10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                          to                        

Commission file number:  001-12648

UFP Technologies, Inc.

 (Exact name of registrant as specified in its charter)

Delaware	04-2314970
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
172 East Main Street, Georgetown, MA – USA	01833-2107
(Address of principal executive offices)	(Zip Code)

(978) 352-2200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.01 par value per share	The NASDAQ Stock Market L.L.C.
Preferred Share Purchase Rights	The NASDAQ Stock Market L.L.C.

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No x

Indicate by check mark 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes o No o

As of June 30, 2011, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $80,608,963, based on the closing price of $18.92 on that date as reported on the NASDAQ Capital Market.

As of March 7, 2012, there were 6,609,957 shares of common stock, $0.01 par value per share, of the registrant outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Document	Parts of this Form 10-K Into Which Incorporated
Portions of the registrant’s Proxy Statement for the 2012 Annual Meeting of Shareholders.	Part III

PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this Report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (Exchange Act). These statements involve known and unknown risks, uncertainties, and other factors, which may cause our or our industry’s actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about our prospects, anticipated advantages we expect to realize from our acquisition strategies, our participation and growth in multiple markets, our business opportunities, our growth potential and strategies for growth, and any indication that we may be able to sustain or increase our sales and earnings, or our sales and earnings growth rates. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including without limitation, risks associated with the identification of suitable acquisition candidates and the successful, efficient execution of acquisition transactions and integration of any such acquisition candidates.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential,” and similar expressions intended to identify forward-looking statements. Our actual results could be different from the results described in or anticipated by our forward-looking statements due to the inherent uncertainty of estimates, forecasts, and projections, and may be materially better or worse than anticipated. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements represent our estimates and assumptions only as of the date of this Report. We expressly disclaim any duty to provide updates to forward-looking statements, and the estimates and assumptions associated with them, after the date of this Report, in order to reflect changes in circumstances or expectations, or the occurrence of unanticipated events, except to the extent required by applicable securities laws. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed above and under “Risk Factors” set forth in Part I Item 1A of this Report, as well as the risks and uncertainties discussed elsewhere in this Report. We qualify all of our forward-looking statements by these cautionary statements. We caution you that these risks are not exhaustive. We operate in a continually changing business environment and new risks emerge from time to time.

ITEM 1.            BUSINESS

The Company designs and manufactures engineered packaging solutions utilizing molded and fabricated foams, vacuum-formed plastics, and molded fiber. The Company also designs and manufactures engineered component products using laminating, molding, and fabricating technologies. The Company serves a myriad of manufacturing sectors, but specifically targets opportunities in the medical, automotive, aerospace and defense, electronics, industrial, and consumer markets.

The Company’s high-performance packaging solutions are made primarily from polyethylene and polyurethane foams, and a wide range of sheet plastics. These solutions are custom-designed and fabricated or molded to provide protection for fragile and valuable items, and are sold primarily to original equipment and component manufacturers. Molded fiber products are made primarily from 100% recycled paper principally derived from waste newspaper. These products are custom-designed, engineered and molded into shapes for packaging high-volume consumer goods, including light electronics, wine bottles, candles, and health and beauty products.

In addition to packaging solutions, the Company fabricates and molds component products made from cross-linked polyethylene foams, reticulated polyurethane foams, and other specialty materials. The Company also laminates fabrics and other materials to cross-linked polyethylene foams, polyurethane foams, and other substrates. The Company’s component products include automotive interior trim, medical device components, disposable wound care components, military uniform and gear components, athletic padding, air filtration, high-temperature insulation, and abrasive nail files and other beauty aids.

The consolidated financial statements include the accounts and results of operations of UFP Technologies, Inc., its wholly-owned subsidiaries, Moulded Fibre Technology, Inc., Simco Industries, Inc. and its wholly-

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owned subsidiary Simco Automotive Trim, Inc., and Stephenson & Lawyer, Inc. and its wholly-owned subsidiary, Patterson Properties Corporation. The Company also consolidates United Development Company Limited (“UDT”), of which the Company owns 26.32% (see Note 8). Unless context otherwise requires, the term “Company” refers to UFP Technologies, Inc. and its consolidated subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.

Wine Packs®, T-Tubes®, BioShell®, and Pro-Sticks® are our U.S. registered trademarks. Each trademark, trade name, or service mark of any other company appearing in this Report belongs to its respective holder.

We were incorporated in the State of Delaware in 1993. Our principal executive offices are located at 172 East Main Street, Georgetown, Massachusetts 01833; telephone number 978-352-2200; corporate website www.ufpt.com. We make available through our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as soon as practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. The information found on our website is not part of this or any other report we file with or furnish to the SEC.

Market Overview

Packaging

The interior cushion packaging market is characterized by three primary sectors: (1) custom fabricated or molded products for low-volume, high-fragility products; (2) molded or die-cut products for high-volume, industrial and consumer goods; and (3) loose fill and commodity packaging materials for products that do not require custom-designed packaging. Packaging solutions are used to contain, display, and/or protect their contents during shipment, handling, storage, marketing, and use. The Company serves both the low-volume, high-fragility market and the high-volume industrial and consumer market, with a range of materials and manufacturing capabilities, but does not materially serve the commodity packaging market.

The low-volume, high-fragility market is generally characterized by annual production volumes of less than 50,000 pieces. Typical goods in this market include precision instruments, medical devices, sensitive electronic components, and other high-value industrial products that are very sensitive to shock, vibration, and other damage that may occur during shipment and distribution. The principal materials used to package these goods include polyethylene and polyurethane foams, foam-in-place polyurethane, and molded expanded polystyrene. Polyurethane and polyethylene foams have high shock absorbency, high resiliency, and vibration-damping characteristics.

The higher-volume consumer packaging market is generally characterized by annual production volumes in excess of 50,000 pieces. Typical goods in this market include toys, light electronics, computers and computer peripherals, stereo equipment, and small appliances. These goods generally do not require as high a level of shock and vibration protection as goods in the low-volume, high-fragility market. The principal materials used to package these goods include various molded, rigid, and foamed plastics, such as expanded polystyrene foam (EPS), vacuum-formed polystyrene (PS) and polyvinyl chloride (PVC), and corrugated die-cut inserts that generally are less protective and less expensive than resilient foams and molded fiber.

Component Products

Component Products’ applications of foam and other types of plastics are numerous and diverse. Examples include automotive interior trim, medical device components, disposable wound care components, military uniform and gear components, athletic padding, air filtration, high-temperature insulation, and abrasive nail files and other beauty aids. Cross-linked polyethylene foams have many of the same properties as traditional polyethylene foams, including lightweight, durability, resiliency, and flexibility. Cross-linked foams have many advantages over traditional foams, including the ability to be thermoformed (molded), availability in vibrant colors, a fine cell structure providing improved esthetics and lower abrasiveness, and enhanced resistance to chemicals and ultraviolet light. Certain grades of cross-linked foams can be radiation-sterilized and have been approved by the U.S. Food and Drug Administration for open wound skin contact.

Cross-linked foam can be combined with other materials to increase product applications and market applications. For example, cross-linked foams can be laminated to fabrics to produce lightweight, flexible, and

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durable insoles for athletic and walking shoes, gun holsters, backpacks, and other products for the leisure, athletic, and retail markets. The Company believes that, as a result of their many advantages, cross-linked foam and cross-linked foam laminated products are being used in a wide range of markets as substitutes for traditional rubber, leather, and other product material alternatives.

Reticulated polyurethane foam is a versatile material typically used to make component products that involve filtration, liquid absorption, noise control, wiping, and padding. These foams feature high tensile, elongation, and tear characteristics; they are used extensively in the medical industry as they are easy to clean, impervious to microbial organisms, and can be made with fungicidal and bactericidal additives for added safety.

Regulatory Climate

The packaging industry has been subject to user, industry, and legislative pressure to develop environmentally-responsible packaging alternatives that reduce, reuse, and recycle packaging materials. Government authorities have enacted legislation relating to source reduction, specific product bans, recycled content, recyclability requirements, and “green marketing” restrictions.

In order to provide packaging that complies with all regulations regardless of a product’s destination, manufacturers seek packaging materials that meet both environmentally-related demands and performance specifications. Some packaging manufacturers have responded by reducing product volume and ultimate waste product disposal through reengineering traditional packaging solutions; adopting new manufacturing processes; participating in recovery and reuse systems for resilient materials that are inherently reusable; creating programs to recycle packaging following its useful life; and developing materials that use a high percentage of recycled content in their manufacture. Wherever feasible, the Company employs one or more of these techniques to create environmentally-responsible packaging solutions.

Products

The Company’s products include foam, plastic, and fiber packaging solutions, and component products.

Packaging Solutions

The Company designs, manufactures, and markets a broad range of packaging solutions primarily using polyethylene, polyurethane, cross-linked polyethylene foams, and rigid plastics. These solutions are custom-designed and fabricated or molded to provide protection for less durable, higher-value items, and are primarily sold to original equipment and component manufacturers. Examples of the Company’s packaging solutions include foam inserts for protective shipping cases, molded foam enclosures for orthopedic implants, plastic trays for medical devices and components, and end-cap packs for computer and electronics. Markets for these products are typically characterized by lower to moderate volumes where performance, such as shock absorbency and vibration damping, is valued.

The Company’s engineering personnel collaborate directly with customers to study and evaluate specific customer requirements. Based on the results of this evaluation, packaging solutions are engineered to customer specifications, using various types and densities of materials with the goal of providing the desired protection for the lowest cost and with the lowest physical package volume. The Company believes its engineering expertise, breadth of material offerings, and manufacturing capabilities have enabled it to provide unique solutions to achieve these goals.

The markets for the Company’s molded fiber packaging and vacuum-formed trays are characterized by high-volume production runs and require rapid manufacturing turnaround times. Raw materials used in the manufacture of molded fiber are primarily recycled newspaper, and a variety of other grades of recycled paper and water. Raw materials used in vacuum-formed plastics include polystyrene (PS) and polyvinyl chloride (PVC). These products compete with expanded polystyrene (EPS) and manually assembled corrugated die-cut inserts.

The Company’s molded fiber products provide customers with packaging solutions that are more responsive to stringent environmental packaging regulations worldwide and meet the demands of environmentally-aware consumers, while simultaneously meeting customer cost and performance objectives.

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Component Products

The Company specializes in engineered products that use the Company’s close tolerance manufacturing capabilities, its expertise in various foam materials and lamination techniques, and its ability to manufacture in clean room environments.  The Company’s component products are sold primarily to customers in the automotive, medical, sporting goods, beauty, and aerospace and defense industries. These products include automotive interior trim, medical device components, disposable wound care components, athletic padding, abrasive nail files and other beauty aids, air filtration, high-temperature insulation, and military uniform and gear components.

The Company believes it is one of the largest purchasers of cross-linked foam in the United States and as a result it has been able to establish important relationships with the relatively small number of suppliers of this product. Through its strong relationships with cross-linked foam suppliers, the Company believes it is able to offer customers a wide range of cross-linked foam products.

The Company benefits from its ability to custom-design its own proprietary manufacturing equipment in conjunction with its machinery suppliers. For example, the Company has custom-designed its own lamination machines, allowing it to achieve adhesive bonds between cross-linked foam and fabric and other materials that do not easily combine. These specialty laminates typically command higher prices than traditional foam products.

The Company has developed a variety of standard products that are branded and, in some cases, trademarked and patented. These products include Wine Packs® (wine shipping solutions made from molded fiber); T-Tubes® (tube and pipe insulation for clean room environments); BioShell® (pharmaceutical bag protection system); and Pro-Sticks® (sanitary solution for nail care services).

Marketing and Sales

The Company markets to the target industries it serves by promoting specific packaging and component solutions, materials, and manufacturing capabilities and services.  The Company is marketed through websites, online advertising and directories, press releases, and trade shows and expositions.

The Company markets and sells its packaging and component products in the United States principally through direct regional sales forces comprised of skilled engineers. The Company also uses independent manufacturer representatives to sell its products. The Company’s sales engineers collaborate with customers and in-house design and manufacturing experts to develop custom-engineered solutions on a cost-effective basis. The Company markets a line of products to the health and beauty industry, primarily through distributors.

The top customer in the Company’s Component Products segment, Recticel Interiors North America, comprised 10.9% of that segment’s total sales and 7.2% of the Company’s total sales for the year ended December 31, 2011. No one customer’s sales exceeded 10% of the Packaging segment sales for the year ended December 31, 2011. The loss of Recticel as a customer could have a material adverse effect on the Company.

Manufacturing

The Company’s manufacturing operations consist primarily of cutting, molding, vacuum-forming, laminating, and assembling. For custom-molded foam products, the Company’s skilled engineering personnel analyze specific customer requirements to design and build prototype products to determine product functionality. Upon customer approval, prototypes are converted to final designs for commercial production runs. Molded cross-linked foam products are produced in a thermoforming process using heat, pressure, and precision metal tooling.

Cushion foam packaging products that do not utilize cross-linked foam are fabricated by cutting shapes from blocks of foam, using specialized cutting tools, routers, water jets, and hot wire equipment, and assembling

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these shapes into the final product using a variety of foam welding or gluing techniques. Products can be used on a stand-alone basis or bonded to another foam product or other material such as a corrugated medium.

Laminated products are produced through a process whereby the foam medium is heated to the melting point. The heated foam is then typically bonded to a non-foam material through the application of mechanical pressure.

Molded fiber products are manufactured by vacuum-forming a pulp of recycled or virgin paper materials onto custom-engineered molds. With the application of vacuum and air, the molded parts are pressed and transferred to an in-line conveyorized dryer, from which they exit ready for packing or subsequent value-added operations.

The Company does not manufacture any of the raw materials used in its products. With the exception of certain grades of cross-linked foam and technical polyurethane foams, these raw materials are available from multiple supply sources. Although the Company relies upon a limited number of suppliers for cross-linked foam, the Company’s relationships with such suppliers are good, and the Company expects that these suppliers will be able to meet its requirements for cross-linked foam. Any delay or interruption in the supply of raw materials could have a material adverse effect on the Company’s business.

Research and Development

The Company’s engineering personnel continuously explore design and manufacturing techniques, as well as new innovative materials to meet the unique demands and specifications of its customers. Because the Company’s products tend to have relatively short life cycles, research and development is an integral part of the Company’s ongoing cost structure. Our research and development expenses were $0.9 million, $0.9 million, and $0.8 million in the years ended December 31, 2011, 2010, and 2009, respectively.

Competition

The packaging industry is highly competitive. While there are several national companies that sell interior packaging, the Company’s primary competition for its packaging products has been from smaller independent regional manufacturing companies. These companies generally market their products in specific geographic areas from neighboring facilities. In addition, the Company’s foam and fiber packaging products compete against products made from alternative materials, including expanded polystyrene foams, die-cut corrugated, plastic peanuts, plastic bubbles, and foam-in-place urethane.

The component products industry is also highly competitive. The Company’s component products face competition primarily from smaller companies that typically concentrate on production of component products for specific industries. The Company believes its access to a wide variety of materials, its engineering expertise, its ability to combine foams with other materials such as plastics and laminates, and its ability to manufacture products in a clean room environment, will enable it to continue to compete effectively in the engineered component products market.

The Company believes its customers typically select vendors based on price, product performance, product reliability, and customer service. The Company believes it is able to compete effectively with respect to these factors in each of its targeted markets.

Patents and Other Proprietary Rights

The Company relies upon trade secrets, patents, and trademarks to protect its technology and proprietary rights. The Company believes the improvement of existing products, reliance upon trade secrets and unpatented proprietary know-how, and the development of new products are generally as important as patent protection in establishing and maintaining a competitive advantage. Nevertheless, the Company has obtained patents and may continue to make efforts to obtain patents, when available, although there can be no assurance that any patent obtained will provide substantial protection or be of commercial benefit to the Company, or that its validity will be upheld if challenged.

The Company has four U.S. patents relating to its molded fiber technology (including certain proprietary machine designs), and has patents with respect to such technology in certain foreign countries. The Company

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also has a total of twelve U.S. patents relating to technologies including foam and packaging, automotive trim, tool control, patterned nail file, and superforming process technologies, as well as patents with respect to such technologies in certain foreign countries. The Company also has some patent applications in process. There can be no assurance that any patent or patent application will provide significant protection for the Company’s products and technology, or will not be challenged or circumvented by others. The expiration dates for the Company’s U.S. patents range from 2012 through 2029.

Environmental Considerations

In addition to offering molded fiber packaging products made from recycled paper derived primarily from post-consumer newspaper waste, the Company actively promotes its philosophy of reducing product volume and resulting post-user product waste. The Company designs products to provide optimum performance with minimum material. In addition, the Company bales and disposes of certain of its urethane foam scrap for use in the carpeting industry.  The Company is aware of public support for environmentally-responsible packaging and other products. Future government action may impose restrictions affecting the industry in which the Company operates. There can be no assurance that any such action will not adversely impact the Company’s products and business.

Backlog

The Company’s backlog, as of February 11, 2012, and February 12, 2011, totaled approximately $8.8 million and $9.6 million, respectively, for the Packaging segment, and $23.8 million and $17.7 million, respectively, for the Component Products segment. The backlog consists of purchase orders for which a delivery schedule within the next twelve months has been specified by customers. Orders included in the backlog may be canceled or rescheduled by customers without significant penalty. The backlog as of any particular date should not be relied upon as indicative of the Company’s revenues for any period.

Employees

As of January 30, 2012, the Company had a total of 617 full-time employees (as compared to 609 full-time employees as of January 31, 2011), with 355 full-time employees in the Component Products segment (39 in engineering, 259 in manufacturing operations, 27 in marketing, sales, and support services, and 30 in general and administration) and 257 full-time employees in the Packaging segment (25 in engineering, 198 in manufacturing, 17 in marketing, sales and support services, and 17 in general and administration). In addition, the Company has five executive officers that are not allocated to a specific segment. The Company is not a party to any collective bargaining agreement. The Company considers its employee relations to be good.

ITEM 1A.         RISK FACTORS

You should carefully consider the risks described below and the other information in this Report before deciding to invest in shares of our common stock. These are the risks and uncertainties we believe are most important for you to consider. Additional risks and uncertainties not presently known to us, which we currently deem immaterial or which are similar to those faced by other companies in our industry or business in general, may also impair our business operations. If any of the following risks or uncertainties actually occurs, our business, financial condition and operating results would likely suffer. In that event, the market price of our common stock could decline and you could lose all or part of your investment.

We depend on a small number of customers for a large percentage of our revenues. The loss of any such customer, a reduction in sales to any such customer, or the decline in the financial condition of any such customer could have a material adverse effect on our business, financial condition, and results of operations.

A limited number of customers typically represent a significant percentage of our revenues in any given year. Our top ten customers represent approximately 28% and 31% of our total revenues in 2011 and 2010, respectively. A single automotive program accounted for approximately 10.9% and 13.9%, respectively, of our Component Products segment sales and approximately 7.2% and 9.3% of our total sales in 2011 and 2010, respectively. A substantial portion of the program was phased out in 2011, and, accordingly, we expect sales from this program to decline in 2012 and beyond.  Our revenues are directly dependent on the ability of our

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customers to develop, market, and sell their products in a timely, cost-effective manner. The loss of a significant portion of our expected future sales to any of our large customers would have a material adverse effect on our business, financial condition, and financial results. Likewise, a material adverse change in the financial condition of any of these customers could have a material adverse effect on our ability to collect accounts receivable from any such customer.

We may pursue acquisitions or joint ventures that involve inherent risks, any of which may cause us to not realize anticipated benefits.

Our business strategy includes the potential acquisition of businesses and entering into joint ventures and other business combinations that we expect will complement and expand our business. For example, during 2009 we acquired selected assets of Foamade Industries, Inc., E.N. Murray Co., and Advanced Materials, Inc. as discussed in Note 19 of the “Notes to Consolidated Financial Statements.” We may not be able to successfully identify suitable acquisition or joint venture opportunities or complete any particular acquisition, combination, joint venture or other transaction on acceptable terms. Our identification of suitable acquisition candidates and joint venture opportunities involves risks inherent in assessing the values, strengths, weaknesses, risks and profitability of these opportunities including their effects on our business, diversion of our management’s attention and risks associated with unanticipated problems or unforeseen liabilities. If we are successful in pursuing future acquisitions or joint ventures, we may be required to expend significant funds, incur additional debt, or issue additional securities, which may materially and adversely affect our results of operations and be dilutive to our stockholders. If we spend significant funds or incur additional debt, our ability to obtain financing for working capital or other purposes could decline and we may be more vulnerable to economic downturns and competitive pressures. In addition, we cannot guarantee that we will be able to finance additional acquisitions or that we will realize any anticipated benefits from acquisitions or joint ventures that we complete. Should we successfully acquire another business, the process of integrating acquired operations into our existing operations may result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of our existing business. Our failure to identify suitable acquisition or joint venture opportunities may restrict our ability to grow our business.

Fluctuations in the supply of components and raw materials we use in manufacturing our products could cause production delays or reductions in the number of products we manufacture, which could materially adversely affect our business, financial condition and results of operations.

Our business is subject to the risk of periodic shortages of raw materials. We purchase raw materials pursuant to purchase orders placed from time to time in the ordinary course of business. Failure or delay by such suppliers in supplying us necessary raw materials could adversely affect our ability to manufacture and deliver products on a timely and competitive basis.

While we believe that we may, in certain circumstances, secure alternative sources of these materials, we may incur substantial delays and significant expense in doing so, the quality and reliability of alternative sources may not be the same and our operating results may be materially adversely affected. Alternative suppliers might charge significantly higher prices for materials than we currently pay. Under such circumstances, the disruption to our business could have a material adverse impact on our customer relationships, business, financial condition, and results of operations.

The cost of raw materials that we use to manufacture our products, particularly petroleum and petroleum-based raw materials, are subject to escalation and could increase, which may materially adversely affect our business, financial condition and results of operations.

The cost of raw materials, including petroleum and petroleum-based raw materials such as resins, used in the production of our products, represents a significant portion of our direct manufacturing costs. We have provisions in most of our sales orders that allow us to pass on to our customers price fluctuations related to certain raw materials, including petroleum. The number of customers to which we are not able to pass on such price increases may increase in the future, and any such increase could adversely affect our operating margins and cash flows. Any fluctuations in the price of petroleum, or any other material used in the production of our products, may have a material adverse effect on our business, financial condition and results of operations. Such price increases could reduce demand for our products. If we are not able to buy raw materials at fixed prices, or pass on price increases to our customers, we may lose orders or enter into orders

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with less favorable terms, any of which could have a material adverse effect on our business, financial condition and results of operations.

Reductions in the availability of energy supplies or an increase in energy costs may increase our operating costs.

We use electricity and natural gas at our manufacturing facilities to operate our equipment. Over the past several years, prices for electricity and natural gas have fluctuated significantly. An outbreak or escalation of hostilities between the United States and any foreign power, or a natural disaster, could result in a real or perceived shortage of petroleum and/or natural gas, which could result in an increase in the cost of electricity or energy generally as well as an increase in the cost of our raw materials, of which many are petroleum-based. In addition, increased energy costs negatively impact our freight costs due to higher fuel prices. Future limitations on the availability or consumption of petroleum products and/or an increase in energy costs, particularly electricity for plant operations, could have a material adverse effect upon our business and results of operations.

Our Packaging segment may lose business if our customers shift their manufacturing offshore.

Historically, geography has played a large factor in the packaging business. Manufacturing and other companies shipping products typically buy packaging from companies that are relatively close to their manufacturing facilities to increase shipping efficiency and decrease costs. As many U.S. companies move their manufacturing operations overseas, particularly to the Far East, the associated packaging business often follows. We have lost customers in the past and may lose customers again in the future as a result of customers moving their manufacturing facilities offshore, then hiring our competitors that operate packaging-production facilities perceived to be more territorially advantageous. As a result, our sales may suffer, which could have a material adverse effect upon our business and results of operations.

Failure to retain key personnel could impair our ability to execute our business strategy.

The continuing service of our executive officers and essential engineering, technical and management personnel, together with our ability to attract and retain such personnel, is an important factor in our continuing ability to execute our strategy. There is substantial competition to attract such employees, and the loss of any such key employees could have a material adverse effect on our business and operating results. The same could be true if we were to experience a high turnover rate among engineering and technical personnel and we were unable to replace them.

Members of our board of directors and management who also are our stockholders exert significant influence over us.

Based on information made available to us, we believe that our executive officers, directors and their affiliates collectively owned approximately 26.1% of our outstanding shares of common stock as of March 1, 2012.  As a result, those stockholders may, if acting together, control or exert substantial influence over actions requiring stockholders’ approval, including elections of our directors, amendments to our certificate of incorporation, mergers, sales of assets or other business acquisitions or dispositions.

As a public company, we need to comply with the reporting obligations of the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, and the Dodd-Frank Act of 2010. If we fail to comply with the reporting obligations of these laws or if we fail to maintain adequate internal controls over financial reporting, our business, results of operations and financial condition, and investors’ confidence in us, could be materially and adversely affected.

As a public company, we are required to comply with the periodic reporting obligations of the Exchange Act, including preparing annual reports, quarterly reports and current reports. We are also subject to certain of the provisions of the Sarbanes-Oxley and Dodd-Frank Acts which, among other things, require enhanced disclosure of business, financial, compensation and governance information. Our failure to prepare and disclose this information in a timely manner could subject us to penalties under federal securities laws, expose us to lawsuits, and restrict our ability to access financing. We may identify areas requiring improvement with respect to our internal control over financial reporting, and we may be required to design enhanced processes and controls to address issues identified. This could result in significant delays and cost to us and require us to

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divert substantial resources, including management time, from other activities. If we fail to maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent fraud.

Provisions of our corporate charter documents, Delaware law, and our stockholder rights plan may dissuade potential acquirers, prevent the replacement or removal of our current management and may thereby affect the price of our common stock.

The board of directors has the authority to issue up to 1,000,000 shares of preferred stock and to determine the price, rights, preferences, privileges, and restrictions, including voting rights of those shares without any further vote or action by the stockholders. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock, while providing flexibility in connection with possible financings, acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock. We have no present plans to issue shares of preferred stock. Further, certain provisions of our certificate of incorporation, bylaws, and Delaware law could delay or make more difficult a merger, tender offer or proxy contest involving us.

We also have a stockholder rights plan designed to protect and enhance the value of our outstanding equity interests in the event of an unsolicited attempt to acquire us in a manner or on terms not approved by the board of directors and that would prevent stockholders from realizing the full value of their shares of our common stock. Its purposes are to deter those takeover attempts that the board believes are undesirable, to give the board more time to evaluate takeover proposals and consider alternatives, and to increase the board’s negotiating position to enhance value in the event of a takeover. The rights issued pursuant to the plan are not intended to prevent all takeovers of our Company. However, the rights may have the effect of rendering more difficult or discouraging our acquisition. The rights may cause substantial dilution to a person or group that attempts to acquire us on terms or in a manner not approved by the board of directors, except pursuant to an offer conditioned upon the negation, purchase, or redemption of the rights with respect to which the condition is satisfied.

Additional provisions of our certificate of incorporation and bylaws could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting common stock. These include provisions that classify our board of directors, limit the ability of stockholders to take action by written consent, call special meetings, remove a director for cause, amend the bylaws, or approve a merger with another company. In addition, our bylaws set forth advance notice procedures for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.

We are subject to the provisions of Section 203 of the Delaware General Corporation Law which prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. For purposes of Section 203, a “business combination” includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder, and an “interested stockholder” is a person who, either alone or together with affiliates and associates, owns (or within the past three years did own) 15% or more of the corporation’s voting stock.

ITEM 2.            PROPERTIES

The following table presents certain information relating to each of the Company’s properties:

Location	Square Feet	Lease Expiration Date	Principal Use
Georgetown, Massachusetts	57,600	(owned by the Company)	Headquarters, fabrication, molding, test lab, clean room, and engineering for Component Products segment
Haverhill, Massachusetts	48,772	02/28/2013	Flame lamination for the Component Products segment

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Location	Square Feet	Lease Expiration Date	Principal Use
Atlanta, Georgia	47,000	04/30/2014	Molding and engineering for the Component Products segment
Gainesville, Georgia	2,500	04/30/2012	Engineering and design for the Packaging Segment
Huntsville, Alabama	9,000	06/30/2016	Engineering, design, and fabrication for the Packaging segment
Ventura, California	48,300	month-to-month	Fabrication and engineering for the Component Products segment
Grand Rapids, Michigan	255,260	(owned by the Company)	Fabrication, molding, and engineering for the Component Products segment
Rancho Dominguez, California	56,000	11/14/2012	Fabrication, molding, and engineering for the Component Products segment
Denver, Colorado	18,270	(owned by the Company)	Fabrication, molding, and engineering for the Component Products segment
Denver, Colorado	28,383	(owned by the Company)	Fabrication, molding, and engineering for the Component Products segment
Raritan, New Jersey	67,125	02/28/2013	Fabrication, molding, test lab, clean-room, and engineering for the Packaging segment
Kissimmee, Florida(1)	49,400	12/31/2011	Fabrication, molding, test lab, and engineering for the Packaging segment
El Paso, Texas	40,000	month-to-month	Warehousing and fabrication for the Packaging segment
El Paso, Texas	48,325	01/30/2017	Warehousing and fabrication for the Packaging segment
Glendale Heights, Illinois	78,913	07/31/2014	Fabricating, clean room, molding, and engineering for the Packaging segment
Clinton, Iowa	60,000	12/31/2014	Molded fiber operations for the Packaging segment
Clinton, Iowa	62,000	02/28/2015	Molded fiber operations for the Packaging segment

(1)United Development Company Limited, a Florida limited partnership and an affiliate of the Company and certain officers, directors and stockholders of the Company, is the lessor of these properties. United Development Company Limited was consolidated into the Company’s financial statements in 2003 (see Notes 8 and 23 to the Consolidated Financial Statements).

ITEM 3.            LEGAL PROCEEDINGS

The Company is a defendant in various administrative proceedings that are being handled in the ordinary course of business.  In the opinion of management of the Company, these suits and claims should not result in final judgments or settlements that, in the aggregate, would have a material adverse effect on the company’s financial condition or results of operations.

ITEM 4.            MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Price

From July 8, 1996, until April 18, 2001, the Company’s common stock was listed on the NASDAQ National Market under the symbol “UFPT.” Since April 19, 2001, the Company’s common stock has been listed on the NASDAQ Capital Market. The following table sets forth the range of high and low quotations for the common stock as reported by NASDAQ for the quarterly periods from January 1, 2010, to December 31, 2011:

Fiscal Year Ended December 31, 2010	High		Low
First Quarter	$	11.06	$	6.50
Second Quarter	11.59		8.26
Third Quarter	12.03		8.51
Fourth Quarter	13.28		10.50

Fiscal Year Ended December 31, 2011	High		Low
First Quarter	$	21.59	$	12.19
Second Quarter	19.64		14.86
Third Quarter	19.68		14.20
Fourth Quarter	15.90		12.65

Number of Stockholders

As of March 7, 2012, there were 86 holders of record of the Company’s common stock.

Due to the fact that many of the shares are held by brokers and other institutions on behalf of stockholders, the Company is unable to estimate the total number of individual stockholders represented by these holders of record.

Dividends

The Company did not pay any dividends in 2010 or 2011. The Company presently intends to retain all of its earnings to provide funds for the operation of its business, although it would consider paying cash dividends in the future. The Company’s ability to pay dividends is subject to approval by its principal lending institution.

Stock Plans

The Company maintains two active stock incentive plans to provide long-term rewards and incentives to the Company’s key employees, officers, employee directors, non-employee directors, and advisors. The 2009 Non-Employee Director Stock Incentive Plan provides for the issuance of up to 975,000 shares of the Company’s common stock to non-employee directors.

The Company also maintains the 2003 Incentive Plan, which provides the Company with the ability to offer up to 2,250,000 shares of equity-based incentives to present and future executives, and other employees who are in a position to contribute to the long-term success and growth of the Company.  Additional details of these plans are discussed in Note 13 to the consolidated financial statements.

Each of these plans and their amendments has been approved by the Company’s stockholders.

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Summary plan information as of December 31, 2011, is as follows:

	Number of shares of UFPT common stock to be issued (1)	Weighted average exercise price of outstanding options		Number of shares of UFPT common stock remaining available for future issuance
1993 Employee Plan(2)	331,620	$	2.65	0
1998 Director Plan	250,651	6.83		220,226
Total Option Plans	582,271	4.45		220,226
2003 Incentive Plan Options	56,250	10.50		0
2003 Incentive Plan RSU	176,209	—		1,087,836	(3)
Total 2003 Incentive Plan	232,459	—		1,087,836
Total All Stock Plans	814,730	—		1,308,062

(1)  Will be issued upon exercise of outstanding options or vesting of stock unit awards.

(2)  The plan expired on April 12, 2010.

(3)  Represents the total of both Options and RSUs available in the 2003 Incentive Plan.

