SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 29, 1996
Commission File Number 0-12948
CHEMFAB CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 03-0221503
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
701 Daniel Webster Highway
Merrimack, New Hampshire 03054
(Address of principal executive office) (Zip Code)
Registrant's telephone number including
area code: (603) 424-9000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------ ------.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 28, 1996
Common Stock, $ .10 par value 8,030,872 shares
CHEMFAB CORPORATION
INDEX
Part I - Financial Information: Page No.
--------
Item 1 - Financial Statements
--------------------
Consolidated Balance Sheets at September 3 - 4
29, 1996 and June 30, 1996
Consolidated Statements of Income for 5
the Three Months Ended September 29,
1996 and October 1, 1995
Consolidated Statements of Cash Flows 6
for the Three Months Ended September
29, 1996 and October 1, 1995
Notes to Consolidated Financial Statements 7 - 8
Item 2 - Management's Discussion and Analysis of 8 - 10
Financial Condition and Results of Operations
Part II - Other Information:
Item 6(a) - Exhibits 10
Item 6(b) - Reports on Form 8-K 10
Signatures 11
PART I - FINANCIAL INFORMATION
------------------------------
CHEMFAB CORPORATION
CONSOLIDATED BALANCE SHEETS
Sept. 29, June 30,
1996 1996
----------- -----------
(Unaudited)
Current assets:
Cash and cash equivalents $ 1,752,000 $ 5,017,000
Receivables:
Trade 17,926,000 17,797,000
Other 195,000 185,000
Costs and estimated earnings in excess of
billings on uncompleted contra 1,125,000 886,000
Inventories 14,603,000 13,622,000
Prepaid expenses, and other 1,376,000 1,246,000
Deferred tax assets 762,000 795,000
----------- ----------
Total current assets 37,739,000 39,548,000
Property, plant and equipment at cost 40,798,000 40,013,000
Less accumulated depreciation
and amortization 20,209,000 19,473,000
Net property, plant and equipment 20,589,000 20,540,000
----------- -----------
Goodwill, net 10,921,000 11,084,000
Other assets 2,599,000 2,490,000
----------- -----------
Total assets $ 71,848,000 $ 73,662,000
=========== ===========
See accompanying Notes to Consolidated Financial Statements
CHEMFAB CORPORATION
CONSOLIDATED BALANCE SHEETS
Sept. 29, June 30,
1996 1996
----------- -----------
(Unaudited)
Current liabilities:
Accounts payable and accrued
expenses $ 8,214,000 $ 9,502,000
Accrued income taxes 1,862,000 1,441,000
Billings in excess of costs and
estimated earnings on
uncompleted contracts 175,000 313,000
---------- ----------
Total current liabilities 10,251,000 11,256,000
Long - term debt - 2,377,000
Deferred income taxes 1,501,000 1,524,000
Shareholders' equity:
Preferred stock, par value $.50:
authorized - 1,000,000 shares,
none issued - -
Common stock, par value $.10:
authorized - 15,000,000 shares;
issued - 8,204,513 at Sept, 29, 1996
and 8,085,607 at June 30, 1996 820,000 809,000
Additional paid-in capital 19,521,000 18,314,000
Retained earnings 42,698,000 40,998,000
Treasury stock, at cost,
(205,904 shares at Sept. 29, 1996
and 95,938 at June 30,1996) (2,393,000) (943,000)
Foreign currency translation
adjustment (550,000) (673,000)
----------- -----------
Total shareholders' equity 60,096,000 58,505,000
Total liabilities and shareholders' $ 71,848,000 $ 73,662,000
See accompanying Notes to Consolidated Financial Statements
CHEMFAB CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
Sep. 29, 1996 Oct. 1, 1995
------------- ------------
Net sales $ 19,938,000 $ 18,466,000
Cost of sales 13,191,000 12,567,000
------------- ------------
Gross Profit 6,747,000 5,899,000
Selling, general and
administrative expenses 3,684,000 3,261,000
Research and development expenses 562,000 545,000
Other income (21,000) (1,000)
Interest expense 76,000 183,000
Interest income (47,000) (45,000)
------------- ------------
Income before income taxes 2,493,000 1,956,000
Provision for income taxes 793,000 597,000
------------- ------------
Net income $ 1,700,000 $ 1,359,000
============= ============
Weighted average common and
common equivalent shares 8,238,000 8,132,000
============= ============
Earnings per common share $0.21 $0.17
===== =====
See accompanying Notes to Consolidated Financial Statements.
