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 28, 1997
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 31, 1997
Common Stock, $ .10 par value 7,925,042 shares
CHEMFAB CORPORATION
INDEX
Part I - Financial Information: Page No.
---------
Item 1 - Financial Statements
--------------------
Consolidated Balance Sheets at September 3 - 4
28, 1997 and June 30, 1997
Consolidated Statements of Income for 5
the Three Months Ended September 28,
1997 and September 29, 1996
Consolidated Statements of Cash Flows 6
for the Three Months Ended September
28, 1997 and September 29, 1996
Notes to Consolidated Financial Statements 7
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
CHEMFAB CORPORATION
CONSOLIDATED BALANCE SHEETS
September 28, June 30,
1997 1997
------------- ------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 7,395,000 $ 8,055,000
Receivables:
Trade 17,244,000 17,078,000
Other 123,000 425,000
Costs and estimated earnings in excess of
billings on uncompleted contracts 1,209,000 1,741,000
Inventories 17,414,000 16,373,000
Prepaid expenses, and other 1,356,000 1,174,000
Deferred tax assets 772,000 770,000
------------- ------------
Total current assets 45,513,000 45,616,000
Property, plant and equipment at cost 44,773,000 43,937,000
Less accumulated depreciation 23,112,000 22,465,000
------------- ------------
Net property, plant and equipment 21,661,000 21,472,000
Goodwill, net 10,209,000 10,740,000
Other assets 2,650,000 2,737,000
------------- ------------
Total assets $ 80,033,000 $ 80,565,000
============= ============
See accompanying Notes to Consolidated Financial Statement
CHEMFAB CORPORATION
CONSOLIDATED BALANCE SHEETS
September 28, June 30,
1997 1997
------------- ---------------
(Unaudited)
Current liabilities:
Accounts payable and accrued
expenses $ 8,617,000 $ 10,169,000
Accrued income taxes 2,864,000 2,119,000
Billings in excess of costs and
estimated earnings on
uncompleted contracts 110,000 102,000
------------- --------------
Total current liabilities 11,591,000 12,390,000
Deferred tax liabilities 1,790,000 1,790,000
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 8,605,660 at Sept, 28, 1997
and 8,521,000 at June 30, 1997 861,000 852,000
Additional paid-in capital 23,687,000 22,749,000
Retained earnings 52,144,000 50,104,000
Treasury stock, at cost
(641,344 shares at Sept. 28, 1997
and 547,719 at June 30, 1997) (9,897,000) (8,007,000)
Foreign currency translation
adjustment (143,000) 687,000
-------------- --------------
Total shareholders' equity 66,652,000 66,385,000
-------------- --------------
Total liabilities and shareholders' $ 80,033,000 $ 80,565,000
equity ============= ==============
See accompanying Notes to Consolidated Financial Statements
CHEMFAB CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
---------------------------------
Sept. 28, 1997 Sept. 29, 1996
-------------- --------------
Net Sales $ 22,154,000 $ 19,938,000
Cost of sales 14,595,000 13,191,000
------------- -------------
Gross Profit 7,559,000 6,747,000
Selling, General and
Administrative Expenses 3,969,000 3,684,000
Research and Development 659,000 562,000
Other Expense (Income) 16,000 (21,000)
Interest (Income) Expense, Net (82,000) 29,000
------------- -------------
Income Before Income Taxes 2,997,000 2,493,000
Provision For Income Taxes 959,000 793,000
------------- -------------
Net Income $ 2,038,000 $ 1,700,000
============= =============
Weighted Average Common and
Common Equivalent Shares 8,281,000 8,238,000
============= =============
Earnings Per Share $0.25 $0.21
----- -----
See accompanying Notes to Consolidated Financial Statements.
<TABLE>
<S><C>
CHEMFAB CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
--------------------------------
Sept. 28, 1997 Sept. 29, 1996
-------------- --------------
Cash flows from operating activities:
Net income $ 2,038,000 $ 1,700,000
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization 1,205,000 1,062,000
Change in assets and liabilities:
Receivables (114,000) (95,000)
Costs and estimated earnings in excess
of billings on uncompleted contracts, net 540,000 (377,000)
Inventories (1,262,000) (945,000)
Prepaid expenses and other (199,000) (128,000)
Other assets (68,000) (193,000)
Accounts payable and accrued expenses (1,427,000) (1,314,000)
Income taxes 825,000 419,000
----------- ------------
Total adjustments (500,000) (1,571,000)
----------- ------------
Net cash provided by operating activities 1,538,000 129,000
Cash flows from investing activities:
Capital expenditures (net) (1,205,000) (761,000)
----------- ------------
Net cash used in investing activities (1,205,000) (761,000)
Cash flows from investing activities:
Proceeds from exercise of stock options 946,000 1,219,000
Repayment of long-term debt 0 (2,382,000)
Purchase of treasury shares (1,889,000) (1,450,000)
----------- ------------
Net cash used in financing activities (943,000) (2,613,000)
Effect of exchange rate changes on cash (50,000) (20,000)
----------- ------------
Net decrease in cash and cash equivalents (660,000) (3,265,000)
Cash and cash equivalents at beginning of year 8,055,000 5,017,000
----------- ------------
Cash and cash equivalents at end of period $ 7,395,000 $ 1,752,000
=========== ============
Interest paid $ 0 $ 106,000
Income taxes paid $ 203,000 $ 152,000
See accompanying notes to the Consolidated Financial Statements
</TABLE>
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 28, 1997 and June 30, 1997 and the
consolidated statements of income and cash flows for the three months
ended September 28, 1997 and September 29, 1996. 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, 1997 (file no.
0-12948).
Note 2 Inventories consist of the following:
Sept. 28, 1997 June 30,1997
-------------- ------------
Finished Goods $ 6,370,000 $ 6,153,000
Work in Process 6,675,000 5,597,000
Raw Materials 4,369,000 4,623,000
------------- -------------
$17,414,000 $16,373,000
============== =============
Note 3 In connection with the CERCLA litigation the Bennington Landfill
Superfund Site described in Part 1, Item 3 in the fiscal year 1997,
Annual Report, the District Court has approved the Consent Decree and
the settlement payment has been made.
Various other 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, 1997. 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.
ITEM 2 Management's Discussion and Analysis of Financial Condition
----------------------------------------------------------
and Results of Operations
------------------------
Three Months Ended September 28, 1997
- -------------------------------------
Net Sales
- ---------
The Company's consolidated net sales for the three months ended September 28,
1997, the first quarter of fiscal 1998, increased 11% to $22,154,000 from
$19,938,000 in the same quarter last year. Shipments of the Company's
engineered products worldwide increased 10% over the year earlier period while
shipments of architectural products rose 18%.
Engineered Products - Americas Business Group sales (which include all non-
architectural product sales to customers in North America and South America)
increased 13% to $10,051,000 from $9,843,000 for the same quarter last year.
This sales increase resulted principally from strength in the Company's food
processing, protective systems, 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 slightly to $6,166,000 from $6,142,000 in the same quarter
last year. During the fiscal 1998 quarter, reported revenue was adversely
impacted by weaker mainland European currencies relative to the British Pound
Sterling. Had these currency exchange rates remained unchanged from the prior
year, European Business Group sales for the quarter, prior to translation into
U.S. dollars, would have increased 6% over the same quarter a year ago. Sales
growth (before the effects of currencies) is expected to continue at
approximately this level for the remainder 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 16% to $1,500,000 from $1,294,000 in the same quarter last year. This
increase was the result of a continued marketing emphasis and sales focus into
this geographic area since the establishment of this business group
approximately two years ago. Percentage revenue growth from industrial product
shipments into the Asia Pacific region is expected to remain strong through the
fiscal year.
Architectural Product sales increased 18% to $3,128,000 from $2,659,000 in the
same quarter last year. This increase in revenues was the result of an increase
in 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
significantly above the levels achieved last year.
Gross Profit Margins
- --------------------
Gross profit margins as a percentage of consolidated net sales improved to 34.1%
for the quarter, up from 33.8% for the first quarter of last year. The
improvement is principally attributable to improved manufacturing efficiencies
and targeted cost-reduction programs.
Selling, Administrative, Research and Development Expenses
- ----------------------------------------------------------
Selling, general and administrative expenses increased 8% to $3,969,000 from
$3,684,000 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 Japan and Brazil, as well as normal increases in salaries and
other costs. Selling, general and administrative expenses as a percentage of
sales was 18%, down slightly from the first quarter of last year.
Research and development expenses were $659,000 compared to last year's level of
$562,000. 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 income of $82,000 for the quarter compared to net
interest expense of $29,000 for the same quarter last year. This decrease in
interest expense resulted from the repayment of debt incurred to finance the
Tygaflor business acquisition.
Liquidity and Capital Resources
- -------------------------------
During the quarter ended September 28, 1997, the Company generated $1,538,000 of
cash from operations which was up from the same quarter of the prior year.
During this same period, the Company invested $1,205,000 in property, plant and
equipment additions, and expended $1,889,000 to repurchase stock under its share
repurchase program. The Company also received $946,000 in cash proceeds and
related tax benefits from the exercise of stock options during this period.
Working capital increased to $33,923,000 from $33,227,000 at the end of fiscal
1997. As of September 28, 1997, the Company had approximately $21 million of
additional credit available under its domestic and international borrowing
facilities. 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 1998 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 that projected or suggested due to certain risks and
uncertainties. Additional information concerning certain risks and
uncertainties that could cause actual results to differ materially from that
projected or suggested is contained in the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1997 which has been filed with the Securities
and Exchange Commission. 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(a)(3) Employment Agreement with Mr. Duane C. Montopoli, dated May
29, 1992 and effective July 1, 1992, as amended by Amendment to
Employment Agreement dated July 1, 1994.
10(a)(12) Amendment No. 2 to Second Amended and Restated 1991 Stock
Option Plan.
10(a)(13) Letter Agreement with Mr. Thomas C. Platt III dated June 26,
1997.
10(a)(14) Employment Agreement with Dr. John W. Verbicky dated August
5, 1997.
10(b)(3) Purchase and Sale Agreement, relating to Birdair Inc. dated
as of March 27, 1992 between Taiyo Kogyo Corporation and the Company.
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/ Hilary A. Arwine
--------------------------------------
Hilary A. Arwine
Controller
(Principal Accounting Officer)
Date: November 12, 1997
CHEMFAB CORPORATION
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT, dated as of the 29th day of May, 1992, by and between
Duane C. Montopoli, an individual residing at 108 Campion Road, North Andover,
Massachusetts 01845 (the "Employee"), and Chemfab Corporation, a Delaware
corporation with its principal place of business at 701 Daniel Webster Highway,
Merrimack, New Hampshire 03054 (the "Employer")
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. Freedom to Contract. The Employee hereby represents that he is
free to enter into this Agreement and that he has not made and will not make any
agreement in conflict with this Agreement.
Section 2. Employment and Effective Date. This Agreement is effective as
of June 1, 1992 (the "Effective Date"). As of the Effective Date, the Employer
hereby continues to employ the Employee, and the Employee hereby accepts his
continued employment by the Employer, as President and Chief Executive Officer
of the Employer, upon the terms and conditions set forth herein.
Section 3. Duties and Authority. Subject to the general direction and
control of the board of directors of the Employer (the "Board of Directors"),
the Employee hereby agrees to use his best efforts, including the highest
standards of professional competence and integrity, and shall devote his full
business time and effort, in and to his employment and the duties of his office
hereunder and shall not engage in any other business activity except that
Employee may engage from time to time in such personal investment activities
as to not interfere with his day-to-day responsibilities to the Employer.
Employee's authority, including without limitation his authority to bind
Employer to contracts, instruments and expenditures of any kind and to dispose
of or encumber corporate assets, shall not be less than that specified in or
incidental to the terms of Section 3.7 of Employer's By-Laws as presently in
effect, and not less than that customary to the office of President and Chief
Executive Officer of an industrial corporation. At any time when any
class of securities of the Employer is registered under section 12 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or when
the Employer is required to file reports under section 15 of the Exchange
Act: (i) the Employee shall report directly and exclusively to the Board of
Directors, and (ii) the Employer shall each year nominate, and make best
efforts to cause the election of, the Employee to a seat on the Board of
Directors.
Section 4. Term; Termination; Rights Upon Termination.
-------------------------------------------
(a) This Agreement shall take effect as of the Effective Date, and
shall remain in full force and effect until terminated in accordance with the
provisions hereof. Notwithstanding anything else herein contained, the
provisions of Sections 6 and 7, and any rights under other provisions hereof
which are vested at the time of termination of employment, shall
survive the termination of this Agreement and of Employee's employment
hereunder.
(b) The Employer may at any time immediately terminate the employment
of the Employee under this Agreement for Cause (as hereinafter defined),
upon written notice. For purposes of this Agreement, the term "Cause" shall
mean (i) a material breach by the Employee of any term of this
Agreement (other than by reason of or resulting from any disability or
illness on his part), (ii) gross and willful misconduct (including, without
limitation, fraud or theft) on the part of the Employee in the
performance of his duties, or his being convicted of a felony, or
(iii) the Employee becoming "permanently disabled," which shall mean that the
occurrence of a mental or physical condition has rendered the Employee incapable
of performing his duties for any period of six consecutive months and such
incapacity is confirmed as continuing at the end of such period by expert
medical opinion. "Cause" shall not include unsatisfactory performance of
duties except as provided above. The Employee may at any time
immediately terminate his employment under this Agreement for Reason (as
hereinafter defined), upon written notice. For purposes of this
Agreement, the term "Reason" shall mean (x) a material breach by the
Employer of any term of this Agreement, (y) any event of bankruptcy or
insolvency in respect of Employer, or (z) any reduction in the duties or
authority of Employee to a level less than customary to the office of
President and Chief Executive Officer of an industrial corporation (
subject to the terms of Employer's By-Laws as presently in effect).
Subject to the remainder of this Section 4, either party may at any
time terminate the employment of Employee under this Agreement upon thirty
(30) days' written notice to the other party, without Cause or Reason, as the
case may be.
(c) In the event that the Employer terminates the employment of
the Employee for Cause as described in Section 4(b) hereof, or Employee
terminates such employment without Reason, then the Employer shall pay and
provide to the Employee at the time otherwise due under Section 5 hereof:
all Salary due to the Employee under said Section 5 that had accrued through the
time of such termination (whether owed currently, or on a deferred basis (in
which case it shall be paid on a deferred basis), all in accordance with the
terms of Section 5); all benefits due to the Employee under said Section 5
that had accrued through the time of such termination; and all Bonus due
to the Employee under said Section 5 that had accrued through the fiscal yearend
of the Employer most recently preceding (or coinciding with) the date of
such termination (whether owed currently, or on a deferred basis (in which case
it shall be paid on a deferred basis), all in accordance with the terms of
Section 5). In addition to the foregoing, if the Employer terminates the
employment of the Employee for Cause as described in Section 4(b)(iii) above,
then the Employer shall pay and provide to the Employee, at the time
otherwise due under Section 5 hereof: (x) in respect of a period (the
"Waiting Period") commencing on the date of such termination and continuing
until such time as benefits under both any group long-term disability insurance
policy and any supplemental individual long-term disability insurance policy
maintained at such time by Employer and covering the permanent disability of
the Employee begin to be payable and the Employee begins to receive payments of
such benefits under both such policies: (A) all benefits that would have
accrued to the Employee under said Section 5 if the Employee had continued
to be employed by the Employer under the terms of this Agreement throughout the
Waiting Period; and (B) the excess of: (I) all Salary that would have
accrued to the Employee at the annual contractual rate under said Section 5
(whether owed currently, or on a deferred basis (in which case it shall be paid
on a deferred basis), all in accordance with the terms of Section 5) if the
Employee had continued to be employed by the Employer under the terms of this
Agreement throughout the Waiting Period, over (II) the amount of any
cash benefits actually received by Employee in respect of the Waiting
Period on account of any group short-term or group or supplemental long-term
disability insurance policy maintained by Employer; and (y) an amount (a
"Pro Rata Bonus Amount") computed by multiplying (A) the fraction computed by
dividing (I) the number of days elapsed in the fiscal year in which the
termination occurred up to and through the effective date of the termination, by
(II) 365, by (B) the amount of Bonus that would have been due to the Employee
under Section 5 hereof if Employee had remained employed under the terms
of this Agreement through the end of the fiscal year in which the
termination occurs (whether owed currently, or on a deferred basis (in which
case it shall be paid on a deferred basis), all in accordance with the terms of
Section 5).
(d) In the event that the employment of the Employee is terminated as a
result of the death of the Employee, then the Employer shall: (i) pay and
provide to the estate, heirs or devisees of the Employee, at the time otherwise
due under Section 5 hereof, (A) all Salary due to the Employee under said
Section 5 that had accrued to the time of his death and all Salary that would
have accrued to the Employee at the annual contractual rate under said Section 5
if the Employee had continued to be employed by the Employer under the terms of
this Agreement for a period of nine (9) months commencing on the date of the
Employee's death (in each case whether owed currently, or on a deferred basis
(in which case it shall be paid on a deferred basis), all in
accordance with the terms of Section 5), (B) all Bonus due to the Employee
under said Section 5 that had accrued through the fiscal yearend of
the Employer most recently preceding (or coinciding with) the date of
Employee's death (whether owed currently, or on a deferred basis (in which
case it shall be paid on a deferred basis), all in accordance with the
terms of Section 5), and (C) a Pro Pata Bonus Amount; and (ii) maintain during
the period of nine (9) months commencing on the date of Employee's death, for
the benefit of the Employee's family, such of the benefits that would have
been provided under Section 5 hereof as apply to Employee's family,
including without limitation, group health insurance coverage of
substantially the same kind and in no lesser amounts than in effect for the
benefit of the members of the Employee's family on the date of the Employee's
death.
