UFP TECHNOLOGIES INC (Form: 10-Q, Received: 05/14/2004 13:11:58)

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

(Mark one)

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

For the quarterly period ended MARCH 31, 2004

OR

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

For the transition period from to

Commission File Number: 001-12648

UFP Technologies, Inc.

(Exact name of registrant as specified in its charter)

Delaware		04-2314970
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

172 East Main Street, Georgetown, Massachusetts 01833, USA
(Address of principal executive offices) (Zip Code)

(978) 352-2200
(Registrant’s telephone number, including area code)


(Former name, former address and former fiscal year, if changed since last report)

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 ý ; No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o ; No ý

4,613,930 shares of registrant’s Common Stock, $.01 par value, were outstanding as of April 28, 2004.

UFP Technologies, Inc.

Index

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets as of March 31, 2004, and December 31, 2003

Consolidated Statements of Operations for the Three Months Ended March 31, 2004 and 2003

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and 2003

Notes to Interim Consolidated Financial Statements

Item 2. Management’s Discussion & Analysis of Financial Condition & Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

PART II - OTHER INFORMATION

SIGNATURES

Exhibit Index

PART I : FINANCIAL INFORMATION

ITEM 1 FINANCIAL STATEMENTS

UFP Technologies, Inc.
Condensed Consolidated Balance Sheets

	31-Mar-2004			31-Dec-2003
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	186,484		$	310,137
Receivables, less allowances of $469,774 and $475,625	9,549,668			9,139,314
Inventories	4,802,831			4,412,606
Prepaid expenses and other current assets	2,021,060			1,973,409
Total current assets	16,560,043			15,835,466
Property, plant and equipment	33,442,359			33,172,875
Less accumulated depreciation and amortization	(22,322,978		)	(21,699,717		)
Net property, plant and equipment	11,119,381			11,473,158
Goodwill	6,481,037			6,481,037
Other assets	2,951,099			2,959,411
Total assets	$	37,111,560		$	36,749,072

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable	$	6,396,835		$	6,737,712
Current installments of long-term debt	1,053,390			1,048,872
Current installments of capital lease obligations	463,354			386,615
Accounts payable	3,265,091			2,632,497
Accrued restructuring charge	580,001			764,745
Accrued expenses and payroll withholdings	3,372,339			3,055,960
Total current liabilities	15,131,010			14,626,401
Long-term debt, excluding current installments	5,960,004			6,222,222
Capital lease obligations, excluding current installments	1,896,510			1,897,128
Minority interest	365,881			455,434
Retirement and other liabilities	856,692			856,692

Stockholders’ equity:
Common stock $.01 value, authorized 20,000,000 shares, issued and outstanding shares 4,613,930 in 2004 and 4,519,666 in 2003	46,139			45,197
Additional paid-in capital	8,585,300			8,429,937
Retained earnings	4,270,024			4,216,061
Total stockholders’ equity	12,901,463			12,691,195

Total liabilities and stockholders’ equity	$	37,111,560		$	36,749,072

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

UFP Technologies, Inc.

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended
	31-Mar-04			31-Mar-03
Net sales	$	15,934,254		$	14,244,653
Cost of sales	12,692,072			11,984,658
Gross profit	3,242,182			2,259,995
Selling, general and administrative expenses	2,981,472			2,685,925
Operating income (loss)	260,710			(425,930		)
Interest expense	170,832			202,847
Minority interest earnings	15,447			0
Other (income)	(12,532		)	(34,704		)
Income (loss) before income taxes	86,963			(594,073		)
Income taxes	33,000			(225,748		)
Net income (loss)	$	53,963		$	(368,325	)

Basic net income (loss) per share	$	0.01		$	(0.08	)
Diluted net income (loss) per share	$	0.01		$	(0.08	)

Weighted average number of shares used in computation of per share data:
Basic	4,573,687			4,428,585
Diluted	4,821,405			4,428,585

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

UFP Technologies, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	31-Mar-04			31-Mar-03
Cash flows from operating activities:
Net income (loss)	$	53,963		$	(368,325	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	631,574			652,294
Minority interest earnings	15,447			0
Equity in net income of unconsolidated affiliate and partnerships	(12,531		)	(17,185		)
Stock issued in lieu of cash compensation	132,250			108,550
Changes in operating assets and liabilities:
Receivables, net	(410,354		)	35,214
Inventories	(390,225		)	(182,115		)
Prepaid expenses and other current assets	(47,651		)	(770,942		)
Accounts payable	344,903			768,127
Accrued restructuring charge, net of fixed asset write-offs	(184,744		)	(102,881		)
Accrued expenses and payroll withholdings	316,379			(728,354		)
Other assets	0			(2,093		)
Net cash provided by (used in) operating activities	449,011			(607,710		)
Cash flows from investing activities:
Additions to property, plant and equipment	(92,885		)	(135,921		)
Payments from affiliated company	12,531			52,133
Net cash used in investing activities	(80,354		)	(83,788		)
Cash flows from financing activities:
Repayments of notes payable	(340,877		)	(442,421		)
Change in book overdrafts	287,691			332,853
Principal repayments of long-term debt	(257,700		)	(6,677,768		)
Principal repayments of capital lease obligations	(100,479		)	(40,436		)
Proceeds from long-term borrowings	0			7,500,000
Distribution to United Development Company partners	(105,000		)	0
Net proceeds from sale of common stock	24,055			22,032
Net cash (used in) provided by financing activities	(492,310		)	694,260
Net (decrease) increase in cash and cash equivalents	(123,653		)	2,762
Cash and cash equivalents, at beginning of period	310,137			25,823
Cash and cash equivalents, at end of period	$	186,484		$	28,585

Significant non-cash transactions:
Property and equipment acquired under capital lease	$	176,600		$	0

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

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation

The interim consolidated financial statements of UFP Technologies, Inc. (the “Company”) presented herein, without audit, have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all the information and note disclosures required by generally accepted accounting principles. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2003, included in the Company’s 2003 Annual Report on Form 10-K as filed with the Securities and Exchange Commission.