ITEM 6.            SELECTED FINANCIAL DATA

The following table summarizes our financial data for the periods presented. You should read the following financial information together with the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the notes to those financial statements appearing elsewhere in this document. The selected statements of operations data for the fiscal years ended December 31, 2011, 2010, and 2009, and the selected balance sheet data as of December 31, 2011, and 2010, are derived from the audited financial statements, which are included elsewhere in this document. The selected statements of operations data for the years ended December 31, 2008, and 2007, and the balance sheet data at December 31, 2009, 2008, and 2007, are derived from our audited financial statements not included in this document.

Selected Consolidated Financial Data:

	Years Ended December 31
	(in thousands, except per share data)
Consolidated statement of operations data(1)	2011		2010	2009	2008		2007
Net sales	$	127,244	120,766	99,231	110,032		93,595
Gross profit	36,245		34,616	26,719	28,563		22,810
Operating income	15,716		14,392	8,192	8,425	(2)	7,247
Net income attributable to UFP Technologies, Inc.	10,346		9,247	5,929	5,116		4,159
Diluted earnings per share	1.48		1.37	0.94	0.82		0.71
Weighted average number of diluted shares outstanding	6,999		6,749	6,294	6,263		5,861

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	As of December 31
	(in thousands)
Consolidated balance sheet data	2011		2010		2009		2008		2007
Working capital	$	48,575	$	38,267	$	27,702	$	18,688	$	14,952
Total assets	79,721		69,478		57,855		47,133		43,336
Short-term debt and capital lease obligations	581		654		623		1,419		1,419
Long-term debt and capital lease obligations, excluding current portion	5,639		6,847		7,502		4,852		6,271
Total liabilities	17,736		19,251		18,849		16,289		18,510
Stockholders’ equity	61,985		50,226		39,005		31,890		24,827

(1)See Note 20 to the consolidated financial statements for segment information.

(2)Amount includes restructuring charges of $1.3 million.

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

UFP Technologies is producer of innovative custom-engineered components, products and specialty packaging. The Company serves a myriad of markets, but specifically targets opportunities in the medical, automotive, aerospace and defense, computer and electronics, industrial, and consumer markets.

In 2011 the Company experienced organic sales growth of 5.4%, reflecting increased demand for products from the automotive and defense and aerospace markets.  The ability of the Company to leverage this sales growth as well as one-time gains and moving allowances associated with the sale of real estate in Alabama by UDT allowed the Company to generate a 9.2% increase in operating income.

On January 13, 2011, United Development Company Limited (“UDT”) sold its Alabama facility (Packaging segment) for approximately $1,250,000.  The net book value of the asset at December 31, 2010, was approximately $384,000.  Selling expenses of approximately $38,000 were incurred.

Due to a redesigned model vehicle, a substantial portion of a large automotive door panel program ended on June 30, 2011, although the Company is still supplying door panels to the customer for other model vehicles.  Sales of door panels for the discontinued model vehicle were approximately $3.8 million and $4.0 million for the six-month periods ended December 31, 2010, and June 30, 2011, respectively.

The Company’s strategy includes further organic growth and growth through strategic acquisitions.

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Results of Operations

The following table sets forth, for the years indicated, the percentage of revenues represented by the items as shown in the Company’s consolidated statements of operations:

	2011		2010		2009
Net sales	100.0	%	100.0	%	100.0	%
Cost of sales	71.5	%	71.3	%	73.1	%
Gross profit	28.5	%	28.7	%	26.9	%
Selling, general, and administrative expenses	16.8	%	16.8	%	18.7	%
Gain on sale of fixed assets	-0.6	%	0.0	%	0.0	%
Operating income	12.3	%	11.9	%	8.2	%
Total other expenses (income), net	0.0	%	0.0	%	-0.7	%
Income before taxes	12.3	%	11.9	%	8.9	%
Income tax expense	3.9	%	4.1	%	2.9	%
Net income attributable to consolidated operations	8.4	%	7.8	%	6.0	%
Net income attributable to non-controlling interests	0.3	%	0.1	%	0.0	%
Net income attributable to UFP Technologies, Inc.	8.1	%	7.7	%	6.0	%

2011 Compared to 2010

Net sales increased 5.4% to $127.2 million for the year ended December 31, 2011, from net sales of $120.8 million in the same period of 2010.  The $6.4 million increase in sales was largely attributable to increased sales into the aerospace and defense industries of approximately $3.1 million fueled by a new contract for the US Marines to supply backpack components (Component Products Segment) as well as demand for interior trim parts from the automotive industry of approximately $1.8 million (Component Products segment).

Gross profit as a percentage of sales (“Gross Margin”) decreased slightly to 28.5% for the year ended December 31, 2011, from 28.7% in 2010. The slight decrease in gross margin is primarily attributable to costs of approximately $350,000 incurred as a result of the closure of the Company’s manufacturing facility in Alabama as well as approximately $300,000 incurred in additional health insurance claims (overhead) partially offset by manufacturing efficiencies achieved in the Company’s plants (as a percentage of sales material and direct labor collectively decreased by 0.2% in 2011).

Selling, General, and Administrative Expenses (“SG&A”) increased 5.6% to $21.4 million for the year ended December 31, 2011, from $20.2 million in 2010. As a percentage of sales, SG&A was 16.8% for both the years ended December 31, 2011, and 2010. The $1.2 million increase in SG&A for the year ended December 31, 2011, is primarily due to an increase in professional fees of approximately $400,000 associated with the development of enhanced internal operating and information systems and a re-branding and marketing project, approximately $400,000 in additional administrative salaries, wages and benefits and approximately $200,000 in additional health insurance claims.

Interest expense net of interest income decreased to approximately $27,000 for the year ended December 31, 2011, from net interest expense of approximately $116,000 in 2010. The decrease in interest expense is primarily attributable to higher interest earned on excess cash balances, as well as lower interest paid on declining term debt balances.

The gain on sale of assets of approximately $834,000 was derived primarily from the sale of real estate in Alabama by UDT.  Of this $834,000 gain, approximately $428,000 relates to non-controlling interests that have been deducted to determine net income attributable to UFP Technologies, Inc., and $250,000 represents a one-time fee paid to the Company for managing the transaction.

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The Company recorded income tax expense as a percentage of income before income tax expense excluding net income attributable to non-controlling interests, of 31.3% and 34.8% for the year ended December 31, 2011, and 2010, respectively. The decrease in the effective tax rate for the year ended December 31, 2011, is primarily attributable to the reversal in 2011 of approximately $385,000 in reserves previously established for uncertain tax benefits due to a favorable outcome on a concluded Federal Internal Revenue Service audit and the statute of limitations expiring on certain other federal income tax filings as well as increased deductions associated with domestic manufacturing.  The non-controlling interest in UDT is not subject to corporate income tax.  The Company has deferred tax assets on its books associated with net operating losses generated in previous years. The Company has considered both positive and negative available evidence in its determination that the deferred tax assets are more likely than not to be realized, and has not recorded a tax valuation allowance at December 31, 2011. The Company will continue to assess whether the deferred tax assets will be realizable and, when appropriate, will record a valuation allowance against these assets. The amount of the net deferred tax asset considered realizable, however, could be reduced in the near term, if estimates of future taxable income during the carry-forward period are reduced.

2010 Compared to 2009

Net sales increased 21.7% to $120.8 million for the year ended December 31, 2010, from net sales of $99.2 million in the same period of 2009, driven primarily by the 2009 acquisitions of Foamade, ENM, and AMI (all within the Component Products segment). Without sales from these acquisitions for the portion of 2010 in which they were not owned in 2009, sales would have increased 10.0% to $109.1 million. The increase in sales excluding these acquisitions was largely due to increased demand for interior trim parts from the automotive industry of approximately $6.6 million (Component Products segment), as well as an increase in sales in the Packaging segment of approximately $2.3 million, due largely to the impact of the improved economy on demand for our customers’ parts.

Gross profit as a percentage of sales (“Gross Margin”) increased to 28.7% for the year ended December 31, 2010, from 26.9% in 2009. The increase in gross margin is primarily attributable to the Company’s ability to leverage sales growth against the fixed component of cost of sales (overhead), partially offset by lower-than-average margins from the increased sales of automotive trim parts (Component Products segment). Overhead as a percentage of sales decreased by 2.2% while material and direct labor collectively increased by 0.4%.

Selling, General, and Administrative Expenses (“SG&A”) increased 9.2% to $20.2 million for the year ended December 31, 2010, from $18.5 million in 2009. As a percentage of sales, SG&A was 16.8% and 18.7%, respectively, for the years ended December 31, 2010, and 2009. The increase in SG&A for the year ended December 31, 2010, is primarily due to increased SG&A associated with newly acquired companies of approximately $1.2 million (Component Products segment) and increased variable-based compensation of approximately $500,000 (primarily Component Products segment). The decrease in SG&A as a percentage of sales is primarily a result of the fixed-cost components of SG&A being measured against higher sales.

Interest expense net of interest income decreased to approximately $116,000 for the year ended December 31, 2010, from interest expense of approximately $233,000 in 2009. The decrease in interest expense is primarily attributable to higher interest earned on excess cash balances, as well as lower interest paid on declining term debt balances.

The Company recorded income tax expense as a percentage of pre-tax income of 34.8% and 32.0% for the year ended December 31, 2010 and 2009, respectively. The increase in effective tax rate for 2010 is primarily due to the non-taxable gains recorded on the acquisitions of Foamade, ENM, and AMI in 2009. The Company has deferred tax assets on its books associated with net operating losses generated in previous years. The Company has considered both positive and negative available evidence in its determination that the deferred tax assets will be realized, and has not recorded a tax valuation allowance at December 31, 2010. The Company will continue to assess whether the deferred tax assets will be realizable and, when appropriate, will record a valuation allowance against these assets. The amount of the net deferred tax asset considered realizable, however, could be reduced in the near term, if estimates of future taxable income during the carry-forward period are reduced.

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Liquidity and Capital Resources

The Company funds its operating expenses, capital requirements, and growth plan through internally-generated cash.

As of December 31, 2011, and 2010, working capital was approximately $48.6 million and $38.3 million, respectively. The increase in working capital is primarily attributable to an increase in cash of approximately $7.7 million due to cash generated from operations and increased inventories of approximately $1.7 million due largely to the build-up of finished goods associated with a project for the US Marines.

Cash provided from operations was approximately $11.7 million and $11.8 million in 2011 and 2010, respectively. The primary reasons for the slight decrease in cash generated from operations in 2011 were (i) an increase in inventory in 2011 of approximately $1.7 million compared to an increase in inventory in 2010 of approximately $400,000 due largely to an increase in inventory associated with a military program, (ii) a decrease in accrued taxes and other expenses of approximately $440,000 in 2011 compared to an increase in 2010 of approximately $1.4 million due mostly to higher income tax payments made in 2011, partially offset by (iii) an increase in profits in 2011 of approximately $1.4 million.  Net cash used in investing activities in 2011 was approximately $2.5 million and was used primarily for the acquisition of new manufacturing equipment of approximately $3.7 million, partially offset by cash provided from the sale of real estate of approximately $1.2 million.

On January 29, 2009, the Company amended and extended its credit facility with Bank of America, NA. The facility is comprised of: (i) a revolving credit facility of $17 million; (ii) a term loan of $2.1 million with a seven-year straight-line amortization; (iii) a term loan of $1.8 million with a 20-year straight-line amortization; and (iv) a term loan of $4.0 million with a 20-year straight-line amortization. Extensions of credit under the revolving credit facility are based in part upon accounts receivable and inventory levels. Therefore, the entire $17 million may not be available to the Company. As of December 31, 2011, the Company had availability of approximately $16.9 million based upon collateral levels in place as of that date. The credit facility calls for interest of LIBOR plus a margin that ranges from 1.0% to 1.5% or, at the discretion of the Company, the bank’s prime rate less a margin that ranges from 0.25% to zero. In both cases the applicable margin is dependent upon Company performance. The loans are collateralized by a first priority lien on all of the Company’s assets, including its real estate located in Georgetown, Massachusetts, and in Grand Rapids, Michigan. Under the credit facility, the Company is subject to a minimum fixed-charge coverage financial covenant. The Company’s $17 million revolving credit facility matures November 30, 2013; the term loans are all due on January 29, 2016. At December 31, 2011, the interest rate on these facilities was 1.28%, and there were no borrowings outstanding on the line of credit.

Commitments, Contractual Obligations, and Off-Balance-Sheet Arrangements

The following table summarizes the Company’s contractual obligations at December 31, 2011:

Payments due in:	Operating Leases		Grand Rapids Mortgage		Term Loans		Massachusetts Mortgage		Debt Interest		Supplemental Retirement		New Molded Fiber Equipment Purchase Commitment		Total
2012	$	1,762,408	$	200,001	$	288,360	$	92,300	$	148,225	$	75,000	$	4,793,000	$	7,359,294
2013	1,127,907		200,001		288,360		92,300		133,708		75,000		—		$	1,917,276
2014	820,134		200,001		288,360		92,300		119,192		45,833		—		$	1,565,820
2015	251,036		200,001		288,360		92,300		104,675		25,000		—		$	961,372
2016 and thereafter	211,752		2,633,329		48,062		1,215,283		255,913		100,000		—		$	4,464,339
Total	$	4,173,237	$	3,433,333	$	1,201,502	$	1,584,483	$	761,713	$	320,833	$	4,793,000	$	16,268,101

The Company requires cash to pay its operating expenses, purchase capital equipment, and to service the obligations listed above. The Company’s principal sources of funds are its operations and its revolving credit

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facility. Although the Company generated cash from operations in the year ended December 31, 2011, it cannot guarantee that its operations will generate cash in future periods. Subject to the Risk Factors set forth in Part I, Item 1A of this Report and the general disclaimers set forth in our Special Note Regarding Forward-Looking Statements at the outset of this Report, we believe that cash flow from operations will provide us with sufficient funds in order to fund our expected operations over the next twelve months.

The Company does not believe inflation has had a material impact on its results of operations in the last three years.

The Company had no off-balance-sheet arrangements in 2011, other than operating leases.

Critical Accounting Policies

The preparation of consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to product returns, bad debts, inventories, intangible assets, income taxes, warranty obligations, restructuring charges, contingencies, and litigation. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances, including current and anticipated worldwide economic conditions, both in general and specifically in relation to the packaging industry, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The Company’s significant accounting policies are described in Note 1 to the consolidated financial statements included in Item 8 of this Form 10-K. The Company believes the following critical accounting policies necessitated that significant judgments and estimates be used in the preparation of its consolidated financial statements.

The Company has reviewed these policies with its Audit Committee.

Revenue Recognition

The Company recognizes revenue at the time of shipment when title and risk of loss have passed to the customer, persuasive evidence of an arrangement exists, performance of its obligation is complete, its price to the buyer is fixed or determinable, and the Company is reasonably assured of collection. If a loss is anticipated on any contract, a provision for the entire loss is made immediately. Determination of these criteria, in some cases, requires management’s judgment. Should changes in conditions cause management to determine that these criteria are not met for certain future transactions, revenue for any reporting period could be adversely affected.

Intangible Assets

Intangible assets include patents and other intangible assets. Intangible assets with an indefinite life are not amortized. Intangible assets with a definite life are amortized on a straight-line basis, with estimated useful lives ranging from eight to 14 years. Indefinite-lived intangible assets are tested for impairment annually, and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate that the carrying amount may be impaired. Intangible assets with a definite life are tested for impairment whenever events or circumstances indicate that their carrying amounts may not be recoverable.

Goodwill

Goodwill is tested for impairment annually, and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate that the carrying amount may be impaired. Impairment testing for goodwill is done at a reporting unit level. Reporting units are one level below the business segment level, but can be combined when reporting units within the same segment have similar economic characteristics. The Company’s reporting units include its Component Products segment, Packaging segment (excluding its Molded Fiber operation), and its Molded Fiber operation. An impairment loss generally would be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting

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unit. The Company assessed qualitative factors as of December 31, 2011, and determined that it was more likely than not that the fair value of both reporting units exceeded their respective carrying amounts.  Factors considered for each reporting unit included financial performance, forecasts and trends, market cap, regulatory and environmental issues, foreign currency, market analysis, recent transactions, macro-economic conditions, industry and market considerations, raw material costs, management stability, and the degree by which the fair value of each reporting unit exceeded its carrying value in 2010 (approximately $37 million or 161% and $7 million or 190% for the Component Products and Molded Fiber reporting units, respectively).  As a result, no goodwill impairment test was performed in 2011.  Based upon tests performed in 2010 and 2009, there was no goodwill impairment as of December 31, 2010, and 2009.

Accounts Receivable

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. These allowances for doubtful accounts are determined by reviewing specific accounts the Company has deemed are at risk of being uncollectible and other credit risks associated with groups of customers. If the financial condition of the Company’s customers were to deteriorate or economic conditions were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required with a resulting charge to results of operations.

Inventories

Inventories include material, labor, and manufacturing overhead and are valued at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method.

The Company periodically reviews the realizability of its inventory for potential obsolescence. Determining adequate reserves for inventory obsolescence requires management’s judgment. Conditions impacting the realizability of the Company’s inventory could cause actual asset write-offs to be materially different than the reserve balances.

Deferred Income Taxes

The Company evaluates the need for a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. The Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. Should the Company determine that it would not be able to realize all or part of its net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion of the Company’s market risk includes “forward-looking statements” that involve risk and uncertainties. Actual results could differ materially from those projected in the forward-looking statements.

Market risk represents the risk of changes in value of a financial instrument caused by fluctuations in interest rates, foreign exchange rates, and equity prices. At December 31, 2011, the Company’s cash and cash equivalents consisted of bank accounts in U.S. dollars, and their valuation would not be affected by market risk. The Company has four debt instruments where interest is based upon either the Prime rate or LIBOR and, therefore, future operations could be affected by interest rate changes; however, the Company believes the market risk of the debt is minimal.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated Financial Statements and Supplementary Data of the Company are listed under Part IV, Item 15, in this Report.

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ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f) and 15d-15(f). Management conducted an assessment of the Company’s internal control over financial reporting as of December 31, 2011, based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework. Based on the assessment, management concluded that, as of December 31, 2011, the Company’s internal control over financial reporting is effective.

The Company’s internal control over financial reporting as of December 31, 2011, has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in their report which is included herein.

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B.OTHER INFORMATION

None.

PART III

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The information required by this Item 10 is hereby incorporated by reference to the Company’s definitive proxy statement to be filed by the Company within 120 days after the close of its fiscal year.

ITEM 11.EXECUTIVE COMPENSATION

The information required by this Item 11 is hereby incorporated by reference to the Company’s definitive proxy statement to be filed by the Company within 120 days after the close of its fiscal year.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item 12 is hereby incorporated by reference to the Company’s definitive proxy statement to be filed by the Company within 120 days after the close of its fiscal year.

20

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item 13 is hereby incorporated by reference to the Company’s definitive proxy statement to be filed by the Company within 120 days after the close of its fiscal year.

ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item 14 is hereby incorporated by reference to the Company’s definitive proxy statement to be filed by the Company within 120 days after the close of its fiscal year.

PART IV

ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES

		Page
(a) (1)	Financial Statements
	Index to Consolidated Financial Statements and Financial Statement Schedule	F-2
	Reports of Independent Registered Public Accounting Firm, Grant Thornton LLP	F-3
	Consolidated Balance Sheets as of December 31, 2011, and 2010	F-5
	Consolidated Statements of Operations for the years ended December 31, 2011, 2010, and 2009	F-6
	Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2011, 2010, and 2009	F-7
	Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010, and 2009	F-8
	Notes to Consolidated Financial Statements	F-9
(a) (2)	Financial Statement Schedule
	Schedule II — Valuation and Qualifying Accounts	F-29
(a) (3)	Exhibits

Number		Reference
2.01	Agreement and Plan of Reorganization among the Company, Moulded Fibre Technology, Inc. and UFP Acquisition, Inc.	A-2.01**
2.02	Agreement of Merger between Moulded Fibre Technology, Inc. and UFP Acquisition, Inc.	B-2.02**
2.03	Merger Agreement relating to the reincorporation of the Company in Delaware.	A-2.02**
2.04	Asset Purchase Agreement relating to the purchase of Foam Cutting Engineers, Inc.	C-2**
2.05	Asset Purchase Agreement relating to the purchase of the assets of Pacific Foam Technologies, Inc.	D-2.05**
2.06	Stock Purchase Agreement dated January 14, 2000, relating to the acquisition of the stock of Simco Industries, Inc.	E-2.01**
3.01	Certificate of Incorporation of the Company, as amended.	F-3.01** G-3.01**
3.02	Amended and Restated Certificate of Designation of Series A Junior Participating Preferred Stock, as filed with the Secretary of State of the State of Delaware on March 20, 2009.	HH-3.02**
3.03	Amended and Restated Bylaws of the Company.	HH-3.03**

21

Number		Reference
4.01	Specimen Certificate for shares of the Company’s Common Stock.	A-4.01**
4.02	Description of Capital Stock (contained in the Certificate of Incorporation of the Company, filed as Exhibit 3.01).	F-3.01**
4.03	Rights Agreement, dated as of March 20, 2009, by and between the Company and American Stock Transfer & Trust Company, LLC, as Rights Agent, which includes as Exhibit A, the Form of Amended and Restated Certificate of Designation of Series A Junior Participating Preferred Stock, as Exhibit B, the Form of Rights Certificate, and as Exhibit C, the Summary of Rights to Purchase Shares of Preferred Stock of UFP Technologies, Inc.	HH-4.03**
10.01	Agreement between the Company and William H. Shaw.	A-10.08*, **
10.02	Agreement and Severance Agreement between the Company and Richard L. Bailly.	A-10.09*, **
10.03	Employee Stock Purchase Plan.	A-10.18**
10.04	1993 Combined Stock Option Plan, as amended.	I-10.19*, **
10.05	1993 Non-employee Director Stock Option Plan.	J-4.5**
10.06	Facility Lease between the Company and Raritan Associates.	A-10.22**
10.07	Facility Lease between the Company and Dana Evans d/b/a Evans Enterprises.	A-10.27**
10.08	Form of Indemnification Agreement for directors and officers of the Company.	A-10.30**
10.09	Facility Lease between the Company and Clinton Area Development Corporation.	K-10.37**
10.10	Employment Agreement with R. Jeffrey Bailly dated April 4, 1995.	L-10.37*, **
10.11	Amended 1998 Employee Stock Purchase Plan.	M**
10.12	Facility Lease between the Company and Quadrate Development, LLC.	N-10.43**
10.13	Amended 1998 Director Stock Option Incentive Plan, as amended.	M, DD*, **
10.14	Amended Facility Lease between the Company and United Development Company Limited.	O-10.27**
10.15	Amended Facility Lease between the Company and United Development Company Limited.	O-10.28**
10.16	Amended Facility Lease between the Company and Ward Hill Realty Associates, LLC, successors in interest to Evans Enterprises of South Beach.	P-10.30**
10.17	Credit and Security Agreement between the Company and Fleet Capital Corporation.	Q-10.31**
10.18	Facility Lease between Simco Automotive Trim, Inc. and Insite Atlanta, LLC.	R-10.31**
10.19	Amended Credit and Security Agreement between the Company and Fleet Capital Corporation.	S-10.33**
10.20	Facility lease between the Company and Clinton Base Company LLC.	G-10.34**
10.21	Second Amendment to the Credit Agreement between the Company and Fleet Capital Corporation.	T-10.35**

22

Number		Reference
10.22	Third Amendment to the Credit and Security Agreement between the Company and Bank of America.	U-10.37**
10.23	1998 Employee Stock Purchase Plan as amended.	V-10.38**
10.24	Form of Stock Unit Award Agreement.	W-10.40*,**
10.25	Executive Non-qualified Excess Plan.	X-10.41*,**
10.26	UFP Technologies, Inc. 2003 Incentive Plan, as amended.	OO-10.26*,**
10.27	Promissory note of United Development Company Limited in favor of Bank of America, N.A. dated May 22, 2007.	Y-10.27
10.28	Employment Agreement with R. Jeffrey Bailly dated October 8, 2007.	Z-10.28*,**
10.29	Agreement and Plan of Merger dated as of January 14, 2008, among UFP Technologies, Inc., S&L Acquisition Corp., and Stephenson & Lawyer, Inc.	AA-10.29**
10.30	Form of 2008 Stock Unit Award Agreement.	CC-10.30*,**
10.42	Amended facility lease between the Company and Rothbart Realty Co.	CC-10.42**
10.43	Amended facility lease between the Company and Rothbart Realty Co.	CC-10.43**
10.44	Amended facility lease between the Company and Quadrate Development, LLC.	CC-10.44**
10.45	Amended facility lease between the Company and Kessler Industries, Inc.	CC-10.45**
10.46	Amended facility lease between the Company and Raritan Johnson Associates, LLC.	CC-10.46**
10.47	Amended facility lease between the Company and Ward Hill Realty Associates, LLC.	CC-10.47**
10.48	Form of Stock Unit Award Agreement by and between UFP Technologies, Inc. and R. Jeffrey Bailly.	EE-10.48*,**
10.49	Third Amendment to Iowa facility lease, signed as of August 20, 2008, between Moulded Fibre Technology, Inc.(Tenant) and Clinton Base Company, LLC (Landlord).	FF-10.49**
10.50	Form of 2009 Stock Unit Award Agreement.	GG-10.50*,**
10.51	Amended and restated Credit and Security Agreement between the Company and Bank of America, N.A, dated January 27, 2009.	II-10.51**
10.52	2009 Non-Employee Director Stock Incentive Plan.	JJ-10.52*, **
10.53	Lease agreement dated July 29, 2009, between ProLogis and UFP Technologies, Inc.	KK-10.53**
10.54	Form of 2010 Stock Unit Award Agreement.	LL-10.54*,**
10.55	Form of 2011 Stock Unit Award Agreement.	MM-10.55*,**
10.56	Amendment to Employment Agreement with R. Jeffrey Bailly.	NN-10.56*,**
10.57	Form of 2011 CEO Stock Unit Award Agreement.	NN-10.57*,**
10.58	Form of 2012 Stock Unit Award Agreement.	PP-10.58*,**
10.59	Form of 2012 Stock Unit Award Agreement.	PP-10.59*,**
10.60	Facility lease between the Company and East Group Properties, LLP.	Filed herewith

23

Number		Reference
14.00	Code of Ethics.	BB**
21.01	Subsidiaries of the Company.	Filed herewith
23.01	Consent of Grant Thornton LLP.	Filed herewith
31.01	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
31.02	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
32.01	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Furnished herewith
101.INS	XBRL Instance Document.	Filed herewith***
101.SCH	XBRL Taxonomy Extension Schema Document.	Filed herewith***
101.CAL	XBRL Taxonomy Calculation Linkbase Document.	Filed herewith***
101.LAB	XBRL Taxonomy Label Linkbase Document.	Filed herewith***
101.PRE	XBRL Taxonomy Presentation Linkbase Document.	Filed herewith***
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.	Filed herewith***

A.	Incorporated by reference to the Company’s Registration Statement on Form S-1 (Registration No. 33-70912). The number set forth herein is the number of the Exhibit in said Registration Statement.
B.	Incorporated by reference to the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 1993. The number set forth herein is the number of the Exhibit in said Annual Report.
C.	Incorporated by reference to the Company’s report on 8-K dated February 3, 1997. The number set forth herein is the number of the Exhibit in said report.
D.	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998. The number set forth herein is the number of the Exhibit in said Annual Report.
E.	Incorporated by reference to the Company’s Report on Form 8-K dated January 31, 2000. The number set forth herein is the number of the Exhibit in said Report.
F.	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 1996. The number set forth herein is the number of the Exhibit in said Quarterly Report.
G.	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2004. The number set forth herein is the number of the exhibit in said Quarterly Report.
H	Incorporated by reference to the Company’s report on Form 8-K dated January 13, 1999. The number set forth herein is the number of the Exhibit in said Report.
I.	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 1998. The number set forth herein is the number of the Exhibit in said Quarterly Report.

24

J.	Incorporated by reference to the Company’s Registration Statement on Form S-8 (Registration No. 33-76440). The number set forth herein is the number of the Exhibit in said Registration Statement.
K.	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1995. The number set forth herein is the number of the Exhibit in said Annual Report.
L.	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 1995. The number set forth herein is the number of the Exhibit in said Quarterly Report.
M.	Incorporated by reference to the Company’s Proxy Statement relating to the Company’s Annual Meeting of Stockholders on June 5, 2002.
N.	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000. The number set forth herein is the number of the Exhibit in said Annual Report.
O.	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001. The number set forth herein is the number of the Exhibit in said Annual Report.
P.	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2002. The number set forth herein is the number of the Exhibit in said Quarterly Report.
Q.	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002. The number set forth is the number of the exhibit in said Annual Report.
R.	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2003. The number set forth herein is the number of the Exhibit in said Annual Report.
S.	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003. The number set forth is the number of the exhibit in said Annual Report.
T.	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2004. The number set forth herein is the number of the exhibit in said Quarterly Report.
U.	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005. The number set forth herein is the number of the exhibit in said annual report.
V.	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2006. The number set forth herein is the number of the exhibit in said quarterly report.
W.	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2006. The number set forth herein is the number of the exhibit in said quarterly report.
X.	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2006. The number set forth herein is the number of the exhibit in said Quarterly Report.
Y.	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2007. The number set forth herein is the number of the exhibit in said Quarterly Report.
Z.	Incorporated by reference to the Company’s Current Report on Form 8-K filed October 12, 2007. The number set forth herein is the number of the Exhibit in said Report.
AA.	Incorporated by reference to the Company’s Current Report on Form 8-K filed January 18, 2008. The number set forth herein is the number of the Exhibit in said Report.
BB.	Incorporated by reference to Appendix C to the Company’s Proxy Statement relating to the Company’s Annual Meeting of Stockholders on June 6, 2007.

25

CC.	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007. The number set forth herein is the number of the exhibit in said Annual Report.
DD.	Incorporated by reference to Appendix A to the Company’s Proxy Statement relating to the Company’s Annual Meeting of Stockholders on June 4, 2008.
EE.	Incorporated by reference to the Company’s Current Report on Form 8-K filed June 10, 2008. The number set forth herein is the number of the exhibit in said Report.
FF	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2008. The number set forth herein is the number of the exhibit in said Quarterly Report.
GG.	Incorporated by reference to the Company’s Current Report on Form 8-K filed March 2, 2009. The number set forth herein is the number of the Exhibit in said Report.
HH.	Incorporated by reference to the Company’s Current Report on Form 8-K filed March 24, 2009. The number set forth herein is the number of the Exhibit in said Report.
II.	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008. The number set forth herein is the number of the exhibit in said Annual Report.
JJ.	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2009. The number set forth herein is the number of the exhibit in said Quarterly Report.
KK.	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2009. The number set forth herein is the number of the exhibit in said Quarterly Report.
LL.	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009. The number set forth herein is the number of the Exhibit in said Annual Report.
MM.	Incorporated by reference to the Company’s Current Report on Form 8-K filed February 25, 2011. The number set forth herein is the number of the Exhibit in said Report.
NN.	Incorporated by reference to the Company’s Current Report on Form 8-K filed March 8, 2011. The number set forth herein is the number of the Exhibit in said Report.
OO.	Incorporated by reference to the Company’s Current Report on Form 8-K filed June 14, 2011. The number set forth herein is the number of the Exhibit in said Report.
PP.	Incorporated by reference to the Company’s Current Report on Form 8-K filed February 24, 2012. The number set forth herein is the number of the Exhibit in said Report.

*	Management contract or compensatory plan or arrangement.
**	In accordance with Rule 12b-32 under the Securities Exchange Act of 1934, as amended, reference is made to the documents previously filed with the Securities and Exchange Commission, which documents are hereby incorporated by reference.
***	Submitted electronically herewith. Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934.

The SEC allows the Company to incorporate by reference certain information into this annual report on Form 10-K. This means that the Company can disclose important information by reference to other documents the Company has filed separately with the SEC. These documents contain important information about the Company and its financial condition. The Company has incorporated by reference into this annual report the information indicated above. This information is considered to be a part of this annual report, except for any information that is superseded by information that is filed at a later date.

26

You may read and copy any of the documents incorporated by reference in this annual report at the following locations of the SEC by using the Company’s file number, 001-12648:

Public Reference Room	Midwest Regional Office	Northeast Regional Office
450 Fifth Street, NW	Citicorp Center	233 Broadway
Room 1024	500 West Madison Street, # 1400	New York, NY 10279
Washington, DC 20549	Chicago, IL 60661

You may also obtain copies of this information by mail from the Public Reference Room of the SEC, 450 Fifth Street, NW, Room 1024, Washington, DC 20549, at prescribed rates. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC also maintains a World Wide Web site that contains reports, proxy statements and other information about issuers, including the Company, that file electronically with the SEC. The address of that site is http://www.sec.gov.

Documents incorporated by reference are also available from the Company without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference in this annual report. You can obtain these documents by requesting them by telephone or in writing from the Company at 172 East Main Street, Georgetown, MA 01833, (978) 352-2200.