CHEMFAB CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
Sept. 29, 1996 Oct. 1, 1995
-------------- ------------
Cash flows from operating activities:
Net income $ 1,700,000 $ 1,359,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,062,000 1,039,000
Change in assets and liabilities:
Receivables (95,000) 1,173,000
Costs and estimated earnings in excess
of billings on uncompleted contracts (377,000) (344,000)
Inventories (945,000) (504,000)
Prepaid expenses and other (128,000) (318,000)
Other assets long-term (193,000) (98,000)
Accounts payable and accrued expenses (1,314,000) (562,000)
Accrued income taxes 409,000 (901,000)
Deferred tax assets and liabilities 10,000 (76,000)
------------ ----------
Total adjustments (1,571,000) (591,000)
------------ ----------
Net cash provided by operating activities 129,000 768,000
Cash flows from investing activities:
Capital expenditures (net) (761,000) (555,000)
------------ ----------
Net cash used in investing activities (761,000) (555,000)
Cash flows from financing activities:
Proceeds from exercise of stock options 1,219,000 365,000
Repayment of long-term debt (2,382,000) (1,067,000)
Purchase of treasury shares (1,450,000) 0
------------ ----------
Net cash used in financing activities (2,613,000) (702,000)
Effect of exchange rate changes on cash (20,000) (11,000)
------------ ----------
Net decrease in cash and cash equivalents (3,265,000) (500,000)
Cash and cash equivalents at beginning of year 5,017,000 3,780,000
------------ ----------
Cash and cash equivalents at end of period $ 1,752,000 $ 3,280,000
============ ==========
Interest paid $ 106,000 $ 190,000
Income taxes paid $ 152,000 $ 936,000
See accompanying notes to the Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 The consolidated financial statements of Chemfab Corporation (the
Company) included in this report reflect all adjustments (consisting of
only normally recurring accruals) which, in the opinion of management,
are necessary for a fair presentation of the consolidated financial
position at September 29, 1996 and June 30, 1996 and the consolidated
statements of income and cash flows for the three months ended September
29, 1996 and October 1, 1995. The unaudited results of operations for
the interim periods reported are not necessarily indicative of results to
be expected for the year.
Certain notes and other information have been condensed or omitted from
these interim financial statements. The statements, therefore, should be
read in conjunction with the consolidated financial statements and
related notes included in the Chemfab Corporation Annual Report on Form
10-K for the year ended June 30, 1996 (file no. 0-12948).
Note 2 Inventories consist of the following:
Sept. 29, 1996 June 30,1996
-------------- ------------
Finished Goods $ 4,999,000 $5,112,000
Work in Process 3,779,000 4,602,000
Raw Materials 5,825,000 3,908,000
__________ __________
$14,603,000 $13,622,000
=========== ===========
Note 3 In connection with obtaining incentive grants from the Industrial
Development Authority of Ireland to subsidize certain 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. $658,000) 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 amount
due.
Various lawsuits and claims are pending or have been asserted against the
Company, including matters previously disclosed by the Company in its
form 10-K for the year ended June 30, 1996. Although the outcome of such
matters cannot be predicted with certainty and some lawsuits or claims
may be disposed of unfavorably to the Company, management believes their
disposition, to the extent not covered by insurance, will not have a
material adverse effect on the Company's financial condition and results
of operations.
Note 4 All reported share data has been adjusted to reflect the Company's 3 for
2 stock split in the form of a stock dividend in February 1996.
Note 5 Subsequent Event
On October 4, 1996, the Company entered into a new three year revolving
credit agreement jointly with two commercial banks, one based in the U.S.
and the other in Ireland. Under the terms of the agreement, the Company
has available a $20,000,000 unsecured credit facility until October 4,
1999. Thereafter, any balance outstanding will convert into a four year
term loan with a five year amortization schedule and a lump sum payment
due October 4, 2003. Borrowing under the facility is at LIBOR plus 1%
and the Company is obligated to pay a commitment fee of 0.125% of the
unused portion of the line. The Company has terminated its previously
existing revolving credit agreement.