The condensed consolidated balance sheet as of March 31, 2004, the consolidated statements of operations for the three months ended March 31, 2004 and 2003, and the consolidated statements of cash flows for the three months ended March 31, 2004 and 2003, are unaudited but, in the opinion of management, include all adjustments (consisting of normal, recurring adjustments) necessary for fair presentation of results for these interim periods.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The results of operations for the three months ended March 31, 2004, are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2004.

(2) New Accounting Pronouncements

In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.” The primary objective of the Interpretation is to provide guidance on the identification of, and financial reporting for, entities over which control is achieved through means other than voting rights. Such entities are known as variable-interest entities (VIEs). Although the FASB’s initial focus was on special-purpose entities (SPEs), the final guidance applies to a wide range of entities. FIN 46 applies to new entities that are created after the effective date, as well as existing entities. The Company has adopted the provisions of FIN 46 as of December 31, 2003, and, accordingly, has consolidated the financial statements of United Development Company Limited, of which it owns 26.32% (see Note 10).

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity”, (FAS 150). This statement establishes standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. The provisions of SFAS No. 150 are effective for instruments entered into or modified after May 31, 2003, and pre-existing instruments as of July 1, 2003. On October 29, 2003, the FASB voted to indefinitely defer the effective date of SFAS No. 150 for mandatorily redeemable instruments as they relate to minority interests in consolidated finite-lived entities through the issuance of FASB Staff Position (FSP) 150-3. The adoption of SFAS

No. 150, as modified by FSP 150-3, did not have an impact on the consolidated financial statements.

In December 2003, the Staff of the Securities and Exchange Commission (SEC or the Staff) issued Staff Accounting Bulletin No. 104 (SAB 104), “Revenue Recognition”, which supercedes SAB 101, “Revenue Recognition” in Financial Statements. SAB 104’s primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, superceded as a result of the issuance of EITF 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” Additionally, SAB 104 rescinds the SEC s Revenue Recognition in Financial Statements Frequently Asked Questions and Answers (the FAQ) issued with SAB 101 that had been codified in SEC Topic 13, Revenue Recognition. Selected portions of the FAQ have been incorporated into SAB 104. The Company’s current accounting policies conform to the requirements of this Staff Accounting Bulletin.

(3) Inventory

Inventories are stated at the lower of cost (first-in, first-out) or market, and consist of the following:

	03/31/04		12/31/03
Raw materials	$	2,928,143	$	2,693,660
Work-in-process	339,900		296,445
Finished goods	1,534,788		1,422,501
Total inventory	$	4,802,831	$	4,412,606

Work-in-process and finished goods inventories consist of materials, labor and manufacturing overhead.

(4) Restructuring Reserve

On October 22, 2003, the Company’s Board of Directors approved a formal plan of restructure in response to continued losses in the Company’s Packaging plant in Visalia, California. To that effect the Company recorded restructuring charges, in the fourth quarter of 2003, of $1,405,000, consisting of asset impairments of $640,000, severance of $40,000, and future lease commitments of $725,000. Of this amount, approximately $580,000 remains on the balance sheet as of March 31, 2004, primarily reflecting future lease payments to be made on the property in Visalia.

The following table summarizes the restructuring activity:

	Total			Asset Impairments			Severance			Future Lease Commitments
Original provision	$	1,405,000		$	640,000		$	40,000		$	725,000
2003 usage	$	(640,000	)	(640,000		)	—			—
December 31, 2003 balance remaining	$	765,000		—			40,000			725,000
2004 usage	$	(185,000	)	—			(40,000		)	(145,000		)
March 31, 2004 balance remaining	$	580,000		—			—			580,000

(5) Common Stock

The Company maintains a stock option plan to provide long-term rewards and incentives to the Company’s key employees, officers, employee directors, consultants, and advisors. The plan provides for either non-qualified stock options or incentive stock options for the issuance of up to 1,550,000 shares of common stock. The exercise price of the incentive stock options may not be less than the fair market value of the common stock on the date of grant, and the exercise price for non-qualified stock options shall be determined by the Stock Option Committee. Options granted under the plan generally become exercisable with respect to 25% of the total number of shares subject to such options at the end of each 12-month period following the grant of the options.

At December 31, 2003, there were 727,125 options outstanding under the Company’s 1993 Employee Stock Option Plan (“1993 Plan”). The purpose of these options is to provide long-term rewards and incentives to the Company’s key employees and officers. During the first three months of 2004, no options were issued, 750 options were exercised, and no options were canceled or expired under the 1993 Plan. At March 31, 2004, there were 726,375 options outstanding under the Plan.