27

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		UFP TECHNOLOGIES, INC.
Date:	March 15, 2012	By:	/s/ R. Jeffrey Bailly
			R. Jeffrey Bailly, President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

SIGNATURE	TITLE	DATE
/s/ R. Jeffrey Bailly	Chairman, Chief Executive Officer,	March 15, 2012
R. Jeffrey Bailly	President, and Director
/s/ Ronald J. Lataille	Chief Financial Officer, Vice President,	March 15, 2012
Ronald J. Lataille	Principal Financial and Accounting Officer
/s/ Kenneth L. Gestal	Director	March 15, 2012
Kenneth L. Gestal
/s/ David B. Gould	Director	March 15, 2012
David B. Gould
/s/ Thomas Oberdorf	Director	March 15, 2012
Thomas Oberdorf
/s/ Marc Kozin	Director	March 15, 2012
Marc Kozin
/s/ David K. Stevenson	Director	March 15, 2012
David K. Stevenson
/s/ Robert W. Pierce, Jr.	Director	March 15, 2012
Robert W. Pierce, Jr.

28

UFP TECHNOLOGIES, INC.

Consolidated Financial Statements

and Financial Statement Schedule

As of December 31, 2011, and 2010

And for the Years Ended December 31, 2011, 2010, and 2009

With Report of Independent Registered Public Accounting Firm

F-1

UFP TECHNOLOGIES, INC.

Index to Consolidated Financial Statements and Financial Statement Schedule

	Page
Reports of Independent Registered Public Accounting Firm, Grant Thornton LLP	F-3
Consolidated Balance Sheets as of December 31, 2011, and 2010	F-5
Consolidated Statements of Operations for the years ended December 31, 2011, 2010, and 2009	F-6
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2011, 2010, and 2009	F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010, and 2009	F-8
Notes to Consolidated Financial Statements	F-9
Schedule II - Valuation and Qualifying Accounts	F-29

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

UFP Technologies, Inc.

Georgetown, MA

We have audited the accompanying consolidated balance sheet of UFP Technologies, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2011, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended. Our audit of the basic consolidated financial statements included the financial statement schedules listed in the index appearing under Item 15 (a)(2). These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.  The consolidated financial statements of the Company as of December 31, 2010 and for each of the years in the two year period ended December 31, 2010 were audited by CCR LLP.  We have since succeeded the practice of such firm.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 financial position of UFP Technologies, Inc. and subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 15, 2012 expressed an unqualified opinion.

/s/ GRANT THORNTON LLP

Boston, MA

March 15, 2012

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

UFP Technologies, Inc.

Georgetown, MA

We have audited UFP Technologies, Inc.’s (a Delaware Corporation) internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). UFP Technologies, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management’s report on internal control over financial reporting. Our responsibility is to express an opinion on UFP Technologies, Inc.’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, UFP Technologies, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of UFP Technologies, Inc. and subsidiaries and our report dated March 15, 2012 expressed an unqualified opinion.

/s/ GRANT THORNTON LLP

Boston, MA

March 15, 2012

F-4

UFP TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

	December 31
	2011			2010
Assets
Current assets:
Cash and cash equivalents (UDT: $278,475 and $277,698, respectively)	$	29,848,798		$	22,102,634
Receivables, net	15,618,717			14,633,375
Inventories, net	9,758,623			8,044,336
Prepaid expenses	558,875			1,035,301
Refundable income taxes	1,086,632			1,414,026
Deferred income taxes	1,168,749			1,208,848
Total current assets	58,040,394			48,438,520
Property, plant, and equipment (UDT: $2,099,960 and $2,756,792, respectively)	47,635,907			45,457,275
Less accumulated depreciation and amortization (UDT: $(1,448,928) and $(1,640,818), respectively)	(34,289,450		)	(32,882,135		)
Net property, plant, and equipment	13,346,457			12,575,140
Goodwill	6,481,037			6,481,037
Intangible assets	398,499			593,829
Other assets	1,454,867			1,389,375
Total assets	$	79,721,254		$	69,477,901
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,344,480		$	2,837,462
Accrued expenses (UDT: $14,400 and $12,900, respectively)	5,540,163			6,679,381
Current installments of long-term debt (UDT: $0 and $39,246, respectively)	580,661			654,331
Total current liabilities	9,465,304			10,171,174
Long-term debt, excluding current installments (UDT: $0 and $627,629, respectively)	5,638,658			6,846,947
Deferred income taxes	1,292,378			880,775
Retirement and other liabilities	1,340,131			1,352,529
Total liabilities	17,736,471			19,251,425
Commitments and contingencies (Note 16)
Stockholders’ equity:
Preferred stock, $.01 par value. Authorized 1,000,000 shares; no shares issued or outstanding	—			—
Common stock, $.01 par value. Authorized 20,000,000 shares; issued and outstanding 6,554,746 in 2011 and 6,338,829 shares in 2010.	65,547			63,388
Additional paid-in capital	18,185,912			16,924,197
Retained earnings	43,059,074			32,712,904
Total UFP Technologies, Inc. stockholders’ equity	61,310,533			49,700,489
Non-controlling interests	674,250			525,987
Total stockholders’ equity	61,984,783			50,226,476
Total liabilities and stockholders’ equity	$	79,721,254		$	69,477,901

The accompanying notes are an integral part of these consolidated financial statements.

F-5

UFP TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Years Ended December 31
	2011			2010			2009
Net sales	$	127,243,846		$	120,766,450		$	99,231,334
Cost of sales	90,999,327			86,150,720			72,511,919
Gross profit	36,244,519			34,615,730			26,719,415
Selling, general, and administrative expenses	21,366,913			20,235,540			18,539,005
Gain on sales of property, plant, and equipment	(838,592		)	(12,000		)	(11,206		)
Operating income	15,716,198			14,392,190			8,191,616
Other (expenses) income
Interest expense, net	(26,874		)	(115,537		)	(232,747		)
Other, net	—			150,000			—
Gains on acquisitions	—			—			839,690
Total other (expense) income	(26,874		)	34,463			606,943
Income before income tax provision	15,689,324			14,426,653			8,798,559
Income tax expense	4,905,708			5,019,136			2,816,575
Net income from consolidated operations	10,783,616			9,407,517			5,981,984
Net income attributable to non-controlling interests	(437,446		)	(160,425		)	(52,559		)
Net income attributable to UFP Technologies, Inc.	$	10,346,170		$	9,247,092		$	5,929,425
Net income per share:
Basic	$	1.60		$	1.50		$	1.02
Diluted	$	1.48		$	1.37		$	0.94
Weighted average common shares:
Basic	6,475,540			6,157,310			5,829,580
Diluted	6,999,300			6,749,062			6,293,964

The accompanying notes are an integral part of these consolidated financial statements.

F-6

UFP TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years Ended December 31, 2011, 2010, and 2009

				Additional					Non-			Total
	Common Stock			Paid-in			Retained		Controlling			Stockholders’
	Shares	Amount		Capital			Earnings		Interests			Equity
Balance at December 31, 2008	5,666,703	$	56,667	$	13,774,334		$	17,536,387	$	523,003		$	31,890,391
Stock issued in lieu of compensation	43,279	433		183,067			—		—			183,500
Share-based compensation	196,000	1,960		898,853			—		—			900,813
Exercise of stock options	39,375	394		129,938			—		—			130,332
Excess tax benefits on share-based compensation	—	—		23,421			—		—			23,421
Net income	—	—		—			5,929,425		52,559			5,981,984
Distribution to non-controlling interests	—	—		—			—		(105,000		)	(105,000		)
Balance at December 31, 2009	5,945,357	59,454		15,009,613			23,465,812		470,562			39,005,441
Stock issued in lieu of compensation	10,291	103		79,145			—					79,248
Share-based compensation	108,421	1,084		962,626			—					963,710
Exercise of stock options net of shares presented for exercise	274,760	2,747		504,309			—					507,056
Net share settlement of restricted stock units and stock option tax withholding	—	—		(485,511		)	—		—			(485,511		)
Excess tax benefits on share-based compensation	—	—		854,015			—					854,015
Net income	—	—		—			9,247,092		160,425			9,407,517
Distribution to non-controlling interests	—	—		—			—		(105,000		)	(105,000		)
Balance at December 31, 2010	6,338,829	63,388		16,924,197			32,712,904		525,987			50,226,476
Stock issued in lieu of compensation	2,735	27		54,973			—		—			55,000
Share-based compensation	69,324	693		1,087,979			—		—			1,088,672
Exercise of stock options net of shares presented for exercise	143,858	1,439		249,099			—		—			250,538
Net share settlement of restricted stock units and stock option tax withholding	—	—		(829,995		)	—		—			(829,995		)
Excess tax benefits on share-based compensation	—	—		699,659			—		—			699,659
Net income	—	—		—			10,346,170		437,446			10,783,616
Distribution to non-controlling interests	—	—		—			—		(289,183		)	(289,183		)
Balance at December 31, 2011	6,554,746	$	65,547	$	18,185,912		$	43,059,074	$	674,250		$	61,984,783

The accompanying notes are an integral part of these consolidated financial statements.

F-7

UFP TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31
	2011			2010			2009
Cash flows from operating activities:
Net income	$	10,783,616		$	9,407,517		$	5,981,984
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,781,002			3,152,193			2,895,062
Gain on sales of property, plant, and equipment	(838,592		)	(12,000		)	(11,206		)
Gain on acquisitions	—			—			(839,690		)
Share-based compensation	1,088,672			963,710			900,813
Stock issued in lieu of compensation	55,000			79,248			183,500
Deferred income taxes	451,702			305,830			226,950
Excess tax benefits on share-based compensation	(699,659		)	(854,015		)	(23,421		)
Changes in operating assets and liabilities, net of effects from acquisition:
Receivables, net	(985,342		)	(415,370		)	(341,536		)
Inventories, net	(1,714,287		)	(396,819		)	1,863,118
Prepaid expenses	476,426			(558,920		)	72,715
Refundable income taxes	327,394			(1,414,026		)	—
Accounts payable	507,018			160,922			384,928
Accrued expenses	(439,559		)	1,380,570			(307,305		)
Retirement and other liabilities	(12,398		)	234,332			204,553
Other assets	(65,492		)	(205,445		)	(509,425		)
Net cash provided by operating activities	11,715,501			11,827,727			10,681,040
Cash flows from investing activities:
Additions to property, plant, and equipment	(3,740,891		)	(3,285,530		)	(1,856,837		)
Acquisition of Foamade Industries, Inc.’s assets	—			—			(375,000		)
Acquisition of E.N. Murray Co. net of cash acquired	—			—			(1,440,534		)
Acquisition of Advanced Materials Group assets	—			—			(620,000		)
Proceeds from sale of property, plant, and equipment	1,222,494			12,000			13,364
Net cash used in investing activities	(2,518,397		)	(3,273,530		)	(4,279,007		)
Cash flows from financing activities:
Distribution to United Development Company Partners (non-controlling interest)	(289,183		)	(105,000		)	(105,000		)
Excess tax benefits on share-based compensation	699,659			854,015			23,421
Proceeds from the exercise of stock options net of attestations	250,538			507,056			130,332
Principal repayment of long-term debt	(1,281,959		)	(623,552		)	(576,690		)
Principal repayment of obligations under capital leases	—			—			(1,612,665		)
Payment of statutory withholding for stock options exercised and restricted stock units vested	(829,995		)	(485,511		)	—
Proceeds from long-term borrowings	—			—			4,000,000
Net cash (used in) provided by financing activities	(1,450,940		)	147,008			1,859,398
Net change in cash and cash equivalents	7,746,164			8,701,205			8,261,431
Cash and cash equivalents at beginning of year	22,102,634			13,401,429			5,139,998
Cash and cash equivalents at end of year	$	29,848,798		$	22,102,634		$	13,401,429

The accompanying notes are an integral part of these consolidated financial statements.

F-8

UFP TECHNOLOGIES, INC.

Notes to Consolidated Financial Statements

December 31, 2011, and 2010

(1)Summary of Significant Accounting Policies

UFP Technologies, Inc. (“the Company”) is an innovative designer and custom converter of foams, plastics, and natural fiber products principally serving the medical, automotive, aerospace and defense, computer and electronics, consumer, and industrial markets. The Company was incorporated in the State of Delaware in 1993.

(a)Principles of Consolidation

The consolidated financial statements include the accounts and results of operations of UFP Technologies, Inc., its wholly-owned subsidiaries, Moulded Fibre Technology, Inc., Simco Industries, Inc. and its wholly-owned subsidiary Simco Automotive Trim, Inc., and Stephenson & Lawyer, Inc. and its wholly-owned subsidiary, Patterson Properties Corporation. The Company also consolidates United Development Company Limited, of which the Company owns 26.32% (see Note 8). All significant inter-company balances and transactions have been eliminated in consolidation.

(b)Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including allowance for doubtful accounts and the net realizable value of inventory, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(c)Fair Value of Financial Instruments

Cash and cash equivalents, accounts receivable, accounts payable, and accrued taxes and other expenses are stated at carrying amounts that approximate fair value because of the short maturity of those instruments. The carrying amount of the Company’s long-term debt approximates fair value as the interest rate on the debt approximates the Company’s current incremental borrowing rate.

(d)Fair Value Measurement

The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurement or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions, and credit risk.

The Company has not elected fair value accounting for any financial instruments for which fair value accounting is optional.

(e)Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2011, and 2010, cash equivalents primarily consisted of money market accounts and certificates of deposit that are readily convertible into cash. The Company utilizes zero-balance disbursement accounts to manage its funds. As such, outstanding checks at the end of a year are recorded as reductions in cash.  Prior to 2011 the Company recorded book overdrafts caused by outstanding checks as an increase to both cash and accounts payable.  Because the Company had sufficient cash on hand at the end of each fiscal year to fund the outstanding checks as they cleared, prior year book overdrafts have been reclassified as a

F-9

reduction in cash to be consistent with the 2011 presentation.  The outstanding checks at December 31, 2011, 2010, and 2009, were $2,016,839, $2,331,117, and $1,597,085, respectively.

The Company maintains its cash in bank deposit accounts, money market funds, and certificates of deposit that at times exceed federally insured limits. The Company periodically reviews the financial stability of institutions holding its accounts, and does not believe it is exposed to any significant custodial credit risk on cash.

(f)Accounts Receivable

The Company periodically reviews the collectability of its accounts receivable. Provisions are recorded for accounts that are potentially uncollectible. Determining adequate reserves for accounts receivable requires management’s judgment. Conditions impacting the realizability of the Company’s receivables could cause actual asset write-offs to be materially different than the reserved balances as of December 31, 2011.

(g)Inventories

Inventories include material, labor, and manufacturing overhead and are valued at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method.

The Company periodically reviews the realizability of its inventory for potential obsolescence. Determining the net realizable value of inventory requires management’s judgment. Conditions impacting the realizability of the Company’s inventory could cause actual asset write-offs to be materially different than the Company’s current estimates as of December 31, 2011.

(h)Property, Plant, and Equipment

Property, plant, and equipment are stated at cost and are depreciated or amortized using the straight-line method over the estimated useful lives of the assets or the related lease term, if shorter (for financial statement purposes) and, in some cases, accelerated methods (for income tax purposes). Certain manufacturing machines that are dedicated to a specific program — where total units to be produced over the life of the program are estimable — are depreciated using the modified units of production method for financial statement purposes.

Estimated useful lives of property, plant, and equipment are as follows:

	Shorter of estimated useful life
Leasehold improvements	or remaining lease term
Buildings and improvements	31.5 years
Equipment	8-10 years
Furniture and fixtures	5-7 years

Property, plant, and equipment amounts are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded is calculated by the excess of the asset’s carrying value over its fair value.

(i)Goodwill

Goodwill is tested for impairment annually, and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate that the carrying amount may be impaired. Impairment testing for goodwill is done at a reporting unit level. Reporting units are one level below the business segment level, but can be combined when reporting units within the same segment have similar economic characteristics. The Company’s reporting units include its Component Products segment, Packaging segment (excluding its Molded Fiber operation), and its Molded Fiber operation. An impairment loss generally would be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit. The

F-10

Company assessed qualitative factors as of December 31, 2011, and determined that it was more likely than not that the fair value of both reporting units exceeded their respective carrying amounts.  Factors considered for each reporting unit included financial performance, forecasts and trends, market cap, regulatory and environmental issues, foreign currency, market analysis, recent transactions, macro-economic conditions, industry and market considerations, raw material costs, management stability, and the degree by which the fair value of each reporting unit exceeded its carrying value in 2010 (approximately $37 million or 161% and $7 million or 190% for the Component Products and Molded Fiber reporting units, respectively).  As a result, no goodwill impairment test was performed in 2011.  Based upon tests performed in 2010 and 2009, there was no goodwill impairment as of December 31, 2010, and 2009.

(j)Intangible Assets

Intangible assets with an indefinite life are not amortized. Intangible assets with a definite life are amortized on a straight-line basis, with estimated useful lives ranging from 5 to 14 years. Indefinite-lived intangible assets are tested for impairment annually, and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate that the carrying amount may be impaired. Intangible assets with a definite life are tested for impairment whenever events or circumstances indicate that their carrying values may not be recoverable.

(k)Revenue Recognition

The Company recognizes revenue at the time of shipment when title and risk of loss have passed to the customer, persuasive evidence of an arrangement exists, performance of its obligation is complete, its price to the buyer is fixed or determinable, and the Company is reasonably assured of collection. If a loss is anticipated on any contract, a provision for the entire loss is made immediately. Determination of these criteria, in some cases, requires management’s judgment.

(l)Share-Based Compensation

When accounting for equity instruments exchanged for employee services, share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant).

Share-based compensation cost that has been charged against income for stock compensation plans is as follows:

	Year Ended December 31
	2011		2010		2009
Selling, general, and administrative expenses	$	1,088,672	$	963,710	$	900,813

The compensation expense for stock options granted during the three-year period ended December 31, 2011, was determined as the intrinsic fair market value of the options, using a lattice-based option valuation model with the assumptions noted as follows:

	Year Ended December 31
	2011	2010	2009
Expected volatility	54.8% to 73.3%	65.8% to 83.4%	68.8% to 84.6%
Expected dividends	None	None	None
Risk-free interest rate	0.9% to 2.9%	2.0% to 3.2%	3.6%
Exercise price	Closing price on date of grant	Closing price on date of grant	Closing price on date of grant
Imputed life	4.6 to 7.7 years (output in lattice-based model)	4.1 to 7.9 years (output in lattice-based model)	4.1 to 7.9 years (output in lattice-based model)

F-11

The stock volatility for each grant is determined based on a review of the experience of the weighted average of historical daily price changes of the Company’s common stock over the expected option term, and the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option.

The weighted average grant date fair value of options granted during 2011, 2010, and 2009, was $5.75, $3.89, and $1.83, respectively. Tax benefits totaling $699,659, $854,015, and $23,421 were recognized as additional paid-in capital during the years ended December 31, 2011, 2010, and 2009, respectively, since the Company’s tax deductions exceeded the share-based compensation change recognized for stock options exercised.

The total income tax benefit recognized in the statement of operations for share-based compensation arrangements was approximately $359,000, $316,600, and $291,000 for the years ended December 31, 2011, 2010, and 2009, respectively.

(m)Deferred Rent

The Company accounts for escalating rental payments on a straight-line basis over the term of the lease.

(n)Shipping and Handling Costs

Costs incurred related to shipping and handling are included in cost of sales. Amounts charged to customers pertaining to these costs are included in net sales.

(o)Research and Development

On a routine basis, the Company incurs costs related to research and development activity. These costs are expensed as incurred. Approximately $0.9 million, $0.9 million, and $0.8 million were expensed in the years ended December 31, 2011, 2010, and 2009, respectively.

(p)Income Taxes

The Company’s income taxes are accounted for under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax expense (benefit) results from the net change during the year in deferred tax assets and liabilities. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company evaluates the need for a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. The Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. Should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in tax expense.

(q)Segments and Related Information

The Company follows the provisions of ASC 280, Segment Reporting, which establish standards for the way public business enterprises report information and operating segments in annual financial statements (see Note 20).

F-12

(2)New Accounting Pronouncements

In May 2011, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and IFRS (“ASU 2011-04”), which amends Accounting Standards Codification (“ASC”) 820, Fair Value Measurement.  ASU 2011-04 improves the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards.  The amended guidance changes the wording used to describe many requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements.  Additionally, the amendments clarify the FASB’s intent about the application of existing fair value measurement and disclosure requirements.  Although ASU 2011-04 is not expected to have a significant effect on practice, it changes some fair value measurement principles and disclosure requirements.  ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011, and must be applied prospectively.  Early application is not permitted.  We do not anticipate that the adoption of ASU 2011-04 will have a material impact on our financial position or the results of our operations.

In September 2011, the FASB issued Accounting Standards Update No. 2011-08, Testing Goodwill for Impairment (“ASU 2011-08”), which amends ASC 350, Intangibles — Goodwill and Other.  Previous guidance under ASC 350 required an entity to test goodwill for impairment on at least an annual basis by comparing the fair value of a reporting unit with its carrying amount, including goodwill (step 1).  The amendments of ASU 2011-08 permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in ASC 350.  The amendments of ASU 2011-08 are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted.  The Company adopted ASU 2011-08 in December 2011 with no impact on the company’s financial position or results of operations.

(3)Supplemental Cash Flow Information

Cash paid for interest and income taxes is as follows:

	Years Ended December 31
	2011		2010		2009
Interest	$	126,999	$	127,378	$	205,828
Income taxes, net of refunds	$	3,793,454	$	5,522,702	$	1,648,764

During the years ended December 31, 2011, and 2010, the Company permitted the exercise of stock options with exercise proceeds paid with the Company’s stock (“cashless” exercises) totaling $93,879 and $343,750, respectively.

(4)Receivables and Net Sales

Receivables consist of the following:

	December 31
	2011			2010
Accounts receivable—trade	$	15,997,576		$	14,976,057
Less allowance for doubtful receivables	(378,859		)	(342,682		)
	$	15,618,717		$	14,633,375

F-13

Receivables are written off against these reserves in the period they are determined to be uncollectible, and payments subsequently received on previously written-off receivables are recorded as a reversal of the bad debt provision.  The Company performs credit evaluations on its customers and obtains credit insurance on a large percentage of its accounts, but does not generally require collateral.  The Company recorded a provision for doubtful accounts of $55,209 and $8,466 for the years ended December 31, 2011, and 2010, respectively.

Sales to the top customer in the Company’s Component Products segment comprised 10.9% of that segment’s total sales and 7.2% of the Company’s total sales for the year ended December 31, 2011. Sales to the top customer in the Company’s Packaging segment comprised 6.9% of that segment’s total sales and 2.3% of the Company’s total sales for the year ended December 31, 2011.

(5)Inventories

Inventories consist of the following:

	December 31
	2011		2010
Raw materials	$	5,425,773	$	4,778,780
Work in process	1,513,794		695,421
Finished goods	2,819,056		2,570,135
	$	9,758,623	$	8,044,336

(6)Other Intangible Assets

The carrying values of the Company’s definite-lived intangible assets as of December 31, 2011, and 2010, are as follows:

	Patents			Non- Compete			Customer List			Total
Gross amount at December 31, 2011	$	428,806		$	200,000		$	769,436		$	1,398,242
Accumulated amortization at December 31, 2011	(425,052		)	(126,500		)	(448,191		)	$	(999,743	)
Net balance at December 31, 2011	$	3,754		$	73,500		$	321,245		$	398,499
Gross amount at December 31, 2010	$	428,806		$	200,000		$	769,436		$	1,398,242
Accumulated amortization at December 31, 2010	(400,885		)	(93,168		)	(310,360		)	$	(804,413	)
Net balance at December 31, 2010	$	27,921		$	106,832		$	459,076		$	593,829

Amortization expense related to intangible assets was $195,330, $223,908, and $157,104 for the years ended December 31, 2011, 2010, and 2009, respectively. Future amortization for the years ending December 31 will be approximately:

2012	$	163,554
2013	159,800
2014	75,145
Total:	$	398,499

F-14

(7)       Property, Plant, and Equipment

Property, plant, and equipment consist of the following:

	December 31
	2011		2010
Land and improvements	$	839,906	$	944,906
Buildings and improvements	6,959,641		7,499,855
Leasehold improvements	3,071,096		2,884,463
Equipment	32,612,522		31,695,304
Furniture and fixtures	2,540,055		2,153,943
Construction in progress—equipment/buildings	1,612,687		278,804
	$	47,635,907	$	45,457,275

Depreciation and amortization expense for the years ended December 31, 2011, 2010, and 2009, was $2,585,672, $2,928,285, and $2,737,958, respectively.

(8)Investment in and Advances to Affiliated Partnership

The Company has a 26.32% ownership interest in a realty limited partnership, United Development Company Limited (“UDT”). The Company has consolidated the financial statements of UDT for all periods presented because it has determined that UDT is a VIE, and the Company is the primary beneficiary. UDT owns one building, which is leased to the Company. The lease payments from the Company account for 100% of UDT’s revenue. Therefore, the Company believes it has the power to direct the activities of UDT that most significantly impact the entity’s economic performance, and the obligation to absorb losses of UDT or the right to receive benefits from UDT that could potentially be significant to UDT. In addition to the lease arrangement, the Company’s management provides management services to UDT in certain situations. The creditors of UDT have no recourse to the general credit of the Company (see Note 23).

Included in the December 31 consolidated balance sheets are the following amounts related to UDT:

	December 31
	2011		2010
Cash	$	278,475	$	277,698
Net property, plant, and equipment	651,032		1,115,974
Accrued expenses	14,400		12,900
Current and long-term debt	—		666,875

(9)Indebtedness

On January 29, 2009, the Company amended and extended its credit facility with Bank of America, NA. The facility is comprised of: (i) a revolving credit facility of $17 million; (ii) a term loan of $2.1 million with a seven-year straight-line amortization; (iii) a mortgage loan of $1.8 million with a 20-year straight-line amortization; and (iv) a mortgage loan of $4.0 million with a 20-year straight-line amortization. Extensions of credit under the revolving credit facility are based in part upon accounts receivable and inventory levels. Therefore, the entire $17 million may not be available to the Company. As of December 31, 2011, the Company had availability of approximately $16.9 million based upon collateral levels in place as of that date. The credit facility calls for interest of LIBOR plus a margin that ranges from 1.0% to 1.5% or, at the discretion of the Company, the bank’s prime rate less a margin that ranges from 0.25% to zero. In both cases the applicable margin is dependent upon Company performance. The loans are collateralized by a first priority lien on all of the Company’s assets, including its real estate located in Georgetown, Massachusetts, and in Grand Rapids, Michigan. Under the credit facility, the Company is subject to a minimum fixed-charge coverage financial covenant, which the Company was in compliance with as of

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December 31, 2011. The Company’s $17 million revolving credit facility matures November 30, 2013; the term loans are all due on January 29, 2016. At December 31, 2011, the interest rate on these facilities was 1.28%, and there were no borrowings outstanding on the line of credit.

Long-term debt consists of the following:

	December 31
	2011			2010
Mortgage notes	$	5,017,817		$	5,310,116
Note payable	1,201,502			1,489,863
UDT mortgage	—			666,875
Equipment loan	—			34,424
Total long-term debt	6,219,319			7,501,278
Current installments	(580,661		)	(654,331		)
Long-term debt, excluding current installments	$	5,638,658		$	6,846,947
Aggregate maturities of long-term debt are as follows:
Year ending December 31:
2012	$	580,661
2013	580,661
2014	580,661
2015	580,661
2016	3,896,675
	$	6,219,319

(10)Accrued Expenses

Accrued expenses consist of the following:

	December 31
	2011		2010
Compensation	$	2,221,730	$	2,855,331
Benefits / self-insurance reserve	621,931		762,515
Paid time off	841,357		780,109
Commissions payable	393,028		416,326
Unrecognized tax benefits (see Note 11)	320,000		685,000
Other	1,142,117		1,180,100
	$	5,540,163	$	6,679,381

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(11)Income Taxes

The Company’s income tax provision (benefit) for the years ended December 31, 2011, 2010, and 2009, consists of the following:

	Years Ended December 31
	2011		2010		2009
Current:
Federal	$	3,752,000	$	4,259,000	$	2,100,000
State	702,000		454,000		490,000
	4,454,000		4,713,000		2,590,000
Deferred:
Federal	396,000		191,000		263,000
State	56,000		115,000		(36,000		)
	452,000		306,000		227,000
Total income tax provision	$	4,906,000	$	5,019,000	$	2,817,000

At December 31, 2011, the Company had net operating loss carryforwards for federal income tax purposes of approximately $1,599,000, which are available to offset future taxable income and expire during the federal tax years ending December 31, 2019, through 2024. The future benefit of the federal net operating loss carryforwards will be limited to approximately $300,000 per year in accordance with Section 382 of the Internal Revenue Code.

The approximate tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows:

	December 31
	2011			2010
Current deferred tax assets:
Reserves	$	377,000		$	359,000
Inventory capitalization	230,000			196,000
Compensation programs	262,000			252,000
Retirement liability	72,000			88,000
Equity-based compensation	228,000			314,000
Total current deferred tax assets	$	1,169,000		$	1,209,000
Long-term deferred tax assets / (liabilities):
Excess of book over tax basis of fixed assets	$	(1,421,000	)	$	(1,065,000	)
Goodwill	(691,000		)	(627,000		)
Intangible assets	(146,000		)	(207,000		)
Net operating loss carryforwards	544,000			644,000
Deferred rent	64,000			57,000
Compensation programs	358,000			317,000
Total long-term deferred tax (liabilities)	$	(1,292,000	)	$	(881,000	)

The amounts recorded as deferred tax assets as of December 31, 2011, and 2010, represent the amount of tax benefits of existing deductible temporary differences or carryforwards that are more likely than not to be realized through the generation of sufficient future taxable income within the carryforward period. The Company has total deferred tax assets of $2,134,000 at December 31, 2011, that it believes

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are more likely than not to be realized in the carryforward period. Management reviews the recoverability of deferred tax assets during each reporting period.

The actual tax provision for the years presented differs from the “expected” tax provision for those years, computed by applying the U.S. federal corporate rate of 34% to income before income tax expense as follows:

	Years Ended December 31
	2011		2010		2009
Computed “expected” tax rate	34.0	%	34.0	%	34.0	%
Increase (decrease) in income taxes resulting from:
State taxes, net of federal tax benefit	3.4		2.0		3.4
Meals and entertainment	0.1		0.1		0.2
R&D credits	(0.4	)	(0.3	)	(0.9	)
Domestic production deduction	(2.8	)	(1.8	)	(1.7	)
Non-deductible ISO stock option expense	0.1		0.1		0.2
Acquisition gains	—		—		(3.3	)
Unrecognized tax benefits	(2.4	)	1.0		—
Income of non-controlling interests	(1.0	)	(0.4	)	(0.2	)
Other	0.3		0.1		0.3
Effective tax rate	31.3	%	34.8	%	32.0	%

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions.  The Company has not been audited by any state for income taxes with the exception of returns filed in Michigan (which have been audited through 2004), and income tax returns filed in Massachusetts for 2005 and 2006, and Florida for 2007, 2008, and 2009 (which are currently being audited). The Company’s federal tax return for 2008 has been audited.  Federal tax returns for the years 2009 through 2010 and state tax returns for the years 2008 through 2010 remain open to examination by the IRS and various state jurisdictions.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (“UTB”) resulting from uncertain tax positions is as follows:

	Federal and State Tax
	2011			2010
Gross UTB balance at beginning of fiscal year	$	685,000		$	545,000
Increases for tax positions of prior years	40,000			140,000
Reductions for tax positions of prior years	(405,000		)	—
Gross UTB balance at December 31	$	320,000		$	685,000

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of December 31, 2011, and 2010, are $320,000 and $685,000, respectively, for each year.

At December 31, 2011, and 2010, accrued interest and penalties on a gross basis, which are included above in the gross UTB balance, were $145,000 both years.

At December 31, 2011, approximately $255,000 of the unrecognized tax benefits relate to tax returns of a specific state jurisdiction that are currently under examination. Accordingly, the Company expects a reduction of this amount during 2012.

F-18

(12)Net Income Per Share

Basic income per share is based upon the weighted average common shares outstanding during each year. Diluted income per share is based upon the weighted average of common shares and dilutive common stock equivalent shares outstanding during each year. The weighted average number of shares used to compute both basic and diluted income per share consisted of the following:

	Years Ended December 31
	2011	2010	2009
Basic weighted average common shares outstanding during the year	6,475,540	6,157,310	5,829,580
Weighted average common equivalent shares due to stock options and restricted stock units	523,760	591,752	464,384
Diluted weighted average common shares outstanding during the year	6,999,300	6,749,062	6,293,964

The computation of diluted earnings per share excludes the effect of the potential exercise of stock awards, including stock options, when the average market price of the common stock is lower than the exercise price of the related options during the period. These outstanding stock awards are not included in the computation of diluted earnings per share because the effect would have been antidilutive. For the years ended December 31, 2011, 2010, and 2009, the number of stock awards excluded from the computation was 23,205, 101,769, and 190,484, respectively.