(e) In the event that: (A) the Employer shall at any time terminate the
employment of the Employee without Cause, or (B) the Employee shall
terminate his employment for Reason, then, and in each such case, the Employer
shall pay and provide to the Employee at the time otherwise due under Section 5
hereof: (i) all Salary due to the Employee under said Section 5 that had
accrued through the time of such termination and all Salary that would have
accrued to the Employee at the annual contractual rate under said
Section 5 if the Employee had continued to be employed by the Employer under the
terms of this Agreement through the day nine (9) months after the date of such
termination of employment (the "Severance Termination Date") (in each case
whether owed currently, or on a deferred basis (in which case it shall
be paid on a deferred basis), all in accordance with the terms of Section
5); (ii) all Bonus due to the Employee under said Section 5 that had
accrued through the fiscal yearend of the Employer most recently
preceding (or coinciding with) the date of such termination (whether owed
currently, or on a deferred basis (in which case it shall be paid on a
deferred basis), all in accordance with the terms of Section 5); (iii) all
benefits due to the Employee under said Section 5 that had accrued through the
time of such termination and all benefits that would have accrued to the
Employee under said Section 5 if he had continued to be employed by the Employer
under the terms of this Agreement through the Severance Termination Date;
and (iv) a Pro Rata Bonus Amount.
(f) All rights of Employee to compensation and benefits under
the terms of this Section 4 are absolute with no requirement to mitigate
damages. Notwithstanding the foregoing, if the Employee is in fact
gainfully employed during any period (a "Severance Period") in respect of which
compensation and/or benefits is/are due him under the terms of this Agreement
after the termination of his employment under the terms of this Agreement,
then any cash amounts actually received by Employee as salary or bonus on
account of such subsequent employment in respect of the Severance Period
shall operate dollar for dollar as a credit against the amounts due from
Employer to Employee in respect of the Severance Period; provided, that the
provisions of this sentence shall not apply, and no such offset or credit
shall operate (whether dollar-for-dollar or otherwise), if the termination
of employment occurs after the completion of a transaction in which
substantially all the outstanding voting stock or substantially all the
assets of the Employer is or are acquired by any person or group of persons
or Employer is party to a merger or consolidation of which Employer is
not in economic substance the predominant surviving entity.
Section 5. Compensation and Benefits.
--------------------------
(a) The Employee shall be paid salary at an annual rate of $205,000
(the "Salary"), such payments to be made (subject to the provisions of
Section 5(c) of this Agreement) as customarily disbursed by the Employer.
Such Salary shall be reviewed by the Board of Directors, for possible
increase (and in no event for decrease during the term of this Agreement),
annually as of September 1 of each year during the term of this Agreement
commencing with September 1, 1992, but Employer shall have no obligation to
increase the Salary. If any such review results in an increase in
the Salary, then the Salary as so increased shall then be the Salary
for purposes of this Agreement. The Employer shall promptly reimburse the
Employee for all ordinary and necessary expenses incurred by the Employee on
behalf of the Employer, upon the presentation of customary vouchers and
reimbursement slips. The Employee shall be entitled to participatein
all fringe benefits made available under Employer's "exempt" benefits
package from time to time to senior executive personnel of the Employer;
provided, that the fringe benefits available to the Employee under this
Agreement shall in any event include the following: (i) Employer shall
maintain at the expense of the Employer, and for the benefit of
beneficiaries named by Employee, in addition to any group life insurance
policy on the life of Employee provided under such exempt benefits
package, a term life insurance policy throughout the term of this Agreement in
the amount of $750,000; (ii) Employer shall maintain at the expense of the
Employer, in addition to any group disability policy provided under such
exempt benefits package, a long-term disability policy, for the benefit
of Employee throughout the term of this Agreement, with benefits (without
offset) equal to 75% of the Salary (without cap) from time to time;
(iii) Employer shall provide to Employee the use of an automobile of
Employee's choice, to be (or to have been) new when first provided to Employee
and to be at any time not more than four years or 75,000 miles old, to be
acquired by purchase or lease at Employer's option, and to have a purchase
price at the time of such acquisition not greater than $45,000 (such dollar
amount to be adjusted for any percentage change in the Consumer Price
Index -- All Urban Consumers (U.S.) (or other equivalent index of the Bureau of
Labor Statistics (or other federal government agency serving similar
function) then available) between the Effective Date and the date of such
acquisition of such automobile by the Employer); and (iv) Employee shall be
entitled to paid vacation accrued at a rate of 15 business days' vacation
per twelve-month period that he is employed under the terms of this Agreement.
(b) In addition to the Salary, Employee shall be paid, in respect of each
fiscal year of the Employer at the end of which Employee is employed under the
terms of this Agreement (and not otherwise, except that in respect of the
fiscal year in which his employment terminates, Employee shall be paid a Pro
Rata Bonus Amount if Section 4 hereof provides in such case for such payment),
as a bonus (the "Bonus"), an amount not less than the sum of (A) the amount of
the "Sales Bonus" in respect of such fiscal year calculated as provided in part
A of the table set forth immediately below, plus (B) the amount of the "Earnings
Bonus" in respect of such fiscal year calculated as provided in part B of
said table; provided, that for purposes of the calculation of the Sales Bonus,
"Sales" shall be defined as net sales of the Employer and its consolidated
subsidiaries on a consolidated basis, calculated in accordance with generally
accepted accounting principles; provided, further, that for purposes of
the calculation of the Earnings Bonus, "EPS" shall be determined by dividing
Consolidated Net Income (as below defined) by the number of shares that
would be used in a primary earnings per share calculation determined in
accordance with generally accepted accounting principles consistently
applied; and provided, further, that any performance bonus to be paid to
Employee at any time in excess of the sum of the amounts of the Sales Bonus and
the Earnings Bonus shall be in the sole and unfettered discretion of the Board
of Directors and shall in no event be required by this Agreement.
A B
Sales Bonus Earnings Bonus
----------- --------------
Sales Growth Bonus As "EPS" Growth Bonus As
Over Pre- % of Year's Over Pre- % of Year's
ceding Year Base Pay ceding Year Base Pay
----------- -------- ----------- --------
50% + 45% 100% + 55%
48% 43% 95% 53%
46% 41% 90% 51%
44% 39% 85% 49%
42% 37% 80% 47%
40% 35% 75% 45%
38% 33% 70% 42%
36% 31% 65% 39%
34% 29% 60% 36%
32% 27% 55% 33%
30% 25% 50% 30%
27% 21% 47% 26%
24% 18% 44% 22%
21% 15% 41% 19%
18% 13% 38% 16%
15% 11% 35% 14%
12% 9% 32% 12%
9% 7.5% 29% 10.5%
6% 6% 26% 9%
Less than 6% -0- 23% 7.5%
20% 6%
Less than 20% -0-
Examples: (I) If Salary for FY 1994 =
$220,000, net sales for FY 1994 =
$61 million, net sales for FY 1993
= $57 million, EPS for FY 1994 =
$1.80, and EPS for FY 1993 = $1.20,
then total Bonus in respect of FY
1994 = $79,200 ($220,000 x [6% +
30%]).
(II) If same facts as Example I
except net sales for FY 1994 = $95
million and EPS for FY 1994 =
$4.00, then total Bonus in respect
of FY 1994 = $220,000 ($220,000 x
[45% + 55%]).
Subject to the provisions of Section 5(c) of this Agreement, the Bonus in
respect of each fiscal year shall be paid to Employee not later than the day 75
days after the last day of such fiscal year. Notwithstanding anything
else contained in this Section 5(b) with respect to the calculation of
the Sales Bonus: (i) payment of the Sales Bonus shall be in the sole and
unfettered discretion of the Board of Directors and shall not be required by the
terms of this Agreement in respect of any fiscal year in respect of which
income before income tax of the Employer and its consolidated
subsidiaries on a consolidated basis, calculated in accordance with
generally accepted accounting principles consistently applied but without
regard to any and all senior management bonuses (including without
limitation the Bonus), ("Consolidated Net Income") is less than one-half
(1/2) the sum of the Consolidated Net Income in respect of the two-year
period ended on the last day before the commencement of such fiscal year; and
(ii) if any consolidated subsidiary, division or portion of the business of
Employer or any consolidated subsidiary was acquired as a going business by
Employer or any consolidated subsidiary during the fiscal year in respect of
which the Sales Bonus is being calculated or at any time during the
one-year period ended on the last day before the commencement of such fiscal
year, then all net sales calculations for purposes of computing the Sales Bonus
(but no Consolidated Net Income calculation for purposes of clause (i) of this
paragraph) in respect of any period before the consummation of such
acquisition shall be made on a pro forma basis as if the acquisition had been
consummated before any period relevant to the calculation of net sales for
purposes of the Sales Bonus.
(c) Notwithstanding anything else contained in this Section 5,
Employee may, before the first day of any fiscal year of the Employer, by
written notice to the Employer irrevocably cause all, or any such portion(s)
as such notice may designate, of the Salary and/or Bonus in respect of such
ensuing fiscal year to be due and payable at any such date or dates (subsequent
to the date or dates when such Salary or Bonus would otherwise, be payable
hereunder (each a 'Normal Due Date")) as such notice may designate (each a
"Deferred Due Date"). From and after each Normal Due Date and until the
corresponding Deferred Due Date, the relevant deferred amount of Salary and/or
Bonus shall accrue interest at an annual rate two and one-half percentage points
(2.5%) less than the rate publicly announced from time to time by Manufacturers
and Traders Trust Company as its prime rate (compounded quarterly). The
relevant deferred amount and all interest so accrued thereon shall be
an unsecured general obligation of Employer, due and payable on the
Deferred Due Date.
Section 6. Level A Agreement. The Level A Employee Agreement dated as of
January 12, 1988 between Employer and Employee (the "Level A Agreement")
shall survive the execution of this Agreement and shall remain in full force
and effect in accordance with its terms.
Section 7. Miscellaneous.
-------------
(a) All notices given under any provisions of this Agreement shall
be in writing and mailed by registered or certified mail, return receipt
requested, or delivered by hand, to the Employer to its Secretary at
its principal place of business, and to the Employee at the address set forth
in the first page of this Agreement, or such other address, in each case,
as the addressee shall have last furnished to the communicating party, and
shall be effective when received or, if sooner, five days after such mailing.
(b) Except as otherwise expressly provided herein, this Agreement
shall be binding upon, and inure to the benefit of, the parties
hereto, their heirs, legal representatives, successors and assigns
(whether by purchase, merger or otherwise) . Neither party may assign any
of its rights or obligations hereunder without the prior written consent of
the other party hereto, except that Employer may assign its rights
hereunder to a successor corporation to Employer.
(c) 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
but one and the same instrument, and in making proof of this Agreement it shall
be necessary to produce only one such counterpart without the necessity of
accounting for any other counterparts.
(d) That certain Employment Agreement between the parties hereto
dated as of June 30, 1989 (the "Prior Employment Agreement") is hereby
rescinded, superseded and rendered void and without effect, as of the
Effective Date and thereafter, other than as to rights already vested, and in no
event shall any compensation or benefit provisions hereof and thereof of
essentially similar import confer a double benefit as to any period of
employment, but rather the provisions of this Agreement shall
control as applicable. As of the Effective Date and thereafter, in case
of any conflict between, on the one hand, this Agreement, the Level
A Agreement, any stock option agreements executed between the Employer
and the Employee and held by the Employee, and/or any other agreement
specifically referenced herein (other than the Prior Employment
Agreement) (all (except this Agreement) collectively the "Referenced
Agreements"), and, on the other hand, any instrument, agreement or understanding
(written or oral) not specifically referenced herein, the terms and
conditions of this Agreement and the Referenced Agreements shall control.
(e) 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 performance of any of the same
or any other obligations hereunder. Failure on the part of any party to
complain of any act or failure to act of any other party or to declare any party
in default, irrespective of how long such failure continues, 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 a breach
or default hereunder.
(f) This Agreement may not be amended or modified except by an
instrument in writing executed by each of the parties hereto.
(g) If any provision of this Agreement or the Level A Agreement shall, in
whole or in part, prove to be invalid for any reason in any circumstances,
such invalidity shall affect only the portion of such provision which shall
be invalid and only in such circumstances, and no other portion or provision
of this Agreement or the Level A Agreement shall be invalidated,
impaired or affected thereby, nor shall be such provision or
portion in any other circumstances.
(h) The headings of sections of this Agreement are for convenience of
reference only and are not intended to affect its meaning or construction.
(i) The validity, enforceability and interpretation of any and all of the
provisions of this Agreement shall be determined in accordance with and
governed by the laws of the State of New Hampshire.
(j) Each of the parties represents that he or it has not used any
employment counsellor or other person who would be entitled to any compensation
which has not been paid for arranging or obtaining the employment hereby
governed.
(k) Any dispute under or relating to this Agreement shall be resolved
promptly by arbitration in New Hampshire by an arbitrator selected by, and
under the rules of, the American Arbitration Association; such arbitrator shall
have the power to award monetary damages, punitive damages, injunctive
relief, costs and attorneys fees, and other appropriate relief; and
judgment upon the award of such arbitrator may be entered in any court
having jurisdiction thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
an instrument under seal as of the date first written above.
CHEMFAB CORPORATION
By /s/ Duane Montopoli
------------------------
Title: President & CEO
---------------------
/s/ Duane C. Montopoli
---------------------------
Duane C. Montopoli
CHEMFAB CORPORATION
AMENDMENT
TO
EMPLOYMENT AGREEMENT
This AMENDMENT (this "Amendment") to Employment Agreement is made as of
July 1, 1994 by and between Duane C. Montopoli, an individual residing at 108
Campion Road, North Andover, Massachusetts 01845 (the "Employee"), and Chemfab
Corporation, a Delaware corporation with its principal place of business at
701 Daniel Webster Highway, Merrimack, New Hampshire 03054 (the "Employer").
W I T N E S S E T H:
WHEREAS, the Employee and the Employer are parties to that certain
Employment Agreement dated as of May 29, 1992 (the "Employment Agreement"); and
WHEREAS, the Employee and the Employer desire to amend the Employment
Agreement in the manner provided below.
NOW, THEREFORE, in consideration of the foregoing premises and the
Employee's continued employment with the Employer, the parties hereto hereby
agree as follows:
SECTION 1. Definitions. Capitalized terms used herein without definition
shall have the respective meaning provided for such terms in the Employment
Agreement.
SECTION 2. Modification of the Employment Agreement.
---------------------------------------
2.1 Section 5(b). Section 5(b) of the Employment Agreement is hereby
amended and restated to read in its entirety as follows:
"(b) In addition to receiving the Salary, during the term
of this Agreement, Employee shall be entitled to participate
in any and all cash bonus plans, and other variable compensation
arrangements, established for the corporate officers of Employer
and approved by the Board of Directors from time to time (any and
all such plans and arrangements being hereinafter referred to as
"Bonus Plans"). The amount of any bonus earned by the Employee
pursuant to any and all Bonus Plans in respect of any fiscal year
of the Employer shall hereinafter be referred to as a "Bonus"."
2.2 Section 4. Sections 4(c), 4(d) and 4(e) of the Employment Agreement
are hereby modified and amended to eliminate therefrom any specific right of
the Employee to receive from the Employer, and any specific obligation of the
Employer to pay to the Employee, any Bonus or any Pro Rata Bonus Amount pursuant
to the Employment Agreement upon any termination of the Employee's employment
with the Employer or with respect to the year in which such termination occurs
or any portion thereof (regardless of the circumstances of such termination and
of whether such termination is effected by the Employer or Employee), since,
from and after the date of this Amendment, any right of the Employee to receive
from the Employer and any obligation of the Employer to pay to the Employee, any
amount in respect of any Bonus upon or after the termination of Employee's
employment with the Employer or with respect to the year in which such
termination occurs or any portion thereof shall be as provided pursuant to the
terms of any and all Bonus Plans then in effect and the Company's practices
thereunder.
SECTION 3. Ratification. Except to the extent amended hereby, all of the
terms, provisions and conditions of the Employment Agreement are hereby ratified
and confirmed and shall remain in full force and effect. The term "Agreement'.
as used in the Employment Agreement, shall be deemed a reference to the
Employment Agreement as amended by this Amendment.
SECTION 4. Entire Agreement. The Employment Agreement and this Amendment,
together with the other writings referred to therein and herein, contain the
entire agreement among the parties with respect to the subject matter thereof
and hereof and shall be read and construed together as a single agreement.
SECTION 5. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of New Hampshire, excluding the choice
of law rules thereof.
SECTION 6. Headings. The headings of the various sections of this Amendment
have been inserted for convenience of reference only and shall not be deemed a
part of this Amendment.
SECTION 7. Counterparts. This Amendment may be executed in any number of
counterparts, any 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 hereto have executed this Amendment as of
the date first above written.