Through July 15, 1998, the Company maintained a stock option plan covering non-employee directors (the “1993 Director Plan”). Effective July 15, 1998, with the formation of the 1998 Director Stock Option Incentive Plan (“1998 Director Plan”), the 1993 Director Plan was frozen. The 1993 Director Plan provided for options for the issuance of up to 110,000 shares of common stock. On July 1 of each year, each individual who at the time was serving as a non-employee director of the Company received an automatic grant of options to purchase 2,500 shares of common stock. These options became exercisable in full six months after the date of grant and will expire ten years from the date of grant. The exercise price was the fair market value of the common stock on the date of grant. At March 31, 2004, there were 57,500 options outstanding under the 1993 Director Plan.

Effective July 15, 1998, the Company adopted the 1998 Director Stock Option Incentive Plan (“1998 Director Plan”) for the benefit of non-employee directors of the Company. The 1998 Director Plan provided for options for the issuance of up to 150,000 shares of common stock. In July 2001, the Company amended the plan to provide an additional 25,000 options for the issuance of up to a total of 175,000 shares of common stock. On June 5, 2002, the Company amended the Plan to increase the allowable amount to 425,000 shares. These options become exercisable in full upon their issuance and expire ten years from the date of grant. In connection with the adoption of the 1998 Director Plan, the 1993 Director Plan was discontinued; however, the options outstanding under the 1993 Director Plan were not affected by the adoption of the new plan. There were no options issued during the three-month period ended March 31, 2004. At March 31, 2004, there were 351,545 options outstanding under the 1998 Director Plan.

On April 18, 1998, the Company adopted the 1998 Stock Purchase Plan, which provides that all employees of the Company – who work more than twenty hours per week and more than five months in any calendar year, and who are employees on or before the applicable offering period – are eligible to participate. The Stock Purchase Plan is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code of 1986. Under the Stock Purchase Plan participants may have up to 10% of their base salaries withheld during the six-

month offering periods ending June 30 and December 31 for the purchase of the Company’s common stock at 85% of the lower of the market value of the common stock on the first or last day of the offering period. The Stock Purchase Plan originally provided for the issuance of up to 150,000 shares of common stock. On June 5, 2002, the Company amended the Plan to increase this quantity to 400,000 shares. Through March 31, 2004, 244,251 shares were issued under this Plan.

In June 2003, the Company formally adopted the 2003 Equity Incentive Plan (the “Plan”). The Plan is intended to benefit the Company by offering equity-based incentives to certain of the Company’s executives and employees, thereby giving them a permanent stake in the growth and long-term success of the Company and encouraging the continuance of their involvement with the Company’s businesses. Two types of awards may be granted to participants under the Plan: restricted shares or other stock awards. Restricted shares are shares of common stock awarded subject to restrictions and to possible forfeiture upon the occurrence of specified events. Other stock awards are awards that are denominated or payable in, valued in whole or in part by reference to or otherwise based on or related to shares of common stock. Such awards may include, without limitation, unrestricted stock, nonqualified options, performance shares, or stock appreciation rights. The Company determines the form, terms, and conditions, if any, of any awards made under the Plan. The maximum number of shares of common stock, in the aggregate, that may be delivered in payment or in respect of stock issued under the Plan is 500,000 shares. Through March 31, 2004, 71,283 shares of unrestricted stock have been issued under this Plan.

(6) Stock Compensation

The Company applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”) and related interpretations in accounting for its stock option and employee stock purchase plans. As a result, no compensation cost has been recognized in connection with these plans.

Since the Company accounts for its stock option plans under APB 25, certain pro forma information regarding net income and net income per share is required by Financial Accounting Standards Board Statement No. 123, Accounting for Stock-Based Compensation (“SFAS 123”), as if the Company had accounted for its stock option plans under the fair value approach of SFAS 123. For purposes of the pro forma disclosures, the estimated fair value of the stock plans is fully amortized over the related vesting period of the options.

The Company’s pro forma information is as follows:

	Three Months Ended
	3/31/2004		3/31/2003
Net income (loss) as reported	$	53,963	$	(368,325	)
Pro forma net income (loss)	33,280		(553,619		)
Basic net income (loss) per share as reported	0.01		(0.08		)
Pro forma basic net income (loss) per share	0.01		(0.13		)
Diluted net income (loss) per share as reported	0.01		(0.08		)
Pro forma diluted net income (loss) per share	$	0.01	$	(0.13	)

The effect of applying SFAS 123 as shown above in the pro forma disclosures is not representative of the pro forma effect on net income (loss) in future years because it does not take into consideration pro forma compensation expenses related to stock options granted prior to 1995.

(7) Earnings Per Share

Basic earnings per share computations are based on the weighted average number of shares of common stock outstanding. Diluted earnings per share is based upon the weighted average of common shares and dilutive common stock equivalent shares outstanding during each period.

The weighted average number of shares used to compute diluted income per share consisted of the following:

	Three Months Ended
	03/31/2004	03/31/2003
Weighted average common shares outstanding - basic	4,573,687	4,428,585
Weighted average common equivalent shares due to stock options	247,718	—
Weighted average common shares oustanding - diluted	4,821,405	4,428,585

Potential common shares of 38,059 were not included in the three months ended March 31, 2003, because their inclusion would be anti-dilutive.

(8) Segment Reporting

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

The accounting policies of the segments are the same as those described in Note 1 of the Company’s annual report on Form 10-K for the year ended December 31, 2003, as filed with the Securities and Exchange Commission. The Company evaluates the performance of its operating segment based on net income.