(13)Stock Option and Equity Incentive Plans

Employee Stock Option Plan

The Company’s 1993 Employee Stock Option Plan (“Employee Stock Option Plan”), which is stockholder approved, provides long-term rewards and incentives in the form of stock options to the Company’s key employees, officers, employee directors, consultants, and advisors. The plan provides for either non-qualified stock options or incentive stock options for the issuance of up to 1,550,000 shares of common stock. The exercise price of the incentive stock options may not be less than the fair market value of the common stock on the date of grant, and the exercise price for non-qualified stock options shall be determined by the Compensation Committee. These options expire over 5- to 10-year periods.

Options granted under the plan generally become exercisable with respect to 25% of the total number of shares subject to such options at the end of each 12-month period following the grant of the options, except for options granted to officers, which may vest on a different schedule. At December 31, 2011, there were 331,620 options outstanding under the Employee Stock Option Plan. The plan expired on April 12, 2010.

Incentive Plan

In June 2003, the Company formally adopted the 2003 Incentive Plan (the “Plan”). The Plan was originally intended to benefit the Company by offering equity-based incentives to certain of the Company’s executives and employees, thereby giving them a permanent stake in the growth and long-term success of the Company and encouraging the continuance of their involvement with the Company’s businesses. The Plan was amended effective June 4, 2008, to permit certain performance-based cash awards to be made under the Plan.  The Plan was further amended on June 8, 2011, to increase the maximum number of shares of common stock in the aggregate to be issued to 2,250,000.  The amendment also added appropriate language so as to enable grants of stock-based awards under the Plan to continue to be eligible for exclusion from the $1,000,000 limitation on deductibility under Section 162(m) of the Internal Revenue Code (the “Code”).

Two types of equity awards may be granted to participants under the Plan: restricted shares or other stock awards. Restricted shares are shares of common stock awarded subject to restrictions and to

F-19

possible forfeiture upon the occurrence of specified events. Other stock awards are awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of common stock. Such awards may include Restricted Stock Unit Awards (“RSUs”), unrestricted or restricted stock, incentive and non-qualified stock options, performance shares, or stock appreciation rights. The Company determines the form, terms, and conditions, if any, of any awards made under the Plan.

Through December 31, 2011, 925,955 shares of common stock have been issued under the 2003 Incentive Plan, none of which have been restricted. An additional 176,209 shares are being reserved for outstanding grants of RSUs and other share-based compensation that are subject to various performance and time-vesting contingencies. The Company has also granted awards in the form of stock options under this Plan. Through December 31, 2011, 60,000 options have been granted and 56,250 options are outstanding.  At December 31, 2011, 1,087,836 shares or options are available for future issuance in the 2003 Incentive Plan.

Director Plan

Effective July 15, 1998, the Company adopted the 1998 Director Plan.  The Plan was amended and renamed, on June 3, 2009, the 2009 Non-Employee Director Stock Incentive Plan.  The Plan, as amended, provides for the issuance of stock options and other equity-based securities up to 975,000 shares.  At December 31, 2011, there were 250,651 options outstanding, and 3,809 shares of common stock were issued in the year ended December 31, 2011, 220,226 shares remained available to be issued under the Plan.

The following is a summary of stock option activity under all plans:

	Shares Under Options		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding December 31, 2010	764,496		$	4.12
Granted	23,205		16.10
Exercised	(149,180	)	2.31
Cancelled or expired	—		—
Outstanding December 31, 2011	638,521		$	4.98	$	6,279,933
Exercisable at December 31, 2011	578,521		$	4.45	$	5,988,946
Vested and expected to vest at December 31, 2011	638,521		$	4.98	$	6,279,933

F-20

The following is a summary of information relating to stock options outstanding and exercisable by price range as of December 31, 2011:

	Options Outstanding				Options Exercisable
Range of exercise prices	Outstanding as of 31-Dec-2011	Weighted average remaining contractual life (years)	Weighted average exercise price		Exercisable as of 31-Dec-2011	Weighted average exercise price
$1.00 - $1.99	46,620	1.2	$	1.00	46,620	$	1.00
$2.00 - $2.99	200,000	3.1	2.32		200,000	2.32
$3.00 - $3.99	111,984	1.6	3.28		111,984	3.28
$4.00 - $4.99	51,174	6.5	4.16		46,174	4.17
$5.00 - $5.99	41,719	4.9	5.12		41,719	5.12
$6.00 - $6.99	27,951	4.5	6.07		27,951	6.07
$9.00 - $9.99	82,599	6.0	9.13		48,849	9.16
$10.00 - $10.99	34,000	5.5	10.23		26,500	10.17
$11.00 - $16.99	42,474	6.6	14.26		28,724	14.06
	638,521	3.9	$	4.98	578,521	$	4.45

During the years ended December 31, 2011, 2010, and 2009, the total intrinsic value of all options exercised (i.e., the difference between the market price and the price paid by the employees to exercise the options) was $2,204,962, $2,711,864, and $79,269, respectively, and the total amount of consideration received from the exercise of these options was $344,417, $850,806, and $130,332, respectively. At its discretion, the Company allows option holders to surrender previously owned common stock in lieu of paying the exercise price and withholding taxes. During the years ended December 31, 2011, and 2010, 20,492 shares were surrendered at a market price of $17.64 and 62,202 shares were surrendered at a market price of $10.42, respectively. No shares were surrendered during the year ended December 31, 2009.

During the years ended December 31, 2011, 2010, and 2009, the Company recognized compensation expense related to stock options granted to directors and employees of $141,499, $213,716, and $150,482, respectively.

On March 2, 2011, the Company’s Compensation Committee approved the issuance of 25,000 shares of unrestricted common stock to the Company’s Chairman, Chief Executive Officer, and President under the 2003 Equity Incentive Plan. The shares were issued on December 22, 2011. The Company has recorded compensation expense of $423,250 for the year ended December 31, 2011, based on the grant date price of $16.93 at March 2, 2011. Stock compensation expense of $192,500 and $106,000 was recorded in 2010 and 2009, respectively, for similar awards.

On June 8, 2011, the Company issued 3,708 shares of unrestricted common stock to the non-employee members of the Company’s Board of Directors as part of their annual retainer for serving on the Board.  Based upon the closing price of $16.17 on June 8, 2011, the Company recorded compensation expense of $60,000 associated with the stock issuance for the year ended December 31, 2011.

It has been the Company’s practice to allow executive officers to take a portion of their earned bonuses in the form of the Company’s common stock. The value of the stock received by executive officers, measured at the closing price of the stock on the date of grant, was $55,000, $79,248, and $183,500, respectively, for the years ended December 31, 2011, 2010, and 2009.

The Company grants RSUs to its executive officers. The stock unit awards are subject to various time-based vesting requirements, and certain portions of these awards are subject to performance criteria of the Company. Compensation expense on these awards is recorded based on the fair value of the award at the date of grant, which is equal to the Company’s closing stock price, and is charged to expense ratably during the service period. No compensation expense is taken on awards that do not become vested, and the amount of compensation expense recorded is adjusted based on management’s

F-21

determination of the probability that these awards will become vested. The following table summarizes information about stock unit award activity during the year ended December 31, 2011

	Restricted Stock Units		Weighted Average Award Date Fair Value
Outstanding at December 31, 2010	251,694		$	5.80
Awarded	11,221		18.27
Shares distributed	(86,706	)	5.02
Forfeited / Cancelled	—		—
Outstanding at December 31, 2011	176,209		$	6.98

The Company recorded $463,923, $557,494, and $644,331, in compensation expense related to these RSUs during the years ended December 31, 2011, 2010, and 2009, respectively.

At the Company’s discretion, RSU holders are given the option to net-share settle to cover the required minimum withholding tax, and the remaining amount is converted into the equivalent number of common shares. During the year ended December 31, 2011, 30,920 shares were redeemed for this purpose at a market price of $18.19. During the year ended December 31, 2010, 19,579 shares were redeemed for this purpose at a market price of $9.25.

The following summarizes the future share-based compensation expense the Company will record as the equity securities granted through December 31, 2011, vest:

	Options		Common Stock		Restricted Stock Units		Total
2012	$	72,744	$	—	$	321,210	$	393,954
2013	70,080		—		219,300		$	289,380
2014	43,892		—		76,456		$	120,348
2015	12,962		—		8,541		$	21,503
Total	$	199,678	$	—	$	625,507	$	825,185

(14)Preferred Stock

On March 18, 2009, the Company declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of common stock, par value $0.01 per share on March 20, 2009, to the stockholders of record on that date. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.01 per share (the “Preferred Share”), of the Company, at a price of $25.00 per one one-thousandth of a Preferred Share subject to adjustment and the terms of the Rights Agreement. The rights expire on March 19, 2019.

(15)Supplemental Retirement Benefits

The Company provides discretionary supplemental retirement benefits for certain retired officers, which will provide an annual benefit to these individuals for various terms following separation from employment. The Company recorded an expense of approximately $6,000, $30,000, and $35,000 for the years ended December 31, 2011, 2010, and 2009, respectively. The present value of the supplemental retirement obligation has been calculated using an 8.5% discount rate, and is included in retirement and other liabilities. Total projected future cash payments for the years ending December 31, 2012 through 2016, are approximately $75,000, $75,000, $46,000, $25,000, and $25,000, respectively, and approximately $75,000 thereafter.

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(16)Commitments and Contingencies

(a)Leases— The Company has operating leases for certain facilities that expire through 2016. Certain of the leases contain escalation clauses that require payments of additional rent, as well as increases in related operating costs.

Future minimum lease payments under non-cancelable operating leases as of December 31, 2011, are as follows:

Years Ending December 31:	Operating Leases
2012	$	1,762,408
2013	1,127,907
2014	820,134
2015	251,036
2016	211,752
Total minimum lease payments	$	4,173,237

Rent expense amounted to approximately $2,305,000, $2,616,000, and $2,442,000 in 2011, 2010, and 2009, respectively.

(b)Legal— The Company is a defendant in various administrative proceedings that are being handled in the ordinary course of business.  In the opinion of management of the Company, these suits and claims should not result in final judgments or settlements that, in the aggregate, would have a material adverse effect on the company’s financial condition or results of operations.

(17)Employee Benefit Plans

The Company maintains a profit sharing plan for eligible employees. Contributions to the Plan are made in the form of matching contributions to employee 401k deferrals, as well as discretionary amounts determined by the Board of Directors, and amounted to approximately $715,000, $785,000, and $709,000 in 2011, 2010, and 2009, respectively.

The Company has a partially self-insured health insurance program that covers all eligible participating employees. The maximum liability is limited by a stop loss of $125,000 per insured person, along with an aggregate stop loss determined by the number of participants.

The Company has an Executive, Non-qualified “Excess” Plan (“the Plan”), which is a deferred compensation plan available to certain executives. The Plan permits participants to defer receipt of part of their current compensation to a later date as part of their personal retirement or financial planning. Participants have an unsecured contractual commitment by the Company to pay amounts due under the Plan. There is currently no security mechanism to ensure that the Company will pay these obligations in the future.

The compensation withheld from Plan participants, together with investment income on the Plan, is reflected as a deferred compensation obligation to participants, and is classified within retirement and other liabilities in the accompanying balance sheets. At December 31, 2011, the balance of the deferred compensation liability totaled approximately $1,105,000. The related assets, which are held in the form of a Company-owned, variable life insurance policy that names the Company as the beneficiary, are reported within other assets in the accompanying balance sheets, and are accounted for based on the underlying cash surrender values of the policies, and totaled approximately $1,096,000 as of December 31, 2011.

(18)Fair Value of Financial Instruments

Financial instruments recorded at fair value in the balance sheets, or disclosed at fair value in the footnotes, are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels defined by ASC 820, Fair Value Measurements and

F-23

Disclosures, and directly related to the amount of subjectivity associated with inputs to fair valuation of these assets and liabilities, are as follows:

Level 1

Valued based on unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2

Valued based on either directly or indirectly observable prices for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3

Valued based on management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

The Company has no assets and liabilities that are measured at fair value.

(19)Acquisitions

On March 9, 2009, the Company acquired selected assets of the Hillsdale, Michigan, operations of Foamade Industries, Inc. (“Foamade”). The Hillsdale operations of Foamade specialized in the fabrication of technical urethane foams for a myriad of industries and bring to the Company further penetration into applications using this family of foams, as well as incremental sales to fold into its operations. The Company has transitioned the acquired assets to its Grand Rapids, Michigan, plant.

On July 7, 2009, the Company acquired substantially all of the assets of E.N. Murray Co. (“ENM”), a Denver, Colorado-based foam fabricator, for $2,750,000. ENM specialized in the fabrication of technical urethane foams primarily for the medical industry. This acquisition brings to the Company further access and expertise in fabricating technical urethane foams and a seasoned management team. The Company had leased the former ENM Denver facilities for a period of two years. The Company purchased these properties on December 22, 2010, for $1,200,000.

F-24

On August 24, 2009, the Company acquired selected assets of Advanced Materials, Inc. (“AMI”) for $620,000. Located in Rancho Dominguez, California, AMI specialized in the fabrication of technical urethane foams primarily for the medical industry and brings to the Company further penetration into this market. The Company assumed the lease of the 56,000-square-foot Rancho Dominguez location, which expires in November 2011.

The Company recorded gains of approximately $81,000, $558,000, and $201,000 on the acquisitions of selected assets of Foamade, ENM, and AMI, respectively, as it acquired the assets in bargain purchases. The Company believes the bargain purchase gains resulted from opportunities created by the overall weak economy.

The following table summarizes the consideration paid and the acquisition date fair value of the assets acquired and liabilities assumed relating to each transaction:

	Foamade			ENM			AMI
	9-Mar-2009			7-Jul-2009			24-Aug-2009
Consideration
Cash	$	375,000		$	2,750,000		$	620,000
Fair value of total consideration transferred	$	375,000		$	2,750,000		$	620,000
Acquisition costs (legal fees) included in SG&A	$	25,000		$	30,000		$	35,000
Recognized amounts of identifiable assets acquired:
Cash	$	—		$	1,309,466		$	—
Accounts receivable	—			832,054			289,540
Inventory	182,864			922,497			252,528
Other assets	—			37,708			—
Fixed assets	189,100			812,000			345,750
Non-compete	30,000			120,000			—
Customer list	103,000			490,000			56,000
Total identifiable net assets	$	504,964		$	4,523,725		$	943,818
Payables and accrued expenses	$	—		$	(830,341	)	$	—
Equipment loan	—			(42,827		)	—
Deferred tax liabilities	(49,386		)	(342,212		)	(123,051		)
Net assets acquired	$	455,578		$	3,308,345		$	820,767

With respect to the acquisition of selected assets of ENM, the Company acquired gross accounts receivable of $873,919, of which it deemed $41,865 to be uncollectible. It therefore recorded the accounts receivable at its fair market value of $832,054. With respect to the acquisition of selected assets of AMI, the Company acquired gross accounts receivable of $324,540, of which it deemed $35,000 to be uncollectible. It therefore recorded the accounts receivable at its fair market value of $289,540. With respect to the non-compete and customer list intangible assets acquired from Foamade, ENM, and AMI, the weighted average amortization period is five years. No residual balance is anticipated for any of the intangible assets.

F-25

The following table contains an unaudited pro forma condensed consolidated statement of operations for the years ended December 31, 2009, as if the ENM acquisition had occurred at the beginning of the period:

	Year Ended 31-Dec-2009
Sales	$	105,228,869
Net income	6,070,518
Earnings Per Share:
Basic	$	1.04
Diluted	0.96

The above unaudited pro forma information is presented for illustrative purposes only, and may not be indicative of the results of operations that would have actually occurred had the ENM acquisition occurred as presented. In addition, future results may vary significantly from the results reflected in such pro forma information.

(20)Segment Data

The Company is organized based on the nature of the products and services that it offers. Under this structure, the Company produces products within two distinct segments: Packaging and Component Products. Within the Packaging segment, the Company primarily uses polyethylene and polyurethane foams, sheet plastics, and pulp fiber to provide customers with cushion packaging for their products. Within the Component Products segment, the Company primarily uses cross-linked polyethylene foam to provide customers in the automotive, athletic, leisure, and health and beauty industries with engineered products for numerous purposes.

The accounting policies of the segments are the same as those described in Note 1. Income taxes and interest expense have been allocated based on operating results and total assets employed in each segment.

Inter-segment transactions are uncommon and not material. Therefore, they have not been separately reflected in the financial table below. The totals of the reportable segments’ revenues, net profits, and assets agree with the Company’s consolidated amounts contained in the audited financial statements. Revenues from customers outside of the United States are not material.

Sales to the top customer in the Company’s Component Products segment comprises 10.9% of that segment’s total sales and 7.2% of the Company’s total sales for the year ended December 31, 2011. Sales to the top customer in the Company’s Packaging segment comprise 6.9% of that segment’s total sales and 2.3% of the Company’s total sales for the year ended December 31, 2011.

The results for the Packaging segment include the operations of United Development Company Limited.

The Company has revised its allocation of corporate assets to the two segments to present cash and cash equivalents as unallocated assets. Prior year numbers have been adjusted to conform to the same allocation method.

Financial statement information by reportable segment is as follows:

F-26

2011	Component Products			Packaging			Unallocated Assets		Total
Sales	$	84,652,237		$	42,591,609		$	—	$	127,243,846
Operating income	13,036,101			2,680,097			—		15,716,198
Total assets	27,169,529			22,702,927			29,848,798		79,721,254
Depreciation / Amortization	1,544,377			1,236,625			—		2,781,002
Capital expenditures	1,029,046			2,711,845			—		3,740,891
Interest expense, net	(14,640		)	(12,234		)	—		(26,874		)
Goodwill	4,463,246			2,017,791			—		6,481,037

2010	Component Products			Packaging			Unallocated Assets		Total
Sales	$	80,373,062		$	40,393,388		$	—	$	120,766,450
Operating income	11,104,306			3,287,884			—		14,392,190
Total assets	26,579,654			20,795,613			22,102,634		69,477,901
Depreciation / Amortization	1,802,085			1,350,108			—		3,152,193
Capital expenditures	1,814,874			1,470,656			—		3,285,530
Interest expense, net	(61,668		)	(53,869		)	—		(115,537		)
Goodwill	4,463,246			2,017,791			—		6,481,037

2009	Component Products			Packaging			Unallocated Assets		Total
Sales	$	60,973,325		$	38,258,009		$	—	$	99,231,334
Operating income	5,806,122			2,385,494			—		8,191,616
Total assets	25,409,608			19,043,675			13,401,429		57,854,712
Depreciation / Amortization	1,658,290			1,236,772			—		2,895,062
Capital expenditures	989,027			867,810			—		1,856,837
Interest expense, net	(126,363		)	(106,384		)	—		(232,747		)
Goodwill	4,463,246			2,017,791			—		6,481,037
Bargain purchase gains	839,690			—			—		839,690

(21)Building Sale

On January 13, 2011, United Development Company Limited (“UDT”) sold its Alabama facility (Packaging segment) for $1,250,000. The net book value of the asset at December 31, 2010, was approximately $384,000.  Selling expenses of approximately $38,000 were incurred.

F-27

(22)Quarterly Financial Information (unaudited)

Year Ended December 31, 2011	Q1		Q2		Q3		Q4
Net sales	$	31,503,588	$	33,500,994	$	30,761,959	$	31,477,305
Gross profit	8,801,548		10,003,484		8,484,298		8,955,189
Net income attributable to UFP Technologies, Inc.	2,204,883		2,701,792		2,435,188		3,004,307
Basic net income per share	0.34		0.42		0.37		0.46
Diluted net income per share	0.32		0.39		0.35		0.43

Year Ended December 31, 2010	Q1		Q2		Q3		Q4
Net sales	$	28,700,466	$	29,957,495	$	30,467,998	$	31,640,491
Gross profit	7,457,254		9,046,836		8,905,976		9,205,664
Net income attributable to UFP Technologies, Inc.	1,511,382		2,281,616		2,364,840		3,089,254
Basic net income per share	0.25		0.37		0.38		0.49
Diluted net income per share	0.23		0.34		0.35		0.45

(23)Subsequent Events

On February 29, 2012, The Company purchased the manufacturing building that it leased from UDT for $1,350,000.  The purchase price approximates fair market value based upon appraisals done by independent professional firms.  As this was the only real estate owned by UDT, the realty limited partnership will be dissolved during 2012.

F-28

Schedule II

UFP TECHNOLOGIES, INC.

Consolidated Financial Statement Schedule

Valuation and Qualifying Accounts

Years ended December 31, 2011, 2010, and 2009

Accounts receivable, allowance for doubtful accounts:

	2011			2010			2009
Balance at beginning of year	$	342,682		$	473,912		$	387,037
Provision (Recoveries) credited to expense	55,209			8,466			155,069
(Write-offs) and recoveries	(19,032		)	(139,696		)	(68,194		)
Balance at end of year	$	378,859		$	342,682		$	473,912

F-29

EX-10.60

Exhibit 10.60

LEASE AGREEMENT

STATE OF TEXAS, COUNTY OF EL PASO

THIS LEASE AGREEMENT, made and entered into as of the Effective Date (as defined in Paragraph 25(g)), by and between EastGroup Properties, L.P., a Delaware limited partnership, hereinafter referred to as “Landlord”, and UFP Technologies Inc., a Delaware corporation, hereinafter referred to as “Tenant”;

WITNESSETH:

Preamble

Landlord is currently the lessee of the real estate located at a portion of Lot 8, Block 12, Butterfield Trail Industrial Park, Unit 1, El Paso, Texas (the “Land”) under the Ground Lease dated December 1, 1997, (the “Ground Lease”), with the City of El Paso (the “Ground Lessor”), a copy of which has been provided to Tenant and by this reference is incorporated for the premises described herein.  All the obligations contained in the Ground Lease conferred and imposed upon Landlord (as lessee therein), except for the payment of ground rental and other charges payable pursuant thereto and except as specifically modified further and amended by this Lease, are hereby conferred and imposed upon Tenant with respect to the Premises (as hereinafter described). Any duty or obligation in the Ground Lease required to be performed for the benefit of the Ground Lessor or any right in the Ground Lease granted for the benefit of the Ground Lessor shall be deemed to be for the benefit of Ground Lessor and Landlord.

1. PREMISES AND TERM. In consideration of the obligation of Tenant to pay Rent as herein provided, and in consideration of the other terms, provisions and covenants hereof, Landlord hereby demises and leases to Tenant, and Tenant hereby takes from Landlord, approximately 48,325 square feet of that certain building located at 32-B Spur Drive, El Paso, Texas 79906, County of El Paso, State of Texas, the real property of which is more particularly described on Exhibit “A” attached hereto and incorporated herein by reference, together with all rights, privileges, easements, appurtenances and immunities belonging to or in any way pertaining thereto and together with the building and other improvements situated or to be situated thereon (the said portion of the project’s real property, building and improvements being hereinafter referred to as the “Premises”).

Landlord and Tenant acknowledge that the Premises is part of a multi-tenant project (the “Project”). Expenses covering the buildings in the Project for property taxes and assessments, insurance, common area utilities and maintenance, and management fees shall be prorated on a square foot basis. The Premises proportionate share of these expenses is 48,325 SF/ 260,500 SF or 18.55 %.

TO HAVE AND TO HOLD the same for a term commencing on the “Commencement Date”, as hereinafter defined, and ending sixty (60) months thereafter (the “Term”), provided, however, that in the event the Commencement Date is a date other than the first day of a calendar month, said Term shall extend for said number of months in addition to the remainder of the calendar month following the Commencement Date.

The “Commencement Date” shall be the date on which the Premises and other improvements to be erected in accordance with the plans and specifications described on Exhibit “B” attached hereto (the “Plans”) have been substantially completed.  As used herein, the term “substantially completed” shall mean, that in the reasonable opinion of the architect or space planner that prepared the Plans, such improvements have been completed in accordance with the Plans and the Premises are in good and satisfactory condition, subject only to completion of minor punch list items.  Landlord shall notify Tenant ten (10) days prior to the occurrence of the Commencement Date.

Landlord shall deliver the Premises to Tenant broom clean and free of debris on the Commencement Date and warrants to Tenant that the existing plumbing, electrical systems, fire sprinkler system, lighting, air conditioning and heating systems and loading doors, if any, in the Premises, other than those constructed or installed by Tenant, shall be in good operating condition on the Commencement Date.  If a non-compliance with said warranty exists as of the Commencement Date, Landlord shall, except as otherwise provided in this Lease, promptly after receipt of written notice from Tenant setting forth with specificity the nature and extent of such non-compliance, rectify the same at Landlord’s expense.  If Tenant does not give Landlord written notice of a non-compliance with this warranty within sixty (60) days after the Commencement Date (except as to the air conditioning system which shall be governed by Paragraph 5(b) below), correction of that non-compliance shall be the obligation of Tenant at Tenant’s sole cost and expense.

Landlord shall notify Tenant in writing of the Commencement Date as soon as such improvements to said Premises have been substantially completed and ready for occupancy as aforesaid. Within ten (10) days thereafter,

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Tenant shall submit to Landlord in writing a punch list of items needing completion or correction. Landlord shall use reasonable efforts to complete such items within thirty (30) days after receipt of such notice. In the event Tenant, its employees, agents or contractors cause construction of such improvements to be delayed, the Commencement Date shall be deemed to be the date that, in the opinion of the architect or space planner that prepared the Plans, substantial completion would have occurred if such delays had not taken place.  Subject to the paragraph next above and other specific provisions of this Lease, the taking of possession by Tenant shall be deemed conclusively to establish that the buildings and other improvements had been completed in accordance with the Plans, that the Premises are in good and satisfactory condition as of when possession was so taken, and that Tenant has accepted the Premises without representation or warranty from Landlord, except as stated in this Lease. After such Commencement Date, Tenant shall, upon demand, execute and deliver to Landlord a Letter of Acceptance of delivery of the Premises.

Landlord and Tenant further agree that Tenant’s obligations, privileges, covenants and agreements contained in this Lease shall be operative and effective regardless of whether the Premises are ever occupied by Tenant.  If Tenant fails to occupy the Premises for any reason (other than a default hereunder by Landlord) after substantial completion of any building or improvements constructed in accordance with the Plans, or if Tenant whether constructively or actively prevents or hinders Landlord from constructing the improvements contemplated herein in accordance with the Plans, this Lease shall be deemed to have commenced automatically and the Commencement Date shall be deemed to be the date on which the improvements would have been completed in Landlord’s sole, but reasonable judgment, but for such hindrance or prevention by Tenant.

2.  RENT AND SECURITY DEPOSIT.

(a)  As part of the consideration for the execution of this Lease, and for the Lease and use of the Premises, Tenant covenants and agrees and promises to pay as net rental to Landlord, or Landlord’s assignees, $0.00 per month during the months 1 through 4 in the Term hereof, $11,880.00 per month during the months 5 through 12 during the Term hereof, $12,887.00 per month during the months 13 through 24 during the Term hereof, $13,289.00 per month during the months 25 through 36 during the Term hereof, $13,692.00 per month during the months 37 through 48 during the Term hereof, and $14,095.00 per month during the months 49 through 60 during the Term hereof (collectively, “Base Rent”). One such monthly installment of $11,880.00, plus the other monthly charges set forth in Paragraph 2(c) below (initially $3,423.00) per month, shall be due and payable on the date hereof and shall be applied in satisfaction of Tenant’s obligation to pay rent as defined in Paragraph 2(c) below for month 5 of the Term, and subsequent monthly installments for an amount as indicated in Paragraph 2(a), herein, shall be due and payable in advance, without demand, deduction or set off, on or before the first day of each succeeding calendar month succeeding the Commencement Date, except that all payments due hereunder for any fractional calendar month shall be prorated.

(b) In addition, Tenant agrees to deposit with Landlord the sum of $16,591.60, which shall be held by Landlord, without obligation for interest, as security for the performance of Tenant’s covenants and obligations under this Lease, it being expressly understood and agreed that such deposit is not an advance rental deposit or a measure of Landlord’s damages in case of Tenant’s default. Upon each occurrence of an event of default by Tenant, Landlord may, from time to time, without prejudice to any other remedy provided herein or provided by law, use such fund to the extent necessary to make good any arrears of Rent or other payments due Landlord hereunder, and any other damage, injury, expense or liability caused by such event of default. On demand, Tenant shall pay to Landlord the amount that will restore the security deposit to its original amount. Although the security deposit shall be deemed the property of the Landlord, any remaining balance of such deposit shall be returned by Landlord to Tenant within thirty (30) days after termination of this Lease, provided that all of Tenant’s obligations under this Lease have been fulfilled.

(c) Tenant agrees to pay to Landlord, as additional rental, beginning on the first day of the fifth (5th) month of the Term, its proportionate share (as defined in Paragraph 1 herein) of Operating Expenses in each calendar year. Operating Expenses include (i) Taxes (hereinafter defined) pursuant to Paragraph 4(a) below, (ii) the cost of all insurance relating to the building or buildings of which the Premises are a part, (iii) the cost of utilities payable by Landlord pursuant to Paragraph 9 below, and the cost of any common area charges payable by Landlord in accordance with Paragraph 5 below, (iv) the cost of management services and (v) any other costs related to the ownership, operation, repair and maintenance of the Project.  Operating Expenses shall not include depreciation or amortization of the Project or equipment in the Project except as provided herein, loan principal payments, costs of alterations of tenants’ premises, leasing commissions, advertising and promotional costs; principal or interest payments on any mortgages or other financing arrangements; legal fees; expenses incurred in connection with negotiating and enforcing leases with tenants in the Project; build out allowances, moving expenses, and other concessions incurred in connection with leasing spacing in the Project; the cost of any item or service to the extent Landlord is reimbursed by tenants, third parties or insurance; cost of any service or material provided by a related party to the extent that the cost of such service or material exceeds the competitive cost of such service or material absent such relationship; fines or penalties (unless such fines or penalties were the result of the acts or omissions of Tenant); and, except as included in the cost of

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management services, wages, salaries, or other compensation paid to any executive employees of Landlord above the grade of Property Manager.

Base Rent, Operating Expenses and any other costs which Landlord is entitled to collect under this Lease are hereinafter referred to collectively as “Rent”.  The amount of the initial monthly Base Rent and the initial monthly Operating Expense escrow payments are as follows:

1.)	Initial Base Rent as set forth in Paragraph 2 (a)	$	11,880.00
2.)	Operating Expense escrow	$	3,423.00
TOTAL INITIAL MONTHLY RENTAL PAYMENT		$	15,303.00

Beginning on the first day of the fifth (5th) month of the Term, and continuing during each month of the Term thereafter, on the same day that Base Rent is due hereunder, Tenant shall escrow with Landlord an amount equal to 1/12 of the estimated annual cost of its proportionate share of such Operating Expenses. The monthly escrow payments shall be adjusted annually to reflect the then current projected cost of all Operating Expenses. Landlord shall annually reconcile Tenant’s proportionate share of Operating Expenses against Tenant’s total annual escrow payments. If Tenant’s total annual escrow payments were insufficient to cover Tenant’s share of the actual annual Operating Expenses, Tenant shall pay the difference to Landlord within ten (10) days after demand. If Tenant’s annual escrow payments were excessive, Landlord shall retain such excess and credit it against Tenant’s future liabilities for Operating Expenses.

In implementation of the foregoing, within a reasonable time after the end of each whole or partial calendar year during the Lease Term, Landlord shall render to Tenant a statement, prepared according to generally accepted accounting principles consistently applied, showing in reasonable detail the Landlord’s Operating Expenses for the preceding calendar year or fraction thereof, as the case may be.  Such statement shall be binding upon Landlord and Tenant, subject to the provisions of this Paragraph .  Tenant shall have the right, at its expense and upon written notice given to Landlord no later than forty-five (45) days after receipt of the annual reconciliation statement from Landlord, to make an audit of all of Landlord’s bills and records relating to Operating Expenses for the immediately preceding calendar year.  Upon such written request of Tenant, Landlord shall make available to Tenant, during normal business hours, at the location where Landlord’s books and records are kept, such information as Tenant shall reasonably request.  Landlord shall cooperate reasonably with Tenant in its explanation of its bills and records.  Tenant agrees that it will treat such information confidentially and shall not divulge such information obtained from Landlord to any other person, firm, corporation, business organization, entity, tenant or occupant at any time.  Tenant shall have the right to retain the services of an independent certified public accountant or lease audit firm for such audit; provided, however, Tenant shall not retain any such auditor or audit firm on a contingency fee basis.  Tenant shall complete any such audit of Operating Expenses within sixty (60) days after the date of Tenant’s audit notice and shall deliver to Landlord the written results of such audit within ten (10) days after Tenant receives the same.  If such audit discloses an overpayment by Tenant in excess of five percent (5%) of the amount Tenant should have paid, Landlord shall credit such amount against Tenant’s future obligations for Operating Expenses.  If such audit discloses additional amounts due from Tenant in excess of five percent (5%) of the amount Tenant should have paid, Tenant shall pay such amounts within ten (10) days of completion of such audit.