ITEM 2 Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
Three Months Ended September 29, 1996
- -------------------------------------
Net Sales
- ---------
The Company's consolidated net sales for the three months ended September 29,
1996, the first quarter of fiscal 1997, increased 8% to $19,938,000 from
$18,466,000 in the same quarter last year. Shipments of the Company's
engineered products worldwide increased 14% over the year earlier period but
were offset, in part, by a decline in shipments of architectural products. The
impact of changes in foreign currency exchange rates on reported revenue growth
for the quarter was not material.
Engineered Products - Americas Business Group sales (which include all non-
architectural product sales to customers in North America and South America)
increased 16% to $9,843,000 from $8,462,000 for the same quarter last year.
This sales increase resulted principally from strength in the Company's
aerospace, communications, energy and environment, and general distributor
markets. It is expected that revenues from sales of engineered products into
the Americas will remain relatively strong through the end of the fiscal year.
Engineered Products - European Business Group sales (which include all non-
architectural product sales to customers in Europe, India, the Middle East and
Africa) increased 8% to $6,142,000 from $5,665,000 in the same quarter last
year. This increase in revenues resulted principally from strength in sales to
general distributors throughout Europe. Moderate growth in sales of the
Company's industrial products into these geographical areas, in line with first
quarter performance, is expected to continue through the end of the fiscal year.
Engineered Products - Asia Pacific Business Group sales (which include all non-
architectural product sales to customers in the Far East and Australia)
increased 23% to $1,294,000 from $1,052,000 in the same quarter last year. This
increase was the result of a strong marketing and sales focus into this
geographic area since the establishment of this business group approximately one
year ago. Sales from the Company's newly established China subsidiary were not
significant during the quarter, but are expected to increase over the course of
the year. Percentage revenue growth from industrial product shipments into the
Asia Pacific region is expected to remain strong through the end of the fiscal
year.
Architectural Product sales decreased 19% to $2,659,000 from $3,287,000 in the
same quarter last year. This decrease in revenues was expected and is the
result of a lower number of sizable projects underway to-date this year versus
last year. The Company expects that architectural product sales for the
remainder of the year will be below the record levels achieved last year.
Gross Profit Margins
- --------------------
Gross profit margins as a percentage of consolidated net sales improved to 34%
for the quarter, up from 32% for the first quarter of last year. The
improvement is principally attributable to the leveraging effect of increased
revenues on a relatively fixed manufacturing overhead cost structure and
targeted cost reduction programs.
Selling, Administrative, Research and Development Expenses
- ----------------------------------------------------------
Selling, general and administrative expenses increased 13% to $3,684,000 from
$3,261,000 in the same quarter last year. Increased selling, general and
administration expenditures resulted from the combined effects of the higher
cost structure in place to support the Company's newly established subsidiary
operations in China and Brazil (these were established after the first quarter
of last year), as well as normal increases in salaries and other costs.
Selling, general and administrative expenses as a percentage of sales was 18%,
the same as the first quarter of last year.
Research and development expenses were $562,000 compared to last year's level of
$545,000. This level of spending, at approximately 3% of total revenues, is
consistent with recent, as well as planned, levels of research and development
spending.
Interest Expense, Net
- ---------------------
The Company had net interest expense of $29,000 for the quarter compared to net
interest expense of $138,000 for the same quarter last year. This decrease
resulted from the repayment of debt incurred to finance the Tygaflor business
acquisition.
Liquidity and Capital Resources
- -------------------------------
During the quarter ended September 29, 1996, the Company generated $129,000 of
cash from operations which was down from the same quarter of the prior year due
to changes in working capital (on September 30, 1996, one day after the close of
the quarter, the Company collected a $2.8 million trade receivable). During the
quarter, the Company invested $761,000 in property, plant and equipment
additions, repaid $2,382,000 of long-term debt and used $1,450,000 to
repurchase stock under its share repurchase program. The Company also received
$1,219,000 in cash proceeds and related tax benefits from the exercise of stock
options during this period.
Working capital decreased to $27,488,000 from $28,292,000 at the end of fiscal
1996. As of September 29, 1996, the Company had approximately $6.6 million of
credit available under its domestic and international borrowing facilities
(these credit facilities have since been replaced by a new $20,000,000 credit
line - see Note 5 above) . Management believes that the combination of cash
on hand, cash expected to be generated from operations, and available credit
facilities, will be adequate to finance operations during fiscal 1997 and to
deal with any liabilities or contingencies described in Note 3 to the
Consolidated Financial Statements.