Inter-segment transactions are uncommon and not material. Therefore, they have not been separately reflected in the financial table below. The totals of the reportable segments’ revenues and net income agree with the Company’s comparable amount contained in the interim financial statements. Revenues from customers outside of the United States are not material. No one customer accounts for more than 10% of the Company’s consolidated revenues. All of the Company’s assets are located in the United States.

	Three Months Ended 3/31/04							Three Months Ended 3/31/03
	Engineered Packaging			Component Products		Total UFPT		Engineered Packaging			Component Products			Total UFPT
Net sales	$	7,160,436		$	8,773,818	$	15,934,254	$	6,517,146		$	7,727,507		$	14,244,653

Net income (loss)	(25,794		)	79,757		53,963		(151,924		)	(216,401		)	(368,325		)

(9) Indebtedness

On February 28, 2003, the Company obtained a new credit facility, which has been amended effective December 31, 2003, to reflect, amongst other things, changes to certain financial covenants. As of March 31, 2004, the Company had a $12,000,000 revolving bank line of credit maturing February 28, 2006, of which $6,397,000 was outstanding. The Company’s borrowing capacity is limited by accounts receivable and inventory levels. As of March 31, 2004, availability under this facility is limited to approximately $9,100,000. Borrowings through the credit facility are due on demand, are secured by the general assets of the Company, and bear interest at the prime rate plus 0% to 1.25%, depending on certain financial ratios, or LIBOR plus a margin that can vary from 1.75% to 3.0%, depending on certain financial ratios. The average interest rate for this line was 3.6% at March 31, 2004. At March 31, 2004, the Company had two additional loans outstanding. The first is a $5,000,000 term loan with a six-year straight line amortization that is secured by the Company’s machinery and equipment with an outstanding balance of approximately $4,300,000 at March 31, 2004. The second is a five-year first mortgage for $2,500,000 with a fifteen-year amortization and is secured by the Company’s real estate in Georgetown, Massachusetts, with a balance of approximately $2,300,000 at March 31, 2004. The interest rate on both of these loans is the prime rate plus 0% to 1.25% depending on certain financial ratios or LIBOR plus a margin that can vary from 2.0% to 3.0% depending on certain financial ratios. Actual interest rates for the period ended March 31, 2004, ranged between 3.25% and 3.7%. Under the amended credit facility, the Company is subject to certain financial covenants including maintaining minimum operating cash, maximum capital expenditures, fixed charge coverage and tangible net worth covenants. As of March 31, 2004, the Company is in compliance with all of its debt covenants.

As a result of the consolidation of United Development Company Limited, a mortgage note collateralized by the Alabama and Florida facilities, dated September 4, 2002, originally for $470,313, is included within long-term debt, as of March 31, 2004, in the consolidated financial statements. The note calls for fifty principal payments of $3,406 and one payment of $300,013 due on December 4, 2006. The note bears interest at LIBOR plus 2.75%, adjusted monthly. At March 31, 2004, the outstanding balance was $437,394. At March 31, 2004, the interest rate was approximately 4%. Payments on this note are funded through rent payments that the Company makes on its Alabama and Florida facilities. The Company is not subject to any financial covenants under this mortgage note.

The Company also has capital lease obligations of approximately $2.4 million at March 31, 2004. At March 31, 2004, the current portion of all debt including the revolving bank loan and capital lease obligations was approximately $7.9 million.

The Company believes that its existing resources, including its revolving line of credit facility together with cash expected to be generated from operations and funds expected to be available to it through any necessary equipment financing, will be sufficient to fund its cash flow requirements through at least the next twelve months. However, there can be no assurances that the Company will be able to obtain such financing, or that either will be available at favorable terms, if at all.

(10) Investment in Affiliated Partnership

The Company has a 26.32% ownership interest in a realty limited partnership, United Development Company Limited (“UDT”). In accordance with the provisions of FIN 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,” the Company has consolidated the

financial statements of UDT as of December 31, 2003, because it absorbs the majority of the expected losses and residual returns. Prior to December 31, 2003, this investment was accounted for under the equity method at cost, plus the Company’s proportionate share of the limited partnership’s income, less any distributions received from the limited partnership. The Company’s proportionate share of the limited partnership’s net income was approximately $17,000 for the period ended March 31, 2003, which was included in other income in the Consolidated Statement of Operations. As a result of consolidating UDT, both total assets and total liabilities of the Company increased by $832,000, as of March 31, 2004. However, there was no overall impact on net income for the period ended March 31, 2004.

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview :

UFP Technologies is a leading designer and manufacturer of interior protective packaging solutions using molded fiber, vacuum formed plastics and molded and fabricated foam plastic products. The Company also designs and manufactures engineered component solutions using laminating, molding and fabricating technologies. The Company serves numerous markets including computer electronics, medical/pharmaceutical, military, automotive, beauty, industrial and sports and leisure.

While the Company has been downsizing in the last three years, it has also been investing in growth opportunities for the future. The Company plans to launch a large automotive program in the fourth quarter of 2004. The Company has been preparing for this program for almost two years, including investing in human resources, machinery and manufacturing space that have resulted in significant operating expenses in 2003 that should continue for the first three quarters of 2004. The company has also invested in the sales and marketing area, creating a Vice President of Sales and Marketing position and hiring several industry veterans to strengthen its sales team. Management believes that these investments leave the Company poised for sales growth in 2004 and beyond.

