industria e Comercio Ltda., incorporated under the laws of Brazil. EX-23 11 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Forms S-8 No. 2-89831, No. 33-61946 and No. 333-07139 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, the Amended and Restated 1991 Stock Option Plan and the 1986 Stock Option Plan and the 1983 Incentive Stock Option Plan of our report dated July 30, 1996, with respect to the consolidated financial statements and schedule of Chemfab Corporation included in this Annual Report (Form 10-K) for the year ended June 30, 1996. Boston, Massachusetts September 24, 1996 Ernst & Young LLP EX-24 12 Exhibit 24 POWER OF ATTORNEY I, the undersigned Director and/or Officer of Chemfab Corporation (the "Company"), hereby severally constitute and appoint Duane C. Montopoli, Moosa E. Moosa, 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, 1996 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, (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, and (6) the Company's Registration Statement on Form S-8 (File No. 333-07139), dated as of June 28, 1996, registering under the Act shares of the Company's Common Stock issuable or transferable on exercise of options under the 1991 Plan and registering under the Act for reoffer certain of such shares. Signature Title Date - --------- ----- ---- /s/ Duane C. Montopoli President, Chief Executive Officer August 1, 1996 - --------------------------- and Director Duane C. Montopoli Signature Title Date - --------- ----- ---- /s/ Moosa E. Moosa Vice President - Finance and August 1, 1996 - --------------------------- Administration, Chief Financial Moosa E. Moosa Officer, Treasurer, and Secretary (principal financial officer) /s/ Laurence E. Richard Corporate Controller August 1, 1996 - --------------------------- (principal accounting officer) Laurence E. Richard /s/ Paul M. Cook Director August 1, 1996 - --------------------------- Paul M. Cook /s/ Warren C. Cook Director August 1, 1996 - --------------------------- Warren C. Cook /s/ Robert E. McGill III Director August 1, 1996 - --------------------------- Robert E. McGill III /s/ James E. McGrath Director August 1, 1996 - --------------------------- James E. McGrath /s/ Nicholas Pappas Director August 1, 1996 - --------------------------- Nicholas Pappas EX-27 13
5 0000725813 YVETTE DESMARAIS 12-MOS JUN-30-1996 JUN-30-1996 $ 5,017,000 0 18,179,000 382,000 13,622,000 39,548,000 40,013,000 19,473,000 73,662,000 11,256,000 0 0 0 809,000 57,696,000 73,662,000 83,882,000 83,882,000 55,773,000 55,773,000 16,344,000 0 611,000 11,154,000 3,440,000 7,714,000 0 0 0 $7,714,000 .94 .94
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