3.  USE.  The Premises shall be used only for normal manufacturing and assembly with related office and warehouse use and for such other lawful and permitted purposes as may be incidental thereto, and in compliance with applicable city and local codes and the Rules of the Premises attached hereto as Exhibit “C”.  Tenant shall, at its own cost and expense, obtain any and all licenses and permits necessary for such use, shall at all times maintain the Premises in a clean, healthful and safe condition and comply with all governmental laws, codes, ordinances, regulations or any other applicable authorities with regard to the use, condition or occupancy of the Premises, including, without limitation, all requirements of the Ground Lease and regulations issued under the provisions of the Texas Architectural Barriers Act, TX Govt. Code Chap. 469, and the Americans with Disabilities Act, 42 U.S.C. 12101 et seq. Tenant shall be responsible, at Tenant’s sole expense, for the correction, prevention and abatement of nuisances in or upon, or connected with the Premises. Tenant shall not permit any objectionable or unpleasant odors, smoke, dust, gas, noise or vibrations, or pest infestations to emanate from the Premises, nor take any other action that would constitute a nuisance or would disturb, unreasonably interfere with, or endanger Landlord or any other tenants of the building or Project of which the Premises are a part. Landlord covenants and warrants to Tenant that the Premises shall, as of the Commencement Date be in compliance with all applicable governmental laws, codes, ordinances, regulations or any other applicable authorities with regard to the condition of the Premises and its use and occupancy for general office and warehouse uses, including, without limitation, all requirements of the Ground Lease and regulations issued under the provisions of the Texas Architectural Barriers Act, TX Govt. Code Chap. 469, and the Americans with Disabilities Act, 42 U.S.C. 12101 et seq.  Notwithstanding the foregoing, Landlord and Tenant agree that the Premises and/or the Project may not comply in all respects with current codes, ordinances or regulations, and Landlord shall not be required

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to comply with such current codes, ordinances or regulations if (i) compliance is waived or otherwise not required by the provisions thereof or (ii) the Premises and/or the Project is considered grandfathered or non-conforming but permissible under any such code or regulation.

Without Landlord’s prior written consent, Tenant shall not receive, store or otherwise handle any product, material or merchandise which is explosive or highly inflammable. Tenant will not permit the Premises to be used for any purpose which would render the property or liability insurance thereon void or the insurance risk more hazardous or cause the State Board of Insurance or other insurance authority to disallow any sprinkler credits.

Tenant and its employees, agents, customers, invitees, and/or licensees shall have the use of sixty (60) parking spaces in the parking area located in front of the Premises.  Landlord reserves the right, in its reasonable discretion, to determine whether such parking facilities are becoming crowded, and in such event, to allocate parking spaces among Tenant and other tenants in the Project.  In the event Landlord elects to allocate parking spaces, Landlord shall allocate no fewer than sixty (60) spaces to Tenant.  Landlord shall not be responsible for enforcing Tenant’s parking rights against any third parties.

4.  TAXES AND OTHER ASSESSMENTS.

(a)  Landlord agrees to pay all taxes, assessments or governmental charges of any kind and nature whatsoever (hereinafter collectively referred to as “Taxes”), levied or assessed against the Premises, and/or the land and/or improvements of which the Premises are a part, and all taxes of whatsoever nature that are imposed in substitution for or in lieu of any such taxes, assessments, or governmental charges, and Tenant shall be liable for its proportionate share of the same.

(b)  If at any time during the Term of this Lease, there shall be levied, assessed or imposed on Landlord a capital levy or other tax directly on the rents received therefrom and/or a margin tax or franchise tax, assessment, levy or charge measured by or based, in whole or in part, upon such rents for the Premises and/or the land and/or improvements of which the Premises are a part, including, but not limited to, any franchise tax imposed under Chapter 171 of the Texas Tax Code, then all such taxes, assessments, levies or charges, or the part thereof so measured or based, shall be deemed to be included within the term “Taxes” for the purposes hereof.

(c)  The Landlord shall have the right to employ a tax consulting firm to attempt to assure a fair tax burden on the Premises within the applicable taxing jurisdictions. Tenant agrees to pay its proportionate share of the cost of such consultant as additional rental. Landlord agrees to make commercially reasonable efforts, in the exercise of Landlord’s reasonable business judgment, to minimize taxes assessed against the Premises, including, without limitation, the timely filing of a protest regarding the annual appraisal of the Premises as appropriate.

(d)  Tenant shall be liable for all taxes levied or assessed against any personal property or fixtures placed in the Premises. If any such taxes are levied or assessed against Landlord or Landlord’s property and (i) Landlord pays the same or (ii) the assessed value of Landlord’s property is increased by inclusion of such personal property and fixtures and Landlord pays the increased taxes, then, upon demand Tenant shall pay to Landlord such taxes.

(e)  To the extent permitted by applicable law, Tenant hereby waives the provisions of §41.413 of the Texas Property Tax Code, or any successor thereto.

5.  MAINTENANCE AND REPAIRS.

(a) Tenant, at its own cost and expense, shall (i) maintain all parts of the Premises in good condition, (ii) promptly make all necessary repairs and replacements, including, but not limited to, windows, glass and plate glass, exterior doors, interior walls and finish work, interior doors and floor covering, utility connections, downspouts, gutters, heating and air conditioning systems (subject to the provisions of paragraph (b) below), light bulbs and ballasts, truck doors, dock bumpers, dock lights, dock levelers, paving, plumbing work and fixtures, termite and pest extermination, regular removal of trash and debris, and dedicated sewer lines, and (iii) keep the parking areas, driveways, truck aprons, and grounds surrounding the Premises in a clean and sanitary condition.

(b) Tenant shall, at its own cost and expense, enter into a regularly scheduled preventive maintenance/service contract with a maintenance contractor for servicing all hot water, heating and air conditioning systems and equipment within the Premises (which contractor and contract must be approved by Landlord, which approval shall not be unreasonably withheld or delayed). The service contract must include all services outlined in Paragraph 31B below and must become effective (and a copy thereof delivered to Landlord) within thirty (30) days of the date Tenant takes possession of the Premises.  Prior to entering the Premises, Tenant’s maintenance contractor shall provide evidence of liability insurance naming Landlord, its directors, officers, employees, agents and affiliates as additional insureds and

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workers compensation insurance including an endorsement waiving subrogation against Landlord, its directors, officers, employees, agents and affiliates, in amounts acceptable to Landlord.  Landlord shall, at its cost, make any repairs or replacements necessary to place the heating and air conditioning units serving the Premises in good working order as of the date of initial startup of such units.  Provided Tenant complies with the requirements of this Paragraph 5 and of Paragraph 31B regarding Tenant’s maintenance obligations, and except to the extent necessitated by the negligence or willful misconduct of Tenant, its employees or agents, if during the period beginning on the date of initial startup of such units and ending on September 30, 2012, (i) any heating or cooling unit provided by Landlord cannot be repaired and requires replacement, Landlord shall provide such replacement at Landlord’s sole cost, and (ii) any heating or cooling unit provided by Landlord shall require repair in excess of $600 per unit per repair, Landlord shall perform such repair at its sole cost.  The cost of the regularly scheduled preventive maintenance/service contract and the cost of routine maintenance items such as filters and belts shall not be considered repair or replacement costs for purposes of determining Landlord’s repair or replacement obligations under this Paragraph 5(b).

(c) Landlord shall (i) maintain the roof, foundation and the structural soundness of the exterior walls of the building of which the Premises are a part in good repair, reasonable wear and tear excepted, (ii) perform the repair, replacement and maintenance of access ways, driveways, parking areas and landscaping, and (iii) perform all exterior painting, common water and sewage line plumbing, and any other common maintenance items, and Tenant shall be liable for its proportionate share of the cost and expense of such repair, replacement, and maintenance. Landlord agrees that such costs shall not include any capital costs for roof, foundation, building structural, or parking lot replacement or work occasioned by fire, windstorm or other casualty to the extent of net insurance proceeds received by Landlord with respect thereto.  Notwithstanding the foregoing, however, to the extent any repair or replacement is necessitated by the acts or omissions of Tenant, its officers, directors, employees, agents, licensees, assignees or subtenants, Tenant shall be liable for the entire cost of such repair or replacement.

6.             TENANT’S ALTERATIONS, ADDITIONS, INSTALLATIONS.

The Tenant shall not make any alterations or additions to or installations at the Premises except as provided in this Section 6.

(a)   Tenant’s Improvements and Installations.  Subject to the provisions of paragraph 6(b) below, Tenant, at its own expense (a) shall, prior to commencing its business operations at the Premises, install a water submeter as described in Paragraph 9 below, (b) may, after the Commencement Date, at Tenant’s election and at Tenant’s sole expense, perform the installations and alterations listed on Exhibit F attached hereto and incorporated herein, which installations and alterations are conceptually acceptable to Landlord, subject to reasonable adjustments to be agreed upon after submittal and review of Tenant’s plans pursuant to paragraph (b) below (“Tenant’s Initial Installations”), and (c) may make further installations, improvements or alterations to the interior of the Premises during the Term of this Lease, provided that Tenant shall comply with the provisions of paragraph (b) below in each such instance.  Should Tenant desire to make additional installations during the Term of the Lease, Tenant may request, in connection with Tenant’s request for Landlord’s approval, that such installations be added to Exhibit F, and Landlord shall not unreasonably withhold consent to the addition of said items.

(b)   Tenant’s Work.  Tenant shall procure at Tenant’s sole expense all necessary permits and licenses before undertaking any work on the Premises; do all such work in a good and workmanlike manner employing materials of good quality and so as to conform with all applicable zoning, building, environmental, fire, health and other codes, regulations, ordinances and laws; furnish to Landlord for Landlord’s review and approval prior to the commencement of any such work reasonably detailed plans and specifications.  Landlord hereby agrees not to unreasonably withhold or delay approval of such plans and/or specifications; provided that Landlord shall not be deemed unreasonable for refusing to approve any construction, alterations, or additions requested by Tenant which would render the Premises or any material part thereof unsuitable for its current use and which would require unusual expense to readapt the Premises substantially to such use on lease termination or would materially increase the cost of insurance or taxes on the Building, unless Tenant first provides security reasonably acceptable to Landlord assuring that such readaptation will be made prior to such termination without expense to Landlord or Tenant agrees to pay such increased cost of insurance.  Any work requiring penetration of, or alterations to, the roof of the Premises shall be performed by Landlord’s approved roofing contractor.  All equipment or structures placed on the roof of the building in which the Premises is located shall be screened from view so as not to be visible from the street and shall be located no closer than thirty feet (30’) from any edge of the roof.  The location and manner of attachment of any equipment or structures placed on the roof by Tenant or its contractors shall be subject to Landlord’s prior review and approval.  Landlord and Landlord’s consultants shall have the right at any time and from time to time to inspect the Premises during the construction of Tenant’s Initial Installations to ensure compliance with the terms hereof, and in the event that Landlord or Landlord’s consultant gives notice to the Tenant of non-compliance of such construction, Tenant shall promptly undertake to correct such deficiencies in order to bring the construction of Tenant’s Initial Installations into compliance with the terms and conditions of this Lease and all applicable laws, ordinances, rules, regulations and/or code

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requirements.  Tenant agrees to pay promptly when due the entire cost of any work on the Premises undertaken by Tenant so that the Premises shall at all times be free of liens for labor and materials; to employ for such work one or more responsible contractors reasonably satisfactory to Landlord; to require such contractors employed by Tenant to carry (i) worker’s compensation insurance in accordance with statutory requirements including an endorsement waiving subrogation against Landlord, its directors, officers, employees, agents and affiliates, and (ii) commercial public liability insurance naming Landlord as an additional insured and covering such contractors on or about the Premises in amounts reasonably satisfactory to Landlord, and to submit certificates evidencing such coverage to Landlord prior to the commencement of such work; and to save Landlord harmless and indemnified from all injury, loss, claims or damage to any person or property occasioned by or growing out of such work. Tenant may also from time to time, with prior notice to Landlord and without the necessity of providing plans to or receiving approval from Landlord, at its own cost and expense and in a good workmanlike manner, make minor alterations, additions or improvements to the interior of the Premises, or erect, remove or alter such shelves, bins, machinery and trade fixtures as Tenant may deem advisable, without altering the basic character of the building or improvements and without overloading or damaging such building or improvements.

(c)  Restoration. Tenant’s Initial Installations shall be and remain the property of Tenant, and upon the termination of this Lease, Tenant shall quit and surrender the Premises having first removed Tenant’s Initial Installations and such of its other alterations, installations and additions as Landlord may designate (unless otherwise agreed at the time the same were approved by Landlord) and having restored the Premises substantially to the condition in which they now exist and repaired all damage occasioned by the removal of Tenant’s installations, alterations and improvements in a good and workmanlike manner.  All such removals and restoration shall be accomplished in good workmanlike manner so as not to damage the primary structure or structural qualities of the Building and other improvements situated on the Premises.

7.   SIGNS. Tenant shall have the right to install a sign upon the exterior of the building only when first approved in writing by Landlord and subject to any applicable governmental laws, ordinances, regulations, deed restrictions and architectural standards reasonably set forth by Landlord, and so long as such signs comply with the requirements set forth in Exhibit C attached hereto.  Tenant shall not (i) make any changes to the exterior of the Premises, (ii) install any exterior lights, decorations, balloons, flags, pennants, banners or painting, or (iii) erect or install any signs, window or door lettering, placards, decorations or advertising media of any type which can be viewed from the exterior of the Premises without Landlord’s prior written consent, which shall not be unreasonably withheld.  All signs, decorations, advertising media, blinds, draperies, and other window treatment or bars or other security installations visible from outside the Premises shall conform in all respects to the criteria established by Landlord and by the Ground Lease.  Tenant shall remove all such signs upon the termination of this Lease. Such installations and removals shall be made in such manner as to avoid injury to or defacement of the building and other improvements. Tenant shall repair any injury or defacement, including without limitation discoloration, caused by such installation and/or removal, if so required by Landlord.

8.   INSPECTION.  Landlord and Landlord’s agents and representatives shall have the right to enter and inspect the Premises at any reasonable time during business hours after prior notice to Tenant (provided, however, that no notice shall be required in the event of emergency) for the purpose of ascertaining the condition of the Premises, determining if Tenant is performing its obligations hereunder, performing the repairs that Landlord is obligated or elects to perform hereunder, making repairs to adjoining space, or curing any Defaults of Tenant hereunder that Landlord elects to cure.  Commencing six (6) months prior to the end of the Term hereof, Landlord and Landlord’s agents and representatives shall have the right to enter the Premises at any reasonable time during business hours for the purpose of showing the Premises and shall have the right to erect on the Premises a suitable sign indicating that the Premises are available. Any such entry by Landlord and its agents, representatives and contractors (and, in particular, any activities involving repairs to adjoining space or construction of a demising wall separating such space from the Premises) shall be made at such times and conducted in such manner as to reasonably minimize any interference with Tenant’s use of the Premises for the conduct of its business.

Tenant shall give written notice to Landlord at least thirty (30) days prior to vacating the Premises and shall arrange to meet with Landlord for a joint inspection of the Premises prior to vacating. In the event of Tenant’s failure to give such notice or arrange such joint inspection, if Landlord is aware of Tenant’s pending departure from the Premises, Landlord shall use reasonable efforts to contact Tenant to arrange such joint inspection. If Tenant fails to respond to Landlord’s contact, then Landlord’s inspection at or after Tenant’s vacating the Premises shall be conclusively deemed correct for purposes of determining Tenant’s responsibility for repairs and restoration.

9.  UTILITIES. Upon the Commencement Date, Landlord agrees to provide normal water, sewer and electricity service connections to the Premises and normal gas and telephone service connections to the demarcation point in the building, which connections shall hereafter be maintained by Tenant. Tenant shall pay for all water, gas, heat, light, power, telephone, sewer, sprinkler charges and other utilities and services used on or at the Premises, and any

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maintenance or inspection charges for utilities. Tenant shall pay its proportional share of all charges for jointly metered and common area utilities. Landlord shall not be liable for any interruption or failure of utility services on the Premises.

Landlord shall furnish the Premises with water and sewer for normal domestic restroom and kitchen usage, and Tenant agrees to reimburse Landlord for the common water and sewer service as a component of additional rental under Paragraph 2(c) above.  Furthermore, Tenant agrees, at its own expense prior to commencement of business operations in the Premises, to install a submeter to measure Tenant’s water usage in connection with its manufacturing use and thereafter to promptly upon demand reimburse Landlord for the cost of such submetered water (and additional sewer costs, if any) as additional rent.  The location and manner of installation of such submeter shall be subject to Landlord’s prior review and approval.

10.   ASSIGNMENT AND SUBLETTING. Tenant shall not have the right to assign this Lease or to sublet the whole or any part of the Premises without the prior written consent of the Landlord.  Upon the occurrence of an “event of default” as hereinafter defined, if the Premises or any part thereof are then assigned or sublet, Landlord, in addition to any other remedies herein provided or provided by law, may at its option collect directly from such assignee or subtenant all rents becoming due to Tenant under such assignment or sublease and apply such rent against any sums due to Landlord from Tenant hereunder, and no such collection shall be construed to constitute a novation or a release of Tenant from the further performance of Tenant’s obligations hereunder.

Notwithstanding any of the above provisions of this Paragraph 10 to the contrary, Tenant may assign this Lease or sublet the Premises or any portion thereof, upon notice to Landlord but without Landlord’s written consent, but subject to all other provisions of this Lease, to any corporation or other entity which controls, is controlled by, or is under common control with Tenant, or to any corporation or other entity resulting from a merger or consolidation of Tenant (collectively, an “Affiliate”), provided that (i) the Affiliate assumes in writing all of Tenant’s obligations under this Lease, and (ii) such transfer is not a subterfuge by Tenant to avoid its obligations under this Lease or the restrictions on assignment and subletting under this Paragraph 10.  Notwithstanding any assignment or subletting, Tenant shall at all times remain directly, primarily and fully responsible and liable for the payment of the Rent herein specified and for compliance with all of Tenant’s other obligations under the terms, provisions and covenants of this Lease.

11.   INSURANCE:  FIRE AND CASUALTY DAMAGE

(a)  Tenant agrees to reimburse Landlord for its proportionate share of the cost to maintain property insurance covering the Premises in an amount equal to the full replacement cost thereof, insuring against the perils of Fire, Lightning, Extended Coverage, Vandalism and Malicious Mischief, extended by Special Extended Coverage Endorsement to insure against all other risks of direct physical loss, such coverages and endorsements to be as defined, provided and limited in the standard bureau forms prescribed by the insurance regulatory authority for the State of Texas for use by insurance companies admitted in Texas for the writing of such insurance on risks located within Texas. Such insurance shall cover those risks of loss that a reasonable and prudent property owner of a like or similar building located in El Paso, Texas would insure against, including liability and loss of rents coverage. Subject to the provisions of subparagraphs 11(b), 11(d) and 11(e) below, such insurance shall be for the sole benefit of Landlord.

(b) If the Premises should be damaged or destroyed by any peril covered by the insurance to be provided by Landlord under subparagraph 11(a) above, Tenant shall give immediate notice thereof to Landlord and Landlord shall at its sole cost and expense thereupon proceed with reasonable diligence to rebuild and repair the Premises to substantially the condition in which they existed prior to such damage or destruction, except that Landlord shall not be required to rebuild, repair or replace any part of the partitions, fixtures, additions and other improvements which may have been placed in, on or about the Premises by Tenant. Unless the damage or destruction is due to the negligence or fault of Landlord, Tenant shall pay to Landlord upon demand Tenant’s proportionate share of any applicable deductible amounts specified under such insurance. The Rent payable hereunder shall abate or be reduced by reason of the damage or destruction, but only in the proportion that the damage or destruction prevents or materially interferes, in Landlord’s reasonable determination, with Tenant’s use of the Premises for the intended purpose hereunder.

(c)  If the Premises should be damaged or destroyed by a casualty other than a peril covered by the insurance to be provided under subparagraph 11(a) above, and the casualty or loss was the result of an action or failure to act by Tenant or Tenant’s employees, agents, guests, customers, representatives or invitees, Tenant shall be responsible for the reasonable cost to rebuild and repair the Premises to substantially the condition in which they existed prior to such damage or destruction.

(d)  Other than the improvements and build-out performed by Landlord as a condition to Tenant’s occupancy of the Premises, Tenant covenants and agrees to maintain insurance on all alterations, additions, partitions and improvements erected by, or on behalf of, Tenant, and all other property of Tenant located in, on or about the Premises

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in an amount equal to the full replacement cost thereof. Such insurance shall insure against the perils and be in form, including stipulated endorsements, as provided in subparagraph 11(a) hereof. Such insurance shall be for the sole benefit of Tenant and under its sole control. All such policies shall be procured by Tenant from responsible insurance companies satisfactory to Landlord. Certificates of Insurance for each such policy of such insurance, together with receipt evidencing payment of the premiums therefore, shall be delivered to Landlord prior to the Commencement Date of this Lease. Not less than fifteen (15) days prior to the expiration date of any such policies, new Certificates of Insurance (bearing notations evidencing the payment of renewal premiums) shall be delivered to Landlord. Such policies shall further provide that not less than thirty (30) days written notice shall be given to Landlord before such policy may be canceled or changed to reduce insurance provided thereby. If requested by the holder of any indebtedness secured by a mortgage or Deed of Trust covering the Premises, certified copies of the insurance policies will need to be furnished in lieu of the certificates of insurance.

(e) Notwithstanding anything herein to the contrary, in the event the holder of any indebtedness secured by a mortgage or Deed of Trust covering the Premises requires that the insurance proceeds be applied to such indebtedness as a result of total loss or constructive total loss of the Premises, then the Landlord shall have the right to terminate this Lease by delivering written notice of termination to Tenant within fifteen (15) days after such requirement is made by any such holder whereupon all rights and obligations hereunder shall cease and terminate. The insurance proceeds arising out of any loss which is not a total loss or a constructive total loss shall be applied by Landlord in the manner prescribed in subparagraph 11(b) above.

(f) Notwithstanding any provision to the contrary contained herein, each party hereto hereby releases any and every claim which arises or may arise in its favor and against the other party hereto and/or such party’s agents, directors, officers, shareholders, partners, employees and affiliates during the Lease Term or any extension or renewal thereof for any and all injury, loss or damage to persons or property (regardless of whether such injury, loss or damage is the result of or caused by the negligent acts or omissions of the released party or any strict liability) arising from any cause that (a) would be insured against under the terms of any property or workers compensation insurance required to be carried hereunder; or (b) is insured against under the terms of any property or workers compensation insurance actually carried, regardless of whether it is required hereunder.  Said waivers shall be in addition to, and not in limitation or derogation of, any other waiver or release contained in this Lease with respect to any injury, loss or damage to persons or property of the parties hereto.  Each party hereto hereby agrees immediately to give to each insurance company which has issued to it policies of property or workers compensation insurance written notice of the terms of said mutual waivers, if necessary, and to have said insurance policies properly endorsed, if necessary, to prevent the invalidation of said insurance coverages by reason of said waivers.

12.   LIABILITY. Unless caused by Landlord’s gross negligence or willful misconduct, Landlord shall not be liable to Tenant or to Tenant’s officers, directors, employees, agents, licensees, or visitors, or to any other person whomsoever, for any injury, loss or damage (regardless of whether such injury, loss or damage is caused by or arises out of Landlord’s negligence or the negligence of any employee or agent of Landlord or any strict liability) to person or property (i) due to the building or the land or any part thereof becoming out of repair or by defect in or failure of pipes or wiring, or by the backing up of drains or by the bursting or leaking of pipes, faucets and plumbing fixtures or by gas, water, steam, electricity or oil leaking, escaping or flowing into the Premises, or (ii) that may be occasioned by or through the acts or omissions of other tenants in the building or of any other persons whatsoever, or (iii) that may be occasioned by theft, fire, act of God, public enemy, injunction, riot, insurrection, war, court order, requisition or order of governmental authority, or any other matter beyond the control of Landlord.  Tenant agrees that all Tenant’s property shall be at the risk of Tenant only, and that Landlord and Ground Lessor shall not be liable for any loss or damage thereto or theft thereof (regardless of whether such loss, damage or theft is caused by or arises out of Landlord’s negligence or the negligence of any employee or agent of Landlord or any strict liability), except where caused by the gross negligence or willful misconduct of Landlord.  Tenant agrees to indemnify Landlord, its agents, directors, officers, shareholders, partners, employees and affiliates and Ground Lessor, and hold them harmless from any loss, expense or claims including attorneys’ fees, arising out of any damage or injury to the extent caused by the acts or omissions of Tenant, its employees, agents, contractors, invitees and subtenants.  Tenant’s obligations pursuant to the foregoing indemnity shall survive the expiration or earlier termination of this Lease.  Tenant shall procure and maintain throughout the Term of this Lease a general liability policy or policies of insurance, at its sole cost and expense, insuring Landlord and Ground Lessor (as additional insureds) and Tenant against all claims, demands, or actions arising out of or in connection with: (i) the Premises; (ii) the condition of the Premises; and (iii) Tenant’s operations in and maintenance and use of the Premises, and which coverage shall be primary.  Such policy or policies shall afford protection with respect to bodily injury, death or property damage (including loss of use) of not less than Two Million Dollars ($2,000,000) each occurrence/Three Million Dollars ($3,000,000) aggregate, and shall include contractual liability coverage which insures contractual liability under the indemnification of Landlord and Ground Lessor by Tenant set forth in this Lease.  Tenant shall also procure and maintain throughout the Term of this Lease a worker’s compensation insurance policy with applicable statutory limits.  All such policies shall be procured by Tenant from responsible insurance companies satisfactory to Landlord. Certificates of Insurance for each such policies,

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together with receipts evidencing payment of premiums therefor, shall be delivered to Landlord prior to the Commencement Date of this Lease, and not less than fifteen (15) days prior to the expiration date of any such policies, new Certificates of Insurance (bearing notations evidencing the payment of renewal premiums) shall be delivered to Landlord. Such policies shall further provide that not less than thirty (30) days written notice shall be given to Landlord before such policy may be canceled or changed to reduce insurance provided thereby. If requested by the holder of any indebtedness secured by a mortgage or deed of trust covering the Premises, certified copies of the insurance policies will need to be furnished in lieu of the Certificates of Insurance.  If Tenant fails to comply with the foregoing requirements relating to insurance, Landlord may, following ten (10) days written notice to Tenant, obtain such insurance and Tenant shall pay to Landlord within thirty (30) days of receipt of an invoice the premium cost thereof.

Any and all covenants of Landlord contained in this Lease shall be binding upon Landlord and its successors only with respect to breaches occurring during its or their respective periods of ownership of the Landlord’s interest hereunder.  Notwithstanding anything to the contrary contained herein, the liability of Landlord to Tenant for any default by Landlord under the terms of this Lease shall be limited to Landlord’s interest in the Project, and Tenant agrees to look solely to Landlord’s interest in the Project, of which the Premises is a part, for the recovery of any judgment against Landlord, it being intended that Landlord shall not be personally liable for any judgment or deficiency.  Notwithstanding anything to the contrary contained herein, in no event shall Landlord be liable for special, incidental, consequential, exemplary or punitive damages.  Before filing suit for an alleged default by Landlord, Tenant shall give Landlord, and any mortgagee of the building of whom Tenant has been notified, notice and reasonable time to cure the default.

13.   CONDEMNATION.

(a) If the whole or any substantial part of the Premises, in Landlord’s reasonable opinion, should be taken for any public or quasi-public use under governmental law, ordinance or regulation, or by right of eminent domain, or by private purchase in lieu thereof, and the taking would prevent or materially interfere with the use of the Premises for the purpose for which they are being used, this Lease shall terminate and the Rent shall be abated during the unexpired portion of this Lease, effective when the physical taking of said Premises shall occur.

(b) If less than a substantial part of the Premises, in Landlord’s reasonable opinion, shall be taken for any public or quasi-public use under any governmental law, ordinance or regulation, or by right of Eminent Domain, or by private purchase in lieu thereof, this Lease shall not terminate, but the Rent payable hereunder during the unexpired portion of this Lease shall be reduced by an amount proportional to the amount of square footage taken.

(c) All compensation awarded in connection with or as a result of any of the foregoing proceedings shall be the property of Landlord and Tenant hereby assigns any interest in any such award to Landlord; provided, however, Landlord shall have no interest in any separate award made to Tenant for loss of business or goodwill or for the taking of Tenant’s fixtures and improvements, if a separate award for such items is made to Tenant.

14.  HOLDING OVER.  At the termination of this Lease by expiration or otherwise, Tenant shall remove all of Tenant’s trade fixtures and other items of personal property from the Premises and shall deliver possession to Landlord with all repairs and maintenance required herein to be performed by Tenant completed.  If Tenant does not remove its property prior to termination, then, in addition to its other remedies at law or in equity, Landlord shall have the right to consider the property abandoned and such property may be removed by Landlord, at Tenant’s expense, or at Landlord’s option become Landlord’s property, and Tenant shall have no further rights relating thereto or for reimbursement therefor.  If, for any reason, Tenant retains possession of the Premises after the expiration or termination of this Lease, unless the parties hereto otherwise agree in writing, such possession shall be subject to termination by either Landlord or Tenant at any time upon not less than ten (10) days advance written notice, and all of the other terms and provisions of this Lease shall be applicable during such period, except that Tenant shall pay Landlord from time to time, upon demand, as rental for the period of any hold over, an amount equal to double the Rent in effect on the expiration or termination date, computed on a daily basis for each day of the hold over period. No holding over by Tenant, whether with or without consent of Landlord, shall operate to extend this Lease except as otherwise expressly provided. The preceding provisions of this Paragraph 14 shall not be construed as Landlord’s consent for Tenant to hold over.

15.  QUIET ENJOYMENT.  Landlord covenants that it now has, or will acquire before Tenant takes possession of the Premises, good title to the Premises, free and clear, of all liens and encumbrances, excepting only the lien for current taxes not yet due, such mortgage or mortgages as are permitted by the terms of this Lease, zoning ordinances and other building and fire ordinances and governmental regulations relating to the use of such property, the provisions of the Ground Lease and easements, restrictions and other conditions of record. Landlord represents and warrants that it has full right and authority to enter into this Lease and that Tenant upon paying the Rent herein set forth and performing its other covenants and agreements herein set forth, shall peaceably and quietly enjoy the Premises for the

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Term hereof without hindrance or molestation from Landlord or anyone claiming by or under Landlord, subject to the terms and provisions of this Lease.

16. EVENTS OF DEFAULT. The following events shall be deemed to be events of default by Tenant under this Lease:

(a) Tenant shall fail to pay any installment of the Rent hereby reserved when due, or any other payment or reimbursement to Landlord required herein, and such failure shall continue for a period of five (5) days from the date Landlord gives Tenant written notice that such amount is due; provided, however, Tenant shall not be entitled to more than one (1) such notice during any twelve (12) month period, and if after such notice any Rent or other payment due hereunder is not paid within five (5) days of when due, an event of default will be considered to have occurred without notice.

(b) Tenant shall become insolvent, or shall make a transfer in fraud of creditors, or shall make an assignment for the benefit of creditors.

(c) Tenant shall file a petition in bankruptcy or under any similar law or statute of the United States or any State thereof, or Tenant shall be adjudged bankrupt, or insolvent in proceedings filed against Tenant thereunder.

(d)  A receiver or trustee shall be appointed for all or substantially all of the assets of Tenant.

(e) Tenant shall desert or vacate any substantial portion of the Premises.

(f) Tenant shall fail to comply with any term, provision or covenant of this Lease (other than the foregoing in this Paragraph 16) within the time period in which such term, provision or covenant is required to be performed by the terms of this Lease, or, if no time period is specified for performance, within thirty (30) days after written notice of such failure to Tenant (plus such additional time as may be reasonably necessary provided Tenant commences such cure within thirty (30) days and diligently pursues same to completion).

17.   REMEDIES. Upon the occurrence of an event of default described in Paragraph 16 hereof, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand:

(a)  Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails so to do, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in Rent, enter upon and take possession of the Premises and expel or remove Tenant or any other person who may be occupying such Premises or any part thereof, without being liable for prosecution or any claim of damages therefor; and Tenant agrees to pay to Landlord on demand the amount of any loss and damage which Landlord may suffer by reason of such termination, whether through inability to relet the Premises on satisfactory terms or otherwise.

(b) Enter upon and take possession of the Premises without termination of this Lease and expel or remove Tenant and any other person who may be occupying such Premises or any part thereof, without being liable for prosecution or any claim of damages therefor; and relet the Premises and receive the rent therefor; and Tenant agrees to pay to the Landlord on demand any deficiency that may arise by reason of such reletting. In the event Landlord is successful in reletting the Premises at a rental in excess of that agreed to be paid by Tenant pursuant to the terms of this Lease, Landlord and Tenant each mutually agree that Tenant shall not be entitled, under any circumstances, to such excess rental, and Tenant does hereby specifically waive any claim to such excess rental.

(c)  Terminate this Lease and treat the event of default as an entire breach of this Lease and Tenant immediately shall become liable to Landlord for damages for the entire breach in the amount equal to the amount of additional Rent which would be payable by Tenant during the unexpired balance of the Term of this Lease and all other payments due for the balance of the Term, adjusted to present value.  In the event Landlord elects to so accelerate the Rent due hereunder, Landlord shall use reasonable efforts to relet the Premises, and if Landlord is successful in reletting the Premises during the unexpired balance of the Term of the Lease, Landlord shall offset the rent received by Landlord for such unexpired portion of the Term as a result of any reletting against the amount of additional Rent owed by Tenant.  Landlord and Tenant each mutually agree that Tenant shall not be entitled, under any circumstances, to any excess rental obtained by Landlord as a result of any reletting, and Tenant does hereby specifically waive any claim to such excess rental.  Such amount shall be due and payable upon Landlord’s notice to Tenant of termination of the Lease and shall bear interest until paid at the maximum annual rate permitted by law.