CHEMFAB CORPORATION
By /s/ Duane C. Montopoli
------------------------------
Name: Duane C. Montopoli
Title: President & CEO
/s/ Duane C. Montopoli
------------------------
Duane C. Montopoli
CHEMFAB CORPORATION
AMENDMENT NO. 2 TO
SECOND AMENDED AND RESTATED
1991 STOCK OPTION PLAN
1. Effective as of August 5, 1997, the first sentence of Section 5 of the
Corporation's Second Amended and Restated 1991 Stock Option Plan (the "1991
Plan") was deleted in its entirety and replaced with the following:
The Plan covers 2,250,000 shares of the Stock, subject, however, to
the provisions of Section 15 of the Plan.
2. Effective as of August 5, 1997, Section 14 of the 1991 Plan was
deleted in its entirety and replaced with the following:
14. Termination of Employment, Disgorgement of Certain Profits.
----------------------------------------------------------
(a) If an Optionee ceases to be an employee, director or
consultant of the Company or any of its subsidiaries for any reason
other than retirement of an employee or death of an Optionee, any
Option held by that Optionee may be exercised by the Optionee at any
time within 90 days after the termination of such relationship, but
only to the extent exercisable at termination and in no event after
the option period. If an Optionee enters retirement from employment
or dies, any Option held by that Optionee may be exercised by the
Optionee or the Optionee's executor or administrator at any time
within the shorter of the option period or 12 months after the date of
retirement or death, but only to the extent exercisable at retirement
or death. Options which are not exercisable at the time of
termination of such relationship or which are so exercisable but are
not exercised within the time periods described above shall terminate.
Military or sick leave shall not be deemed a termination under this
Section 14 provided that it does not exceed the longer of 90 days or
the period during which the rights of the absent employee, director or
consultant are guaranteed by statute or by contract.
(b) If, during the twelve-month period following the cessation of
an Optionee's employment with, and/or directorship of, and/or
consultancy for, the Company or any of its subsidiaries, as the case
may be, and regardless of the reason or absence of reason for such
cessation (the date of which cessation hereinafter, a "Cessation
Date"), said Optionee engages directly or indirectly in any business,
activity or enterprise which diverts business from, is in conflict
with, causes a competitive disadvantage to, or otherwise adversely
affects the interests or business of, the Company or any of its
subsidiaries, the Optionee shall automatically owe to the Company, and
shall promptly and without demand pay to the Company, with respect to
each share of Stock issued to the Optionee upon the full or partial
exercise of each Option exercised by the Optionee from and after that
date which is nine (9) months prior to the Optionee's Cessation Date,
an amount equal to the excess of Market Value of such share on the
date of exercise over the Option Price paid by the Optionee for such
share; provided that, on a case by case basis, a majority of
disinterested members of the Board of Directors or the Committee may,
in their sole discretion, waive enforcement of this provision, in
whole or in part; and provided further that no such waiver shall be
deemed a waiver of enforcement in any other instance. The provisions
of this Section 14(b) shall be applicable only with respect to Options
granted on or after August 5, 1997.
June 26, 1997
Mr. Thomas C. Platt III
90 N. Spring St. #3
Concord, NH 03301-4206
Dear Tim:
On behalf of Chemfab Corporation, I'm pleased to offer you the position of Vice
President - General Counsel and Administration of Chemfab Corporation. In this
officer-level position, you will report to me.
Tim, I truly look forward to having you join us. I'm confident that you have
the background and personal qualities needed to be successful at Chemfab, and
that you will make a significant contribution to our business as a key member of
our senior management team.
Enclosed with this letter are the following documents, each of which is an
integral part hereof:
Details of Offer of Employment
Summary Outline of Fringe Benefits
Automobile Policy for Corporate Officers.
Level A Employee Agreement
Form I-9
Policy Statement regarding Drug-Free Workplace and Pre-Employment Drug
Screening, and related Consent and Release for Medial Examination and
Testing.
As you know, this offer is conditioned on the following:
(1) Your entering into a Level A Employee Agreement with the Company (form
enclosed) at the time of commencement of your employment. This is a standard
form which all of Chemfab's officers have signed.
(2) Passing a urine drug screening analysis which will be conducted as part of
Chemfab's Pre-Employment Medical Evaluation. See attached forms for details and
required consent and release.
(3) Your providing to Chemfab, on your first day of employment (which we've
agreed will be July 21), with proof of legal employability. I refer you to the
enclosed Form I-9 regarding what is required in that regard.
If you have any questions regarding the content of this letter, please do not
hesitate to call me. If these terms and conditions are acceptable to you,
please confirm same by signing one copy of this letter and returning it to me
not later than July 9, 1997. As stated above, I very much look forward to
having you join us.
Very truly yours,
Duane C. Montopoli
President and
Chief Executive Officer
DCM/jea
Enclosures
I hereby accept this offer of employment in its entirety as described above.
Date July 30, 1997 Signature /s/ Thomas C. Platt
----------------------------------- -----------------------------
June 12, 1997
Mr. Thomas C. Platt III
DETAILS OF OFFER OF EMPLOYMENT
------------------------------
Position: Vice President - General Counsel and Administration. You
- --------- will report to Chemfab's Chief Executive Officer, Duane C.
Montopoli.
Cash Compensation: $125,000 per annum base salary with an annual review on or
- ----------------- about September 1 of each year commencing September, 1998.
You will also be eligible to participate in Chemfab's
Officer Bonus Plan for FY 1998 (i.e. our year which ends
June 30, 1998) and for each fiscal year thereafter. Please
note that annual bonuses under this Plan are determined
based on both corporate and individual performance, and are
subject to the terms and conditions of the plan as in effect
each year.
Equity: Effective on your first day of employment with Chemfab,
- ------- you will be granted non-qualified stock options on 40,000
shares of Chemfab common stock at an exercise price equal
to the closing price on that day. These options will vest
(i.e. become exercisable) as follows:
One year from date of employment 10,000 shares
Two years from date of employment 10,000 shares
Three years from date of employment 10,000 shares
Four years from date of employment 10,000 shares
------
TOTAL . . . . . . . . . . . . . . . . . . 40,000
If prior to the scheduled vesting date of any of the above-
listed options Chemfab is acquired by another entity (i.e.
there is a change of control), the vesting of all such
options (i.e. the as yet unvested options) shall be
accelerated to the date which is one day prior to the
corporate acquisition date.
Benefits: See attached Summary Outline and Automobile Policy.
- --------
Severance: In the unexpected circumstance that your employment is
- ---------- terminated by Chemfab for any reason other than for Cause
(as defined in the enclosed Level A Employee Agreement),
you will qualify for salary continuation (i.e. severance
pay) during the six-month period following termination
date, subject to dollar-for-dollar reduction for cash
amounts received by you or accrued for your benefit from
any successor employer or other entity that pays you for
services rendered during that period.
CHEMFAB CORPORATION
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of the 5th day of August, 1997, by and
between John W. Verbicky, Jr., an individual residing at 60 Highland Avenue,
York Beach, Maine 03910 (the "Employee"), and Chemfab Corporation, a Delaware
corporation with its principal place of business at 701 Daniel Webster Highway,
Merrimack, New Hampshire 03054 (the "Employer").
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section l. Freedom to Contract. The Employee hereby represents that he is
free to enter into this Agreement and that he has not made and will not make any
agreement in conflict with this Agreement.
Section 2. Employment and Effective Date. This Agreement is effective
as of August 5, 1997 (the "Effective Date"). As of the Effective Date, the
Employer hereby continues to employ the Employee, and the Employee hereby
accepts his continued employment by the Employer, as Executive Vice President
and Chief Operating Officer through January 3, 1998 (the "Change Date"). As of
September 8, 1997 (the "Transition Date" ) the Duties and Authority of the
President and Chief Executive Officer will be delegated to the Employee by the
then current President and Chief Executive Officer. This delegation of
authority will be effective during the period from the Transition Date through
the Change Date. As of the Change Date, the Employer hereby agrees to employ
and Employee agrees to be employed by the Employer, as President and Chief
Executive Officer of the Employer, upon the terms and conditions set forth
herein.
Section 3. Duties and Authority. Subject to the general direction and
control of the board of directors of the Employer (the "Board of Directors") and
effective as of the Transition Date, the Employee hereby agrees to use his best
efforts, including the highest standards of professional competence and
integrity, and shall devote his full business time and effort, in and to his
employment and the duties of his office hereunder and shall not engage in any
other business activity except that Employee may engage from time to time in
such personal investment activities, as do not interfere with his day-to-day
responsibilities to the Employer. Employee's authority, including without
limitation his authority to bind Employer to contracts, instruments and
expenditures of any kind and to dispose of or encumber corporate assets, shall
not be less than that specified in or incidental to the terms of Section 3.7 of
Employer's By-Laws as presently in effect, and not less than that customary to
the office of President and Chief Executive Officer of an industrial
corporation. At any time when any class of securities of the Employer is
registered under section 12 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or when the Employer is required to file reports under
section 15 of the Exchange Act: (i) the Employee shall report directly and
exclusively to the Board of Directors, and (ii) the Employer shall each year
nominate, and make best efforts to cause the election of, the Employee to a seat
on the Board of Directors.
Section 4. Term; Termination; Rights Upon Termination.
(a) This Agreement shall take effect as of the Effective Date,
and shall remain in full force and effect until terminated in accordance with
the provisions hereof. Notwithstanding anything else herein contained, the
provisions of Sections 6 and 7, and any rights under other provisions hereof
which are vested at the time of termination of employment, shall survive the
termination of this Agreement and of Employee's employment hereunder.
(b) The Employer may at any time immediately terminate the employment
of the Employee under this Agreement for Cause (as hereinafter defined), upon
thirty (30 days) written notice. For purposes of this Agreement, the term
"Cause" shall mean gross or willful misconduct leading to his being convicted of
a felony. "Cause" shall not include unsatisfactory performance of duties except
as provided above. The Employee may at any time immediately terminate his
employment under this Agreement for Reason (as hereinafter defined), upon thirty
(30 days) written notice. For purposes of this Agreement, the term "Reason"
shall mean (x) a material breach by the Employer of any term of this Agreement,
(y) any event of bankruptcy or insolvency in respect of Employer, or (z) any
reduction in the duties or authority of Employee to a level less than customary
to the office of President and Chief Executive Officer of an industrial
corporation (subject to the terms of Employer's By-Laws as presently in effect).
Subject to the remainder of this Section 4, either party may at any time
terminate the employment of Employee under this Agreement upon ninety (90) days'
written notice to the other party, without Cause or Reason, as the case may be.
(c) In the event that the Employer terminates the employment of the
Employee for Cause as described in Section 4(b) hereof, or Employee terminates
such employment without Reason, then the Employer shall pay and provide to the
Employee at the time otherwise due under Section 5 hereof: all Salary due to the
Employee under said Section 5 that had accrued through the time of such
termination (whether owed currently, or on a deferred basis (in which case it
shall be paid on a deferred basis), all in accordance with the terms of Section
5); all benefits due to the Employee under said Section 5 that had accrued
through the time of such termination; and all Bonus due to the Employee under
said Section 5 that had accrued through the fiscal yearend of the Employer most
recently preceding (or coinciding with) the date of such termination (whether
owed currently, or on a deferred basis (in which case it shall be paid on a
deferred basis), all in accordance with the terms of Section 5 ) . In addition
to the foregoing, if the Employer terminates the employment of the Employee
based upon the Employee becoming "permanently disabled", which shall mean that
the occurrence of a mental or physical condition has rendered the Employee
incapable of performing his duties for any period of six (6) consecutive months
and such incapacity is confirmed as continuing at the end of such period by
expert medical opinion, then the Employer shall pay and provide to the Employee,
at the time otherwise due under Section 5 hereof: (x) in respect of a period
(the "Waiting Period") commencing on the date of such termination and continuing
until such time as benefits under both any group long-term disability insurance
policy and any supplemental individual long-term disability insurance policy
maintained at such time by Employer and covering the permanent disability of the
Employee begin to be payable and the Employee begins to receive payments of such
benefits under both such policies: (A) all benefits that would have accrued to
the Employee under said Section 5 if the Employee had continued to be employed
by the Employer under the terms of this Agreement throughout the Waiting Period;
and (B) the excess of: (I) all Salary that would have accrued to the Employee at
the annual contractual rate under said Section 5 (whether owed currently, or on
a deferred basis (in which case it shall be paid on a deferred basis), all in
accordance with the terms of Section 5) if the Employee had continued to be
employed by the Employer under the terms of this Agreement throughout the
Waiting Period, over (II) the amount of any cash benefits actually received by
Employee in respect of the Waiting Period on account of any group short-term or
group or supplemental long-term disability insurance policy maintained by
Employer; and (y) an amount (a "Pro Rata Bonus Amount") computed by multiplying
(A) the fraction computed by dividing (.1) the number of days elapsed in the
fiscal year in which the termination occurred up to and through the effective
date of the termination, by (II) 365, -by (B) the amount of Bonus that would
have been due to the Employee under Section 5 hereof if Employee had remained
employed under the terms of this Agreement through the end of the fiscal year in
which the termination occurs (whether owed currently, or on a deferred basis (in
which case it shall be paid on a deferred basis), all in accordance with the
terms of Section 5).
(d) In the event that the employment of the Employee is terminated as a
result of the death of the Employee, then the Employer shall: (i) pay and
provide to the estate, heirs or devisees of the Employee, at the time otherwise
due under Section 5 hereof, (A) all Salary due to the Employee under said
Section 5 that had accrued to the time of his death and all Salary that would
have accrued to the Employee at the annual contractual rate under said Section 5
if the Employee had continued to be employed by the Employer under the terms of
this Agreement for a period of nine (9) months commencing on the date of the
Employee's death (in each case whether owed currently, or on a deferred basis
(in which case it shall be paid on a deferred basis), all in accordance with the
terms of Section 5), (B) all Bonus due to the Employee under said Section 5 that
had accrued through the fiscal yearend of the Employer most recently preceding
(or coinciding with) the date of Employee's death (whether owed currently, or on
a deferred basis (in which case it shall be paid on a deferred basis), all in
accordance with the terms of Section 5), and (C) a Pro Rata Bonus Amount; and
(ii) maintain during the period of nine (9) months commencing on the date of
Employee's death, for the benefit of the Employee's family, such of the benefits
that would have been provided under Section 5 hereof as apply to Employee's
family, including without limitation, group health insurance coverage of
substantially the same kind and in no lesser amounts than in effect for the
benefit of the members of the Employee's family on the date of the Employee's
death.
(e) In the event that: (A) the Employer shall at anytime terminate the
employment of the Employee without Cause, or (B) the Employee shall, terminate
his employment for Reason, then, and in each such case, the Employer shall pay
and provide to the Employee at the time otherwise due under Section 5 hereof:
(i) all Salary and benefits due to the Employee under said Section 5 that had
accrued through the time of such termination and all Salary that would have
accrued to the Employee at the annual contractual rate under said Section 5 if
the Employee had continued to be employed by the Employer under the terms of
this Agreement through the day nine (9) months after the date of such
termination of employment (the "Severance Termination Date") (in each case
whether owed currently, or on a deferred basis (in which case it shall be paid
on a deferred basis), all in accordance with the terms of Section 5); (ii) all
Bonus due to the Employee under said Section 5 that had accrued through the
fiscal yearend of the Employer most recently preceding (or coinciding with) the
date of such termination (whether owed currently, or on a deferred basis (in
which case it shall be paid on a deferred basis), all in accordance with the
terms of Section 5); (iii) all benefits due to the Employee under said Section 5
that had accrued through the time of such termination and all benefits that
would have accrued to the Employee under said Section 5 if he had continued to
be employed by the Employer under the terms of this Agreement through the
Severance Termination Date; and (iv) a Pro Rata Bonus Amount.
(f) All rights of Employee to compensation and benefits under the
terms of this Section 4 are absolute with no requirement to mitigate damages.
Notwithstanding the foregoing, if the Employee is in fact gainfully employed
during any period (a "Severance Period") in respect of which compensation and/or
benefits is/are due him under the terms of this Agreement after the termination
of his employment under the terms of this Agreement, then any cash amounts
actually received by Employee as salary or bonus on account of such subsequent
employment in respect of the Severance Period shall operate dollar for dollar as
a credit against the amounts due from Employer to Employee in respect of the
Severance Period; provided, that the provisions of this sentence shall not
apply, and no such offset or credit shall operate (whether dollar-for-dollar or
otherwise), if the termination of employment occurs after the completion of a
transaction in which substantially all the outstanding voting stock or
substantially all the assets of the Employer is or are acquired by any person or
group of persons or Employer is party to a merger or consolidation of which
Employer is not in economic substance the predominant surviving entity.
Section 5. Compensation and Benefits. The Employee shall be
entitled to all benefits and compensation defined in this paragraph effective
September 8, 1997.
