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