Forward-Looking Statements
- --------------------------
Except for the historical information contained herein, the matters discussed in
this form 10-Q are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Investors are cautioned that forward-
looking statements are inherently uncertain. Actual performance and results may
differ materially from those projected or suggested in the forward-looking
statements due to certain risks and uncertainties including, without limitation,
the timely introduction of new products and the market acceptance of those
products, and the impact of competitive products and pricing. Additional
information concerning certain risks and uncertainties that could cause actual
results to differ materially from those projected or suggested in the forward-
looking statements is contained in the Company's filings with the Securities and
Exchange Commission, including those risks and uncertainties discussed in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996 in
the section titled "Forward-Looking Statements". The forward-looking
statements contained herein represent the Company's judgment as of the date of
this filing, and the Company cautions readers not to place undue reliance on
such statements.
PART II - OTHER INFORMATION
---------------------------
ITEM 6 - Exhibits and Reports on Form 8-K
--------------------------------
6(a) Exhibits
--------
10(b)(11) Consulting Agreement dated August 2, 1996, between Chemfab
Corporation and Chemfab Director, Dr. Nicholas Pappas.
6(b) Reports on Form 8-K
-------------------
None.
CHEMFAB CORPORATION
SIGNATURES
----------
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
CHEMFAB CORPORATION
-------------------
(Registrant)
by:/S/ Duane C. Montopoli
-------------------------------------------
Duane C. Montopoli
President and Chief Executive Officer
By:/S/Moosa E. Moosa
-------------------------------------------
Moosa E. Moosa
Vice President - Finance and Administration
(Principal Financial Officer)
by:/S/ Laurence E. Richard
------------------------------------------
Laurence E. Richard
Controller
(Principal Accounting Officer)
Date: November 12, 1996
Exhibit 10(b)(11)
CONSULTING AGREEMENT
--------------------
This Consulting Agreement (this "Agreement"), dated as of the 2nd day of
August, 1996, is by and between Chemfab Corporation, a Delaware corporation with
its principal place of business at 701 Daniel Webster Highway, Merrimack, New
Hampshire, on behalf of itself and each of its subsidiaries (hereinafter,
individually and collectively, the "Company"), and Dr. Nicholas Pappas, an
individual residing at 606 Swallow Hollow Road, Wilmington, Delaware
(hereinafter, "Consultant").
WHEREAS, the Company desires to extend and broaden its technologies,
business operations and commercial activities to include materials, products,
processes, applications and capabilities that are materially different from, but
synergistic with, those currently produced, sold, practiced, and used by the
Company;
WHEREAS, the Company recognizes that such broadening of its existing
technologies, business operations and commercial activities will likely best be
achieved over time from various sources that are both internal and external to
the Company;
WHEREAS, the Company further recognizes that any such external sources will
likely result from transactions such as, but not limited to, business
acquisitions, joint ventures and other strategic alliances, licenses, joint
development arrangements, joint marketing arrangements or similar arrangements
(each, hereinafter, a "Strategic Alliance");
WHEREAS, Consultant is highly qualified to assist the Company in finding
and entering into Strategic Alliances which constitute Diversifying Arrangements
(as defined below) due to his experience, knowledge and contacts in the field of
materials science and in the plastics industry; and
WHEREAS, the Company desires to engage the services of Consultant to assist
it in finding and entering into Diversifying Arrangements, and Consultant
desires to provide said services to the Company as an independent contractor to
the Company;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
undertakings hereinafter set forth, the parties hereto agree as follows:
Section 1. Definitions. For the purposes of this Agreement, the
following words and expressions shall have the following meanings:
Section 1.1 "Diversifying Arrangement" shall mean any Strategic Alliance
that materially diversifies or extends the Company's technologies, business
operations and/or commercial activities to include materials, products,
processes, applications and/or capabilities that are materially different from,
but synergistic with, those that are produced, sold, practiced, and used by the
Company as of the date hereof.
Section 1.2 "Diversifying Acquisition" shall mean a Diversifying
Arrangement in which the Company acquires Control (as defined below) of an
Unrelated Business Entity (as defined below) by acquisition or accumulation of
its voting stock or other equity interests, by merger or consolidation, or by
purchase of all or substantially all of its assets.
Section 1.3 "Control" shall mean with respect to any Unrelated Business
Entity the power to direct the affairs of such Unrelated Business Entity by
reason of ownership of voting stock or other equity interests of such Unrelated
Business Entity (or of another entity having the power to direct the affairs of
such Unrelated Business Entity) or by reason of ownership of assets of such
Unrelated Business Entity.