(a) The Employee shall be paid salary at an annual rate of $220,000 (the
"Salary"), such payments to be made (subject to the provisions of Section 5(c)
of this Agreement) as customarily disbursed by the Employer. Such Salary shall
be reviewed by the Board of Directors, for possible increase (and in no event
for decrease during the term of this Agreement), annually as of September 1 of
each year during the term of this Agreement commencing with September 1, 1998,
but Employer shall have no obligation to increase the Salary. If any such
review results in an increase in the Salary, then the Salary as so increased
shall then be the Salary for purposes of this Agreement. The Employer shall
promptly reimburse the Employee for all ordinary and necessary expenses incurred
by the Employee on behalf of the Employer, upon the presentation of customary
vouchers and reimbursement slips. The Employee shall be entitled to participate
in all fringe benefits made available under Employer's "exempt" benefits package
from time to time to senior executive personnel of the Employer; provided, that
the fringe benefits available to the Employee under this Agreement shall in any
event include the following: (i) Employer shall maintain at the expense of the
Employer, and for the benefit of beneficiaries named by Employee, in addition to
any group life insurance policy on the life of Employee provided under such
exempt benefits package, a term life insurance policy) throughout the term this
Agreement in the amount of $500,000. ii) Employer shall maintain at the expense
of the Employer, in addition to any group disability policy provided under such
exempt benefits package, a long-term disability policy, for the benefit of
Employee throughout the term of this Agreement, with benefits (without offset)
equal to 75% of the Salary (without cap) from time to time; (iii) Employer shall
provide to Employee the use of an automobile of Employee's choice, to be (or to
have been) new when first provided to Employee and to be at any time not more
than four years or 75,000 miles old, to be acquired by purchase or lease at
Employer's option, and to have a purchase price at the time of such acquisition
not greater than $45,000 (such dollar amount to be adjusted for any percentage
change in the Consumer Price Index -- All Urban Consumers (U.S.) (or other
equivalent index of the Bureau of Labor Statistics (or other federal government
agency serving similar function) then available) between the Effective Date and
the date of such acquisition of such automobile by the Employer); and (iv)
Employee shall be entitled to paid vacation accrued at a rate of 20 business
days' vacation per twelve-month period that he is employed under the terms of
this Agreement.
(b) In addition to receiving the Salary, during the term of this
Agreement, Employee shall be entitled to participate in any and all cash bonus
plans, and other variable compensation arrangements, established for the
corporate officers of Employer and approved by the Board of Directors from time
to time (any and all such plans and arrangements being hereinafter referred to
as "Bonus Plans"). The amount of any bonus earned by the Employee pursuant to
any and all Bonus Plans in respect of any fiscal year of the Employer shall
hereinafter be referred to as a "Bonus". Except that for FY98, the Employee's
base salary for all bonus plan calculations shall be $220,000.00 per annum.
(c) Employee will be granted stock options in the amount of 72,000 shares
at an option price equal to the closing price of company stock on September 8,
1997.
(d) In the event that the Employer terminates the employment of the
Employee without Cause or the Employee terminates such employment with Reason
(including death or disability), the Employer will provide to the Employee and
the Employee's dependents, Group or Family Health and Dental insurance coverage
of substantially the same kind, and in no lesser amounts, than in effect on the
Effective Date of this agreement until the Employee's sixty-second (62nd)
birthday during any periods between the termination date and the Employee's
sixty-second (62nd) birthday during which the Employee is not employed by
another employer who offers equivalent or better Group Health and Dental
insurance. In the event of the Employee's death prior to the Employee's sixty-
second (62nd) birthday, such benefits will be provided to his surviving spouse
and/or dependents until the date on which the Employee would have otherwise
attained the age of sixty-two (62). The Employee shall make copayments to cover
the cost of such insurance coverage during such periods equivalent to the
percentage of the total cost of such insurance coverage paid by the Employee as
of the Effective Date of this agreement.
(e) The Employee will be provided on the "Transition Date" with an
interest free loan in the amount of $50,000.00 which shall be forgiven over a 5
year period in equal amounts as ordinary income and deducted from any bonus due
to the Employee during each of the ensuing 5 years. If the Employee's
employment is terminated by the Employer for any reason other than Cause or by
the Employee for reason including death or disability, then the remaining unpaid
balance will be forgiven by the Employer. In the event that the Employee's
employment is terminated by the Employer for Cause or by the Employee without
reason (excluding death or disability), the Employee shall repay the unforgiven
portion of said loan plus interest at a rate of 2% above the then current prime
interest rate as defined in paragraph 5 (f) of this agreement.
(f) Notwithstanding anything else contained in this Section 5, Employee
may, before the first day of any fiscal year of the Employer, by written notice
to the Employer irrevocably cause all, or any such portion(s) as such notice may
designate, of the Salary and/or Bonus in respect of such ensuing fiscal year to
be due and payable at any such date or dates (subsequent to the date or dates
when such Salary or Bonus would otherwise, be payable hereunder (each a "Normal
Due Date")) as such notice may designate (each a "Deferred Due Date"). From and
after each Normal Due Date and until the corresponding Deferred Due Date, the
relevant deferred amount of Salary and/or Bonus shall accrue interest at an
annual rate two and one-half percentage points (2.5%) less than the rate
publicly announced from time to time by Manufacturers and Traders Trust Company
as its prime rate (compounded quarterly). The relevant deferred amount and all
interest so accrued thereon shall be an unsecured general obligation of
Employer, due and payable on the Deferred Due Date.
Section 6. Level A Agreement. The Level A Employee Agreement dated as
March 10, 1995, between Employer and Employee (the "Level A Agreement")
shall survive the execution of this Agreement and shall remain in full force
and effect in accordance with its terms.
Section 7. Miscellaneous.
(a) All notices given under any provisions of this Agreement shall be in
writing and mailed by registered or certified mail, return receipt requested,
or delivered by hand, to the Employer to its Secretary at its principal place
of business, and to the Employee at the address set forth in the first page
of this Agreement, or such other address, in each case, as the addressee shall
have last furnished to the communicating party, and shall be effective when
received or, if sooner, five days after such mailing.
(b) Except as otherwise expressly provided herein, this Agreement shall be
binding upon, and inure to the benefit of, the parties hereto, their heirs,
legal representatives, successors and assigns (whether by purchase, merger or
otherwise). Neither party may assign any of its rights or obligations hereunder
without the prior written consent of the other party hereto, except that
Employer may assign its rights hereunder to a successor corporation to Employer.
(c) 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
but one and the same instrument, and in making proof of this Agreement it shall
be necessary to produce only one such counterpart without the necessity of
accounting for any other counterparts.
(d) This Agreement constitutes the entire agreement among the parties with
respect to the subject matter hereof.
(e) 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 performance of any of the same or any
other obligations hereunder. Failure on the part of any party to complain of
any act or failure to act of any other party or to declare any party in default,
irrespective of how long such failure continues, 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 a breach or default hereunder.
(f) This Agreement may not be amended or modified except by an instrument
in writing executed by each of the parties hereto.
(g) If any provision of this Agreement or the Level A Agreement shall, in
whole or in part, prove to be invalid for any reason in any circumstances, such
invalidity shall affect only the portion of such provision which shall be
invalid and only in such circumstances, and no other portion or provision of
this Agreement or the Level A Agreement shall be invalidated, impaired or
affected thereby, nor shall be such provision or portion in any other
circumstances.
(h) The headings of sections of this Agreement are for convenience of
reference only and are not intended to affect its meaning or construction.
(i) The validity, enforceability and interpretation of any and all of the
provisions of this Agreement shall be determined in accordance with and governed
by the laws of the State of New Hampshire, excluding the choice of law rules
thereof.
(j) Each of the parties represents that he or it has not used any
employment counselor or other person who would be entitled to any compensation
which has not been paid for arranging or obtaining the employment hereby
governed.
(k) Any dispute under or relating to this Agreement shall be resolved
promptly by arbitration in New Hampshire by an arbitrator selected by, and under
the rules of, the American Arbitration Association; such arbitrator shall have
the power to award monetary damages, punitive damages, injunctive relief, costs
and attorneys, fees, and other appropriate relief; and judgment upon the award
of such arbitrator may be entered in any court having jurisdiction thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as an
instrument under seal as of the date first written above.
CHEMFAB CORPORATION
By: /s/ Nicholas Pappas Date: August 12, 1997
-------------------------------------- -----------------
Title: Chairman Elect - Board of Directors
-------------------------------------
/s/ John W. Verbicky, Jr. Date: August 6, 1997
--------------------------------------- -----------------
PURCHASE AND SALE AGREEMENT
---------------------------
PURCHASE AND SALE AGREEMENT effective as of March 27, 1992 (the "Purchase and
Sale Agreement") by and among Taiyo Kogyo Corporation, a Japanese corporation
("Taiyo"), and Chemfab Corporation, a Delaware corporation ("Chemfab"). Taiyo
and Chemfab, together with their respective Affiliates (as defined in Section
1), are sometimes collectively referred to herein as the "Parties" and
separately as a "Party"; and this Purchase and Sale Agreement is sometimes
herein referred to as the "Agreement."
WITNESSETH:
Part I - General
----------------
WHEREAS, the Parties are stockholders of Birdair, Inc., a Delaware
corporation ("Birdair" or the "Company");
WHEREAS, the Company's authorized capital consists of 1053 shares of
Common Stock, $.01 par value (the "Common Stock"), consisting of 553 shares of
Class A Common Stock (the "Class A Shares") and 500 shares of Class B Common
Stock (the "Class B Shares");
WHEREAS, Taiyo owns all the Class A Shares of the Company's Common Stock
and Chemfab owns all the Class B Shares of the Company's Common Stock;
WHEREAS, Taiyo and Chemfab are parties with Birdair to a Shareholder
Agreement dated as of June 7, 1989 (the "Existing Shareholder Agreement");
WHEREAS, Taiyo desires to acquire control of the Company, and desires to
purchase a majority of the Class B Shares of Company Common Stock owned by
Chemfab;
WHEREAS, Chemfab desires to retain an equity investment in the Company;
WHEREAS, the Parties are willing to cause the Company to implement a tax-
free recapitalization, on the terms and conditions set forth herein, in order to
effectuate the objectives of its shareholders;
WHEREAS, Chemfab is willing to sell to Taiyo the shares of the Company's
common stock that it receives in said recapitalization, only on the terms and
conditions of this Agreement;
WHEREAS, Chemfab has made available to the Company, since its inception, on
a confidential and restricted usage basis, certain trade secrets, Know How,
Technology, and other Confidential Information and desires to protect such
intellectual property;
WHEREAS, Birdair has developed extensive goodwill with respect to the
business in which it has been engaged and Birdair and the Parties desire to
protect that goodwill;
WHEREAS, Taiyo, through its ownership of Birdair and as licensee under the
Cross License Agreement (as defined in Section 1(a) below), has had access to
trade secrets, Know How, Technology and other confidential information which
Chemfab has provided to Birdair on a confidential and restricted usage basis;
and
WHEREAS, Chemfab desires to minimize its liability for Birdair's business,
projects, obligations and liabilities.
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, the Parties hereto have agreed and do hereby agree as follows:
1. Definitions. (a) Words. Capitalized terms defined elsewhere in this
Agreement shall have the meaning assigned to such terms. In addition, the
following terms shall have the following meanings:
"Affiliate" means any company (including its successors) by which a Party
or Birdair is now or hereafter controlled or any company or division (including
its successors) now or hereafter controlled by a Party or Birdair or with which
a Party or Birdair is now or hereafter under common control. For purposes of
this agreement, "control" means the possession, direct or indirect, whether (i)
through the ownership of common stock or the holding of proxies with respect
thereto, (ii) by voting trust or other contract, or (iii) otherwise, of power to
elect or cause to be elected in accordance with the by-laws of Birdair or such
Party or company a majority of the members of the board of directors of Birdair
or such Party or company.
"Agent" means all present and former officers, directors, employees,
agents, shareholders, promoters, counsel and advisers of Birdair or either Party
or other entity, as the case may be, and their predecessors.
"Antenna Shelters" means coverings comprised, in whole or in part, of High
Performance Materials intended to protect or shelter from weather, or conceal,
radar or microwave antenna equipment used for intelligence gathering, weather
data collection, communications and the like, while minimally interfering with
signal transmission or reception. Included within the definition of Antenna
Shelters, without limitation, are radomes, planar covers and electromagnetic
windows.
"Birdair" means Birdair, Inc., a Delaware corporation with a principal
place of business in Amherst, New York, and its successors.
"Birdair Liabilities" shall have the meaning set forth in Section 6(a) of
this Agreement.
"Birdair Structures" means Birdair Structures, Inc., a New York corporation
with a registered office in Buffalo, New York, and its successors.
"Birdair's Existing Technology" means any and all of Birdair's Know How and
Technology, whether or not patented or to be patented (including the Technology
for non-structural fabric cladding applications, such as anaerobic digestors),
that exists as of the Closing Date.
"Birdair New Technology" means any and all improvements or inventions
developed by Birdair or any of the other Taiyo Companies after the Closing Date
that relate to or involve the fabrication or use of High Performance Materials.
"Cash Payment" shall have the meaning set forth in Section (3) (b) of this
Agreement.
"Chemfab" means Chemfab Corporation, a Delaware Corporation with its
principal place of business in Merrimack, New Hampshire, and its successors.
"Chemfab New Technology" means any and all improvements or inventions
developed by Chemfab or its Affiliates after the Closing Date that relate to or
involve the fabrication or use of High Performance Materials that are
manufactured, used or sold (now or hereafter) by Chemfab or its Affiliates.
"Chemfab's Exclusive Supply Obligation" shall have the meaning set forth in
Paragraph 2.1(b) of the Supply Agreement.
"Chemfab Shares" shall have the meaning set forth in Section 2(b)(i) of
this Agreement.
"Class A Common Stock" shall have the meaning set forth in Section 2(a) of
this Agreement.
"Closing" and "Closing Date" shall have the meanings set forth in Section
16(a) of this Agreement.
"Closing Documents" means this Agreement, the New Shareholder Agreement,
the Supply Agreement, the Revised Charter, and the other documents listed on the
closing agenda attached as Exhibit C.
"Confidential Information" means marketing methods, plans, and strategies;
engineering drawings and designs and other Know How; manufacturing plans and
techniques and other Technology; research and development projects in progress
and future plans; Fabric Structure project information; financial and business
plans and strategies; business relationships and sources of supply; contractual
obligations and arrangements; and other information with respect to the current
and future operations of Chemfab, Taiyo, Birdair, or any of their respective
Affiliates, as the case may be; provided, however, that the term "Confidential
Information" shall not include information which:
(i) was either published or otherwise available to the public at the time
of its receipt by the receiving party from the transmitting party or
later became published or available to the public other than by breach
of this Purchase and Sale Agreement, the New Shareholder Agreement or
the Supply Agreement by the receiving party or its or their employees;
(ii) was already known to the receiving party at the time of receipt
thereof from the transmitting party as shown by documents in the
receiving party's possession or by other reliable evidence; or
(iii) was disclosed to the receiving party by a third party having no
obligation to the transmitting party to keep the information
confidential.
"Consent Agreement" means that certain Consent and Agreement dated as of
January 1, 1988 by and among the Company (f/k/a OC Birdair, Inc.), Chemfab
(f/k/a Chemical Fabrics Corporation), and Taiyo.
"Construction Contracts" means all contracts entered into by Birdair
relating to the design, engineering, fabrication or installation of, and/or
warranty and service agreements for, Permanent Fabric Structures or Temporary
Fabric Structures, or otherwise relating to the Fabric Structures Business.
"Cross License Agreement" means the Cross License Agreement dated March 26,
1986, as amended, between Birdair and Taiyo.
"Effective Time" shall have the meaning set forth in Section 2(d) of this
Agreement.
"Existing Shareholder Agreement" means the Shareholder Agreement dated June
7, 1989 by and among Taiyo, Chemfab and Birdair.
"Fabric Structures" means air-supported, cable-supported, or frame-
supported roof or roof sections, skylights, or awnings containing fabric-like or
membrane-like flexible materials as an integral part of the structure and which
are customarily built under regulation of architectural building codes. For
purposes of this Agreement, the term "Fabric Structures" shall not include
Antenna Shelters.
"Fabric Structures Business" shall have the meaning set forth in Section
4(b) of this Agreement.
"Guaranteed Obligations" means those obligations of Birdair related to one
or more Construction Contracts the performance of which has been guaranteed,
either in whole or in part, by Taiyo, OCF or Chemfab, either directly pursuant
to a Performance Indemnification Contract, or indirectly pursuant to the
guaranty of a performance or surety bond or letter of credit issued with respect
to such Construction Contract(s), including those listed on Exhibit A. For
purposes of this definition, the term "Guaranteed Obligations" includes
Qualified Guaranteed Obligations and Original Guaranteed Obligations.
"High Performance Fabricated Products" means any and all end-use products
(including Antenna Shelters) comprised, in whole or in part, of High Performance
Materials (excluding Permanent Architectural Fabrics), and produced, in whole or
in part, by any process of seaming and/or joining by which two or more sheets or
pieces of such material are combined into one or more patterned panel or piece,
and which possess as a major characteristic in any end-use application one or
more of the following performance properties:
(i) chemical resistance and low permeability performance as required in
applications such as (but not limited to) (A) protective clothing and
hoods, and shelters for protection against chemical or biological attack
in a military or industrial environment; (B) primary and/or secondary
containment systems for vessels containing chemicals, hazardous waste, or
hazardous materials; and (C) liners for various types of tanks, vessels,
and piping;
(ii) the absence of out-gassing and/or dissipation of static electricity
as required in applications such as (but not limited to) acoustical
blankets and other aerospace applications;
(iii) unique electrical properties (e.g., very low and/or closely
controlled dielectric constant and dissipation factor) as required in
applications such as (but not limited to) wire and cable insulation and
flexible circuitry;
(iv) excellent release (non-stick) characteristics for a broad range of
contacted materials and end-use temperatures as required in applications
such as (but not limited to) sheets and conveyors for food processing,
static control, release surfaces in laminating and casting processes, and
various other low-friction applications; and
(v) high strength and flexural endurance (particularly in combination with
chemical and/or temperature resistance) as required in applications such
as (but not limited to) expansion joints, hosing, and expansion bladders;
provided that the term "High Performance Fabricated Products" shall not include
any and all end-use products to the extent used in applications which fall
outside of the principal performance characteristics and applications listed
above.