Forward-looking Statements :

This report contains statements that are “forward-looking statements” as that term is defined under the Act and releases issued by the Securities and Exchange Commission. The words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” and other expressions which are predications of or indicate future events and trends and which do not relate to historical matters identify forward-looking statements. The Company’s plans, described herein, to launch a program in the fourth quarter of 2004 for an automotive supplier is an example of a forward looking statement. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements.

The Company cannot guarantee that it will benefit at all from the automotive program it plans to launch in the fourth quarter of 2004. This program relies upon a contract with an automotive supplier which is terminable by the automotive supplier for any reason, subject to a cancellation charge. The Company’s revenues from this contract are directly dependent on the ability of the automotive supplier to develop, market and sell its products in a timely, cost-effective manner. If the automotive supplier’s needs decrease over the course of the contract, the Company’s estimated revenues from this contract may also decrease. Even if the Company generates revenue from the project, the Company cannot guarantee

that the project will be profitable, particularly if revenues from the contract are less than expected. Although the Company has met every milestone to date in advance of this program’s launch, the Company cannot guarantee the project’s launch date.

Other examples of these risks, uncertainties, and other factors include, without limitation, the following: (i) economic conditions that affect sales of the products of the Company’s packaging customers, (ii) actions by the Company’s competitors and the ability of the Company to respond to such actions, (iii) the ability of the Company to obtain new customers and (iv) the ability of the Company to execute and integrate favorable acquisitions. In addition to the foregoing, the Company’s actual future results could differ materially from those projected in the forward-looking statements as a result of changes in general economic conditions, interest rates, and the assumptions used in making such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

For example, in January 2001, the Company’s largest customer in the Component Products segment informed the Company that it no longer required the Company’s products because the customer could satisfy its need internally. This customer accounted for approximately $5.5 million in annual revenues in 2000.

Sales:

Net sales for the three-month period ended March 31, 2004, were $15.9 million or 11.9% above sales of $14.2 million in the same period last year. The increase in sales for the three-month period ended March 31, 2004, is primarily a result of increased sales to existing customers in the medical and military markets in the Component Products segment.

Gross Profit :

Gross profit as a percentage of sales (gross margin) increased to 20.3% for the three-month period ended March 31, 2004, from 15.9% in the same period last year. The improvement in gross margin for the three-month period ended March 31, 2004, is primarily attributable to economies-of-scale realized on increased sales partially offset by start-up costs associated with new automotive programs. The Company expects to continue to incur start-up costs associated with a new large automotive program until its scheduled launch in the fourth quarter of 2004.

Selling , General and Administrative Expenses:

Selling, general and administrative (“SG&A”) expenses were $3.0 million or 18.7% of net sales for the three-month period ended March 31, 2004, compared to $2.7 million or 18.9% of net sales in the same period last year. The increase in SG&A dollars is primarily attributable to investments the Company has made in the sales and marketing area as well as the ramp-up of a new automotive program in the southeast.

Other Expenses:

Interest expense for the three-month period ended March 31, 2004, decreased to approximately $170,832 from $203,000 in the same period last year. Interest expense reductions are primarily due to lower interest rates.

The Company recorded a tax expense of 38% for the three-month period ended March 31, 2004, and a 38% benefit for the same period of 2003. The Company will continue to assess the realizability of deferred tax assets created by booking tax benefits on operating losses and, where appropriate, record reserves against these assets. The amount of the net deferred tax asset considered realizable, however, could be reduced in the near term, if estimates of future taxable income during the carryforward period are reduced.

Liquidity and Capital Resources:

The Company funds its operating expenses, capital requirements, and growth plan through internally generated cash, bank credit facilities, and long-term capital leases.

At March 31, 2004 and December 31, 2003, the Company’s working capital was approximately $1.4 million and $1.2 million, respectively. The increase in working capital is primarily due to increases in accounts receivable and inventories partially offset by increases in accounts payable and accrued expenses.

Net cash provided by operations for the three-month period ended March 31, 2004, was approximately $449,000, compared to net cash used in operations for the three-month period ended March 31, 2003, of approximately $608,000. The increase in cash generated from operations is primarily attributable to improved profits for the quarter as well as the collection of a $408,000 tax refund during the quarter, partially offset by higher customer receivables due to the improved sales. Cash used in investing activities during the three-month period ended March 31, 2004 was approximately $80,000, which primarily was the result of additions to property, plant and equipment of approximately $93,000. The capital expenditures were primarily related to the additions of manufacturing equipment.

The Company intends to continue to invest in capital equipment to support its operations. In conjunction with recently awarded programs, the Company is committed to acquire certain equipment for a total of approximately $3.4 million over the next eighteen months. As of March 31, 2004, the Company has incurred approximately $1.7 million of this commitment. The Company expects to finance the purchase through equipment leases, but cannot guarantee that it will be able to obtain such financing on favorable terms, if at all. The Company, from time to time, is engaged in discussions regarding potential strategic acquisitions, but presently does not have any agreements in place.

margin that can vary from 2.0% to 3.0% depending on certain financial ratios. Actual interest rates for the period ended March 31, 2004, ranged between 3.25% and 3.7%. Under the amended credit facility, the Company is subject to certain financial covenants including maintaining minimum operating cash, maximum capital expenditures, fixed charge coverage and tangible net worth covenants. As of March 31, 2004, the Company is in compliance with all of its debt covenants.