Section 1.4 "Unrelated Business Entity" shall mean any corporation,
operating division of a corporation, or other established business entity
theretofore unaffiliated with and unrelated to the Company.
Section 1.5 "Alternative Diversifying Arrangement" shall mean any
Diversifying Arrangement, other than a Diversifying Acquisition, entered into
between the Company and any Unrelated Legal Entity (as defined below) that is of
such significance and importance to the Company that it is submitted to and
approved by the Company's Board of Directors (with Consultant, in his capacity
as a director, abstaining from any vote thereon) by resolution adopted prior to
the Closing Date with respect thereto.
Section 1.6 "Unrelated Legal Entity" shall mean any Unrelated Business
Entity or any natural person or group of natural persons theretofore
unaffiliated with and unrelated to the Company.
Section 1.7 "Closing Date" shall mean in the case of a Diversifying
Acquisition the legal closing date for the transaction by which the Company
acquires Control of the Unrelated Business Entity, and in the case of an
Alternative Diversifying Arrangement the date the contractual agreement(s) that
establish the date of such Alternative Diversifying Arrangement become(s)
legally binding on the parties under applicable law.
Section 1.8 "Lead" shall mean any specific business opportunity or idea
involving a specified Unrelated Legal Entity that is (1) originated or first
identified to the Company by Consultant, (2) presented by Consultant to the
Company as a possible transaction that may, if consummated, constitute a
Diversifying Arrangement, and (3) confirmed in writing by Consultant to the
Company as soon as practicable after it is originated or identified by
Consultant.
Section 1.9 "Qualifying Lead" shall mean any Lead with respect to which
Consultant is not informed in writing by the Company, within twenty (20) days
after the date of the Company's receipt of Consultant's written confirmation of
same, that such Lead does not qualify as a Qualifying Lead because either:
(a) In the case of a proposed Diversifying Acquisition, the Company
had identified the relevant Unrelated Business Entity as a potential subject of
a Diversifying Acquisition prior to the initial disclosure of such Lead to the
Company by Consultant, as shown by written records in existence at that time or
as evidenced by corroborating certifications or testimony by one or more Company
employees or third parties, or
(b) In the case of a proposed Alternative Diversifying Arrangement,
the Company had identified the relevant specific business opportunity or idea as
a potential Alternative Diversifying Arrangement prior to the initial disclosure
of such Lead to the Company by Consultant, as similarly shown by written records
or corroborating evidence.
Section 2. Consulting Relationship.
-----------------------
Section 2.1 Freedom to Contract. Consultant represents that he is free
to enter into this Agreement, that he has not made and will not make any
agreements in conflict with this Agreement, and will not disclose to the
Company, or use for the Company's benefit, any trade secrets or confidential
information now or hereafter in Consultant's possession which is the property of
any other party.
Section 2.2 Independent Contractor. This Agreement shall be construed
as an independent contractor's agreement for all purposes. Consultant shall be
independent and not an employee of the Company or of any affiliate of the
Company, and subject to the provisions of Section 3, Consultant shall control
the location and timing of the performance of his services hereunder.
Consultant and the Company are not partners or joint ventures with each other
with respect to the matters subject to this Agreement and nothing herein shall
be construed so as to make them such partners or joint ventures or to impose any
obligation or liability as such on them.
Section 3. Services Provided.
-----------------
Section 3.1 Consulting Services. In accordance with the provisions of
this Agreement, Consultant shall provide consulting services to the Company on
an as-needed basis, specifically by providing suggestions, direction and
assistance to the Company in finding and entering into Diversifying
Arrangements, and in particular by providing appropriate Leads to the Company.
The Company shall have no obligation to enter into any agreement or other
business arrangement of any kind as a result of its receipt of any Lead or
Qualifying Lead from Consultant. Consultant shall provide oral and/or written
reports to the Chief Executive Officer of Chemfab Corporation from time to time
to apprise the Company of the nature and extent of his efforts and the status of
any possible Diversifying Arrangements that he has or is investigating.
Consultant hereby accepts such engagement upon the terms and conditions set
forth herein.
Section 3.2 Secretarial Support. The Company shall provide secretarial
and administrative support to Consultant on a limited, as-needed basis,
particularly during such times as Consultant is performing services at the
Company's offices, but only to the extent that such support is reasonably
available from existing resources within the Company.