"High Performance Materials" means (1) flexible composite materials
comprised of woven or non-woven fiberglass or other woven or non-woven fibrous
reinforcements that are impregnated, coated and/or laminated with polymers or
resins (in any form, including film form) that have high-performance properties,
including, but not limited to, fluoroplastic and fluoroelastomeric polymers and
(2) non-reinforced (i.e., not fiber reinforced) monolithic and composite films
containing such polymers or resins. For purposes of this Agreement, the term
"High Performance Materials" shall not include, among other things, woven or
non-woven fiberglass, polyester or other fabrics coated and/or laminated with
polyvinyl chloride or polyurethane or polyacrylate polymers or other non-High
Performance Materials, whether or not protected with PVF.
"Joint Holding Period" means the time period from and after the Closing
Date during which Chemfab, as the owner of any of the Preferred Stock, and
Taiyo, as the owner of any of the Class A Common Stock, are both stock holders
of Birdair.
"Know How" includes, but is not limited to, drawings, plans, designs and
quality control; machine, mechanical and technical specifications; testing
methods, formula, engineering data, production techniques, fabrication methods,
tooling information, installation data, and application data; investigations and
discoveries, including all developments, improvements, modifications and other
ideas relating thereto, whether now existing, under development, in concept-
stage or hereafter conceived or developed; chemical formulation and processing
techniques, processes, sources of supply, marketing data, and sales techniques;
trade secrets, intangible intellectual property and other confidential or
proprietary information.
"Marked Confidential Information" shall have the meaning set forth in
paragraph 1.1 of the Supply Agreement.
"N.C. Joint Venture Agreement" means that certain Joint Venture Agreement
dated as of June 4, 1985 by and among Chemfab, Taiyo, and Nitto Denko
Corporation (formerly Nitto Electric Industrial Co., Ltd.) as amended and/or in
effect from time to time.
"New Shareholder Agreement" shall have the meaning set forth in Section 8
below.
"OCF" means Owens-Corning Fiberglas Corporation, a Delaware corporation
which formerly owned the Class A Shares of Company Common Stock and which is a
party to the Option Agreement.
"Option Agreement" means that certain Option Agreement dated as of January
1, 1988 between OCF and Chemfab, to which Taiyo consented pursuant to the
Consent Agreement.
"Organizational Agreement" means that certain Organizational Agreement
dated as of March 1, 1985 as amended by Stock Purchase Agreement and Supplement
to Amendment of Organizational Agreement dated as of August 18, 1986. For
purposes of this Agreement, the term "Organizational Agreement" shall not
include the Partial Release or the Termination and Release (as those terms are
defined in the Option Agreement); but the Parties agree and acknowledge that the
latter documents shall continue to be effective as between the parties thereto,
except to the extent modified or supplemented by Section 6 of this Agreement
relating to indemnification.
"Original Guaranteed Obligation" means a Guaranteed Obligation of Birdair
that was guaranteed or issued before June 7, 1989 either (i) by Chemfab; or (ii)
by OCF and for which Chemfab has agreed to indemnify OCF pursuant to Sections 12
and 23.2(c) of the Option Agreement; provided, however, that for purposes of
this Agreement, any Performance Indemnification Contract (or any part thereof)
issued by Chemfab relating to the San Diego Convention Center or other
Guaranteed Obligation of Birdair relating thereto for which Chemfab is or may
be, directly or indirectly, liable, shall not be deemed to be an Original
Guaranteed Obligation.
"Performance Indemnification Contract" means, with respect to those
Construction Contracts for which Birdair is the contractor or general
contractor, any separate agreement or undertaking, made by Taiyo, OCF or Chemfab
with or for the benefit of the principal, owner or general contractor (other
than Birdair) under such contract, to guaranty in whole or in part Birdair's
performance under such contract.
"PERMAFAB Agreement" means the Supply Agreement dated January 25, 1988,
between Chemfab and PERMAFAB Pty Limited (formerly CHEMFAB Pty. Limited) as
amended and/or in effect from time to time.
"PERMAFAB Indemnity" means Chemfab's indemnification obligations under
that certain Deed of warranty and Indemnification dated January 25, 1988,
between Birdair, Chemfab and PERMAFAB Pty Limited (formerly CHEMFAB Pty.
Limited).
"Permanent Architectural Fabrics" means High Performance Materials and
other flexible materials, regardless of composition, designed to meet building
and fire codes for permanent fabric structures substantially as met by SHEERFILL
permanent architectural membrane products as of the Closing Date, or having an
estimated service life of approximately twenty years as judged by (i) retention
of adequate tensile strength to support design mechanical loads, and (ii)
retention of good visual appearance. Expressly excluded from the definition of
Permanent Architectural Fabrics are flexible non-High Performance Materials
which do not otherwise meet the definition of Permanent Architectural Fabrics,
including woven or non-woven fiberglass, polyester or other fabrics coated
arid/or laminated with polyvinyl chloride or polyurethane or polyacrylate
polymers or other materials (whether or not protected with PVF) which, in each
case, do not otherwise meet the definition of Permanent Architectural Fabrics.
"Permanent Fabric Structures" means Fabric Structures which contain, as an
integral part of the structure, Permanent Architectural Fabrics.
"Preferred Stock" means the preferred stock of the Company to be issued to
Chemfab in connection with this Agreement, as provided and defined in Sections
2(a-b) of this Agreement.
"Purchasers' Obligations" shall have the meaning set forth in Paragraph
2.3(d) of the Supply Agreement.
"PVC" means polyvinyl chloride.
"PVF" means a film of oriented polyvinyl fluoride.
"Qualified Guaranteed Obligations" means those Guaranteed Obligations for
the projects and Construction Contracts listed as Item 1 on Exhibit A for which
Chemfab agreed to indemnify OCF pursuant to the Option Agreement, and shall have
the same meaning herein as set forth in the Option Agreement, notwithstanding
any consummation, termination, modification or waiver of the Option Agreement or
of the transactions contemplated thereby.
"Recapitalization" shall have the meaning set forth in Section 2(a) of
this Agreement.
"Recapitalized Stock" shall have the meaning set forth in Section 2(a) of
this Agreement.
"Restricted Business Activities Period" shall have the meaning set forth
in Section 4(b) of this Agreement.
"Revised Charter" shall have the meaning set forth in Section 2(a) of this
Agreement.
"Supply Agreement" shall have the meaning set forth in Section 7 of this
Agreement.
"Taiyo" means Taiyo Kogyo Corporation, a Japanese corporation with its
principal place of business in Osaka, Japan, and its successors.
"Taiyo Companies" means Taiyo and all Affiliates of Taiyo, including,
after the Closing, Birdair.
"Technology" includes, but is not limited to, any and all Know How and
products, and all techniques, applications and other uses with respect thereto,
resulting from the research and development efforts on or with respect to such
Know How and products, whether conducted by OCF, Birdair Structures, Chemfab,
Taiyo or Birdair, their respective employees or by or on behalf of those
authorized by OCF, Birdair Structures, Chemfab, Taiyo or Birdair to use the
technology through license, agreement or otherwise.
"Temporary Fabric Structures" means Fabric Structures which do not contain
Permanent Architectural Fabrics.
"Territory" means such countries and territories as specified in Exhibit B
hereto.
"Transferred Technology" shall have the meaning set forth in
Section 4(a) of this Agreement.
(b) Construction. Wherever appropriate, (i) the singular and plural
form of words, (ii) words of different gender, and (iii) the use of a defined
term as a verb or noun, shall within those respective classifications be deemed
interchangeable.
Part II - Recapitalization and Sale.
-----------------------------------
2. Recapitalization and Exchange.
-----------------------------
(a) Recapitalization. Subject to the other conditions of this
Agreement, the Parties will cause Birdair to execute and carry out a tax-free
recapitalization (the "Recapitalization") of Birdair's authorized capitalized
stock pursuant to Sections 368(a)(l)(E) and 1036 of the Internal Revenue Code of
1986, as amended, pursuant to which Birdair's new capital structure shall
consist, as of the Closing Date, of 1,000 shares of Class A Common Stock, $.0l
Par Value (the "Class A Common Stock"), and 1,000 shares of Preferred Stock,
$533.33 Par Value (the "Preferred Stock") (the Class A Common Stock and the
Preferred Stock herein collectively the "Recapitalized Stock"). The Preferred
Stock shall have the terms and conditions described in the Restated Certificate
of Incorporation of Birdair, Inc. (herein the "Revised Charter").
(b) Exchange. Subject to the other conditions of this Agreement, the
Parties agree that, as of the Effective Time (as defined in subsection 2(d)
below), the Parties shall cause Birdair to issue to Chemfab shares of Class A
Common Stock and Preferred Stock, and Chemfab shall exchange the Class B Shares
therefor as follows:
(i) Chemfab will exchange 53 of the Class B Shares for all 1000 shares
of Preferred Stock; and Chemfab will exchange the remaining 447 shares of Class
B Shares owned by it for 447 shares of Class A Common Stock (such 447 shares of
Class A Common Stock of the Company herein the "Chemfab Shares"); and
(ii) Birdair will issue or cause to be issued stock certificates to
Chemfab in accordance with the foregoing.
(c) Implementation. Each of Taiyo and Chemfab, in their capacity as
shareholders of Birdair, shall take and shall cause their representatives on the
Board of Directors of the Company to take all such action (including meetings
and votes approving, authorizing, adopting and consummating this Agreement and
the transactions contemplated hereby, the Recapitalization and the Revised
Charter and the issuance to Chemfab of the Preferred Stock at its stated par
value), file such certificates and documents, pay such fees and expenses, and do
such other things as necessary or desirable to carry out the purposes of this
Agreement.
(d) Effective Time. The Recapitalization shall become effective at that
time on the Closing Date (the "Effective Time") when (i) all conditions
precedent to the obligations of the Parties to consummate this Agreement have
been satisfied or waived, (ii) the Revised Charter has been duly authorized by
the Company's Board of Directors and shareholders and duly executed by the
Company's President and Secretary, and (iii) the Parties have agreed to
consummate the sale by Chemfab to Taiyo of the Chemfab Shares pursuant to
Section 3 of this Agreement, and have executed and delivered, unconditionally,
the other Closing Documents.
(e) Subordination of Preferred Stock. It is understood and agreed that
Birdair's Preferred Stock shall be subordinated in right to payment to Birdair's
debt obligations to Manufacturers and Traders Trust Company ("M & T Bank") or
other holder(s) of Birdair's senior debt.
(f) Preferred Stock and Release of Financial Support. Neither Chemfab
nor any other holder of the Preferred Stock shall have any obligation, express
or implied, to the Company or with respect to its business, now or hereafter to
make any capital contributions (whether debt or equity), directly or indirectly.
Each of the Taiyo Companies expressly acknowledges that it has no expectation of
any such financial support from Chemfab and expressly releases Chemfab
therefrom.
3. Purchase and Sale of Chemfab Shares.
-----------------------------------
(a) Subject to the other conditions of this Agreement, on and as of the
Closing Date, Chemfab shall sell to Taiyo, and Taiyo shall purchase from
Chemfab, the Chemfab Shares for the consideration described in Section 3(b)
below.
(b) For payment by Taiyo to Chemfab of $4,533,333 (the "Cash Payment"),
as provided in Section 16(b) below, and in consideration of and subject to the
other provisions and obligations of this Agreement, on and as of the Closing
Date, Chemfab shall sell to Taiyo, and Taiyo shall purchase from Chemfab, the
Chemfab Shares.
Part III - Other Agreements.
---------------------------
4. Restrictions on Chemfab's Business Activities.
---------------------------------------------
(a) Each of the Parties recognizes and acknowledges that, in connection
with the formation of Birdair and the conduct of Birdair's operations since its
inception, Chemfab and its Affiliates have licensed, transferred or otherwise
made available, on a confidential, restricted usage basis, many rights, trade
secrets, Know How, Technology and other proprietary information (the
"Transferred Technology"); that Chemfab and its Affiliates retained the right to
use and license all such Transferred Technology for application in all usages
with the exception of certain restrictions on usage for Permanent Fabric
Structures and Temporary Fabric Structures; that Birdair has developed goodwill
in the business of Permanent Fabric Structures and Temporary Fabric Structures;
and that Taiyo, in its capacity as a shareholder of Birdair and as a licensee
under the Cross License Agreement, and its Affiliates have had access to the
Transferred Technology and have been subject to restrictions on its usage.
(b) During the Joint Holding Period and for a period of five (5) years
thereafter (the "Restricted Business Activities Period"), neither Chemfab nor
any Affiliate of Chemfab shall engage, anywhere in the world, in the design,
engineering, fabrication, construction, installation, sale or other distribution
of Permanent Fabric Structures or Temporary Fabric Structures (the "Fabric
Structures Business"); provided that, Chemfab's participation in or performance
under the N.C. Joint Venture Agreement, the PERMAFAB Agreement, or the PERMAFAB
Indemnity in accordance with their respective terms, and subject to their
respective conditions, shall not be deemed to be a violation of this Section
4(b); and provided further that, Chemfab's sale and supply of Permanent
Architectural Fabrics under the terms and conditions of the Supply Agreement
shall not be deemed to be a violation of this Section 4(b). Notwithstanding the
foregoing, nothing herein shall be construed to restrict Chemfab or its
Affiliates from engaging in businesses utilizing High Performance Materials,
High Performance Fabricated Products, or any other business (other than the
Fabrics Structures Business to the extent provided above).
(c) Notwithstanding the foregoing, nothing contained herein shall prohibit
Chemfab or its Affiliates from engaging in the Fabric Structures Business to the
extent necessary to complete warranty or other services in respect of work in
progress on April 1, 1985 and not assigned or otherwise transferred to Birdair,
or to perform contracts to which Chemfab was a party on April 1, 1985 and which
were not assigned to Birdair, or other work previously done by Chemfab or its
Affiliates.
(d) (i) Except as provided in subsection 4(d) (ii) below, if any term or
provision of this Section 4 or the application thereof to any circumstance
shall, in any jurisdiction and to any extent, be determined to be invalid or
unenforceable, such term or such provision shall become ineffective as to such
jurisdiction to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable any remaining terms and provisions
hereof or the application of such term or provision to circumstances other than
those as to which it is held invalid or unenforceable. To the extent permitted
by applicable law, the Parties hereto hereby waive any provision of law which
renders any term or provision of this Section 4 invalid or unenforceable in any
respect.
(ii) If any term or provision of Section 5 relating to restrictions on
certain business activities of the Taiyo Companies or the application thereof to
any circumstance shall, in any jurisdiction and to any extent, (A) be determined
to be invalid or unenforceable, or (B) be breached or violated by any of the
Taiyo Companies, or (C) be challenged, directly or indirectly, by any of the
Taiyo Companies in any complaint, action, litigation or other proceeding, at law
or in equity or otherwise (whether judicial (including declaratory judgment or
adversarial actions) or otherwise), then such occurrence may, in Chemfab's sole
discretion, be deemed to be a Conversion Event (as defined in Section 2.6 of the
Supply Agreement), provided that, nothing in this subsection 4(d) (ii) nor in
the exercise by Chemfab or its Affiliates of their respective rights hereunder
shall (or shall be deemed to) terminate, reduce or otherwise limit, or be deemed
to have the effect of terminating, reducing or otherwise limiting, the
obligations of the Taiyo Companies under Section 5 of this Agreement.
(e) During the Restricted Business Activities Period, each of Chemfab
and its Affiliates shall, except as required by law (including any duty to warn)
or only as necessary to enforce any rights of Chemfab under this Agreement or
the Supply Agreement, keep confidential and not disclose to any third party any
and all Confidential Information relating to Birdair or any of the Taiyo
Companies. Chemfab further agrees that it shall not, during such period (and
shall not permit any of its Affiliates to), use any such Confidential
Information for any purpose or in any business; provided that, this restriction
shall not apply to the use by Chemfab and its Affiliates in their respective
businesses of the Transferred Technology and Birdair's Existing Technology, and
provided further that, nothing herein shall prohibit Chemfab or its Affiliates
from using any Confidential Information in such manner as is reasonably
necessary or desirable in connection with the performance of Supplier's rights,
obligations and activities under the Supply Agreement or other supply
arrangement(s) contemplated by Section 21 of this Agreement.
(f) These business restriction, confidentiality and restricted
information-use agreements of Chemfab shall survive Closing.
(g) In light of the unique and invaluable nature of the benefits to
Taiyo and Birdair of compliance by each and all of Chemfab and its Affiliates
with their covenants and agreements in this Section 4, and of the irreparable
harm that Taiyo and Birdair will sustain if Chemfab or any of its Affiliates
breaches the business restriction, confidentiality and restricted information-
use provisions of this Section 4, it is understood and agreed that, (i) if any
of Chemfab or its Affiliates breaches any of these covenants, then (A) Taiyo or
Birdair will have no adequate remedy at law to reinstate those benefits and/or
prevent such irreparable harm, and (B) Birdair or Taiyo may petition a court of
competent jurisdiction for injunctive and other equitable relief to enforce the
obligations of Chemfab and/or its Affiliates under this Section 4; and (ii) if
Chemfab or any of its Affiliates breaches the business restriction provisions of
this Section 4 or uses or discloses Marked Confidential Information in a manner
or for a purpose not permitted by under Section 4(e), then Taiyo and Birdair may
elect to treat such breach as a Redemption Event (as defined in Section 10 of
the New Shareholder Agreement).