Contractual Obligations

The following table summarizes the Company’s contractual obligations at March 31, 2004, and the effect such obligations are expected to have on its cash flow in future periods:

Payments due in:	Operating Leases		Capital Leases		Term Loan		Mortgage		United Development Company Mortgage		Total
2004	$	1,395,489	$	365,861	$	630,000	$	126,000	$	35,172	$	2,552,522
2005	1,443,115		391,359		840,000		168,000		40,872		$	2,883,346
2006	1,411,901		389,993		840,000		168,000		361,350		$	3,171,244
2007	1,143,880		365,400		840,000		168,000		—		$	2,517,280
2008 & thereafter	1,150,807		847,251		1,136,000		1,660,000		—		$	4,794,058
	$	6,545,192	$	2,359,864	$	4,286,000	$	2,290,000	$	437,394	$	15,918,450

Payments on the United Development Company Limited note are funded through rent payments made by the Company on the Company’s Alabama and Florida facilities.

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

December 31, 2003 and through the first quarter of 2004, it cannot guarantee that its operations will generate cash in future periods.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The following discussion of the Company’s market risk includes forward-looking statements that involve risk and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. Market risk represents the risk of changes in value of a financial instrument caused by fluctuations in interest rates, foreign exchange rates, and equity prices. At March 31, 2004, the Company’s cash and cash equivalents consisted of bank accounts in U.S. dollars, and their valuation would not be affected by market risk. The Company has two debt instruments where interest is based upon the prime rate (and/or LIBOR) and, therefore, future operations could be affected by interest rate changes; however, the Company believes that the market risk of the debt is minimal.

ITEM 4 CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company’s Chief Executive Officer and Chief Financial Officer performed an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in SEC Rule 13a-15 or 15d-15), which have been designed to ensure that material information related to the Company is timely disclosed. Based upon that evaluation, they concluded that the disclosure controls and procedures were effective.

Since the last evaluation of the Company’s internal controls and procedures for financial reporting, the Company has made no significant changes in those internal controls and procedures or in other factors that could significantly affect the Company’s internal controls and procedures for financial reporting

PART II - OTHER INFORMATION

UFP TECHNOLOGIES, INC.

Item 1 Legal Proceedings

No material litigation

Item 2 Changes in Securities

None

Item 3 Defaults Upon Senior Securities

None

Item 4 Submission of Matters to a Vote of Security Holders

None

Item 5 Other Information

None

Item 6 Exhibits and Reports on Forms 8-K

(a) The following exhibits are included herein:

Exhibit No.		Description
3.01		Certificate of Incorporation of the Company, as amended
10.34		Facility lease between the Company and Clinton Base Company LLC
31		Rule 13a-14d/15d-14(a) Certifications
32		Section 1350 Certifications

(b) Reports on Form 8-K:

The Company furnished a Current Report on Form 8-K on March 24, 2004, relating to a press release of the Company’s annual results for the period ended December 31, 2003.

UFP TECHNOLOGIES, INC.

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.

UFP TECHNOLOGIES, INC.

(Registrant)

/s/ May 14, 2004		/s/ R. Jeffrey Bailly
Date		R. Jeffrey Bailly President, Chief Executive Officer and Director

/s/ May 14, 2004		/s/ Ronald J. Lataille
Date		Ronald J. Lataille Vice President, Chief Financial Officer & Treasurer

* * *

EXHIBIT INDEX

Exhibit No.		Description

3.01		Certificate of Incorporation of the Company, as amended
10.34		Facility lease between the Company and Clinton Base Company LLC
31		Rule 13a-14a/15d-14(a) Certifications
32		Section 1350 Certifications

EXHIBIT 3.01

CERTIFICATE OF AMENDMENT

CERTIFICATE OF INCORPORATION

UFP TECHNOLOGIES, INC.

UFP TECHNOLOGIES, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:

FIRST: That the Board of Directors of the Corporation, at meeting held on February 24, 1999 at which a quorum was present, adopted a resolution setting forth a proposed amendment to the Certificate of Incorporation of said Corporation, declaring said amendment to be advisable and directing that such proposed amendment be considered at the next Annual Meeting of Stockholders which was held on June 9, 1999. The resolution setting forth the proposed amendment is as follows:

RESOLVED, That the Certificate of Incorporation of the Corporation be amended by striking out Article EIGHTH thereof in its entirety, and by substituting in lieu thereof the following new Article EIGHTH:

“ EIGHTH : For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of the Corporation and of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that:

(a) The business of the Corporation shall be conducted by the officers of the Corporation under the supervision of the Board of Directors.

(b) The number of directors which shall constitute the whole Board of Directors shall be fixed by, or in the manner provided in, the By-Laws. No election of Directors need be by written ballot.