(d)  Enter upon the Premises, without being liable for prosecution or any claim of damages therefor, and do whatever Tenant is obligated to do under the terms of this Lease; and Tenant agrees to reimburse Landlord on demand for any expenses which Landlord may incur in thus effecting compliance with Tenant’s obligations under this Lease,

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and Tenant further agrees that Landlord shall not be liable for any damages resulting to the Tenant from such action, whether caused by the negligence of Landlord or otherwise.

(e)  Alter locks and other security devices at the Premises without being liable for prosecution or any claim of damages therefor, and such alteration of locks and security devices shall not be deemed unauthorized or constitute a conversion.

(f)  Receive payment from Tenant, in addition to any sum provided to be paid above, for any and all of the following expenses for which Tenant shall be considered liable:

1. Broker’s fees incurred by Landlord in connection with reletting the whole or any part of the Premises;

2. The cost of removing and storing Tenant’s or other occupant’s property;

3.  The cost of repairing, altering, remodeling or otherwise putting the Premises into the condition in which they were required to be put upon termination of this Lease, plus a reasonable charge to cover Landlord’s overhead; and

4. All reasonable expenses incurred by Landlord in enforcing Landlord’s remedies.

In the event Tenant fails to pay any installment of Rent hereunder within five (5) days after such installment is due, to help defray the additional cost to Landlord for processing such late payments Tenant shall pay to Landlord on demand a late charge in an amount equal to five percent (5%) of such installment; and the failure to pay such late charges within ten (10) days after demand therefor shall be an event of default hereunder. The provision for such late charge shall be in addition to all of Landlord’s other rights and remedies hereunder or at law and shall not be construed as liquidated damages or as limiting Landlord’s remedies in any manner.

Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law, nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any Rent due to Landlord hereunder or of any damages accruing to Landlord by reason of the violation of any of the terms, provisions and covenants herein contained. No act or thing done by the Landlord or its agents during the Term hereby granted shall be deemed a termination of this Lease or an acceptance of the surrender of the Premises, and no agreement to terminate this Lease or to accept a surrender of said Premises shall be valid unless in writing and signed by Landlord, no waiver by Landlord of any violation or breach of any of the terms, provisions and covenants herein contained shall be deemed or construed to constitute a waiver of any other violation or breach of any of the other terms, provisions and covenants herein contained. Landlord’s acceptance of the payment of rental or other payments hereunder after the occurrence of an event of default shall not be construed as a waiver of such default, unless Landlord so notifies Tenant in writing. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default or of any subsequent default. If, on account of any breach or default by Tenant in Tenant’s obligations under the terms and conditions of this Lease, it shall become necessary or appropriate for Landlord to employ or consult with an attorney concerning any of Landlord’s rights or remedies hereunder or to enforce or defend any of the Landlord’s rights or remedies hereunder, Tenant agrees to pay any reasonable attorneys fees so incurred.

18.  LANDLORD’S LIEN.  [Intentionally omitted].

19.  MORTGAGES AND GROUND LEASES.  This Lease shall be subordinate to the Ground Lease and to any deed of trust, mortgage, or other security instrument (a “Mortgage”) that hereafter covers all or any part of the Premises or the Project. The mortgagee under any Mortgage is referred to herein as “Landlord’s Mortgagee”.  Landlord shall use commercially reasonable efforts to obtain a recognition and non-disturbance agreement in commercially reasonable form from any future Landlord’s Mortgagee whereby such Landlord’s Mortgagee agrees not to disturb the possession of Tenant and to recognize Tenant’s rights under this Lease in the event such Landlord’s Mortgagee obtains possession of the Premises or Project through foreclosure or otherwise for so long as Tenant is not in default hereunder.

Tenant shall attorn to any party succeeding to Landlord’s interest in the Premises, whether by purchase, foreclosure, deed in lieu of foreclosure, power of sale, termination of lease, or otherwise, upon such party’s request, and shall execute such agreements confirming such attornment as such party may reasonably request. In the event of such request and upon Tenant’s attornment as aforesaid, Tenant will automatically become the tenant of the successor to Landlord’s interest without change in the terms or provisions of this Lease; provided, however, that such successor to Landlord’s interest shall not be bound by (a) an payment of Rent for more than one month in advance (except prepayments for security deposits, if any), (b) any amendments or modifications of this Lease made without the prior

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written consent of Landlord’s Mortgagee if Tenant was advised on the interest of the same, or (c) any credits, offsets, defenses or claims which Tenant may have against Landlord.

Tenant shall not seek to enforce any remedy it may have for any default on the part of the Landlord without first giving written notice by certified mail, return receipt requested, specifying the default in reasonable detail, to any Landlord’s Mortgagee, whose address has been given to Tenant, and affording such Landlord’s Mortgagee a reasonable opportunity to perform Landlord’s obligations hereunder. Subject to the provisions of Paragraph 12 hereof, Landlord reserves the right, without notice to or consent of the Tenant, to assign this Lease and/or any and all Rent hereunder as security for the payment of any Mortgage.

Tenant agrees at any time and from time to time during the Term to execute, acknowledge and deliver to Landlord and/or Landlord’s designee within seven (7) days of any request by Landlord, a statement or statements, in writing, certifying (if such be true) that a copy of this Lease and any amendments hereto are true and correct copies, this Lease is unmodified and in good standing (or if modified, then in good standing as modified, stating the modification), the date to which all Rent and other charges hereunder have been paid in advance, and any other items reasonably requested of Tenant.  From time to time, Tenant shall furnish to any Landlord’s Mortgagee, within ten (10) days after a request therefor, such estoppel certificates, non-disturbance and attornment agreements, or other certificates as Landlord’s Mortgagee may reasonably request.

20.  LANDLORD’S DEFAULT.

(a)  In the event Landlord should default in any of its obligations hereunder, Tenant shall simultaneously give Landlord and Landlord’s Mortgagee (if Landlord has given Tenant written advance notice of such mortgagee’s interest and address) written notice specifying such default and Landlord shall thereupon have thirty (30) days (plus an additional reasonable period as may be required in the exercise by Landlord of due diligence) in which to cure any such default.  In addition, Landlord’s Mortgagee shall have the right (but not the obligation) to cure or remedy such default during the period that is permitted to Landlord hereunder, plus an additional period of thirty (30) days, and Tenant will accept such curative or remedial action taken by Landlord’s Mortgagee with the same effect as if such action had been taken by Landlord,

(b) Upon the failure of Landlord or Landlord’s Mortgagee to cure such default in accordance with the provisions of Paragraph 20(a) hereof, Tenant shall be authorized and empowered to perform the obligations which Landlord failed to perform, and the reasonable costs incurred by Tenant in so doing, together with any interest or penalty required to be paid in connection therewith, shall be payable on demand by Landlord to Tenant. Tenant’s exclusive remedy shall be self-help as set forth herein and an action for damages against Landlord, and Tenant hereby waives the benefit of any laws granting Tenant a lien upon the property of Landlord and/or upon Rent due Landlord.

21.  ASSIGNMENT BY LANDLORD.  Landlord shall have the right to assign or transfer, in whole or in part every feature of its rights and obligations hereunder and the Premises provided such assignee or transferee recognizes and agrees to be bound by the terms of this Lease. Such assignments or transfers may be made to a corporation, trust, trust company, individual or group of individuals, and howsoever made shall be in all things respected and recognized by Tenant.

22.  DISCLAIMER.  This Lease and the obligation of Tenant to pay Rent hereunder and perform all of the other covenants and agreements hereunder on the part of the Tenant to be performed shall not be affected, impaired or excused because Landlord is unable to fulfill any of its covenants and obligations under this Lease, expressly or impliedly to be performed by Landlord, if Landlord is prevented or delayed from doing so by reason of strikes, labor troubles, accident, adjustment of insurance, or by any reason or cause whatsoever reasonably beyond Landlord’s control. Reasons beyond Landlord’s control shall include, but not be limited to, laws, governmental preemption in connection with a National Emergency or by any reason of any rule, order or regulation of any governmental agency, federal, state, county or municipal authority or any department or subdivision thereof, or by reason of the conditions of supply and demand which have been or are affected by war or other emergency.

23.  MECHANIC’S LIENS.  Tenant shall have no authority, express or implied, to create or place any lien or encumbrance, of any kind or nature whatsoever, upon, or in any manner to bind, the interest of Landlord in the Premises for any claim in favor of any person dealing with Tenant, including those who may furnish materials or perform labor for any construction or repairs, and each such claim shall affect and each such lien shall attach to, if at all, only the leasehold interest granted to Tenant by this instrument. Tenant covenants and agrees that it will pay or cause to be paid all sums legally due and payable by it on account of any labor performed or materials furnished in connection with any work performed on the Premises on which any lien is or can be validly and legally asserted against its leasehold interest in the Premises or the improvements thereon, and that it will save and hold Landlord harmless from any and all loss, cost or expense based on or arising out of asserted claims or liens against the leasehold estate, or

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against the right, title and interest of the Landlord in the Premises or under the terms of this Lease.  In the event any such lien is attached to the Premises or any portion thereof, Tenant shall cause the same to be discharged of record within twenty (20) days after filing of same.

24.  NOTICES.  Each provision of this instrument or of any applicable governmental laws, ordinances, regulations and other requirements with reference to the sending, mailing or delivery of any notice or the making of any payment by Landlord to Tenant or with reference to the sending, mailing or delivery of any notice or the making of any payment by Tenant to Landlord shall be deemed to be complied with when and if the following steps are taken:

(a)  All Rent and other payments required to be made by Tenant to Landlord hereunder shall be payable to Landlord at the address hereinbelow set forth or at such other address as Landlord may specify from time to time by written notice delivered in accordance herewith. Tenant’ s obligation to pay Rent and any other amounts to Landlord under the terms of this Lease shall not be deemed satisfied until Rent and other amounts have been actually received by Landlord.

(b)  All payments required to be made by Landlord to Tenant hereunder shall be payable to Tenant at the address hereinbelow set forth, or at such other address within the continental United States as Tenant may specify from time to time by written notice delivered in accordance herewith.

(c)  Any notice or document required or permitted to be delivered hereunder may be personally delivered, sent via nationally recognized overnight courier or placed in the United States mail, postage prepaid, registered or certified mail, return receipt requested, addressed in each case to the parties hereto at the respective addresses set out below, or at such other address as the parties have theretofore specified by written notice delivered in accordance herewith.  A notice shall be deemed to be effective (a) when delivered personally, (b) if sent by registered or certified mail or overnight delivery service, at the time the delivery is indicated on the duly completed United States Postal Service return receipt, or (c) the time of package delivery as indicated on the records of or certificates provided by the overnight delivery service:

LANDLORD:	TENANT:
EastGroup Properties, L.P.	UFP Technologies Inc.,
c/o NDH Property Management	172 East Main Street
7400 Viscount, Suite 112	Georgetown, MA 01833
El Paso, Texas 79925	Attention: Ron Lataille
Attention: Nancy De Haro
With copy to:	With copy to:
EastGroup Properties, L.P.	Owen B. Lynch, Esq.
4220 World Houston Parkway, Suite 170	Lynch, Brewer, Hoffman & Fink, LLP
Houston, Texas 77032	75 Federal Street, Floor 7
Attention: Asset Manager	Boston, MA  02110

If and when included within the term “Landlord”, as used in this instrument, there are more than one person, firm or corporation, all shall jointly arrange among themselves for their joint execution of such a notice specifying some individual at some specific address for the receipt of notices and payments to Landlord; if and when included within the term “Tenant”, as used in this instrument, there are more than one person, firm or corporation, all shall jointly arrange among themselves for their joint execution of such a notice specifying some individual at some specific address within the continental United States for the receipt of notices and payments to Tenant. All parties included within the terms “Landlord” and “Tenant”, respectively, shall be bound by notices given in accordance with the provisions of this Paragraph to the same effect as if each had received such notice.

25.  MISCELLANEOUS.

(a)  Words of any gender used in this Lease shall be held and construed to include any other gender and words in the singular number shall be held to include the plural, unless the context otherwise requires.

(b)  The terms, provisions, covenants and conditions contained in this Lease shall apply to, inure to the benefit of, and be binding upon, the parties hereto and upon their respective heirs, legal representatives, successors and permitted assigns except as otherwise herein expressly provided.

(c)  Because the Premises are on the open market and are presently being shown, this Lease shall be treated as an offer with the Premises being subject to prior lease and such offer subject to withdrawal or non-acceptance by Landlord

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or to other use of the Premises without notice, and this Lease shall not be valid or binding unless and until accepted by Landlord in writing and a fully executed copy delivered to both parties.

(d) The captions inserted in this Lease are for convenience only and in no way define, limit or otherwise describe the scope or intent of this Lease, or any provision hereof, or in any way affect the interpretation of this Lease.

(e) All obligations of Tenant hereunder not fully performed upon the expiration or earlier termination of the Term of this Lease shall survive the expiration or earlier termination of the Term hereof, including, without limitation, all payment obligations with respect to taxes and insurance and all obligations concerning the condition of the Premises.  Upon the expiration or termination of the Term hereof, and prior to Tenant vacating the Premises, Tenant shall put the Premises, including, without limitation, all heating and air conditioning systems and equipment therein, in good condition and repair, reasonable wear and tear excepted, including, but not limited to, removal of Tenant’s Initial Installations and other alterations and restoration of the Premises as set forth in Paragraph 6(c) above, and shall pay to Landlord the amount, if any, as reasonably estimated by Landlord, of Tenant’s proportionate share of Taxes and insurance premiums for the pro-rata portion of the year in which the Lease expires or terminates. All such amounts shall be used and held by Landlord for payment of such obligations of Tenant hereunder, with Tenant being liable for any additional costs therefor upon demand by Landlord, or with any excess to be returned to Tenant after all such obligations have been determined and satisfied, as the case may be. Any security deposit held by Landlord shall be credited against the amount payable by Tenant under this Paragraph 25(e).

(f)  If any clause or provision of this Lease is illegal, invalid or unenforceable under present or future laws effective during the Term of this Lease, then and in that event, it is the intention of the parties hereto that the remainder of this Lease shall not be affected thereby, and it is also the intention of the parties to this Lease that, in lieu of each clause or provision of this Lease that is illegal, invalid or unenforceable, there be added as a part of this Lease contract a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable.

(g) The Effective Date of this Lease shall be the date on which the last of Landlord or Tenant has executed this Lease.  All references in this Lease to “the date hereof” or similar references shall be deemed to refer to the Effective Date.

(h)  This Lease may not be altered, changed or amended except by an instrument in writing signed by both parties hereto.

(i)  Landlord and Tenant acknowledge and agree that this Lease shall be interpreted and enforced in accordance with the laws of the State of Texas and all obligations and duties are performable exclusively in El Paso, El Paso County, Texas.

(j)  Each party agrees to furnish to the other, promptly upon demand, a corporate resolution, proof of due authorization by partners, or other appropriate documentation evidencing the due authorization of such party to enter into this Lease.

(k)  This Lease may be signed in any number of counterparts, each of which shall be an original for all purposes, but all of which taken together shall constitute only one agreement. The production of any executed counterpart of this Lease shall be sufficient for all purposes without producing or accounting for the other counterparts hereof.

26.  HAZARDOUS MATERIALS.  Tenant shall, at Tenant’s expense, comply with all present and hereinafter enacted Environmental Laws (as defined herein), and any amendments thereto, affecting Tenant’s use, operation, occupation or alteration of the Premises including any improvements thereon. Landlord acknowledges that Tenant’s permitted use of the Premises may involve certain Hazardous Materials (a) listed in Exhibit E to this Lease, or (b) contained in products used by Tenant in de minimis quantities for ordinary cleaning and office purposes, which use shall be subject to the provisions of this Paragraph 26.

(a)           Definitions

1.“Environmental Laws” means any one or all of the following as the same are amended from time to time:  the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6941 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300h et seq.; the Clean Water Act, 33 U.S.C. Section 1251 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; and the regulations promulgated thereunder and any other laws, regulations and ordinances (whether enacted by

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the local, state or federal government) now in effect or hereinafter enacted that deal with the regulation or protection of the environment, including the ambient air, ground water, surface water, and land use, including sub-strata land.

2.“Hazardous Material” shall mean all substances, materials and wastes that are, or that become, regulated under or classified as hazardous or toxic under any applicable Environmental Law.

3.“Release” shall mean any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing, or dumping into the environment.

(b)Compliance

1.Tenant shall not cause or permit any hazardous material to be used, generated, manufactured, produced, stored, brought upon, or released, on, under or about the Premises, or transported to and from the Premises, by Tenant, its agents, employees, contractors, invitees, or a third party doing business with or on behalf of Tenant in violation of any applicable Environmental Law. Tenant SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS LANDLORD, GROUND LESSOR, AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, EMPLOYEES, AGENTS AND ATTORNEYS FROM AND AGAINST ANY AND ALL LIABILITY, LOSS, DAMAGE, EXPENSE, PENALTIES AND LEGAL AND INVESTIGATION FEES OR COSTS, ARISING FROM OR RELATED TO ANY CLAIM OR ACTION FOR INJURY, LIABILITY, BREACH OF WARRANTY OR REPRESENTATION, OR DAMAGE TO PERSONS OR PROPERTY AND ANY AND ALL CLAIMS OR ACTIONS BROUGHT BY ANY PERSON, ENTITY OR GOVERNMENTAL BODY, ALLEGING OR ARISING IN CONNECTION WITH CONTAMINATION OF, OR ADVERSE EFFECTS ON, THE ENVIRONMENT OR VIOLATION OF ANY ENVIRONMENTAL LAW OR OTHER STATUTE, ORDINANCE, RULE, REGULATION, JUDGMENT OR ORDER OF ANY GOVERNMENT OR JUDICIAL ENTITY WHICH ARE INCURRED OR ASSESSED AS A RESULT (WHETHER IN PART OR IN WHOLE) OF ANY ACTIVITY OR OPERATION ON OR DISCHARGE FROM THE PREMISES OR ANY IMPROVEMENTS THEREON CAUSED OR PERMITTED BY TENANT, ITS EMPLOYEES, AGENTS, CONTRACTORS OR INVITEES.  THIS OBLIGATION INCLUDES, BUT IS NOT LIMITED TO, ALL COSTS AND EXPENSES RELATED TO CLEANING UP THEPREMISES, IMPROVEMENTS, LAND, SOIL, AND UNDERGROUND OR SURFACE WATER AS REQUIRED UNDER THE LAW.  TENANT’S OBLIGATIONS AND LIABILITIES UNDER THIS SECTION SHALL CONTINUE SO LONG AS LANDLORD BEARS ANY LIABILITY OR RESPONSIBILITY UNDER THE ENVIRONMENTAL LAWS FOR ANY ACTION THAT OCCURRED ON THE PREMISES OR ANY IMPROVEMENTS THEREON.  THIS INDEMNIFICATION OF LANDLORD AND GROUND LESSOR BY TENANT INCLUDES, WITHOUT LIMITATION, COSTS INCURRED IN CONNECTION WITH ANY INVESTIGATION OF SITE CONDITIONS OR ANY CLEANUP, REMEDIAL, REMOVAL OR RESTORATION WORK REQUIRED BY ANY FEDERAL, STATE OR LOCAL GOVERNMENTAL AGENCY OR POLITICAL SUBDIVISION BECAUSE OF HAZARDOUS MATERIAL LOCATED ON THE PREMISES, OR PRESENT IN THE SOIL OR GROUND WATER ON, UNDER OR ABOUT THE PREMISES.  THE PARTIES AGREE THAT LANDLORD’S RIGHT TO ENFORCE TENANT’S PROMISE TO INDEMNIFY IS NOT AN ADEQUATE REMEDY AT LAW FOR TENANT’S VIOLATION OF ANY PROVISION OF THIS SECTION.  LANDLORD SHALL ALSO HAVE ALL OTHER RIGHTS AND REMEDIES PROVIDED BY LAW OR OTHERWISE PROVIDED IN THIS LEASE.

2.Without limiting the foregoing, if the presence of any hazardous material brought onto the Premises by Tenant, its employees, agents, contractors or invitees and released on, under or about the Project, the Premises or in any improvements thereon or permitted by Tenant results in any contamination of the Project, the Premises or any improvements thereon, Tenant shall promptly take all actions at its sole cost and expense as are necessary to return the Project, the Premises or any improvements thereon to the condition existing prior to the introduction of any such hazardous material to the Project, the Premises or in any improvements thereon; provided that Landlord’s approval of such actions shall first be obtained, which approval shall

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not be unreasonably withheld so long as such actions would not potentially have any material adverse long-term effect on the Project, the Premises or on any improvements thereto.

3.Tenant shall, at Tenant’s own cost and expense, make all submissions to, provide all information to, and comply with all requirements of the appropriate governmental authority (the “Government”) under the Environmental Laws applicable to the Premises.  Should the Government determine that site characterization, site assessment and/or a cleanup plan be prepared or that a cleanup should be undertaken on the Premises or in any improvements thereon, then Tenant shall, at Tenant’s own cost and expense, prepare and submit the required plans and financial assurances, and carry out the approved plans.  At no cost or expense to Landlord, Tenant shall promptly provide all information requested by Landlord to determine the applicability of the Environmental Laws to the Premises or to respond to any governmental investigation or to respond to any claim of liability by third parties which is related to environmental contamination.

4.Tenant shall immediately notify Landlord of any of the following:

i)any correspondence or communication from any governmental entity regarding the application of Environmental Laws to the Premises or Tenant’s operation on the Premises;

ii)any change in Tenant’s operation on the Premises that will change or has the potential to change Tenant’s or Landlord’s obligations or liabilities under the Environmental Laws; or

iii)any Release at or about the Premises.

Notwithstanding any other provision in this Lease to the contrary, Landlord and Ground Lessor shall have the right of “self-help” or similar remedy in order to minimize any damages, expenses, penalties and related fees or costs, arising from or related to a violation of any law on, under or about the Premises.

Tenant’s failure or the failure of its agents, employees, contractors, invitees or the failure of a third party for whom Tenant is legally responsible to comply with any of the requirements and obligations of this Paragraph 26 shall constitute a material default of this Lease and shall permit Landlord to pursue the remedies as set forth in this Lease, in addition to all other rights and remedies provided by law, to which Landlord may resort cumulatively, or in the alternative.

26A.  LANDLORD’S ENVIRONMENTAL REPRESENTATIONS AND INDEMNIFICATION.  Landlord represents and warrants to Tenant that Landlord has not received any written notification that any violation of any Environmental Laws exist on the Premises or Project.  Landlord shall indemnify, protect, defend and hold Tenant, its successors, assigns, subtenants, agents, employees, officers and directors harmless from any and all losses, damages, liabilities, judgments, costs, claims, expenses, penalties, including, but not limited to, attorneys’ fees, consultant fees, expert fees, and court costs (A) arising out of or involving any Hazardous Materials introduced to the Premises or the Project by Landlord its agents or representatives, or (B) due to Landlord’s breach of its foregoing representation. The provisions of this Paragraph 26A shall survive the expiration or earlier termination of this Lease. In addition, Landlord shall be responsible for, at Landlord’s sole cost and expense, the repair, cleanup, detoxification, encapsulation, removal and/or remediation of Hazardous Materials, to the extent such action is necessitated, directly or indirectly, by the presence or use, generation, storage, release, or disposal of Hazardous Materials by any person at or on the Premises or the Project, prior to the Commencement Date, including any prior owner of such real property, and to the extent such removal or remediation is required by applicable law, provided that the presence, generation, storage, release, or disposal of such Hazardous Material is not the result of acts or omissions of Tenant, or its agents, employees, contractors or invitees (which acts or omissions shall be governed by Paragraph 26 above).

27.  BROKERAGE.  Tenant represents and warrants that it has dealt with no broker, agent or other person in connection with this transaction and that no broker, agent or other person brought about this transaction, other than Best+White Commercial Real Estate, and Tenant agrees to indemnify and hold Landlord and Ground Lessor harmless from and against any claims by any other broker, agent or other person claiming a commission or other form of compensation by virtue of having dealt with Tenant with regard to this leasing transaction. The provisions of this Paragraph, in addition to all of Tenant’s indemnities and covenants expressly set forth in this Lease, shall survive the termination of this Lease.

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28.  SECURITY.  Any and all security of any kind for Tenant, Tenant’s agents, employees or invitees, the Premises, or any personal property thereon (including, without limitation, any personal property of any sublessee) shall be the sole responsibility and obligation of Tenant, and shall be provided by Tenant at Tenant’s sole cost and expense. Tenant acknowledges and agrees that Landlord and Ground Lessor shall have no obligation or liability whatsoever with respect to the same. Tenant shall indemnify and hold Landlord and Ground Lessor harmless from and against any and all loss, cost, damage or other liability arising directly or indirectly from security measures or the absence thereof with respect to the Premises and the building or the Project of which the Premises are a part. Tenant may, at Tenant’s sole cost and expense, install alarm systems in the Premises provided such installation complies with the provisions of Paragraph 6 hereof. Removal of such alarm systems shall be Tenant’s sole responsibility and, at Tenant’s sole cost and expense, shall be completed prior to Lease termination and all affected areas of the Premises shall be repaired and/or restored in a good and workmanlike manner to the condition that existed prior to such installation. Notwithstanding the foregoing, Landlord may elect in Landlord’s sole discretion to contract for common security services, to whatever extent Landlord may deem appropriate, for the building or the Project of which the Premises are a part, provided, however Tenant acknowledges and agrees that Landlord shall in no event be obligated to provide any such services and the provision of such services shall not alter or modify Tenant’s indemnification of Landlord and Ground Lessor or the obligation of Tenant to provide its own security as set forth herein. The cost of any security services contracted for by Landlord shall be treated as an operating expense pursuant to Paragraph 2 hereof; provided that Landlord shall use reasonable efforts to contract such services at commercially reasonable rates.

29.  PATRIOT ACT.  Each party hereby represents, warrants and certifies that: (i) neither it nor its officers, directors, or controlling owners is acting, directly or indirectly, for or on behalf of any person, group, entity, or nation named by any Executive Order, the United States Department of Justice, or the United States Treasury Department as a terrorist, “Specifically Designated National or Blocked Person,” or other banned or blocked person, entity, nation, or transaction pursuant to any law, order, rule or regulation that is enforced or administered by the Office of Foreign Assets Control (“SDN”); (ii) neither it nor its officers, directors or controlling owners is engaged in this transaction, directly or indirectly on behalf of, or instigating or facilitating this transaction, directly or indirectly on behalf of, any such person, group, entity, or nation; and (iii) neither it nor its officers, directors or controlling owners is in violation of Presidential Executive Order 13224, the USA PATRIOT Act, (Public Law 107-56), the Bank Secrecy Act, the Money Laundering Control Act or any regulations promulgated pursuant thereto.  Each party hereby agrees to defend, indemnify and hold harmless the other party, its agents, directors, officers, shareholders, partners and employees from and against any and all claims, damages, losses, risks, liabilities and expenses (including reasonable attorneys’ fees and costs) arising from or related to any breach of the foregoing representations, warranties and certifications by the indemnifying party.  The provisions of this Paragraph shall survive the expiration or earlier termination of this Lease.

30.  RELOCATION.  [Intentionally omitted].

31.  ADDITIONAL PROVISIONS.  The provisions contained in this Paragraph 31 shall supplement, modify and be in addition to the terms and conditions contained in the remainder of this Lease, and shall control in the event of a conflict with such other terms and provisions.

31A.  Tenant Improvements.  Tenant has inspected and agrees to accept the Premises on an “as is” basis, except for the warranties, repair and maintenance obligations of Landlord contained in this Lease, with the further exception that Landlord shall, at Landlord’s expense, prior to the Commencement Date cause the construction of the following improvements to the Premises using Landlord’s standard materials and finishes and otherwise in accordance with the Plans (the “Tenant Improvements”):

1.  Upgrade the electrical service in the Premises to 2,000 amps, subject to Tenant providing information as required by the electrical service provider to support such upgrade.  In the event that, based on the information provided by Tenant or on Tenant’s electrical usage, the electrical service provider imposes any surcharge, fee or rate increase in connection with the upgrade of electrical service to the Premises, Tenant shall pay all such amounts.

2. Replace current light fixtures in the warehouse portion of the Premises with T-8 HO fixtures, to achieve 48 foot-candles at 36” above finished floor level, based on an open warehouse with no racking or other obstructions.

3. Re-paint walls and replace carpet and/or VCT in the existing large second floor open area containing private offices, such paint and carpet/VCT to match existing finishes in large office/conference room within second floor open area.

Any and all costs associated with any changes, additions or revisions to the Tenant Improvements shall be the sole responsibility of Tenant.  Tenant shall pay to Landlord any such cost prior to the commencement of the construction of any item which contributes to such cost.

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Landlord shall reimburse to Tenant the lesser of: (i) Tenant’s actual out-of-pocket costs incurred in installing compressed air lines in the Premises; or (ii) $10,000 (the “Allowance”).  Tenant shall provide Landlord with copies of invoices evidencing such costs, and Landlord, shall, within thirty (30) days of receipt of such invoices, issue such reimbursement payment to Tenant.

Landlord shall not be required to construct a demising wall between the Premises and the ROFR Space (as defined below) until such time as Landlord elects in its sole discretion to do so.  Provided Tenant has not exercised the Right of First Refusal set forth in Paragraph 31E below, Landlord may elect to construct such demising wall at any time during the Term of the Lease.  Upon notice from Landlord that Landlord has elected to construct such demising wall, Tenant shall move all furniture, fixtures and other items away from the immediate vicinity in which the demising wall will be constructed in order to provide sufficient room for Landlord’s construction activities; provided that Landlord shall use commercially reasonable efforts to construct said wall at such times and in such manner as to minimize any interference with Tenant’s use of the Premises for the conduct of its business.  If Tenant requests that such work be performed outside of normal business hours, Tenant shall pay any overtime or other increased costs incurred by Landlord in complying with Tenant’s request.

31B.  HVAC Maintenance/Service Contract Requirements.  The HVAC maintenance/service contract must become effective within thirty (30) days of the date of occupancy of the facility and must be performed on at least a quarterly basis during the heating season with respect to the heating units in the Premises and on at least a quarterly basis during the cooling season with respect to the air conditioning and cooling units in the Premises, or more frequently if necessitated by the terms of any manufacturer’s or supplier’s warranty on the heating or air conditioning systems in the Premises.  The following items must be included in the maintenance contract:

1.       Adjust belt tension;

2.       Lubricate all moving parts, as necessary;

3.       Inspect and adjust all temperature and safety controls;

4.       Check refrigeration system for leaks and operation;

5.       Check refrigeration system for moisture;

6.       Inspect compressor oil level and crank heaters;

7.       Check head pressure, suction pressure and oil pressure;

8.       Inspect air filters and replace when necessary; (minimum of once per month)

9.       Check space conditions;

10.     Check condensate drains and drain pans and clean, if necessary;

11.     Inspect and adjust all valves;

12.     Check and adjust dampers;

13.Run machine through complete cycle;

14.Clean evaporative and condensing coils;

15.Check and repair all sheet metal duct, duct board, and flexible duct;

16.Inspect and replace if necessary all belts;

17.Inspect and repair if necessary unit housing;

18.Check thermostat operation;

19.Inspect and repair as necessary the heating elements;

20.Any and all other items as recommended by the manufacturer of the unit(s).

31C.  No Discrimination.  In accordance with the terms of the Ground Lease, Tenant covenants that no person on the grounds of race, age, disability, creed, color, sex or national origin shall be excluded from participation in, denied the benefits of, or be otherwise subjected to discrimination in the use of the Premises or in the construction of any improvements on, over, or under the Premises, or in the furnishing of any services thereon.  To the extent applicable to Tenant, Tenant shall also comply with all requirements of the Department of Transportation described in Sections 11.07 and 11.08 of the Ground Lease

31D.  Renewal Option.  Landlord hereby grants to Tenant the right and option to renew and extend the term of this Lease for one (1) term of sixty (60) months (the “Renewal Period”).  In the event Tenant elects to exercise the option described herein, all terms and conditions of this Lease shall continue in full force and effect except as set forth in this Paragraph.

The monthly rent to be paid during the Renewal Period (the “Renewal Rate”) shall be the fair market value of the Premises as determined by the market rental rate for buildings comparable to the Project, at the commencement of such extended Lease Term, for space of equivalent quality, size, utility and location, with the length of the extended Lease Term and the credit standing of Tenant to be taken into account; provided, however, the Base Rent for the Renewal Period shall not be less than the then-applicable Base Rent for the Premises nor exceed $3.90 per square foot on an annual basis.