Section 4. Compensation, Expenses and Taxes.
--------------------------------
Section 4.1 Compensation and Expenses. The Company shall pay Consultant
$7,500 per month (and a corresponding pro rata amount for partial months) for
each month (or partial month) during which Consultant provides consulting
services hereunder, payable in arrears on the last day of each month. For the
term of this Agreement, the Company shall reimburse Consultant for documented,
reasonable out-of-pocket expenses incurred in the performance of consulting
services hereunder, provided that Consultant's requests for reimbursement
(together with reasonable supporting documentation) are submitted to the Company
within forty-five (45) days after the date on which such expenses were incurred.
Section 4.2 Grant of Options.
----------------
(a) If, as a result of any Qualifying Lead from Consultant, the
Company consummates a Diversifying Acquisition for which the Closing Date occurs
within twenty-four (24) months after the date of the Company's receipt of
Consultant's written confirmation of the related Lead, then, subject to Section
4.2(c) hereof, the Company shall grant Consultant, on the tenth (10th) business
day following such Closing Date, an option (an "Option") to purchase forty-five
thousand (45,000) shares of the Company's Common Stock; provided; however, that
if Consultant previously received an Option, pursuant to Section 4.2(b), with
respect to the same Unrelated Business Entity with which the Company consummated
such Diversifying Acquisition, then the Option granted to Consultant pursuant to
this Section 4.2(a) shall be an Option to purchase twenty-five thousand (25,000)
shares of the Company's Common Stock.
(b) If, as a result of any Qualifying Lead from Consultant, the
Company consummates an Alternative Diversifying Arrangement for which the
Closing Date occurs within twenty-four (24) months after the date of the
Company's receipt of Consultant's written confirmation of the related Lead,
then, subject to Section 4.2(c) hereof, the Company shall grant Consultant, on
the tenth (10th) business day following such Closing Date, an Option to purchase
twenty thousand (20,000) shares of the Company's Common Stock.
(c) No Option shall be granted hereunder unless Consultant, in his
capacity as Consultant, a director of the Company, or otherwise, is eligible on
the date of the grant of such Option to receive non-qualified stock options
under a Company stock option plan as in effect on such date (the "Plan"). The
number of shares for which Options may be granted pursuant to this Section 4.2,
and the number of shares for which any Option is exercisable, shall be
automatically adjusted, as appropriate, to account for any stock dividends,
stock splits or contractions, reclassifications, or similar changes in the
Company's Common Stock.
Section 4.3 Terms of the Option. Any Option shall (i) be granted
pursuant to the Plan as a non-qualified option, (ii) have an exercise price
equal to the closing price of the Company's Common Stock on the date of grant
thereof (or, in the event that no trading of the Company's Common Stock occurred
on such date, on the business day last preceding such date for which such
information was reported), (iii) vest in full on the date of grant thereof, and
(v) be subject to the terms and conditions of the Plan and an Option Agreement
representing such Option.
Section 4.4 Responsibility for Taxes. All compensation (including the
grant of Options) to be paid to Consultant hereunder shall be paid without
deduction or withholding of any federal, state, local or foreign taxes, and
Consultant shall be solely responsible for and pay all federal, state, local and
foreign taxes due with respect thereto and all other deductions required by law.
Consultant agrees to indemnify the Company and hold it harmless from and against
any liability, cost or expense (including, without limitation, court costs and
attorney's fees) resulting from Consultant's breach of his obligations under
this Section 4.4. The Company shall have the right to set off against any
payments owing to Consultant any amounts owed to the Company by Consultant as a
result of any breach of Consultant's obligations under this Section 4.4.
Section 5. Term.
----
Section 5.1 General. This Agreement shall take effect as of the date
first above written, and shall remain in effect until November 30, 1996, or
until earlier terminated under the provisions of this Section 5. This Agreement
may be renewed or extended by mutual written agreement of the parties.
Section 5.2 Survival of Certain Provisions. The provisions of the
following sections shall survive the termination of this Agreement: 4 (but, as
to Section 4.2, only with respect to any Leads (that subsequently become
Qualifying Leads hereunder) of which Consultant has given written confirmation
to the Company prior to or as of the date of termination of this Agreement) 5
and 7. Furthermore, termination of this Agreement shall not affect any other
obligations of either party that have accrued prior to or as of the date of
termination.