(c) The Directors of the Corporation shall be classified in respect to the time for which they shall hold office by dividing them into three classes, each class to consist of approximately the same number of Directors, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. If a fraction is contained in the quotient arrived at by dividing the designated number of directors by three, then, if such fraction is one-third, the extra director shall be a member of Class III, and if such fraction is two-thirds, one of the extra directors shall be a member of Class II and the other shall be a member of Class III, unless otherwise provided from time to time by resolution adopted by the Board of Directors. Directors shall hold office until the third annual meeting following the annual meeting at which they were elected; provided, however, that the Directors first elected to Class I shall hold office for the term ending on the date of the annual meeting in 2000; the Directors first elected to Class II shall hold office for the term ending on the date of the annual meeting in 2001; and the Directors first elected to Class III shall hold office for the term ending on the date of the annual meeting in 2002; and provided further, that the term of each director shall be subject to the election and qualification of his successor and to his earlier death, resignation or removal. Vacancies in the Board of Directors may be filled only by the Directors. Any person elected by the Directors to fill a vacancy in the Board shall hold office until the expiration of the term of office for the class of Directors to which elected and thereafter until his successor is chosen and qualified. In the event of any increase or decrease in the authorized number of directors, (x) each director then serving as such shall nevertheless continue as a director of the class of which he is a member and (y) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of directors so as to ensure that the classes have as nearly as possible the same number of directors. To the extent possible, consistent with the foregoing rule, any newly created directorships shall be added to those classes whose terms of office are to expire at the latest dates following such allocation, and any newly eliminated directorships shall be subtracted from those classes whose terms of office are to expire at the earliest dates following such allocation, unless otherwise provided from time to time by resolution adopted by the Board of Directors.

(d) In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to adopt, amend or repeal the By-laws of the Corporation.

(e) Notwithstanding any other provision of law, all action required to be taken by the stockholders of the Corporation shall be taken at a meeting duly called and held in accordance with law and with the Certificate of Incorporation and the By-laws, and not by written consent.”

SECOND: That at the Annual Meeting of the Stockholders of said corporation, which was held on June 9, 1999, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, the necessary number of shares as required by statute were voted in favor of the amendment.

THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, said UFP TECHNOLOGIES, INC. has caused this Certificate to be signed by R. Jeffrey Bailly, its President, this 9th day of June, 1999.

	UFP TECHNOLOGIES, INC.


	/s/ R. Jeffrey Bailly
	R. Jeffrey Bailly
	President & Chief Executive Officer

CERTIFICATE OF DESIGNATIONS

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

UFP TECHNOLOGIES, INC.

(Pursuant to Section 151 of the
Delaware General Corporation Law)

UFP Technologies, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the “Corporation”), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation as required by Section 151 of the General Corporation Law at a meeting duly called and held on January 13, 1999:

RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (hereinafter called the “Board of Directors” or the “Board”) in accordance with the provisions of the Certificate of Incorporation of the Corporation, the Board of Directors hereby designates 20,000 shares of the Corporation’s Preferred Stock, par value $0.01 per share, as “Series A Junior Participating Preferred Stock” of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, preferences, and limitations thereof as follows:

Series A Junior Participating Preferred Stock:

Section 1. Designation and Amount . The shares of this series shall be designated as “Series A Junior Participating Preferred Stock” (the “Series A Preferred Stock”) and the number of shares constituting the Series A Preferred Stock shall be 20,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock.

Section 2. Dividends and Distributions .

(A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any other stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the last day of March, June, September and December in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount (if any) per share (rounded to the nearest cent), subject to the provision for adjustment hereinafter set forth, equal to 1000 times the aggregate per share amount of all cash dividends, and 1000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock, par value $0.01 per share (the “Common Stock”), of the Company or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock).

(C) Dividends due pursuant to paragraph (A) of this Section shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro

rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.

Section 3. Voting Rights . The holders of shares of Series A Preferred Stock shall have the following voting rights:

(A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 1000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(B) Except as otherwise provided in the Certificate of Incorporation of the Corporation, as amended, including any other Certificate of Designations creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.

(C) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

Section 4. Certain Restrictions .

(A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

(i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;

(ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; or

(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (as to dividends and upon dissolution, liquidation or winding up) to the Series A Preferred Stock.

(B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

Section 5. Reacquired Shares . Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation of the Company, as amended, including any Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law.

Section 6. Liquidation, Dissolution or Winding Up . Upon any liquidation, dissolution or winding up of the Corporation the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1000 times the aggregate amount to be distributed per share to holders of shares of Common Stock plus an amount equal to any accrued and unpaid dividends. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of

Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 8. Redemption . The shares of Series A Preferred Stock shall not be redeemable.

Section 9. Ranking . Unless otherwise provided in the Certificate of Incorporation, as amended, or a Certificate of Designations relating to a subsequently-designated series of preferred stock of the Corporation, the Series A Preferred Stock shall rank junior to any other series of the Corporation’s preferred stock subsequently issued, as to the payment of dividends and the distribution of assets on liquidation, dissolution or winding up and shall rank senior to the Common Stock.

Section 10. Amendment . The Certificate of Incorporation of the Corporation, as amended, shall not be amended in any manner, including in a merger or consolidation, which would alter, change, or repeal the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class.

Section 11. Fractional Shares. Series A Preferred Stock may be issued in whole shares or in any fraction of a share that is one one-thousandth of a share or any integral multiple of such fraction, which shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Preferred Stock. In lieu of fractional shares, the Corporation may elect to make a cash payment as provided in the Rights Agreement for fractions of a share other than one one-thousandth of a share or any integral multiple thereof.

IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its Vice President, C.F.O. and Treasurer this 13th day of January, 1999.

	UFP TECHNOLOGIES, INC.


	/s/ Ronald J. Lataille
	Ronald J. Lataille
	Vice President, C.F.O. and Treasurer

CERTIFICATE OF INCORPORATION

UFP TECHNOLOGIES, INC.

AS AMENDED ON

JUNE 28, 1996

The undersigned, a natural person, for the purposes of organizing a corporation for conducting the business and promoting the purposes hereinafter stated, under the provisions and subject to the requirements of the laws of the State of Delaware (particularly Chapter l, Title 8 of the Delaware Code and the acts amendatory thereof and supplemental thereto, and generally known as the “General Corporation Law of the State of Delaware”), hereby certifies that:

FIRST : The name of the corporation (hereinafter called the “Corporation”) is UFP Technologies, Inc.