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Notice of Tenant’s intention to exercise the option must be given to Landlord in writing not less than six (6) months prior to the expiration of the primary term of this Lease, and Tenant must not be in default (after any applicable notice and cure period) under this Lease at either the time that this option must be exercised or the commencement of the Renewal Period; otherwise, this Renewal Option shall be null and void and of no further force or effect.  Tenant’s failure to give notice of exercise of the Renewal Option shall be deemed a waiver of such option and such option will then be of no further force or effect.  Landlord shall deliver written notice (the “Landlord Notice”) to Tenant, within fifteen (15) days after Landlord’s receipt of a timely Renewal Option notice, which sets forth the Renewal Rate after the Landlord’s reasonable determination of the fair market value of the Premises as set forth in this Paragraph.  Landlord and Tenant shall negotiate in good faith to attempt to reach agreement on the Renewal Rate.  If Landlord and Tenant are unable to come to an agreement as to the Renewal Rate within thirty (30) days of the Landlord Notice, then this Renewal Option shall be deemed waived and of no effect.  If Landlord and Tenant agree on the Renewal Rate, Tenant shall promptly execute and deliver an amendment of the Lease in form and substance satisfactory to Landlord and Tenant to evidence the exercise of this Renewal Option and the effect thereof.  In the event the Premises are sublet or assigned other than to an Affiliate, this renewal option shall be null and void and of no effect.

31E.  Right of First Refusal.  Provided Tenant is not in default (after any applicable notice and cure period) under the terms of this Lease, Tenant shall have a one-time right of first refusal to lease the 36,675 square feet adjacent to the Premises as depicted on Exhibit “D” attached hereto (the “ROFR Space”).  In the event that, during the Term (which shall be deemed to include the Renewal Period if Tenant duly exercises its Renewal Option under Paragraph 31D above), Landlord receives from a third party an offer to lease all or any portion of the ROFR Space which offer Landlord desires to accept (such bona fide proposal or such offer being referred to herein as a “Proposed Offer”), then Landlord shall give Tenant written notice of the Proposed Offer, together with an offer by Landlord to lease to Tenant the portion of the ROFR Space set forth in the Proposed Offer on the same material terms and conditions as contained in the Proposed Offer.  Tenant shall have five (5) business days to respond to Landlord, in writing, either exercising or waiving this right of first refusal.  In the event that Tenant’s written response is not timely received by Landlord, Tenant will be deemed to have waived this right.  If Tenant exercises its right of first refusal option, Landlord and Tenant shall execute an amendment to this Lease setting forth the space to be added hereto and the terms of such expansion.  If Tenant elects not to lease the ROFR Space set forth in the Proposed Offer, or if Tenant is deemed to have waived this right of first refusal, this right of first refusal shall terminate and shall thereafter be of no force or effect; provided, however, in the event Tenant waives this right of first refusal in any instance and Landlord fails to consummate the lease to the third party, this right of first refusal shall remain in effect as to any subsequent Proposed Offer.

[Signature Page Follows]

Initials:	/s/ KS	/s/ RL
	Landlord	Tenant

19

LANDLORD:			TENANT:
EASTGROUP PROPERTIES, L.P.			UFP TECHNOLOGIES INC.
A Delaware limited partnership			a Delaware corporation
By:	EastGroup Properties General Partners, Inc.,
	A Delaware corporation,
	Its sole general partner
By:		/s/ Kevin Sager	By:	/s/ Ron Lataille
Name:		Kevin Sager	Name::	Ron Lataille
Title:		Vice President	Title:	Chief Financial Officer
Date:		11-18-11	Date:	November 15, 2011
By:		/s/ Brent Wood
Name:		Brent Wood
Title:		Sr. Vice President
Date:		11-18-11

[Signature Page to Lease Agreement]

Initials:	/s/ KS	/s/ RL
	Landlord	Tenant

20

EXHIBIT “A”

LEGAL DESCRIPTION

Being a portion of Lot 8, Block 12, Butterfield Trail Industrial Park, Unit 3, El Paso County, El Paso, Texas.

Initials:	/s/ KS	/s/ RL
	Landlord	Tenant

21

EXHIBIT “B”

PLANS

[Intentionally omitted]

Initials:	/s/ KS	/s/ RL
	Landlord	Tenant

22

EXHIBIT “C”

RULES OF PREMISES

1.   Signs:  Tenant shall submit to Landlord a lay-out of Tenant’s proposed sign to be placed on the front of the building stating Tenant’s name and/or logo.  Tenant may not install any sign on the front of the building other than that approved by Landlord, which approval shall not be unreasonably withheld or delayed.  Subject to Landlord’s reasonable approval of the design, construction, placement and installation method, Tenant may, at its sole expense, have the sign installed by a licensed company which has liability insurance meeting the requirements for Tenant’s contractors set forth in Paragraph 6 of the Lease, and which has received any necessary permits allowing it to perform such work.  Except as set forth above, no signs, advertisements or notices shall be painted or affixed on or to any exterior portion of the Premises, or to any portion of the interior of the Premises if such sign, advertisement or notice is visible from outside of the Premises.

2.   Storage and Vehicle Loading Areas:  Tenant may place dumpsters immediately behind the Premises no further than ten feet (10’) from the rear exterior wall of the Premises. Dumpsters shall not be placed in any location that will impede access to the rear of any adjacent premises.  No materials, supplies, garbage containers or equipment, including company owned or operated trucks, shall be stored in any area other than those designated by Landlord.  Nothing in this paragraph is intended to hinder usual operation and movement of vehicles in Tenant’s day to day business.

3.   Objectionable Conditions:  The Premises shall not be used or occupied in any manner that may create any dangerous, injurious, noxious, or otherwise objectionable conditions which may affect the property, including but not limited to fire and explosive hazards, noise, vibration or shock, smoke, dust or odor, unusual heat or glare, visible rubbish, litter or trash, or any other condition that would affect the environmental comfort and convenience of the Premises and adjoining premises.

4.   Rights of Landlord:  Any rights of enforcement contained in the Lease Agreement shall be fully available to Landlord regarding these Rules.

Initials:	/s/ KS	/s/ RL
	Landlord	Tenant

23

EXHIBIT “D”

ROFR SPACE

Initials:	/s/ KS	/s/ RL
	Landlord	Tenant

24

Exhibit E

Hazardous Materials Held in Bulk

Product:	Description:	Unit:	Quantity:
Shell Tellus Plus Oil 46	Hydraulic Fluid	55 Gallon Drum	2
EP Hydraulic Oil 46	Hydraulic Fluid	55 Gallon Drum	2
Star Fire Oil AW 46	Hydraulic Fluid	55 Gallon Drum	2
Mobil DTE Oil Heavy Med	Compressor Oil	5 Gallon Pail	2
Mobile Therm 603	Oil	55 Gallon Drum	2
Therminol FF Heat Transfer	Heating Oil	55 Gallon Drum	2
Isopropyl Alcohol	Alcohol	5 Gallon Pail	6
Protek PG-100	Antifreeze	1 Gallon Pail	12
Hot Melt Adhesive (granules)	Adhesive	25 Lb. Boxes	150
Water Based Adhesive (liquid)	Adhesive	55 Gallon Drum	2

Initials:	/s/ KS	/s/ RL
	Landlord	Tenant

25

Exhibit F Initial Installations

General

·Electrical drops and connections as applicable to equipment

·Compressed air drops and connections as applicable to equipment

·Computer or information systems equipment (data, communications, video, security, scan system, work stations or terminals, and related)

·Air compressors

·Place and/or anchor pallet and storage shelving

·Ancillary installations

Clean Room Installation

·Room Enclosure, walls, and support structure

·Plumbing lines and connections

·Sub meter for water usage of washing operation

·Electrical Service to room, electrical connections to equipment, lighting

·Installation of clean room area equipment

·Place and/or anchor washer and dryer units

·Water filtration, reverse osmosis, ionization systems

·Air filtration systems

·External HVAC/air handling units with roof penetration

·Wash stations for clean room entry and exit

·Installation of related process and material handling equipment

Saw Cut Equipment

·Installation of saw cut area equipment

·Place and anchor horizontal saws

·Place and anchor vertical saws

·Place and anchor slicers

·Place and anchor billet and butt welders

Die Cut Equipment

·Installation of die cut area equipment

·Place and anchor die cut presses

·Place and anchor convoluter

·Place and/or anchor routers and CNC machines

Assembly Equipment

·Installation of assembly area equipment

·Place IR ovens

·Place and/or anchor conveyors

·Work tables, lighting, IR systems, heat and glue systems, welders, etc.

Baling/Recycling Equipment

·Installation of baling area equipment

·Place and anchor balers

·Place and anchor compactors

·Place and anchor pelletizers

·Place and/or anchor conveyor system

Other than (i) the external HVAC/air handling units in the Clean Room, and (ii) a plumbing vent in connection with the installation of the clean room area equipment, none of the Initial Installations will require penetration of the roof of the building or cutting of the slab of the building.

Initials:	/s/ KS	/s/ RL
	Landlord	Tenant

26

EX-21.01

Exhibit 21.01

UFP Technologies, Inc. (“UFPT”) wholly owns the following companies:

1.Moulded Fibre Technology, Inc. (“MFT”), a Maine company

2.Simco Industries, Inc. (“Simco”), a Michigan company

3.Simco Automotive Trim, Inc. (“SAT”), a Michigan company (wholly-owned by Simco)

4.Stephenson & Lawyer, Inc. (“S&L”), a Michigan company

5.Patterson Properties Corporation, a Michigan company (wholly-owned by S&L)

1

EX-23.01

Exhibit 23.01

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our reports dated March 15, 2012, with respect to the consolidated financial statements, schedule, and internal controls over financial reporting included in the Annual Report of UFP Technologies, Inc. on Form 10-K for the year ended December 31, 2011.  We hereby consent to the incorporation by reference of said reports in the Registration Statements of UFP Technologies, Inc. on Forms S-8 (File No. 333-174907, effective June 15, 2011, File No. 333-151883, effective June 24, 2008, File No.333-143673, effective June 12, 2007, File No. 333-116436, effective June 14, 2004, File No. 333-56741, effective June 12, 1998, File No. 333-39946, effective June 23, 2000, File No. 333-91408, effective June 28, 2002 and File No. 333-106390, effective June 23, 2003).

/s/ GRANT THORNTON LLP

Boston, MA

March 15, 2012

1

EX-31.01

Exhibit 31.01

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, R. Jeffrey Bailly, President and Chief Executive Officer of UFP Technologies, Inc., certify that:

1.I have reviewed this annual report on Form 10-K of UFP Technologies, Inc.;

2.                Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 15, 2012	/s/ R. Jeffrey Bailly
Date	R. Jeffrey Bailly Chairman, Chief Executive Officer, President, and Director (Principal Executive Officer)

1

EX-31.02

Exhibit 31.02

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Ronald J. Lataille, Chief Financial Officer of UFP Technologies, Inc., certify that:

1.I have reviewed this annual report on Form 10-K of UFP Technologies, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 15, 2012	/s/ Ronald J. Lataille
Date	Ronald J. Lataille Chief Financial Officer (Principal Financial Officer)

1

EX-32.01

Exhibit 32.01

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officers of UFP Technologies, Inc., a Delaware corporation (the “Company”), do hereby certify, to the best of such officers’ knowledge and belief, that:

(1)The Annual Report on Form 10-K for the year ended December 31, 2011 (the “Form 10-K”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Form 10-K fairly presents, in all materials respects, the financial condition and results of operations of the Company.

March 15, 2012	/s/ R. Jeffrey Bailly
Date	R. Jeffrey Bailly Chairman, Chief Executive Officer, President, and Director (Principal Executive Officer)

March 15, 2012	/s/ Ronald J. Lataille
Date	Ronald J. Lataille Chief Financial Officer (Principal Financial Officer)

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to UFP Technologies, Inc. and will be retained by UFP Technologies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

1

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Acquisitions

12 Months Ended

Dec. 31, 2011

Acquisitions

Acquisitions

(19)Acquisitions

On March 9, 2009, the Company acquired selected assets of the Hillsdale, Michigan, operations of Foamade Industries, Inc. (“Foamade”). The Hillsdale operations of Foamade specialized in the fabrication of technical urethane foams for a myriad of industries and bring to the Company further penetration into applications using this family of foams, as well as incremental sales to fold into its operations. The Company has transitioned the acquired assets to its Grand Rapids, Michigan, plant.

On July 7, 2009, the Company acquired substantially all of the assets of E.N. Murray Co. (“ENM”), a Denver, Colorado-based foam fabricator, for $2,750,000. ENM specialized in the fabrication of technical urethane foams primarily for the medical industry. This acquisition brings to the Company further access and expertise in fabricating technical urethane foams and a seasoned management team. The Company had leased the former ENM Denver facilities for a period of two years. The Company purchased these properties on December 22, 2010, for $1,200,000.

On August 24, 2009, the Company acquired selected assets of Advanced Materials, Inc. (“AMI”) for $620,000. Located in Rancho Dominguez, California, AMI specialized in the fabrication of technical urethane foams primarily for the medical industry and brings to the Company further penetration into this market. The Company assumed the lease of the 56,000-square-foot Rancho Dominguez location, which expires in November 2011.

The Company recorded gains of approximately $81,000, $558,000, and $201,000 on the acquisitions of selected assets of Foamade, ENM, and AMI, respectively, as it acquired the assets in bargain purchases. The Company believes the bargain purchase gains resulted from opportunities created by the overall weak economy.

The following table summarizes the consideration paid and the acquisition date fair value of the assets acquired and liabilities assumed relating to each transaction:

	Foamade			ENM			AMI
	9-Mar-2009			7-Jul-2009			24-Aug-2009
Consideration
Cash	$	375,000		$	2,750,000		$	620,000
Fair value of total consideration transferred	$	375,000		$	2,750,000		$	620,000
Acquisition costs (legal fees) included in SG&A	$	25,000		$	30,000		$	35,000
Recognized amounts of identifiable assets acquired:
Cash	$	—		$	1,309,466		$	—
Accounts receivable	—			832,054			289,540
Inventory	182,864			922,497			252,528
Other assets	—			37,708			—
Fixed assets	189,100			812,000			345,750
Non-compete	30,000			120,000			—
Customer list	103,000			490,000			56,000
Total identifiable net assets	$	504,964		$	4,523,725		$	943,818
Payables and accrued expenses	$	—		$	(830,341	)	$	—
Equipment loan	—			(42,827		)	—
Deferred tax liabilities	(49,386		)	(342,212		)	(123,051		)
Net assets acquired	$	455,578		$	3,308,345		$	820,767

With respect to the acquisition of selected assets of ENM, the Company acquired gross accounts receivable of $873,919, of which it deemed $41,865 to be uncollectible. It therefore recorded the accounts receivable at its fair market value of $832,054. With respect to the acquisition of selected assets of AMI, the Company acquired gross accounts receivable of $324,540, of which it deemed $35,000 to be uncollectible. It therefore recorded the accounts receivable at its fair market value of $289,540. With respect to the non-compete and customer list intangible assets acquired from Foamade, ENM, and AMI, the weighted average amortization period is five years. No residual balance is anticipated for any of the intangible assets.

The following table contains an unaudited pro forma condensed consolidated statement of operations for the years ended December 31, 2009, as if the ENM acquisition had occurred at the beginning of the period:

	Year Ended 31-Dec-2009
Sales	$	105,228,869
Net income	6,070,518
Earnings Per Share:
Basic	$	1.04
Diluted	0.96

The above unaudited pro forma information is presented for illustrative purposes only, and may not be indicative of the results of operations that would have actually occurred had the ENM acquisition occurred as presented. In addition, future results may vary significantly from the results reflected in such pro forma information.

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Supplemental Cash Flow Information

12 Months Ended

Dec. 31, 2011

Supplemental Cash Flow Information

Supplemental Cash Flow Information

(3)Supplemental Cash Flow Information

Cash paid for interest and income taxes is as follows:

	Years Ended December 31
	2011		2010		2009
Interest	$	126,999	$	127,378	$	205,828
Income taxes, net of refunds	$	3,793,454	$	5,522,702	$	1,648,764

During the years ended December 31, 2011, and 2010, the Company permitted the exercise of stock options with exercise proceeds paid with the Company’s stock (“cashless” exercises) totaling $93,879 and $343,750, respectively.

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Subsequent Events

12 Months Ended

Dec. 31, 2011

Subsequent Events

Subsequent Events

(23)Subsequent Events

On February 29, 2012, The Company purchased the manufacturing building that it leased from UDT for $1,350,000.  The purchase price approximates fair market value based upon appraisals done by independent professional firms.  As this was the only real estate owned by UDT, the realty limited partnership will be dissolved during 2012.

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Quarterly Financial Information (unaudited)

12 Months Ended

Dec. 31, 2011

Quarterly Financial Information (unaudited)

Quarterly Financial Information (unaudited)

(22)Quarterly Financial Information (unaudited)

Year Ended December 31, 2011	Q1		Q2		Q3		Q4
Net sales	$	31,503,588	$	33,500,994	$	30,761,959	$	31,477,305
Gross profit	8,801,548		10,003,484		8,484,298		8,955,189
Net income attributable to UFP Technologies, Inc.	2,204,883		2,701,792		2,435,188		3,004,307
Basic net income per share	0.34		0.42		0.37		0.46
Diluted net income per share	0.32		0.39		0.35		0.43

Year Ended December 31, 2010	Q1		Q2		Q3		Q4
Net sales	$	28,700,466	$	29,957,495	$	30,467,998	$	31,640,491
Gross profit	7,457,254		9,046,836		8,905,976		9,205,664
Net income attributable to UFP Technologies, Inc.	1,511,382		2,281,616		2,364,840		3,089,254
Basic net income per share	0.25		0.37		0.38		0.49
Diluted net income per share	0.23		0.34		0.35		0.45

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Schedule II - Valuation and Qualifying Accounts

12 Months Ended

Dec. 31, 2011

Schedule II - Valuation and Qualifying Accounts

Schedule II - Valuation and Qualifying Accounts

Years ended December 31, 2011, 2010, and 2009

Accounts receivable, allowance for doubtful accounts:

	2011			2010			2009
Balance at beginning of year	$	342,682		$	473,912		$	387,037
Provision (Recoveries) credited to expense	55,209			8,466			155,069
(Write-offs) and recoveries	(19,032		)	(139,696		)	(68,194		)
Balance at end of year	$	378,859		$	342,682		$	473,912

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New Accounting Pronouncements

12 Months Ended

Dec. 31, 2011

New Accounting Pronouncements

New Accounting Pronouncements

(2)New Accounting Pronouncements

In May 2011, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and IFRS (“ASU 2011-04”), which amends Accounting Standards Codification (“ASC”) 820, Fair Value Measurement.  ASU 2011-04 improves the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards.  The amended guidance changes the wording used to describe many requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements.  Additionally, the amendments clarify the FASB’s intent about the application of existing fair value measurement and disclosure requirements.  Although ASU 2011-04 is not expected to have a significant effect on practice, it changes some fair value measurement principles and disclosure requirements.  ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011, and must be applied prospectively.  Early application is not permitted.  We do not anticipate that the adoption of ASU 2011-04 will have a material impact on our financial position or the results of our operations.

In September 2011, the FASB issued Accounting Standards Update No. 2011-08, Testing Goodwill for Impairment (“ASU 2011-08”), which amends ASC 350, Intangibles — Goodwill and Other.  Previous guidance under ASC 350 required an entity to test goodwill for impairment on at least an annual basis by comparing the fair value of a reporting unit with its carrying amount, including goodwill (step 1).  The amendments of ASU 2011-08 permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in ASC 350.  The amendments of ASU 2011-08 are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted.  The Company adopted ASU 2011-08 in December 2011 with no impact on the company’s financial position or results of operations.

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CONSOLIDATED BALANCE SHEETS (USD $)	Dec. 31, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents (UDT: $278,475 and $277,698, respectively)	$ 29,848,798	$ 22,102,634
Receivables, net	15,618,717	14,633,375
Inventories, net	9,758,623	8,044,336
Prepaid expenses	558,875	1,035,301
Refundable income taxes	1,086,632	1,414,026
Deferred income taxes	1,168,749	1,208,848
Total current assets	58,040,394	48,438,520
Property, plant, and equipment (UDT: $2,099,960 and $2,756,792, respectively)	47,635,907	45,457,275
Less accumulated depreciation and amortization (UDT: $(1,448,928) and $(1,640,818), respectively)	(34,289,450)	(32,882,135)
Net property, plant, and equipment	13,346,457	12,575,140
Goodwill	6,481,037	6,481,037
Intangible assets	398,499	593,829
Other assets	1,454,867	1,389,375
Total assets	79,721,254	69,477,901
Current liabilities:
Accounts payable	3,344,480	2,837,462
Accrued expenses (UDT: $14,400 and $12,900, respectively)	5,540,163	6,679,381
Current installments of long-term debt (UDT: $0 and $39,246, respectively)	580,661	654,331
Total current liabilities	9,465,304	10,171,174
Long-term debt, excluding current installments (UDT: $0 and $627,629, respectively)	5,638,658	6,846,947
Deferred income taxes	1,292,378	880,775
Retirement and other liabilities	1,340,131	1,352,529
Total liabilities	17,736,471	19,251,425
Commitments and contingencies (Note 16)
Stockholders' equity:
Preferred stock, $.01 par value. Authorized 1,000,000 shares; no shares issued or outstanding
Common stock, $.01 par value. Authorized 20,000,000 shares; issued and outstanding 6,554,746 in 2011 and 6,338,829 shares in 2010.	65,547	63,388
Additional paid-in capital	18,185,912	16,924,197
Retained earnings	43,059,074	32,712,904
Total UFP Technologies, Inc. stockholders' equity	61,310,533	49,700,489
Non-controlling interests	674,250	525,987
Total stockholders' equity	61,984,783	50,226,476
Total liabilities and stockholders' equity	$ 79,721,254	$ 69,477,901

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Cash flows from operating activities:
Net income	$ 10,783,616	$ 9,407,517	$ 5,981,984
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,781,002	3,152,193	2,895,062
Gain on sales of property, plant, and equipment	(838,592)	(12,000)	(11,206)
Gain on acquisitions			(839,690)
Share-based compensation	1,088,672	963,710	900,813
Stock issued in lieu of compensation	55,000	79,248	183,500
Deferred income taxes	451,702	305,830	226,950
Excess tax benefits on share-based compensation	(699,659)	(854,015)	(23,421)
Changes in operating assets and liabilities, net of effects from acquisition:
Receivables, net	(985,342)	(415,370)	(341,536)
Inventories, net	(1,714,287)	(396,819)	1,863,118
Prepaid expenses	476,426	(558,920)	72,715
Refundable income taxes	327,394	(1,414,026)
Accounts payable	507,018	160,922	384,928
Accrued expenses	(439,559)	1,380,570	(307,305)
Retirement and other liabilities	(12,398)	234,332	204,553
Other assets	(65,492)	(205,445)	(509,425)
Net cash provided by operating activities	11,715,501	11,827,727	10,681,040
Cash flows from investing activities:
Additions to property, plant, and equipment	(3,740,891)	(3,285,530)	(1,856,837)
Acquisition of Foamade Industries, Inc.'s assets			(375,000)
Acquisition of E.N. Murray Co. net of cash acquired			(1,440,534)
Acquisition of Advanced Materials Group assets			(620,000)
Proceeds from sale of property, plant, and equipment	1,222,494	12,000	13,364
Net cash used in investing activities	(2,518,397)	(3,273,530)	(4,279,007)
Cash flows from financing activities:
Distribution to United Development Company Partners (noncontrolling interest)	(289,183)	(105,000)	(105,000)
Excess tax benefits on share-based compensation	699,659	854,015	23,421
Proceeds from the exercise of stock options net of attestations	250,538	507,056	130,332
Principal repayment of long-term debt	(1,281,959)	(623,552)	(576,690)
Principal repayment of obligations under capital leases			(1,612,665)
Payment of statutory withholding for stock options exercised and restricted stock units vested	(829,995)	(485,511)
Proceeds from long-term borrowings			4,000,000
Net cash (used in) provided by financing activities	(1,450,940)	147,008	1,859,398
Net change in cash and cash equivalents	7,746,164	8,701,205	8,261,431
Cash and cash equivalents at beginning of year	22,102,634	13,401,429	5,139,998
Cash and cash equivalents at end of year	$ 29,848,798	$ 22,102,634	$ 13,401,429

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2011

Commitments and Contingencies

Commitments and Contingencies

(16)Commitments and Contingencies

(a)Leases— The Company has operating leases for certain facilities that expire through 2016. Certain of the leases contain escalation clauses that require payments of additional rent, as well as increases in related operating costs.

Future minimum lease payments under non-cancelable operating leases as of December 31, 2011, are as follows:

Years Ending December 31:	Operating Leases
2012	$	1,762,408
2013	1,127,907
2014	820,134
2015	251,036
2016	211,752
Total minimum lease payments	$	4,173,237

Rent expense amounted to approximately $2,305,000, $2,616,000, and $2,442,000 in 2011, 2010, and 2009, respectively.

(b)Legal— The Company is a defendant in various administrative proceedings that are being handled in the ordinary course of business.  In the opinion of management of the Company, these suits and claims should not result in final judgments or settlements that, in the aggregate, would have a material adverse effect on the company’s financial condition or results of operations.

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Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2011

Fair Value of Financial Instruments

Fair Value of Financial Instruments

(18)Fair Value of Financial Instruments

Financial instruments recorded at fair value in the balance sheets, or disclosed at fair value in the footnotes, are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels defined by ASC 820, Fair Value Measurements and Disclosures, and directly related to the amount of subjectivity associated with inputs to fair valuation of these assets and liabilities, are as follows:

Level 1

Valued based on unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2

Valued based on either directly or indirectly observable prices for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3

Valued based on management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

The Company has no assets and liabilities that are measured at fair value.

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2011

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

(1)Summary of Significant Accounting Policies

UFP Technologies, Inc. (“the Company”) is an innovative designer and custom converter of foams, plastics, and natural fiber products principally serving the medical, automotive, aerospace and defense, computer and electronics, consumer, and industrial markets. The Company was incorporated in the State of Delaware in 1993.

(a)Principles of Consolidation

The consolidated financial statements include the accounts and results of operations of UFP Technologies, Inc., its wholly-owned subsidiaries, Moulded Fibre Technology, Inc., Simco Industries, Inc. and its wholly-owned subsidiary Simco Automotive Trim, Inc., and Stephenson & Lawyer, Inc. and its wholly-owned subsidiary, Patterson Properties Corporation. The Company also consolidates United Development Company Limited, of which the Company owns 26.32% (see Note 8). All significant inter-company balances and transactions have been eliminated in consolidation.

(b)Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including allowance for doubtful accounts and the net realizable value of inventory, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(c)Fair Value of Financial Instruments

Cash and cash equivalents, accounts receivable, accounts payable, and accrued taxes and other expenses are stated at carrying amounts that approximate fair value because of the short maturity of those instruments. The carrying amount of the Company’s long-term debt approximates fair value as the interest rate on the debt approximates the Company’s current incremental borrowing rate.

(d)Fair Value Measurement

The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurement or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions, and credit risk.

The Company has not elected fair value accounting for any financial instruments for which fair value accounting is optional.

(e)Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2011, and 2010, cash equivalents primarily consisted of money market accounts and certificates of deposit that are readily convertible into cash. The Company utilizes zero-balance disbursement accounts to manage its funds. As such, outstanding checks at the end of a year are recorded as reductions in cash.  Prior to 2011 the Company recorded book overdrafts caused by outstanding checks as an increase to both cash and accounts payable.  Because the Company had sufficient cash on hand at the end of each fiscal year to fund the outstanding checks as they cleared, prior year book overdrafts have been reclassified as a reduction in cash to be consistent with the 2011 presentation.  The outstanding checks at December 31, 2011, 2010, and 2009, were $2,016,839, $2,331,117, and $1,597,085, respectively.

The Company maintains its cash in bank deposit accounts, money market funds, and certificates of deposit that at times exceed federally insured limits. The Company periodically reviews the financial stability of institutions holding its accounts, and does not believe it is exposed to any significant custodial credit risk on cash.

(f)Accounts Receivable

The Company periodically reviews the collectability of its accounts receivable. Provisions are recorded for accounts that are potentially uncollectible. Determining adequate reserves for accounts receivable requires management’s judgment. Conditions impacting the realizability of the Company’s receivables could cause actual asset write-offs to be materially different than the reserved balances as of December 31, 2011.

(g)Inventories

Inventories include material, labor, and manufacturing overhead and are valued at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method.

The Company periodically reviews the realizability of its inventory for potential obsolescence. Determining the net realizable value of inventory requires management’s judgment. Conditions impacting the realizability of the Company’s inventory could cause actual asset write-offs to be materially different than the Company’s current estimates as of December 31, 2011.

(h)Property, Plant, and Equipment

Property, plant, and equipment are stated at cost and are depreciated or amortized using the straight-line method over the estimated useful lives of the assets or the related lease term, if shorter (for financial statement purposes) and, in some cases, accelerated methods (for income tax purposes). Certain manufacturing machines that are dedicated to a specific program — where total units to be produced over the life of the program are estimable — are depreciated using the modified units of production method for financial statement purposes.

Estimated useful lives of property, plant, and equipment are as follows:

	Shorter of estimated useful life
Leasehold improvements	or remaining lease term
Buildings and improvements	31.5 years
Equipment	8-10 years
Furniture and fixtures	5-7 years

Property, plant, and equipment amounts are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded is calculated by the excess of the asset’s carrying value over its fair value.

(i)Goodwill

Goodwill is tested for impairment annually, and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate that the carrying amount may be impaired. Impairment testing for goodwill is done at a reporting unit level. Reporting units are one level below the business segment level, but can be combined when reporting units within the same segment have similar economic characteristics. The Company’s reporting units include its Component Products segment, Packaging segment (excluding its Molded Fiber operation), and its Molded Fiber operation. An impairment loss generally would be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit. The Company assessed qualitative factors as of December 31, 2011, and determined that it was more likely than not that the fair value of both reporting units exceeded their respective carrying amounts.  Factors considered for each reporting unit included financial performance, forecasts and trends, market cap, regulatory and environmental issues, foreign currency, market analysis, recent transactions, macro-economic conditions, industry and market considerations, raw material costs, management stability, and the degree by which the fair value of each reporting unit exceeded its carrying value in 2010 (approximately $37 million or 161% and $7 million or 190% for the Component Products and Molded Fiber reporting units, respectively).  As a result, no goodwill impairment test was performed in 2011.  Based upon tests performed in 2010 and 2009, there was no goodwill impairment as of December 31, 2010, and 2009.

(j)Intangible Assets

Intangible assets with an indefinite life are not amortized. Intangible assets with a definite life are amortized on a straight-line basis, with estimated useful lives ranging from 5 to 14 years. Indefinite-lived intangible assets are tested for impairment annually, and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate that the carrying amount may be impaired. Intangible assets with a definite life are tested for impairment whenever events or circumstances indicate that their carrying values may not be recoverable.

(k)Revenue Recognition

The Company recognizes revenue at the time of shipment when title and risk of loss have passed to the customer, persuasive evidence of an arrangement exists, performance of its obligation is complete, its price to the buyer is fixed or determinable, and the Company is reasonably assured of collection. If a loss is anticipated on any contract, a provision for the entire loss is made immediately. Determination of these criteria, in some cases, requires management’s judgment.

(l)Share-Based Compensation

When accounting for equity instruments exchanged for employee services, share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant).

Share-based compensation cost that has been charged against income for stock compensation plans is as follows:

	Year Ended December 31
	2011		2010		2009
Selling, general, and administrative expenses	$	1,088,672	$	963,710	$	900,813

The compensation expense for stock options granted during the three-year period ended December 31, 2011, was determined as the intrinsic fair market value of the options, using a lattice-based option valuation model with the assumptions noted as follows:

	Year Ended December 31
	2011	2010	2009
Expected volatility	54.8% to 73.3%	65.8% to 83.4%	68.8% to 84.6%
Expected dividends	None	None	None
Risk-free interest rate	0.9% to 2.9%	2.0% to 3.2%	3.6%
Exercise price	Closing price on date of grant	Closing price on date of grant	Closing price on date of grant
Imputed life	4.6 to 7.7 years (output in lattice-based model)	4.1 to 7.9 years (output in lattice-based model)	4.1 to 7.9 years (output in lattice-based model)

The stock volatility for each grant is determined based on a review of the experience of the weighted average of historical daily price changes of the Company’s common stock over the expected option term, and the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option.

The weighted average grant date fair value of options granted during 2011, 2010, and 2009, was $5.75, $3.89, and $1.83, respectively. Tax benefits totaling $699,659, $854,015, and $23,421 were recognized as additional paid-in capital during the years ended December 31, 2011, 2010, and 2009, respectively, since the Company’s tax deductions exceeded the share-based compensation change recognized for stock options exercised.

The total income tax benefit recognized in the statement of operations for share-based compensation arrangements was approximately $359,000, $316,600, and $291,000 for the years ended December 31, 2011, 2010, and 2009, respectively.

(m)Deferred Rent

The Company accounts for escalating rental payments on a straight-line basis over the term of the lease.

(n)Shipping and Handling Costs

Costs incurred related to shipping and handling are included in cost of sales. Amounts charged to customers pertaining to these costs are included in net sales.