Section 5.3 Termination. The Company shall have the right upon thirty
(30) days' notice to terminate this Agreement without cause (as defined below),
and immediately upon notice to terminate this Agreement with cause (as defined
below), with no compensation to accrue or to be owing in respect of any period
after the effective date of such termination and no liability of any kind to
accrue on account of such termination. For the purposes of this Section 5.3,
the term "cause" shall mean a breach of this Agreement by Consultant.
Section 6. Confidentiality and Assignment of Inventions.
Simultaneously with the execution of this Agreement, the parties hereto shall
enter into an Independent Contractor Confidentiality and Assignment of
Inventions Agreement, substantially in the form of Exhibit A hereto (the
"Confidentiality Agreement"). Such Confidentiality Agreement shall survive any
termination of this Agreement.
Section 7. Provisions of General Application.
---------------------------------
Section 7.1 Governing Law. This Agreement and the rights and
obligations of the parties hereunder shall be construed, interpreted and
determined in accordance with the laws of the State of New Hampshire.
Section 7.2 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original and all of which, taken
together, shall constitute one and the same instrument. In making proof of this
Agreement it shall not be necessary to produce or account for more than one such
counterpart.
Section 7.3 Entire Agreement. This Agreement, including the
Confidentiality Agreement, represents the entire understanding and agreement
between the parties as to the subject matter hereof. No prior, concurrent or
subsequent agreement, whether written or oral, shall be construed to change,
amend, alter, repeal or invalidate this Agreement, unless this Agreement is
specifically identified in and made subject to such other written agreement.
Section 7.4 Amendment. This Agreement may be amended only by a written
instrument executed in one or more counterparts by the parties hereto.
Section 7.5 Waiver. No consent to or waiver of any breach or default in
the performance of any obligation hereunder shall be deemed or construed to be a
consent to or waiver of any other breach or default in the performance of any of
the same or any other obligation hereunder. Failure on the part of either party
to complain of any act or failure to act of the other party or to declare the
other party in default, irrespective of the duration of such failure, shall not
constitute a waiver of rights hereunder and no waiver hereunder shall be
effective unless it is in writing, executed by the party waiving the breach or
default hereunder.
Section 7.6 Headings. The headings of sections and subsections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement or to affect the meaning of any of its
provisions.
Section 7.7 Severability. If any provision of this Agreement shall, in
whole or in part, prove to be invalid for any reason, such invalidity shall
affect only the portion of such provision which shall be invalid, and in all
other respects this Agreement shall stand as if such invalid provision, or the
invalid portion thereof, had not been a part hereof.
Section 7.8 Notices and Other Communications. All notices and other
communications required hereunder shall be effective if in writing and if
delivered by hand or set via U.S. mail or telecopier (a) if to Consultant, at
his residence address first set forth above, and (b) if to the Company, at its
principal business address first set forth above, or to such other persons or
addresses as the parties hereto may specify by a written notice to the other
from time to time.
IN WITNESS WHEREOF, this Agreement has been executed by the Company, by its
duly authorized officer, and by Consultant, as of the date first above written.
CHEMFAB CORPORATION
By:
------------------------------------------
- -
Duane C. Montopoli
Chief Executive Officer
By:
------------------------------------------
- - Dr. Nicholas Pappas
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000725813
<NAME> YVETTE DESMARAIS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-29-1996
<CASH> $1,752,000
<SECURITIES> 0
<RECEIVABLES> 18,314,000
<ALLOWANCES> 388,000
<INVENTORY> 14,603,000
<CURRENT-ASSETS> 37,739,000
<PP&E> 40,798,000
<DEPRECIATION> 20,209,000
<TOTAL-ASSETS> 71,848,000
<CURRENT-LIABILITIES> 10,251,000
<BONDS> 0
0
0
<COMMON> 820,000
<OTHER-SE> 59,276,000
<TOTAL-LIABILITY-AND-EQUITY> 71,848,000
<SALES> 19,938,000
<TOTAL-REVENUES> 19,938,000
<CGS> 13,191,000
<TOTAL-COSTS> 13,191,000
<OTHER-EXPENSES> 4,178,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,000
<INCOME-PRETAX> 2,493,000
<INCOME-TAX> 793,000
<INCOME-CONTINUING> 1,700,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,700,000
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