5. Restrictions on Business Activities of the Taiyo Companies. (a)
----------------------------------------------------------
Each of the Parties recognizes and acknowledges that, in connection with the
formation of Birdair and the conduct of Birdair's operations since its
inception, Chemfab and its Affiliates have licensed, transferred or otherwise
made available, on a confidential, restricted usage basis, the Transferred
Technology; that Chemfab and its Affiliates retained the right to use and
license all such Transferred Technology for application in all usages with the
exception of certain restrictions on usage for Permanent Fabric Structures and
Temporary Fabric Structures; that Birdair has developed goodwill in the business
of Permanent Fabric Structures and Temporary Fabric Structures; and that Taiyo,
in its capacity as a shareholder of Birdair and as a licensee under the Cross
License Agreement, and its Affiliates have had access to the Transferred
Technology and have been subject to restrictions on its usage. This Transferred
Technology was licensed, transferred or otherwise made available on the
understanding and condition that it would be used by Birdair solely in its
conduct of the Fabric Structures Business. Accordingly, during the Restricted
Business Activities Period, none of the Taiyo Companies (including, after the
Closing, Birdair) shall (i) engage, anywhere in the world, in the development or
manufacture, for use or sale, of Permanent Architectural Fabrics or of other
High Performance Materials (except and to the extent permitted by paragraph 3 of
the Supply Agreement) provided that Taiyo's participation in the N.C. Joint
Venture Agreement in accordance with its terms, and subject to its conditions,
shall not be deemed to be a violation of this Section 5(a); or (ii) engage,
anywhere in the world other than within the Territory, in the design,
engineering, development, manufacture, sale, distribution or supply of High
Performance Fabricated Products.
(b) Further, each of the Taiyo Companies hereby agrees to keep the
Transferred Technology and Birdair's Existing Technology confidential, not to
disclose the same to third parties and not to use the Transferred Technology or
Birdair's Existing Technology for any purpose or in any business in a manner
that would adversely affect the goodwill and/or ongoing business of Chemfab or
any of its Affiliates or its respective research and development efforts,
whether previously conducted, now pending or hereafter conducted or applied.
(c) During the Restricted Business Activities Period, each of the Taiyo
Companies shall, except as required by law (including any duty to warn) or only
as necessary to enforce any rights of any of the Taiyo Companies under this
Agreement or the Supply Agreement, keep confidential and not disclose to any
third party any and all Confidential Information relating to Chemfab or any of
its Affiliates, and none of the Taiyo Companies shall use such Confidential
Information (other than Transferred Technology) except as reasonably necessary
or desirable in connection with the rights and obligations of any of the Taiyo
Companies under the Supply Agreement.
(d) These business restriction, confidentiality and restricted
information-use agreements of each of the Taiyo Companies shall survive Closing.
(e) In light of the unique and invaluable nature of the benefits to
Chemfab and its Affiliates of compliance by each and all of the Taiyo Companies
with their covenants and agreements in this Section 5, and of the irreparable
harm that Chemfab and its Affiliates will sustain if any of the Taiyo Companies
breaches the business restriction, confidentiality and restricted information-
use provisions of this Section 5, it is understood and agreed that, (i) if any
of the Taiyo Companies breaches any of these covenants, then (A) Chemfab and its
Affiliates will have no adequate remedy at law to reinstate those benefits
and/or prevent such irreparable harm; and (B) Chemfab and/or its Affiliates may
petition a court of competent jurisdiction for injunctive and other equitable
relief to enforce the obligations of Birdair and/or of any of the Taiyo
Companies under this Section 5; and (ii) if any of the Taiyo Companies breaches
the business restriction provisions of this Section 5 or uses or discloses any
Marked Confidential Information in a manner or for a purpose not permitted under
Section 5(b) or (c), then Chemfab may elect to treat such event as a Conversion
Event (as defined in paragraph 2.6(a) of the Supply Agreement).
(f) Upon closing, Taiyo shall take all actions necessary to cause
Birdair and all of the other Taiyo Companies to comply with the provisions of
this Section 5.
(g) (i) Except as provided in subsection 5(g) (ii) below, if any term or
provision of this Section 5 or the application thereof to any circumstance
shall, in any jurisdiction and to any extent, be determined to be invalid or
unenforceable, such term or such provision shall become ineffective as to such
jurisdiction to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable any remaining terms and provisions
hereof or the application of such term or provision to circumstances other than
those as to which it is held invalid or unenforceable. To the extent permitted
by applicable law, the Parties hereby waive, and, upon closing, Taiyo waives on
behalf of Birdair, any provision of law which renders any term or provision of
this Section 5 invalid or unenforceable in any respect.
(ii) If any term or provision of Section 4 relating to restrictions on
certain business activities of Chemfab and its Affiliates or the application
thereof to any circumstance shall, in any jurisdiction and to any extent, (A) be
determined to be invalid or unenforceable, or (B) be breached or violated by any
of Chemfab or its Affiliates, or (C) be challenged, directly or indirectly, by
any of Chemfab or its Affiliates in any complaint, action, litigation or other
proceeding, at law or in equity or otherwise (whether judicial (including
declaratory judgment or adversarial actions) or otherwise), then such occurrence
may, in Taiyo's sole discretion, be deemed to be a Redemption Event (as defined
in Section 10 of the New Shareholder Agreement), provided that, nothing in this
subsection 5(g) (ii) nor in the exercise by Taiyo of its respective rights
hereunder shall (or shall be deemed to) terminate, reduce or otherwise limit, or
be deemed to have the effect of terminating, reducing or otherwise limiting, the
obligations of Chemfab and its Affiliates under Section 4 of this Agreement.
6. Indemnification.
---------------
(a) Birdair's Indemnification. Taiyo acknowledges that Birdair
currently has an obligation, under the Existing Shareholder Agreement and under
law, to indemnify Chemfab, Birdair Structures and their respective Agents
against the following-described Birdair Liabilities (as defined below). In
order to confirm that obligation, and in further consideration of this
Agreement, Taiyo hereby agrees that from and after the Closing Date, Taiyo shall
cause Birdair, subject to Sections 6(c-d) of this Agreement and except as
otherwise provided in Section 6(g) of this Agreement, to indemnify and hold
Chemfab, Birdair Structures and their respective Agents, harmless from and
against any loss, expense (including attorneys' fees and disbursements) damage
or liability resulting from, or arising out of the business of Birdair on and
after April 1, 1985, whether now known or unknown, whether accrued, absolute or
contingent, including without limitation any and all claims made relating to (i)
Birdair's Construction Contracts; (ii) any and all Guaranteed obligations; (iii)
any and all liability that Chemfab or Birdair Structures may now or hereafter
have to OCF under the Organizational Agreement, the Option Agreement, the
Consent Agreement, or any other contract or by operation of law, for loss,
damage or expense arising from or relating to Birdair's business or the above-
described Construction Contracts and/or Guaranteed Obligations; (iv) liabilities
for which Birdair is obligated to indemnify Chemfab, Birdair Structures and/or
any of their respective Agents under the Organizational Agreement, the Option
Agreement, the Consent Agreement and/or the Existing Shareholder Agreement, or
under Corporate law, the law of suretyship or subrogation, or otherwise by
operation of law or equity; and (v) any and all claims against Chemfab, Birdair
Structures and/or their respective Agents for actions taken or inaction in their
respective capacities as a promoter, predecessor, shareholder, director,
officer, employee or agent of Birdair (all such claims and liabilities described
in this Section 6(a) collectively herein "Birdair Liabilities").
(b) Taiyo's Indemnification. Except as provided below, to the extent
that Birdair does not fulfill any or all of its indemnification obligations to
Chemfab, Birdair Structures, and/or their respective Agents with respect to the
Birdair Liabilities as provided in Section 6(a) or by law, each of Taiyo and its
Affiliates, jointly and severally, shall, subject to Sections 6(c) and 6(d) of
this Agreement and except as otherwise provided in Section 6(g) of this
Agreement, indemnify each of Chemfab, Birdair Structures and their respective
Agents to the full extent that Birdair's obligations thereunder are not met;
provided that, if a claim is made by a third party (i.e., a person or entity
other than Birdair, Taiyo or any other Affiliate of Taiyo) in writing against
Chemfab on or before the first anniversary of the Closing Date with respect to
(but only with respect to) an Original Guaranteed Obligation (such a claim
herein a "Qualifying Claim"), each of Taiyo and Chemfab shall remain liable, to
the extent and only after Birdair has not been able to pay or satisfy such
claim, for fifty percent (50%) of the resulting liability with respect to such
Original Guaranteed obligation, as provided in Section 8(b) of the Existing
Shareholder Agreement. In any event, Taiyo shall use its best efforts to cause
Birdair (i) to pay and satisfy any and all such Qualifying Claims, (ii) to
indemnify Chemfab with respect thereto pursuant to Section 6(a) of this
Agreement, and (iii) to provide the defense against such Qualifying Claims
pursuant to Section 6(d). In the event that such a Qualifying Claim with
respect to any and all Original Guaranteed Obligations is not, in whole or in
part, made by such third party and received by Chemfab in writing by the first
anniversary of the Closing Date--time being of the essence--the foregoing
proviso shall not apply, and Taiyo's indemnification obligation under the first
clause of this Section 6(b) shall be absolute.
For purposes of this Section 6(b), Chemfab, Birdair Structures and their
respective Agents shall be entitled to such indemnification by Taiyo and its
Affiliates immediately upon the non-fulfillment of Birdair's indemnification
obligations under Section 6(a); and the initiation or resolution of any legal
remedy by Chemfab, Birdair Structures, and/or their respective Agents against
Birdair shall not be a precondition to the obligations of Taiyo and its
Affiliates under this Section 6(b). Upon making full payment with respect to
any of the Birdair Liabilities, the pertinent Taiyo Company shall be subrogated
to the rights of the indemnitee or payee against Birdair and/or other
responsible party or parties. It is understood and agreed by Chemfab, Birdair
and each of Taiyo and its other Affiliates that the undertaking by each of Taiyo
and its Affiliates in this Section 6(b) is intended for the exclusive benefit of
Chemfab, Birdair Structures, and their respective Agents, and is not for the
benefit of any third parties.
(c) Survival of Indemnity Obligations. After the Closing Date, the
obligations of Taiyo and its Affiliates (including, after Closing, Birdair)
under Section 6(a) and (b) with respect to any loss, expense, damage or
liability for which Chemfab, Birdair Structures, and/or their respective Agents,
as the case may be, is entitled to indemnity hereunder (collectively, an
"Indemnifiable Loss") shall terminate, with respect to such Indemnifiable Loss,
on the date of the latter of (i) the expiration of the statutes of limitation
applicable to any action, suit, proceeding, claim, demand or assessment that
might give rise to such Indemnifiable Loss, and (ii) the final resolution of any
such action, suit, proceeding, claim, demand or assessment, regardless of
whether commenced or made prior to the expiration of the applicable statutes of
limitation.
(d) Defense of Claims. Upon receipt by Chemfab, Birdair Structures or
their respective Agents (each such party, for such purposes, being hereinafter
referred to as an "Indemnified Party") of notice of any action, suit,
proceeding, claim, demand or assessment against such Indemnified Party which
might give rise to a claim pursuant to this Section 6, the Indemnified Party
shall give written notice thereof to Birdair and Taiyo (each such party, for
purposes of this Section 6, being hereinafter referred to as an "Indemnifying
Party"), indicating the nature of such claim and the basis therefor. Such
notice given to Taiyo shall be deemed to be sufficient as if given to all the
Affiliates of Taiyo for purposes of giving notice to all such Affiliates of
their indemnification obligations hereunder. A claim for indemnity may, at the
option of the Indemnified Party, be asserted as soon as any claim has been
asserted by a third party in writing, regardless of whether actual harm has been
suffered or out-of-pocket expenses incurred, provided that the Indemnified Party
shall have reasonably determined that it may be liable or shall otherwise incur
losses, damages or costs in respect of such claim. Promptly after a claim is
made for which the Indemnified Party seeks indemnity, the Indemnified Party
shall permit the Indemnifying Party, at its option, to assume the complete
defense of such action, suit, proceeding, claim, demand or assessment with full
authority to conduct such defense and to settle or otherwise dispose of the same
(except as hereinafter provided) and the Indemnified Party will cooperate fully
in such defense. The Indemnifying Party will not, and Taiyo will not cause or
permit any Indemnifying Party to, in defense of any such action, suit,
proceeding, claim, demand or assessment, except with the consent of the
Indemnified Party, consent to the entry of any judgment or enter into any
settlement which does not include, as an unconditional term thereof, the giving
by the claimant or plaintiff to the Indemnified Party of a release from all
liability in respect thereof. Notwithstanding anything to the contrary in this
Section 6, after notice to the Indemnified Party of the Indemnifying Party's
election to assume the defense of such action, suit, proceeding, claim, demand
or assessment, the Indemnifying Party shall only be liable to the Indemnified
Party for (i) such legal fees or other expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof at the request of the
Indemnifying Party; and (ii) any and all legal fees and other expenses incurred
by the Indemnified Party to enforce or assert its rights under this Section 6.
As to those actions, suits, proceedings, claims, demands or assessments with
respect to which the Indemnifying Party does not elect to assume control of the
defense, the Indemnified Party will afford the Indemnifying Party an opportunity
to participate in such defense, at the Indemnifying Party's own additional cost
and expense, and will not settle or otherwise dispose of any of the same without
the consent of the Indemnifying Party.
(e) Taiyo shall have caused Chemfab, within fifteen (15) days after
Closing, to be removed and released as a guarantor and indemnitor of all
performance or surety bonds issued with respect to Birdair's existing bonding
facility with CIGNA (the "CIGNA Bonds") , and have provided to Chemfab, within
fifteen (15) days after Closing, satisfactory written evidence of same.
(f) In light of the essential and invaluable nature of these
indemnification agreements as an inducement to Chemfab to sell the Chemfab
Shares, and of the irreparable harm that Chemfab and its Affiliates will sustain
if either Birdair or any of Taiyo or its Affiliates breaches any one or more of
these indemnification provisions, it is understood and agreed that, if Birdair
or any of Taiyo or its Affiliates breaches any one or more of these
indemnification obligations, (i) Chemfab and its Affiliates will have no
adequate remedy at law to reinstate those benefits and/or prevent such
irreparable harm; (ii) Chemfab and/or its Affiliates may petition a court of
competent jurisdiction for injunctive and other equitable relief to enforce the
obligations of Birdair and/or Taiyo and its Affiliates under this Section 6;
(iii) Chemfab may elect, in its sole judgment, (A) to treat such breach as a
Conversion Event (as defined in paragraph 2.6 of the Supply Agreement), and (B)
to exercise its other remedies under paragraph 8.2 of the Supply Agreement.
(iv) Chemfab shall have the other rights and remedies set forth in the New
Shareholder Agreement; and (v) the Indemnifying Party shall pay the Indemnified
Party's legal fees and other expenses incurred in enforcing or asserting its
rights under this Section 6.
(g) San Diego Convention Center Claim.
---------------------------------
(i) Introduction. The Parties acknowledge that a claim may possibly be
asserted against Birdair related to a tear in a portion of the roof on the San
Diego Convention Center on or about February 28, 1991 (such roof incident herein
the "San Diego Incident" and any ultimate economic loss suffered by Birdair due
to the possible claim relating thereto herein the "San Diego Claim"). The
Parties further acknowledge that the extent of Birdair's liability, if any, in
this matter and the financial exposure related thereto is impossible to
determine as of the Closing Date.
(ii) Contingent Contribution. Notwithstanding the indemnity
provisions in Sections 6(a) and (b) of this Agreement, Chemfab agrees, subject
to the conditions precedent set forth in Section 6(g) (iv) below, to contribute
an amount up to the Contribution Amount (as defined below) toward the cost of
settling or otherwise paying any ultimately determined San Diego Claim.
Chemfab's contribution, if any, will be determined based upon the formula set
forth in subsection 6(g) (iii) below if, but only if, all of the conditions
listed in Section 6(g) (iv) below have been fulfilled by Taiyo and Birdair.
(iii) Formula for Chemfab's Contribution. In satisfaction of the San
Diego Claim, Chemfab will pay the amount to Taiyo computed in accordance with
the contribution formula set forth below. For purposes of this formula, the
following terms will have the following definitions:
(A) "Total Cost" means the total of all amounts actually paid by Taiyo,
Birdair, and/or its insurers to the owner of the San Diego Convention
Center, its insurer(s), or any third parties in final settlement of or
satisfaction of any and all claims and/or judgments for all damages,
whether direct, consequential, or otherwise, related to the San Diego
Incident; provided that, "Total Cost" shall not include (I) legal fees of
any party or insurer, or (II) any and all other related investigation,
settlement and/or defense costs.
(B) "Third Party Contributions" means any and all proceeds and/or
contributions funded by any insurer (other than the owner's insurer)
and/or directly by any other third party (e.g., an architect, engineer, or
general contractor, but excluding Birdair or Taiyo).
(C) "Remainder Amount" means the difference, if any, between (I) Total
Costs, less (II) the sum total of Third Party Contributions plus $750,000.