(o)Research and Development

On a routine basis, the Company incurs costs related to research and development activity. These costs are expensed as incurred. Approximately $0.9 million, $0.9 million, and $0.8 million were expensed in the years ended December 31, 2011, 2010, and 2009, respectively.

(p)Income Taxes

The Company’s income taxes are accounted for under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax expense (benefit) results from the net change during the year in deferred tax assets and liabilities. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company evaluates the need for a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. The Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. Should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in tax expense.

(q)Segments and Related Information

The Company follows the provisions of ASC 280, Segment Reporting, which establish standards for the way public business enterprises report information and operating segments in annual financial statements (see Note 20).

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2011	Dec. 31, 2010
Cash and cash equivalents, UDT	$ 29,848,798	$ 22,102,634
Property, plant, and equipment, UDT	47,635,907	45,457,275
Accumulated depreciation and amortization, UDT	34,289,450	32,882,135
Accrued taxes and other expenses, UDT	5,540,163	6,679,381
Current installments of long-term debt, UDT	580,661	654,331
Long-term debt, excluding current installments, UDT	5,638,658	6,846,947
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, Authorized shares (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, Authorized shares (in shares)	20,000,000	20,000,000
Common stock, issued shares (in shares)	6,554,746	6,338,829
Common stock, outstanding shares (in shares)	6,554,746	6,338,829
UDT
Cash and cash equivalents, UDT	278,475	277,698
Property, plant, and equipment, UDT	2,099,960	2,756,792
Accumulated depreciation and amortization, UDT	(1,448,928)	(1,640,818)
Accrued taxes and other expenses, UDT	14,400	12,900
Current installments of long-term debt, UDT	0	39,246
Long-term debt, excluding current installments, UDT	$ 0	$ 627,629

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Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

(11)Income Taxes

The Company’s income tax provision (benefit) for the years ended December 31, 2011, 2010, and 2009, consists of the following:

	Years Ended December 31
	2011		2010		2009
Current:
Federal	$	3,752,000	$	4,259,000	$	2,100,000
State	702,000		454,000		490,000
	4,454,000		4,713,000		2,590,000
Deferred:
Federal	396,000		191,000		263,000
State	56,000		115,000		(36,000		)
	452,000		306,000		227,000
Total income tax provision	$	4,906,000	$	5,019,000	$	2,817,000

At December 31, 2011, the Company had net operating loss carryforwards for federal income tax purposes of approximately $1,599,000, which are available to offset future taxable income and expire during the federal tax years ending December 31, 2019, through 2024. The future benefit of the federal net operating loss carryforwards will be limited to approximately $300,000 per year in accordance with Section 382 of the Internal Revenue Code.

The approximate tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows:

	December 31
	2011			2010
Current deferred tax assets:
Reserves	$	377,000		$	359,000
Inventory capitalization	230,000			196,000
Compensation programs	262,000			252,000
Retirement liability	72,000			88,000
Equity-based compensation	228,000			314,000
Total current deferred tax assets	$	1,169,000		$	1,209,000
Long-term deferred tax assets / (liabilities):
Excess of book over tax basis of fixed assets	$	(1,421,000	)	$	(1,065,000	)
Goodwill	(691,000		)	(627,000		)
Intangible assets	(146,000		)	(207,000		)
Net operating loss carryforwards	544,000			644,000
Deferred rent	64,000			57,000
Compensation programs	358,000			317,000
Total long-term deferred tax (liabilities)	$	(1,292,000	)	$	(881,000	)

The amounts recorded as deferred tax assets as of December 31, 2011, and 2010, represent the amount of tax benefits of existing deductible temporary differences or carryforwards that are more likely than not to be realized through the generation of sufficient future taxable income within the carryforward period. The Company has total deferred tax assets of $2,134,000 at December 31, 2011, that it believes are more likely than not to be realized in the carryforward period. Management reviews the recoverability of deferred tax assets during each reporting period.

The actual tax provision for the years presented differs from the “expected” tax provision for those years, computed by applying the U.S. federal corporate rate of 34% to income before income tax expense as follows:

	Years Ended December 31
	2011		2010		2009
Computed “expected” tax rate	34.0	%	34.0	%	34.0	%
Increase (decrease) in income taxes resulting from:
State taxes, net of federal tax benefit	3.4		2.0		3.4
Meals and entertainment	0.1		0.1		0.2
R&D credits	(0.4	)	(0.3	)	(0.9	)
Domestic production deduction	(2.8	)	(1.8	)	(1.7	)
Non-deductible ISO stock option expense	0.1		0.1		0.2
Acquisition gains	—		—		(3.3	)
Unrecognized tax benefits	(2.4	)	1.0		—
Income of non-controlling interests	(1.0	)	(0.4	)	(0.2	)
Other	0.3		0.1		0.3
Effective tax rate	31.3	%	34.8	%	32.0	%

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions.  The Company has not been audited by any state for income taxes with the exception of returns filed in Michigan (which have been audited through 2004), and income tax returns filed in Massachusetts for 2005 and 2006, and Florida for 2007, 2008, and 2009 (which are currently being audited). The Company’s federal tax return for 2008 has been audited.  Federal tax returns for the years 2009 through 2010 and state tax returns for the years 2008 through 2010 remain open to examination by the IRS and various state jurisdictions.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (“UTB”) resulting from uncertain tax positions is as follows:

	Federal and State Tax
	2011			2010
Gross UTB balance at beginning of fiscal year	$	685,000		$	545,000
Increases for tax positions of prior years	40,000			140,000
Reductions for tax positions of prior years	(405,000		)	—
Gross UTB balance at December 31	$	320,000		$	685,000

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of December 31, 2011, and 2010, are $320,000 and $685,000, respectively, for each year.

At December 31, 2011, and 2010, accrued interest and penalties on a gross basis, which are included above in the gross UTB balance, were $145,000 both years.

At December 31, 2011, approximately $255,000 of the unrecognized tax benefits relate to tax returns of a specific state jurisdiction that are currently under examination. Accordingly, the Company expects a reduction of this amount during 2012.

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2011	Mar. 07, 2012	Jun. 30, 2011
Document and Entity Information
Entity Registrant Name	UFP TECHNOLOGIES INC
Entity Central Index Key	0000914156
Document Type	10-K
Document Period End Date	Dec. 31, 2011
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 80,608,963
Entity Common Stock, Shares Outstanding		6,609,957
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY

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Net Income Per Share

12 Months Ended

Dec. 31, 2011

Net Income Per Share

Net Income Per Share

(12)Net Income Per Share

Basic income per share is based upon the weighted average common shares outstanding during each year. Diluted income per share is based upon the weighted average of common shares and dilutive common stock equivalent shares outstanding during each year. The weighted average number of shares used to compute both basic and diluted income per share consisted of the following:

	Years Ended December 31
	2011	2010	2009
Basic weighted average common shares outstanding during the year	6,475,540	6,157,310	5,829,580
Weighted average common equivalent shares due to stock options and restricted stock units	523,760	591,752	464,384
Diluted weighted average common shares outstanding during the year	6,999,300	6,749,062	6,293,964

The computation of diluted earnings per share excludes the effect of the potential exercise of stock awards, including stock options, when the average market price of the common stock is lower than the exercise price of the related options during the period. These outstanding stock awards are not included in the computation of diluted earnings per share because the effect would have been antidilutive. For the years ended December 31, 2011, 2010, and 2009, the number of stock awards excluded from the computation was 23,205, 101,769, and 190,484, respectively.

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Net sales	$ 127,243,846	$ 120,766,450	$ 99,231,334
Cost of sales	90,999,327	86,150,720	72,511,919
Gross profit	36,244,519	34,615,730	26,719,415
Selling, general, and administrative expenses	21,366,913	20,235,540	18,539,005
Gain on sales of property, plant, and equipment	(838,592)	(12,000)	(11,206)
Operating income	15,716,198	14,392,190	8,191,616
Other (expenses) income
Interest expense, net	(26,874)	(115,537)	(232,747)
Other, net		150,000
Gains on acquisitions			839,690
Total other (expense) income	(26,874)	34,463	606,943
Income before income tax provision	15,689,324	14,426,653	8,798,559
Income tax expense	4,905,708	5,019,136	2,816,575
Net income from consolidated operations	10,783,616	9,407,517	5,981,984
Net income attributable to non-controlling interests	(437,446)	(160,425)	(52,559)
Net income attributable to UFP Technologies, Inc.	$ 10,346,170	$ 9,247,092	$ 5,929,425
Net income per share:
Basic (in dollars per share)	$ 1.60	$ 1.50	$ 1.02
Diluted (in dollars per share)	$ 1.48	$ 1.37	$ 0.94
Weighted average common shares:
Basic (in shares)	6,475,540	6,157,310	5,829,580
Diluted (in shares)	6,999,300	6,749,062	6,293,964

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Other Intangible Assets

12 Months Ended

Dec. 31, 2011

Other Intangible Assets

Other Intangible Assets

(6)Other Intangible Assets

The carrying values of the Company’s definite-lived intangible assets as of December 31, 2011, and 2010, are as follows:

	Patents			Non- Compete			Customer List			Total
Gross amount at December 31, 2011	$	428,806		$	200,000		$	769,436		$	1,398,242
Accumulated amortization at December 31, 2011	(425,052		)	(126,500		)	(448,191		)	$	(999,743	)
Net balance at December 31, 2011	$	3,754		$	73,500		$	321,245		$	398,499
Gross amount at December 31, 2010	$	428,806		$	200,000		$	769,436		$	1,398,242
Accumulated amortization at December 31, 2010	(400,885		)	(93,168		)	(310,360		)	$	(804,413	)
Net balance at December 31, 2010	$	27,921		$	106,832		$	459,076		$	593,829

Amortization expense related to intangible assets was $195,330, $223,908, and $157,104 for the years ended December 31, 2011, 2010, and 2009, respectively. Future amortization for the years ending December 31 will be approximately:

2012	$	163,554
2013	159,800
2014	75,145
Total:	$	398,499

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Inventories

12 Months Ended

Dec. 31, 2011

Inventories

Inventories

(5)Inventories

Inventories consist of the following:

	December 31
	2011		2010
Raw materials	$	5,425,773	$	4,778,780
Work in process	1,513,794		695,421
Finished goods	2,819,056		2,570,135
	$	9,758,623	$	8,044,336

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2011

Employee Benefit Plans

Employee Benefit Plans

(17)Employee Benefit Plans

The Company maintains a profit sharing plan for eligible employees. Contributions to the Plan are made in the form of matching contributions to employee 401k deferrals, as well as discretionary amounts determined by the Board of Directors, and amounted to approximately $715,000, $785,000, and $709,000 in 2011, 2010, and 2009, respectively.

The Company has a partially self-insured health insurance program that covers all eligible participating employees. The maximum liability is limited by a stop loss of $125,000 per insured person, along with an aggregate stop loss determined by the number of participants.

The Company has an Executive, Non-qualified “Excess” Plan (“the Plan”), which is a deferred compensation plan available to certain executives. The Plan permits participants to defer receipt of part of their current compensation to a later date as part of their personal retirement or financial planning. Participants have an unsecured contractual commitment by the Company to pay amounts due under the Plan. There is currently no security mechanism to ensure that the Company will pay these obligations in the future.

The compensation withheld from Plan participants, together with investment income on the Plan, is reflected as a deferred compensation obligation to participants, and is classified within retirement and other liabilities in the accompanying balance sheets. At December 31, 2011, the balance of the deferred compensation liability totaled approximately $1,105,000. The related assets, which are held in the form of a Company-owned, variable life insurance policy that names the Company as the beneficiary, are reported within other assets in the accompanying balance sheets, and are accounted for based on the underlying cash surrender values of the policies, and totaled approximately $1,096,000 as of December 31, 2011.

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Stock Option and Equity Incentive Plans

12 Months Ended

Dec. 31, 2011

Stock Option and Equity Incentive Plans

Stock Option and Equity Incentive Plans

(13)Stock Option and Equity Incentive Plans

Employee Stock Option Plan

The Company’s 1993 Employee Stock Option Plan (“Employee Stock Option Plan”), which is stockholder approved, provides long-term rewards and incentives in the form of stock options to the Company’s key employees, officers, employee directors, consultants, and advisors. The plan provides for either non-qualified stock options or incentive stock options for the issuance of up to 1,550,000 shares of common stock. The exercise price of the incentive stock options may not be less than the fair market value of the common stock on the date of grant, and the exercise price for non-qualified stock options shall be determined by the Compensation Committee. These options expire over 5- to 10-year periods.

Options granted under the plan generally become exercisable with respect to 25% of the total number of shares subject to such options at the end of each 12-month period following the grant of the options, except for options granted to officers, which may vest on a different schedule. At December 31, 2011, there were 331,620 options outstanding under the Employee Stock Option Plan. The plan expired on April 12, 2010.

Incentive Plan

In June 2003, the Company formally adopted the 2003 Incentive Plan (the “Plan”). The Plan was originally intended to benefit the Company by offering equity-based incentives to certain of the Company’s executives and employees, thereby giving them a permanent stake in the growth and long-term success of the Company and encouraging the continuance of their involvement with the Company’s businesses. The Plan was amended effective June 4, 2008, to permit certain performance-based cash awards to be made under the Plan.  The Plan was further amended on June 8, 2011, to increase the maximum number of shares of common stock in the aggregate to be issued to 2,250,000.  The amendment also added appropriate language so as to enable grants of stock-based awards under the Plan to continue to be eligible for exclusion from the $1,000,000 limitation on deductibility under Section 162(m) of the Internal Revenue Code (the “Code”).

Two types of equity awards may be granted to participants under the Plan: restricted shares or other stock awards. Restricted shares are shares of common stock awarded subject to restrictions and to possible forfeiture upon the occurrence of specified events. Other stock awards are awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of common stock. Such awards may include Restricted Stock Unit Awards (“RSUs”), unrestricted or restricted stock, incentive and non-qualified stock options, performance shares, or stock appreciation rights. The Company determines the form, terms, and conditions, if any, of any awards made under the Plan.

Through December 31, 2011, 925,955 shares of common stock have been issued under the 2003 Incentive Plan, none of which have been restricted. An additional 176,209 shares are being reserved for outstanding grants of RSUs and other share-based compensation that are subject to various performance and time-vesting contingencies. The Company has also granted awards in the form of stock options under this Plan. Through December 31, 2011, 60,000 options have been granted and 56,250 options are outstanding.  At December 31, 2011, 1,087,836 shares or options are available for future issuance in the 2003 Incentive Plan.

Director Plan

Effective July 15, 1998, the Company adopted the 1998 Director Plan.  The Plan was amended and renamed, on June 3, 2009, the 2009 Non-Employee Director Stock Incentive Plan.  The Plan, as amended, provides for the issuance of stock options and other equity-based securities up to 975,000 shares.  At December 31, 2011, there were 250,651 options outstanding, and 3,809 shares of common stock were issued in the year ended December 31, 2011, 220,226 shares remained available to be issued under the Plan.

The following is a summary of stock option activity under all plans:

	Shares Under Options		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding December 31, 2010	764,496		$	4.12
Granted	23,205		16.10
Exercised	(149,180	)	2.31
Cancelled or expired	—		—
Outstanding December 31, 2011	638,521		$	4.98	$	6,279,933
Exercisable at December 31, 2011	578,521		$	4.45	$	5,988,946
Vested and expected to vest at December 31, 2011	638,521		$	4.98	$	6,279,933

The following is a summary of information relating to stock options outstanding and exercisable by price range as of December 31, 2011:

	Options Outstanding				Options Exercisable
Range of exercise prices	Outstanding as of 31-Dec-2011	Weighted average remaining contractual life (years)	Weighted average exercise price		Exercisable as of 31-Dec-2011	Weighted average exercise price
$1.00 - $1.99	46,620	1.2	$	1.00	46,620	$	1.00
$2.00 - $2.99	200,000	3.1	2.32		200,000	2.32
$3.00 - $3.99	111,984	1.6	3.28		111,984	3.28
$4.00 - $4.99	51,174	6.5	4.16		46,174	4.17
$5.00 - $5.99	41,719	4.9	5.12		41,719	5.12
$6.00 - $6.99	27,951	4.5	6.07		27,951	6.07
$9.00 - $9.99	82,599	6.0	9.13		48,849	9.16
$10.00 - $10.99	34,000	5.5	10.23		26,500	10.17
$11.00 - $16.99	42,474	6.6	14.26		28,724	14.06
	638,521	3.9	$	4.98	578,521	$	4.45

During the years ended December 31, 2011, 2010, and 2009, the total intrinsic value of all options exercised (i.e., the difference between the market price and the price paid by the employees to exercise the options) was $2,204,962, $2,711,864, and $79,269, respectively, and the total amount of consideration received from the exercise of these options was $344,417, $850,806, and $130,332, respectively. At its discretion, the Company allows option holders to surrender previously owned common stock in lieu of paying the exercise price and withholding taxes. During the years ended December 31, 2011, and 2010, 20,492 shares were surrendered at a market price of $17.64 and 62,202 shares were surrendered at a market price of $10.42, respectively. No shares were surrendered during the year ended December 31, 2009.

During the years ended December 31, 2011, 2010, and 2009, the Company recognized compensation expense related to stock options granted to directors and employees of $141,499, $213,716, and $150,482, respectively.

On March 2, 2011, the Company’s Compensation Committee approved the issuance of 25,000 shares of unrestricted common stock to the Company’s Chairman, Chief Executive Officer, and President under the 2003 Equity Incentive Plan. The shares were issued on December 22, 2011. The Company has recorded compensation expense of $423,250 for the year ended December 31, 2011, based on the grant date price of $16.93 at March 2, 2011. Stock compensation expense of $192,500 and $106,000 was recorded in 2010 and 2009, respectively, for similar awards.

On June 8, 2011, the Company issued 3,708 shares of unrestricted common stock to the non-employee members of the Company’s Board of Directors as part of their annual retainer for serving on the Board.  Based upon the closing price of $16.17 on June 8, 2011, the Company recorded compensation expense of $60,000 associated with the stock issuance for the year ended December 31, 2011.

It has been the Company’s practice to allow executive officers to take a portion of their earned bonuses in the form of the Company’s common stock. The value of the stock received by executive officers, measured at the closing price of the stock on the date of grant, was $55,000, $79,248, and $183,500, respectively, for the years ended December 31, 2011, 2010, and 2009.

The Company grants RSUs to its executive officers. The stock unit awards are subject to various time-based vesting requirements, and certain portions of these awards are subject to performance criteria of the Company. Compensation expense on these awards is recorded based on the fair value of the award at the date of grant, which is equal to the Company’s closing stock price, and is charged to expense ratably during the service period. No compensation expense is taken on awards that do not become vested, and the amount of compensation expense recorded is adjusted based on management’s determination of the probability that these awards will become vested. The following table summarizes information about stock unit award activity during the year ended December 31, 2011

	Restricted Stock Units		Weighted Average Award Date Fair Value
Outstanding at December 31, 2010	251,694		$	5.80
Awarded	11,221		18.27
Shares distributed	(86,706	)	5.02
Forfeited / Cancelled	—		—
Outstanding at December 31, 2011	176,209		$	6.98

The Company recorded $463,923, $557,494, and $644,331, in compensation expense related to these RSUs during the years ended December 31, 2011, 2010, and 2009, respectively.

At the Company’s discretion, RSU holders are given the option to net-share settle to cover the required minimum withholding tax, and the remaining amount is converted into the equivalent number of common shares. During the year ended December 31, 2011, 30,920 shares were redeemed for this purpose at a market price of $18.19. During the year ended December 31, 2010, 19,579 shares were redeemed for this purpose at a market price of $9.25.

The following summarizes the future share-based compensation expense the Company will record as the equity securities granted through December 31, 2011, vest:

	Options		Common Stock		Restricted Stock Units		Total
2012	$	72,744	$	—	$	321,210	$	393,954
2013	70,080		—		219,300		$	289,380
2014	43,892		—		76,456		$	120,348
2015	12,962		—		8,541		$	21,503
Total	$	199,678	$	—	$	625,507	$	825,185

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Indebtedness

12 Months Ended

Dec. 31, 2011

Indebtedness

Indebtedness

(9)Indebtedness

On January 29, 2009, the Company amended and extended its credit facility with Bank of America, NA. The facility is comprised of: (i) a revolving credit facility of $17 million; (ii) a term loan of $2.1 million with a seven-year straight-line amortization; (iii) a mortgage loan of $1.8 million with a 20-year straight-line amortization; and (iv) a mortgage loan of $4.0 million with a 20-year straight-line amortization. Extensions of credit under the revolving credit facility are based in part upon accounts receivable and inventory levels. Therefore, the entire $17 million may not be available to the Company. As of December 31, 2011, the Company had availability of approximately $16.9 million based upon collateral levels in place as of that date. The credit facility calls for interest of LIBOR plus a margin that ranges from 1.0% to 1.5% or, at the discretion of the Company, the bank’s prime rate less a margin that ranges from 0.25% to zero. In both cases the applicable margin is dependent upon Company performance. The loans are collateralized by a first priority lien on all of the Company’s assets, including its real estate located in Georgetown, Massachusetts, and in Grand Rapids, Michigan. Under the credit facility, the Company is subject to a minimum fixed-charge coverage financial covenant, which the Company was in compliance with as of December 31, 2011. The Company’s $17 million revolving credit facility matures November 30, 2013; the term loans are all due on January 29, 2016. At December 31, 2011, the interest rate on these facilities was 1.28%, and there were no borrowings outstanding on the line of credit.

Long-term debt consists of the following:

	December 31
	2011			2010
Mortgage notes	$	5,017,817		$	5,310,116
Note payable	1,201,502			1,489,863
UDT mortgage	—			666,875
Equipment loan	—			34,424
Total long-term debt	6,219,319			7,501,278
Current installments	(580,661		)	(654,331		)
Long-term debt, excluding current installments	$	5,638,658		$	6,846,947
Aggregate maturities of long-term debt are as follows:
Year ending December 31:
2012	$	580,661
2013	580,661
2014	580,661
2015	580,661
2016	3,896,675
	$	6,219,319

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Property, Plant, and Equipment

12 Months Ended

Dec. 31, 2011

Property, Plant, and Equipment

Property, Plant, and Equipment

(7)       Property, Plant, and Equipment

Property, plant, and equipment consist of the following:

	December 31
	2011		2010
Land and improvements	$	839,906	$	944,906
Buildings and improvements	6,959,641		7,499,855
Leasehold improvements	3,071,096		2,884,463
Equipment	32,612,522		31,695,304
Furniture and fixtures	2,540,055		2,153,943
Construction in progress—equipment/buildings	1,612,687		278,804
	$	47,635,907	$	45,457,275

Depreciation and amortization expense for the years ended December 31, 2011, 2010, and 2009, was $2,585,672, $2,928,285, and $2,737,958, respectively.

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Investment in and Advances to Affiliated Partnership

12 Months Ended

Dec. 31, 2011

Investment in and Advances to Affiliated Partnership

Investment in and Advances to Affiliated Partnership

(8)Investment in and Advances to Affiliated Partnership

The Company has a 26.32% ownership interest in a realty limited partnership, United Development Company Limited (“UDT”). The Company has consolidated the financial statements of UDT for all periods presented because it has determined that UDT is a VIE, and the Company is the primary beneficiary. UDT owns one building, which is leased to the Company. The lease payments from the Company account for 100% of UDT’s revenue. Therefore, the Company believes it has the power to direct the activities of UDT that most significantly impact the entity’s economic performance, and the obligation to absorb losses of UDT or the right to receive benefits from UDT that could potentially be significant to UDT. In addition to the lease arrangement, the Company’s management provides management services to UDT in certain situations. The creditors of UDT have no recourse to the general credit of the Company (see Note 23).

Included in the December 31 consolidated balance sheets are the following amounts related to UDT:

	December 31
	2011		2010
Cash	$	278,475	$	277,698
Net property, plant, and equipment	651,032		1,115,974
Accrued expenses	14,400		12,900
Current and long-term debt	—		666,875

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Accrued Expenses

12 Months Ended

Dec. 31, 2011

Accrued Expenses

Accrued Expenses

(10)Accrued Expenses

Accrued expenses consist of the following:

	December 31
	2011		2010
Compensation	$	2,221,730	$	2,855,331
Benefits / self-insurance reserve	621,931		762,515
Paid time off	841,357		780,109
Commissions payable	393,028		416,326
Unrecognized tax benefits (see Note 11)	320,000		685,000
Other	1,142,117		1,180,100
	$	5,540,163	$	6,679,381

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Supplemental Retirement Benefits

12 Months Ended

Dec. 31, 2011

Supplemental Retirement Benefits

Supplemental Retirement Benefits

(15)Supplemental Retirement Benefits

The Company provides discretionary supplemental retirement benefits for certain retired officers, which will provide an annual benefit to these individuals for various terms following separation from employment. The Company recorded an expense of approximately $6,000, $30,000, and $35,000 for the years ended December 31, 2011, 2010, and 2009, respectively. The present value of the supplemental retirement obligation has been calculated using an 8.5% discount rate, and is included in retirement and other liabilities. Total projected future cash payments for the years ending December 31, 2012 through 2016, are approximately $75,000, $75,000, $46,000, $25,000, and $25,000, respectively, and approximately $75,000 thereafter.

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Segment Data

12 Months Ended

Dec. 31, 2011

Segment Data

Segment Data

(20)Segment Data

The Company is organized based on the nature of the products and services that it offers. Under this structure, the Company produces products within two distinct segments: Packaging and Component Products. Within the Packaging segment, the Company primarily uses polyethylene and polyurethane foams, sheet plastics, and pulp fiber to provide customers with cushion packaging for their products. Within the Component Products segment, the Company primarily uses cross-linked polyethylene foam to provide customers in the automotive, athletic, leisure, and health and beauty industries with engineered products for numerous purposes.

The accounting policies of the segments are the same as those described in Note 1. Income taxes and interest expense have been allocated based on operating results and total assets employed in each segment.

Inter-segment transactions are uncommon and not material. Therefore, they have not been separately reflected in the financial table below. The totals of the reportable segments’ revenues, net profits, and assets agree with the Company’s consolidated amounts contained in the audited financial statements. Revenues from customers outside of the United States are not material.

Sales to the top customer in the Company’s Component Products segment comprises 10.9% of that segment’s total sales and 7.2% of the Company’s total sales for the year ended December 31, 2011. Sales to the top customer in the Company’s Packaging segment comprise 6.9% of that segment’s total sales and 2.3% of the Company’s total sales for the year ended December 31, 2011.

The results for the Packaging segment include the operations of United Development Company Limited.

The Company has revised its allocation of corporate assets to the two segments to present cash and cash equivalents as unallocated assets. Prior year numbers have been adjusted to conform to the same allocation method.

Financial statement information by reportable segment is as follows:

2011	Component Products			Packaging			Unallocated Assets		Total
Sales	$	84,652,237		$	42,591,609		$	—	$	127,243,846
Operating income	13,036,101			2,680,097			—		15,716,198
Total assets	27,169,529			22,702,927			29,848,798		79,721,254
Depreciation / Amortization	1,544,377			1,236,625			—		2,781,002
Capital expenditures	1,029,046			2,711,845			—		3,740,891
Interest expense, net	(14,640		)	(12,234		)	—		(26,874		)
Goodwill	4,463,246			2,017,791			—		6,481,037

2010	Component Products			Packaging			Unallocated Assets		Total
Sales	$	80,373,062		$	40,393,388		$	—	$	120,766,450
Operating income	11,104,306			3,287,884			—		14,392,190
Total assets	26,579,654			20,795,613			22,102,634		69,477,901
Depreciation / Amortization	1,802,085			1,350,108			—		3,152,193
Capital expenditures	1,814,874			1,470,656			—		3,285,530
Interest expense, net	(61,668		)	(53,869		)	—		(115,537		)
Goodwill	4,463,246			2,017,791			—		6,481,037

2009	Component Products			Packaging			Unallocated Assets		Total
Sales	$	60,973,325		$	38,258,009		$	—	$	99,231,334
Operating income	5,806,122			2,385,494			—		8,191,616
Total assets	25,409,608			19,043,675			13,401,429		57,854,712
Depreciation / Amortization	1,658,290			1,236,772			—		2,895,062
Capital expenditures	989,027			867,810			—		1,856,837
Interest expense, net	(126,363		)	(106,384		)	—		(232,747		)
Goodwill	4,463,246			2,017,791			—		6,481,037
Bargain purchase gains	839,690			—			—		839,690

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)	Total	Common Stock	Additional Paid-in Capital	Retained Earnings	Non-Controlling Interests
Balance at Dec. 31, 2008	$ 31,890,391	$ 56,667	$ 13,774,334	$ 17,536,387	$ 523,003
Balance (in shares) at Dec. 31, 2008		5,666,703
Increase (Decrease) in Stockholders' Equity
Stock issued in lieu of compensation	183,500	433	183,067
Stock issued in lieu of compensation (in shares)		43,279
Share-based compensation	900,813	1,960	898,853
Share-based compensation (in shares)		196,000
Exercise of stock options net of shares presented for exercise	130,332	394	129,938
Exercise of stock options net of shares presented for exercise (in shares)		39,375
Excess tax benefits on share-based compensation	23,421		23,421
Net income	5,981,984			5,929,425	52,559
Distribution to non-controlling interests	(105,000)				(105,000)
Balance at Dec. 31, 2009	39,005,441	59,454	15,009,613	23,465,812	470,562
Balance (in shares) at Dec. 31, 2009		5,945,357
Increase (Decrease) in Stockholders' Equity
Stock issued in lieu of compensation	79,248	103	79,145
Stock issued in lieu of compensation (in shares)		10,291
Share-based compensation	963,710	1,084	962,626
Share-based compensation (in shares)		108,421
Exercise of stock options net of shares presented for exercise	507,056	2,747	504,309
Exercise of stock options net of shares presented for exercise (in shares)		274,760
Net share settlement of restricted stock units and stock option tax withholding	(485,511)		(485,511)
Excess tax benefits on share-based compensation	854,015		854,015
Net income	9,407,517			9,247,092	160,425
Distribution to non-controlling interests	(105,000)				(105,000)
Balance at Dec. 31, 2010	50,226,476	63,388	16,924,197	32,712,904	525,987
Balance (in shares) at Dec. 31, 2010	6,338,829	6,338,829
Increase (Decrease) in Stockholders' Equity
Stock issued in lieu of compensation	55,000	27	54,973
Stock issued in lieu of compensation (in shares)		2,735
Share-based compensation	1,088,672	693	1,087,979
Share-based compensation (in shares)		69,324
Exercise of stock options net of shares presented for exercise	250,538	1,439	249,099
Exercise of stock options net of shares presented for exercise (in shares)		143,858
Net share settlement of restricted stock units and stock option tax withholding	(829,995)		(829,995)
Excess tax benefits on share-based compensation	699,659		699,659
Net income	10,783,616			10,346,170	437,446
Distribution to non-controlling interests	(289,183)				(289,183)
Balance at Dec. 31, 2011	$ 61,984,783	$ 65,547	$ 18,185,912	$ 43,059,074	$ 674,250
Balance (in shares) at Dec. 31, 2011	6,554,746	6,554,746

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Receivables and Net Sales

12 Months Ended

Dec. 31, 2011

Receivables and Net Sales

Receivables and Net Sales

(4)Receivables and Net Sales

Receivables consist of the following:

	December 31
	2011			2010
Accounts receivable—trade	$	15,997,576		$	14,976,057
Less allowance for doubtful receivables	(378,859		)	(342,682		)
	$	15,618,717		$	14,633,375

Receivables are written off against these reserves in the period they are determined to be uncollectible, and payments subsequently received on previously written-off receivables are recorded as a reversal of the bad debt provision.  The Company performs credit evaluations on its customers and obtains credit insurance on a large percentage of its accounts, but does not generally require collateral.  The Company recorded a provision for doubtful accounts of $55,209 and $8,466 for the years ended December 31, 2011, and 2010, respectively.

Sales to the top customer in the Company’s Component Products segment comprised 10.9% of that segment’s total sales and 7.2% of the Company’s total sales for the year ended December 31, 2011. Sales to the top customer in the Company’s Packaging segment comprised 6.9% of that segment’s total sales and 2.3% of the Company’s total sales for the year ended December 31, 2011.

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Building Sale

12 Months Ended

Dec. 31, 2011

Building Sale

Building Sale

(21)Building Sale

On January 13, 2011, United Development Company Limited (“UDT”) sold its Alabama facility (Packaging segment) for $1,250,000. The net book value of the asset at December 31, 2010, was approximately $384,000.  Selling expenses of approximately $38,000 were incurred.

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Preferred Stock

12 Months Ended

Dec. 31, 2011

Preferred Stock

Preferred Stock

(14)Preferred Stock

On March 18, 2009, the Company declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of common stock, par value $0.01 per share on March 20, 2009, to the stockholders of record on that date. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.01 per share (the “Preferred Share”), of the Company, at a price of $25.00 per one one-thousandth of a Preferred Share subject to adjustment and the terms of the Rights Agreement. The rights expire on March 19, 2019.