(D) Contribution Formula and Contribution Amount. Chemfab will pay to
either Taiyo or Birdair, at Taiyo's election, an amount (the "Contribution
Amount") equal to 50% of the Remainder Amount, but in no event will the
Contribution Amount exceed $300,000. If Chemfab has any obligation to pay
the Contribution Amount under this clause (D) with respect to the San Diego
Claim, Chemfab may, at its sole election, satisfy its obligation hereunder
by the payment of cash or by providing Taiyo or Birdair with such volume of
Permanent Architectural Fabrics that has a then-current list selling price
equal to the Contribution Amount.
(iv) Conditions Precedent to Chemfab Payment. Chemfab's obligation to pay
the Contribution Amount (if any) shall be expressly contingent upon the prior
performance and fulfillment of each of the following actions by Taiyo and
Birdair:
(A) Subject to Taiyo's and Birdair's business judgment and advice of
counsel, as soon as practicable after the Closing Date, Taiyo, together
with Birdair, will initiate good faith discussions with the owners of the
San Diego Convention Center and its insurers to expeditiously resolve and
settle the San Diego Claim on such terms and in any amount that Taiyo and
Birdair, and/or its insurer(s), may deem appropriate.
(B) As part of any resolution or settlement, Taiyo and Birdair shall
obtain a complete release from the owners of the San Diego Convention
Center, and any other parties in interest, and their insurer(s)
specifically releasing Birdair, Chemfab, and Taiyo, and waiving all past,
present and future claims as to each of the parties related to the San
Diego Incident (including without limitation the San Diego Claim).
Further, as part of any resolution or settlement, the owners of the San
Diego Convention Center shall be required to indemnify Birdair, Chemfab,
and Taiyo and hold each of them harmless against any and all claims made
by any other party in the future related to the San Diego Incident
(including without limitation the San Diego Claim.
(v) Taiyo and Birdair further acknowledge that they are and shall be
solely responsible for the management and disposition of the San Diego Claim and
will pay all legal fees, investigation, defense and associated settlement costs,
to the extent not covered by insurance. It is understood and agreed by Chemfab,
Birdair and each of Taiyo and its Affiliates that the undertakings by Chemfab in
this Section 6(g) are intended for the exclusive benefit of Taiyo and Birdair,
and are not for the benefit of any third parties.
7. Supply Agreement. As an essential inducement to Chemfab to agree to
the Recapitalization and to sell the Chemfab Shares to Taiyo, each of the Taiyo
Companies is willing and has agreed to enter into the Supply Agreement (the
"Supply Agreement").
8. New Shareholder Agreement. As an essential inducement to Chemfab to
agree to the Recapitalization and to sell the Chemfab Shares to Taiyo, Taiyo and
Chemfab shall enter into a New Shareholder Agreement with the Company, effective
as of the Closing Date (the "New Shareholder Agreement").
Part IV - Representations, Warranties.
--------------------------------------
Covenants and Agreements
------------------------
9. Representations. Warranties, Covenants and Agreements of Taiyo.
Taiyo hereby represents and warrants to Chemfab as follows:
(a) Corporate Organization, qualification, etc. of Taiyo. Taiyo is a
corporation duly incorporated, validly existing and in good standing under the
laws of Japan. The execution and delivery of this Agreement and of the other
Closing Documents and the performance by Taiyo of its obligations hereunder and
thereunder have been duly authorized by all necessary corporate actions on
behalf of Taiyo. Each of this Agreement and the other Closing Documents is
binding upon Taiyo in accordance with its terms.
(b) Non-Contravention. The execution and delivery of this Agreement and
the other Closing Documents and the consummation of the transactions
contemplated hereby and thereby will not violate any material agreement to which
Taiyo is a party or any provision of the Certificate of Incorporation or By-Laws
of Taiyo.
(c) Ownership of the Class A Shares. Taiyo owns the Class A Shares free
and clear of all liens, adverse claims or options (except for restrictions in
Birdair's Certificate of Incorporation, as amended, the Organizational
Agreement, the Existing Shareholder Agreement or as required by applicable
securities laws).
(d) Purchase for Investment. Taiyo intends to purchase the Chemfab
Shares for its own account for investment purposes and not with a view to the
distribution thereof.
(e) Investigation by Taiyo. Taiyo has made, or will have made prior to
the Closing Date, such investigation of the business, properties, financial and
legal condition, books, records, facilities and personnel of Birdair as Taiyo
deems necessary or appropriate in order for Taiyo to purchase the Chemfab
Shares.
(f) Consents. No consent, license, approval, order or authorization of,
or registration, filing or declaration with, any governmental authority, and no
consent of any third party (other than as may be required by the Organizational
Agreement) is required to be obtained by Taiyo in connection with the execution,
delivery and performance by Taiyo of this Agreement or the other Closing
Documents.
(g) Litigation. There is no action, proceeding, or investigation or
inquiry pending or, to the best of the knowledge of Taiyo, threatened, which
questions the validity of this Agreement, the other Closing Documents or any
action proposed to be taken by Taiyo pursuant hereto.
(h) Finders or Brokers. Taiyo has not employed any investment banker,
broker, finder or intermediary in connection with the transactions contemplated
hereby who might be entitled to a fee or any commission in connection with or
upon consummation of this Agreement or the other Closing Documents or the
transactions contemplated hereby or thereby.
(i) Guaranteed Obligations. To the best of the knowledge of Taiyo,
there are no Guaranteed Obligations guaranteed by Taiyo except as set forth on
Exhibit A.
(j) Documentary and Transfer Taxes. Taiyo will pay any and all
documentary, stamp or other transfer taxes (collectively, "Transfer Taxes")
assessed, levied or otherwise due with respect to the sale and purchase of the
Chemfab Shares.
10. Representations and Warranties of Chemfab. Chemfab hereby
represents and warrants to Taiyo as follows:
(a) Corporate Organization. Qualification. etc. of Chemfab. Chemfab is a
corporation duly incorporated, validly existing and in good standing under the
laws of the state of Delaware. The execution and delivery of this Agreement and
of the other Closing Documents and the performance by Chemfab of its obligations
hereunder and thereunder have been duly authorized by all necessary corporate
action on behalf of Chemfab. Each of this Agreement and the other Closing
Documents is binding upon Chemfab in accordance with its terms.
(b) Ownership of Class B Shares. Chemfab owns the Class B Shares, and,
as of the time immediately prior to the Effective Time, will own the Chemfab
Shares, free and clear of all liens, adverse claims or options (except for
restrictions in Birdair's Certificate of Incorporation, as amended, the
Agreement, and the Existing Shareholder Agreement or required by applicable
securities laws).
(c) Non-Contravention. The execution and delivery of this Agreement and
the other Closing Documents and the consummation of the transactions
contemplated hereby and thereby will not violate any material agreement to which
Chemfab is a party or any provision of the Certificate of Incorporation or By-
Laws of Chemfab.
(d) Consents. No consent, license, approval, order or authorization of,
or registration, filing or declaration with, any governmental authority, and no
consent of any third party (other than (i) as may be required by the
Organizational Agreement; and (ii) the consent of Chemfab's and Birdair's
institutional lenders, the consent of each of which has been obtained), is
required to be obtained, by Chemfab in connection with the execution, delivery
and performance by Chemfab of this Agreement or the other Closing Documents.
(e) Litigation. There is no action, proceeding, or investigation or
inquiry pending or, to the best of the knowledge of Chemfab, threatened which
questions the validity of this Agreement, the other Closing Documents or any
action proposed to be taken by Chemfab pursuant hereto or thereto.
(f) Finders or Brokers. Chemfab has not employed any investment banker,
broker, finder or intermediary in connection with the transactions contemplated
hereby who might be entitled to a fee or any commission in connection with or
upon consummation of this Agreement or the other Closing Documents or the
transactions contemplated hereby or thereby.
11. Representations and Warranties of Birdair. On behalf of Birdair,
Chemfab and Taiyo hereby represent and warrant to each other that they have
caused or will cause the following to be true and accurate:
(a) Record Ownership of Shares. The Class B Shares are owned of record
by Chemfab and are fully paid and non-assessable.
(b) Authorization and Issuance of Capital Stock. (i) As of the
Effective Time, the 1000 shares of Preferred Stock will be duly authorized and
issued and will be owned of record by Chemfab; will be fully paid non-
assessable; and the Preferred Stock will have the rights and preferences set
forth in the Revised Charter.
(ii) As of the time immediately prior to the Effective Time, the Class A
Common Stock will be duly authorized and issued and be owned of record,
respectively, as follows: 447 shares --Chemfab; 553 shares -- Taiyo; and all
such shares will be fully paid and non-assessable.
12. Certain Covenants, Agreements and Consents of Both Parties. Each of
Chemfab and Taiyo covenants and agrees as follows:
(a) Accuracy of Representations, Warranties, Covenants and Agreements.
Each of Taiyo and Chemfab covenants and agrees that it will take any and all
action reasonably necessary to cause its representations, warranties, covenants
and agreements in Sections 9 and 10, respectively, to continue to be true,
accurate and complete in all material respects to the extent that they survive
Closing.
(b) Shareholder Consent. The Parties acknowledge and agree that each of
Taiyo and Chemfab has consented to this Agreement and/or waived any
preconditions to or prohibitions against this Agreement, to the extent required
by the Organizational Agreement or the Existing Shareholder Agreement.
(c) Expenses. Each of the Parties hereto will pay its own fees and
expenses, including its own counsel fees and accountants' fees, incurred in
connection with the transactions contemplated by this Agreement and the other
Closing Documents, except as otherwise provided herein.
Part V - Closing Conditions and Closing
---------------------------------------
13. Conditions Precedent to Obligations of Each Party to Consummate
Transactions. The obligations of the Parties hereunder to consummate the
purchase and sale of the Chemfab Shares shall be subject to the fulfillment of
the following conditions at the Closing Date:
(a) There shall be no action, suit, proceeding or investigation at law
or in equity before or by any court, public board or body, pending or
threatened, against Birdair or either Party hereto, which seeks an injunction
against or threatens to enjoin the consummation of this Agreement or the other
Closing Documents, which questions or would question the validity or propriety
of this Agreement or the other Closing Documents or wherein an unfavorable
decision, ruling or finding would materially adversely affect the transactions
contemplated by this Agreement or the other Closing Documents;
(b) Birdair and its shareholders and directors shall have taken all
necessary action as of the Effective Time (other than the filing of the Revised
Charter with the Delaware Secretary of States Office) to carry out and complete
the Recapitalization;
(c) Birdair shall have issued to Chemfab duly executed share
certificate(s) representing (i) all of the Company's Preferred Stock, and (ii)
the Chemfab Shares; and
(d) Each of the Closing Documents has been duly authorized, executed and
delivered by each of the parties thereto.
14. Conditions Precedent to Obligations of Chemfab. The obligations of
Chemfab to consummate this Agreement and the other Closing Documents shall be
subject to the satisfaction of the following conditions, at or prior to the
Closing Date:
(a) Representations, Covenants. etc. The representations and warranties
of Taiyo set forth herein shall be true and correct in all material respects on
the Closing Date to the same extent as if made on such date, and Taiyo shall
have complied in all material respects with its covenants, agreements and
obligations hereunder.
(b) Opinion of Counsel. Chemfab shall have received from counsel for
Taiyo a written opinion dated the Closing Date, addressed to Chemfab, relative
to the matters set forth in Sections 9(a-c), (f) & (g) above, inclusive.
(c) Certificate. Taiyo shall have delivered to Chemfab a certificate,
dated the Closing Date, signed by the Chairman, President or any Vice President
of Taiyo, certifying as to the fulfillment of the conditions specified in
Section 9.
(d) Taiyo shall have paid the Cash Payment (and any related Transfer
Taxes) for the Chemfab Shares as provided in Section 16(b) below.
15. Conditions Precedent to Obligations of Taiyo. The obligations of
Taiyo to consummate this Agreement and the other Closing Documents shall be
subject to the satisfaction of the following conditions at or prior to the
Closing Date:
(a) Representations, Covenants, etc. The representations and warranties
of Chemfab set forth herein shall be true and correct in all material respects
on the Closing Date to the same extent as if made on such date, and Chemfab
shall have complied in all material respects with its covenants, agreements and
obligations hereunder.
(b) Opinion of Counsel. Taiyo shall have received from counsel for
Chemfab a written opinion, dated the Closing Date, addressed to Taiyo, relative
to the matters set forth in Sections 10(a) & (c-e) above.
(c) Certificate. Chemfab shall have delivered to Taiyo a certificate,
dated the Closing Date, signed by the President or any Vice President of
Chemfab, certifying as to the fulfillment of the conditions specified in Section
10.
16. The Closing. (a) The closing of the sale by Chemfab and purchase by
Taiyo of the Chemfab Shares and of the other transactions contemplated by this
Agreement and the other Closing Documents (the "Closing") shall take place at
11:00 A.M. (EST) on the closing date (the "Closing Date") agreed to by the
Parties, which in any event shall be consummated on or before March 29, 1992.
(b) Method of Payment. Taiyo shall make and pay the Cash Payment for
the Chemfab Shares in the form of a wire transfer on or before the Closing Date
in the amount of $4,533,333 in immediately available funds to Chemfab's account
with M & T Bank, Buffalo, New York, Account Number 150-039-1, or such other
account as Chemfab shall direct in writing prior to the Closing Date. Taiyo
shall pay directly to the pertinent taxing authority(ies) any and all transfer
Taxes relating to such sale and purchase of the Chemfab Shares.
(c) Closing Deliveries by Chemfab. Subject to the terms and conditions
hereof, at the Closing, Chemfab shall deliver to Taiyo (i) good and marketable
title to the Chemfab Shares, free and clear of all liens, adverse claims or
options (except for restrictions in Birdair's Certificate of Incorporation,
contained herein or in the New Shareholder Agreement, or required by applicable
securities laws), by delivering certificates representing the Chemfab Shares
(the `Stock Certificates"), in good delivery form for transfer, accompanied by
stock powers duly executed in blank with all requisite stock transfer stamps
attached; and (ii) the opinion and certificate referred to in Sections 15(b) and
(c) of this Agreement.
(d) Closing Deliveries by Taiyo. Subject to the terms and conditions
hereof, at the Closing, Taiyo shall deliver to Chemfab (i) the Cash Payment as
provided in Section 16(b), and (ii) the opinion and certificate referred to in
Sections 14(b) and (c) of this Agreement.
(e) Further Assurances of Taiyo. From time to time, at Chemfab's request
(whether at or after the Closing), Taiyo will, at its own expense, execute and
deliver such further instruments and take such other action as Chemfab may
reasonably request in order to more effectively consummate the sale of the
Chemfab Shares pursuant to this Agreement.
(f) Further Assurances of Chemfab. From time to time, at Taiyo's request
(whether at or after the Closing), Chemfab will, at its own expense, execute and
deliver such further instruments and take such other action as Taiyo may
reasonably request in order to more effectively convey and transfer to Taiyo the
Chemfab Shares.
(g) Survival of Representations and Warranties. The representations and
warranties of Taiyo contained in Section 9, and the representations and
warranties of Chemfab contained in Section 10, in connection with the
transactions contemplated hereby shall survive for a period of one year from the
Closing Date, except for the representations and warranties of Taiyo contained
in Section 9(d-e) and of Chemfab in Section 10(b), which shall survive for a
time period equal to the applicable statute of limitations for claims relating
to the provisions of such Sections 9(d-e) and 10(b), after which all liability
with respect thereto shall terminate, except as to any inaccuracy or breach
thereof of which either Party shall have, prior to such date, advised the other
Party hereto in writing, specifying in reasonable detail the representation or
warranty that is inaccurate or that has been breached and the basis for such
allegation.
Part VI. Post-Closing Agreements.
---------------------------------
17. Repairs and Warranty Work. After Closing, Taiyo shall, at the request
of Chemfab or any of its Affiliates, cause Birdair to perform any repair or
replacement services (collectively "Repair Services"), required to be performed
by operation of law, by operation of any warranty, express or implied, or as the
result of any valid, final and binding adjudication of the negligence or strict
liability of Chemfab or any of its Affiliates, with respect to any products sold
or services performed by Chemfab or any of its Affiliates relating to the Fabric
Structures Business. Taiyo shall cause Birdair to perform such Repair Services
for a price equal to Birdair's "costs" (as defined below) plus a fee equal to
15% of such costs, and upon such other terms and conditions as are acceptable to
the Parties; provided that, it is understood and agreed that Birdair will be
acting as an agent of Chemfab or one or more of its Affiliates with respect to
such Repair Services and nothing in this Section 17 shall release Chemfab or its
Affiliates of liability, or render Taiyo or Birdair liable, for initial and
recurring repair or replacement services required to be performed hereunder.
Taiyo shall, or shall cause Birdair to, indemnify and hold harmless Chemfab and
its Affiliates from and against any and all loss or expense (including
reasonable attorneys' fees and expenses) that arises out of any negligence by
Birdair or any of its employees with respect to Birdair's performance under this
Section 17. For purposes of this section, Birdair's "costs" for Repair Services
provided to Chemfab or any of its Affiliates shall be those variable costs that
have been consistently treated as direct project costs in the computation of
"project profit" in Birdair's internal financial statements during the two years
prior to the Closing Date.
18. Bonding Commitment. After the Closing Date, Taiyo agrees to use its
best efforts to obtain on Birdair's behalf, or cause Birdair to obtain, as soon
as practicable, a bonding commitment from a surety which is adequate to support
the business of Birdair. The Parties agree that, notwithstanding Chemfab's
Preferred Stock investment, none of Chemfab nor any of its Affiliates will be
required (nor will Taiyo request any of them) to be an indemnitor or guarantor
of (or otherwise to have any financial liability (direct or indirect) with
respect to) any new bonds issued with respect to Birdair's business after the
Closing Date. Further, in order to satisfy the notice provisions of the CIGNA
Bond Indemnity Agreement to remove Chemfab as an indemnitor, Taiyo agrees that
no new bonds will be issued under Birdair's existing CIGNA bonding facility for
the first thirty days after the Closing Date.
19. Savings and Security Plan and Bargaining Unit Pension Plan. The
Parties acknowledge that both Birdair's union and nonunion employees are
participants in the Chemfab Corporation Savings and Security Plan and Trust (the
"Savings Plan") and that Birdair's union employees are participants in the
CHEMFAB New York, Inc. Bargaining Employees' Retirement Plan ("CHEMFAB New York
Plan," together with the Savings Plan, the "Plans"). The Parties further
acknowledge and agree that effective on the Closing Date, Chemfab will operate
the Plans as multiple employer plans (thus providing continuing participation)
from the Closing Date until the end of the current Plan year (May 31, 1992) for
the Savings Plan, and the end of the current collective bargaining agreement
between the Company and its union employees (April 5, 1992) for the CHEMFAB New
York Plan.
Taiyo agrees that, after the Closing Date, it will provide, or cause
Birdair to provide, benefits substantially identical to those currently
available through the Plans for the affected Birdair employees as provided in,
and for the periods indicated in, Sections 19(a) and 19(b) below. Taiyo agrees
to pay all costs of establishing the new plan described in Section 19(a) and any
additional actuarial or valuation costs incurred by Chemfab (beyond those costs
customarily incurred by Chemfab and Birdair to value the Plans at their
respective plan year ends) to disaggregate and/or distribute amounts under the
Plans. Taiyo further agrees that it is solely responsible for Birdair's
compliance with the Employee Retirement Income Security Act of 1974 (ERISA) from
and after the Closing Date.
Chemfab acknowledges that the disaggregation of, and/or distributions
from, the plans will require significant administrative assistance, and Chemfab
will provide the necessary administrative support to Taiyo and Birdair after the
Closing Date to reasonably facilitate a transfer and/or distribution of the
affected employees' benefits and related assets in accordance with Sections
19(a) and 19(b) below.
(a) Savings Plan. Chemfab shall cause the Savings Plan to be divided into
two plans, effective June 1, 1992, one plan for current and former employees of
Birdair who are not then employees of Chemfab and its Affiliates (the "Birdair
Savings Plan") and one plan for current and former employees of Chemfab and its
Affiliates who are not then employees of Birdair (the "Chemfab Savings Plan")
Taiyo shall cause Birdair to adopt the Birdair Savings Plan for the benefit of
its current and former employees, and Chemfab shall cause assets equal to the
aggregate account balances of the participants in the Birdair Savings Plan on
June 1, 1992 to be transferred from the Savings Plan to the Birdair Savings Plan
within a reasonable time after June 1, 1992. It is anticipated that a final
accounting for the Savings Plan's plan year ending May 31, 1992, will be
available on or about September 15, 1992. The amount so transferred shall be
adjusted to reflect estimated income, appreciation and depreciation of the
assets of the Savings Plan between May 31, 1992 and the date of transfer and to
reflect any payments made to participants in the Birdair Savings Plan after May
31, 1992. Effective June 1, 1992, all Plan contributions deducted from Birdair
employees will be deposited directly into the Birdair Savings Plan. Once a
final accounting of the participant account balances has been rendered for the
period ending May 31, 1992, Birdair, on its own behalf and (to the extent
permitted by applicable law) on behalf of the participants in the Birdair
Savings Plan, agrees to execute and deliver to Chemfab an instrument releasing
Chemfab and its Affiliates and their respective Agents from any liability
arising from any actions or omissions with respect to the Savings Plan prior to
the date the assets are transferred or in connection with any adverse tax
consequences resulting therefrom.
(b) CHEMFAB New York, Inc. Bargaining Employees' Retirement Plan. Taiyo
acknowledges and agrees that the Birdair employees who are members of the
Amalgamated Clothing and Textile Workers Union have voted to decertify the Union
effective April 5, 1992. Accordingly, as of April 6, 1992, these employees will
no longer be working under a collective bargaining agreement and will no longer
qualify for participation in the CHEMFAB New York Plan as of that date. In
order to maintain continuity of benefits through April 5, 1992, Taiyo agrees
that it will cause Birdair to become a participating employer in the CHEMFAB New
York Plan from March 27, 1992, through April 5, 1992. Thereafter, Taiyo will
cause Birdair to include these former union employees in the Company's money
purchase plan or any other retirement plan broadly available to its non-union
employees as of April 6, 1992.
After the end of the Plan Year, Chemfab shall request a valuation as of
April 30, 1992 and a determination by an enrolled actuary of the present value
at April 5, 1992, of the benefits accrued under the CHEMFAB New York Plan
calculated on a termination basis. If the assets of the CHEMFAB New York Plan
as of April 30, 1992 are less than the actuarially computed present value of all
benefits accrued thereunder at April 30, 1992, then Taiyo Kogyo shall cause
Birdair to make a contribution to the Plan equal to Birdair's proportionate
share of the underfunded amount based upon the number of its participants in the
plan as a percentage of the total number of participants in the plan.
After a final actuarial valuation and accounting has been completed for
the plan year ending April 30, 1992, vested accrued benefits for the Birdair
employees as of April 5, 1992, will be distributed to those employees in
accordance with the terms of and as prescribed by ERISA.
On the date of the distribution of the vested accrued benefits, Birdair
shall execute and deliver to Chemfab a certificate executed by Birdair, on its
own behalf and (to the extent permitted by applicable law) on behalf of
Bargaining Unit Plan Participants, releasing Chemfab and its Affiliates and
their respective Agents from any liability arising from any actions or omissions
concerning the CHEMFAB New York Plan through the date of the distribution of the
assets, including without limitation liability for the payment of benefits
accrued under the CHEMFAB New York Plan and any adverse tax consequences
resulting therefrom.
20. Non-Exclusive License. Taiyo agrees that it will cause Birdair to
grant to Chemfab and its Affiliates, on a non-exclusive, royalty-free basis
(with the right to sub-license, subject to the same restrictions applicable to
Chemfab and its Affiliates, but without Birdair's further consent), both (a) the
right to use any and all of Birdair's Existing Technology for applications
relating to Chemfab's present or future business; and (b) the right to use the
Transferred Technology in any application other than the Fabric Structures
Business. The duration of this non-exclusive license shall be perpetual.
21. Supply of High Performance Materials to Taiyo Companies. After
Closing, if any Taiyo Company desires to develop or manufacture new products
(other than High Performance Fabricated Products) that involve the utilization
or fabrication of a specific High Performance Material (other than Permanent
Architectural Fabrics) which, at that time, Chemfab produces or has the
capability to develop or supply, Taiyo shall give notice to Chemfab of such
desire and Taiyo shall discuss with Chemfab, on a confidential basis, the
desired specifications for the specific High Performance Material involved. If,
within ten days after receiving such notice from Taiyo, Chemfab advises Taiyo
that it is interested in supplying such material, then Taiyo and Chemfab will
use their best efforts to develop, if applicable, a mutually acceptable
development plan, and to negotiate a supply agreement for such product pursuant
to which Chemfab would supply all of the Taiyo Companies' requirements for such
High Performance Material.
Part VII - Miscellaneous
------------------------
22. Miscellaneous Provisions.
------------------------
(a) Governing Law. This Agreement shall be construed and interpreted
according to the laws of the State of Delaware.
(b) Amendment and Modification. The Parties by mutual consent of their
respective officers may amend, modify and supplement this Agreement in such
manner as may be agreed upon by them in writing.
(c) Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if delivered by hand or
mailed, certified or registered mail, with postage prepaid: (i) if to Chemfab,
to Chemical Fabrics Corporation, Daniel Webster Highway, P.O. Box 1137,
Merrimack, New Hampshire 03054, Attention: President, or to such other person
or address as Chemfab shall furnish to Taiyo in writing and (ii) if to Taiyo, to
Taiyo Kogyo Corporation, 3-22-1 Higashiyama, Meguro-ku, Tokyo 153 Japan, or to
such other person or address as Taiyo shall furnish to Chemfab in writing.
(d) Assignment; Successors of Parties. Subject to the provisions of
Section 7 of the New Shareholder Agreement, each of this Agreement, the other
Closing Documents, and all of the provisions thereof shall be binding upon and
inure to the benefit of the Parties hereto and their respective successors and
permitted assigns, provided that, none of this Agreement, the other Closing
Documents nor any of the rights, interests or obligations hereunder or
thereunder shall be assigned by either of the Parties hereto without the prior
written consent of the other Party except to a company which becomes a successor
to its principal business by merger, consolidation, purchase of all or
substantially all of its assets, or otherwise.
(e) Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed as an original, but all of
which together shall constitute one and the same instrument.
(f) Headings. The headings of the sections of this Agreement are
inserted for convenience only and shall not constitute a part hereof.
(g) Entire Agreement. This Agreement and other documents specifically
referred to herein which form a part hereof or are marked for identification by
each of the Parties hereto contain the entire understanding of the Parties in
the respect of the subject matter of this Agreement. There are no restrictions,
promises, warranties, covenants, or undertakings, other than those expressly set
forth herein. This Agreement supersedes all prior agreements and understandings
between the Parties with respect to subject matter.
IN WITNESS WHEREOF, the Parties have duly executed and delivered this
Agreement this 27 th day of March, 1992.
CHEMFAB CORPORATION
/s/ L. James Newman By /s/ Duane Montopoli
- ------------------------- --------------------------
Witness Title
TAIYO KOGYO CORPORATION
/s/ S. Hamada By /s/ Motonobu Nohmura
- ------------------------- --------------------------
Witness Title
EXHIBIT A
--------
Guaranteed Obligations
----------------------
Bonded
Performance Guarantees Contract
and/or Individual Bonds Amount
- ----------------------- -------
Illinois State University $1,793,532
San Diego Convention Center 1,000,000
Rolling Oaks 900,000
Sherway Gardens 500,000
U.C. Davis 145,000
Cobb Place 317,048
Heritage Hjemkomst 475,000
St. Petersburg 1,000,000
Sunland Mall 200,000
Bonds under CIGNA line
- ----------------------
A. Contract Bonds (By Project)
--------------------------
New Market Mall 343,104
Stonewood 669,879
Library Square 155,100
Georgia Dome 19,915,000
Broward City Convention Center 178,850
Anderson Dance Pavilion 299,530
Orlando Airport 1,326,050
Rockingham Park Mall 278,038
Folkstone Terminal 44,942
Northgate (Seattle) Transit 731,800
Hyatt Regency Orlando 115,000
Denver Airport 28,177,445
San Diego Convention Center (Repair) 342,335
San Diego Convention Center (Repair) 404,430
B. Miscellaneous Bonds.
-------------------
State of Louisiana 6,150
State of Washington 4,000
State of California (License) 5,000
State of California (Individual) 5,000
State of Georgia 10,000
District Council of Iron Workers 10,000
City of Sioux City 10,000
Item 1. List of qualified Guaranteed Obligations Project
------------------------------------------------
Sunland Mall $200,000
Cobb Place 317,048
Heritage Hjemkomst 475,000
U.C. Davis 145,000
Rolling Oaks 900,000
Illinois State University 1,793,532
Exhibit B
THE TERRITORY
--------------
1. Asia
Japan
Democratic Republic of Afghanistan
People's Republic of Bangladesh
Bhutan
Socialist Republic of the Union of Burma
People's Republic of China
India
Republic of Indonesia
Cambodia
Republic of Korea
Democratic People's Republic of Korea
Lao People's Democratic Republic
Malaysia
Republic of Maldives
Mongolian People's Republic
Kingdom of Nepal
Islamic Republic of Pakistan
Republic of the Philippines
Republic of Singapore
Democratic Socialist Republic of Sri Lanka
Kingdom of Thailand
Socialist Republic of Vietnam
2. Oceania
Fiji
Republic of Kiribati
Republic of Nauru
Papua New Guinea
Solomon Islands
Kingdom of Tonga
Tuvalu
The Republic of Vanuatu
Western Samoa
3. Eastern Europe and Asia
Republics, countries, states and provinces of the former Union of Soviet
Socialist Republics
4. Other territories
Taiwan
Hong Kong
Macao
Jammu and Kashmir
East Timor
Samoa (U.S.A.)
Canton and Enderbury (U.K., U.S.A.)
Polynesia (French)
Guam (U.S.A.)
Johnston (U.S.A.)
Midway (U.S.A.)
New Caledonia (French)
Pacific Islands Trust Territory (UN)
Pitcairn (U.K.)
Wake (U.S.A.)
Wallis (French)
Any islands in Pacific Ocean other than Hawaii and ones possessed by
Australia and New Zealand.
Exhibit C
BIRDAIR, INC.
CHEMFAB CORPORATION/TAIYO KOGYO CORPORATION
March 27, 1992
CLOSING AGENDA
---------------
Document Parties Preparation
-------- ------- -----------
A. Closing Matters.
----------------
1. Purchase and Sale TKC/CFC OR
Agreement
2. Supply Agreement TKC/CFC OR
3. Shareholder TKC/CFC OR
Agreement
4. Revised Charter BI (President OR
& Secretary)
5. BI Board Resolution BI Directors OR
Recommending Share
holder Adoption of
Revised Charter and
Revised By-Laws
6. BI Shareholder TKC/CFC OR
Resolution Adopting
Revised Charter and
Revised By-Laws
7. TKC Board Resolu- TKC YYB
tions Authorizing
Transactions
8. CFC Board Resolu- CFC OR/WHE
tions Authorizing
Transactions
9. BI Board of Directors BI Directors OR
Standing Resolu-
tions
10. CFC Tender of BI CFC/OR
Class B Shares to
effectuate Recapi-
talization
a) Assignment CFC OR
Separate from
Certificate
11. Issuance by BI BI SD
to CFC of 447
Shares of BI Class A
Common Stock
a) New BI Stock SD
Certificate
No.
12. Issuance by BI BI SD
to CFC of 1000
Shares of BI Pre-
ferred Stock
a) New BI Stock SD
Certificate
No.
13. Assignment Sep- CFC OR
arate from Certi
ficate (whereby CFC
assigns and sells
to TKC BI Stock
Certificate No.
representing
all 447 shares of
BI Class A Common Stock (Item 11 above))
14. BI Consent and BI OR
Assumption Agreement
15. BI Board Resolutions BI OR
Approving BI Consent
16. TKC Officer's TKC YYB
Certificate
17. CFC Officer's CFC OR
Certificate
18. TKC Legal Opinion YYB YYB
(addressed to CFC)
19. CFC Legal Opinion OR OR
(addressed to TXC)
20. Resignations of CFC OR
Class B BI Directors
21. CFC Designation of CFC OR
BI Preferred Stock
Board Member and
Non-Voting Repre
sentative
22. Cash Payment TKC TKC
($4,533,333)
Wired to CFC
23. Superseding CIGNA CFC
Indemnity
24. CIGNA's Release CFC
of CFC
25. CFC Bond Certificate CFC CFC
26. M&T Bank Consent CFC
27. Morgan Bank Consent CFC
B. Post-Closing Matters
--------------------
28. Filing Revised BI OR
with Delaware
Secretary of
State
29. Exchange of BI TKC SD
Stock Certificate
No. (in CFC's
name) and accompany
ing stock power
(Item 13 above) for
new BI Stock Certif
icate No. (to be
issued in TKC's name)
30. Election of Successor
BI Directors BI OR
31. New York Real Property
Gains Tax
a) Filing of Return BI SD
TKC
CFC
32. New York Real Property
Transfer Tax BI SD
TKC
CFC
33. IRS Form 8820 -
Information Filing
re: BI Recapitali-
zation BI EY
34. Affiliate Board
Votes TKC
CFC
Legend:
- ------
BI = Birdair, Inc. YYB = Yonemura, Yasaki & Boizer
CFC = Chemfab Corporation SD = Saperston & Day
TKC = Taiyo Kogyo Corporation WHE = William H. Everett
OR = Orr and Reno EY = Ernst & Young
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000725813
<NAME> YVETTE DESMARAIS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-28-1997
<CASH> 7395000
<SECURITIES> 0
<RECEIVABLES> 17597000
<ALLOWANCES> 353000
<INVENTORY> 17414000
<CURRENT-ASSETS> 45513000
<PP&E> 44773000
<DEPRECIATION> 23112000
<TOTAL-ASSETS> 80033000
<CURRENT-LIABILITIES> 11591000
<BONDS> 0
0
0
<COMMON> 861000
<OTHER-SE> 65791000
<TOTAL-LIABILITY-AND-EQUITY> 80033000
<SALES> 22154000
<TOTAL-REVENUES> 22154000
<CGS> 14595000
<TOTAL-COSTS> 14595000
<OTHER-EXPENSES> 4644000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (82000)
<INCOME-PRETAX> 2997000
<INCOME-TAX> 959000
<INCOME-CONTINUING> 2038000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2038000
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