SECOND : The address, including street, number, city, and county, of the registered office of the Corporation in the State of Delaware is 32 Loockerman Square, Suite L-100, Dover, County of Kent, Delaware 19901; and the name of the registered agent of the Corporation in the State of Delaware at such address is The Prentice-Hall Corporation System, Inc.

THIRD : The nature of the business and the purposes to be conducted and promoted by the Corporation, shall be (a) to engage in the manufacture, sale, research and development of packaging and specialty products and (b) any lawful business, to promote any lawful purpose, and to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

FOURTH :

(a) The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 20,000,000 shares of Common Stock, $.01 par value per share (“Common Stock”), and (ii) 1,000,000 shares of Preferred Stock, $.01 par value per share (the “Preferred Stock”).

(b) The Preferred Stock may be issued and designated by the Board of Directors, in one or more classes or series and with such rights, powers, preferences and terms and at such times and for such consideration as the Board of Directors shall determine, without further stockholder action. With respect to each class or series of

Preferred Stock, prior to issuance, the Board of Directors by resolution shall designate that class or series to distinguish it from other classes and series of stock of the Corporation, shall specify the number of shares to be included in the class or series, and shall fix the rights, powers, preferences and terms of the shares of the class or series, including, but without limitation: (i) the dividend rate, which may be fixed or variable, its preference as to any other class or series of capital stock, and whether dividends will be cumulative or noncumulative; (ii) whether the shares are to be redeemable and, if so, at what times and prices (which price or prices may, but need not, vary according to the time or circumstances of such redemption) and on what other terms and conditions; (iii) the terms and amount of any sinking fund provided for the purchase or redemption of the shares; (iv) whether the shares shall be convertible or exchangeable and, if so, the times, prices, rates, adjustments and other terms of such conversion or exchange; (v) the voting rights, if any, applicable to the shares in addition to those prescribed by law; (vi) the restrictions and conditions, if any, on the issue or reissue of any additional shares of such class or series or of any other class or series of Preferred Stock ranking on a parity with or prior to the shares of such class or series; (vii) whether, and the extent to which, any of the rights, powers, preferences and terms of any such class or series may be made dependent upon facts ascertainable outside of the Certificate of Incorporation or outside the resolution or resolutions providing for the issuance of such class or series by the Board of Directors, provided that the manner in which such facts shall operate is clearly set forth in the resolution or resolutions providing for the issuance of such class or series adopted by the Board of Directors; and (viii) the rights of the holders of such shares upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation.

FIFTH : The name and the mailing address of the incorporator is as follows:

NAME		ADDRESS

Owen B. Lynch		101 Federal Street
		Boston, MA. 02110-1800

SIXTH : The Corporation shall have perpetual existence.

SEVENTH : Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number

representing three-fourths in value of the creditors or class of creditors, and/or of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agrees to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.

EIGHTH : For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of the Corporation and of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that:

(a) The business of the Corporation shall be conducted by the officers of the Corporation under the supervision of the Board of Directors.

(b) The number of directors which shall constitute the whole Board of Directors shall be fixed by, or in the manner provided in, the By-Laws. No election of Directors need be by written ballot.

(c) The Board of Directors of the Corporation may adopt, amend or repeal the By-Laws of the Corporation at any time after the original adoption of the By-Laws according to Section 109 of the General Corporation Law of the State of Delaware; provided, however, that any amendment to provide for the classification of directors of the Corporation for staggered terms pursuant to the provisions of subsection (d) of Section 141 of the General Corporation Law of the State of Delaware shall be set forth in an amendment to this Certificate of Incorporation, in an initial By-Law, or in a By-Law adopted by the stockholders of the Corporation entitled to vote.

(d) Notwithstanding any other provision of law, all action required to be taken by the stockholders of the Corporation shall be taken at a meeting duly called and held in accordance with law and with the Certificate of Incorporation and the By-laws, and not by written consent.

NINTH :

(a) The Corporation may, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which a person indemnified may be entitled under any By-Law, agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person

who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

(b) No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law (i) for breach of the Director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the General Corporation Law of the State of Delaware or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this paragraph (b) of this Article Ninth shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such Director occurring prior to such amendment.

TENTH : From time to time, subject to the provisions of this Certificate of Incorporation (including without limitation the provisions of paragraph (d) of Article Eleventh and of Article Twelfth), any of the provisions of this Certificate of Incorporation may be amended, altered or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the Corporation by this Certificate of Incorporation are granted subject to the provisions of this Article Tenth.

ELEVENTH :

(a) Any direct or indirect purchase or other acquisition in one or more transactions by the Corporation or any Subsidiary of any of the outstanding Voting Stock of any class from any one or more individuals or entities known by the Corporation to be a Related Person, who has beneficially owned such security or right for less than two years prior to the date of such purchase, at a price in excess of the Fair Market Value shall, except as hereinafter provided, require the affirmative vote of the holders of at least two-thirds of the shares of Voting Stock, voting as a single class, excluding any votes cast with respect to shares of Voting Stock beneficially owned by such Related Person. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified by law or any agreement with any national securities exchange, or otherwise, but no such affirmative vote shall be required with respect to any purchase or other acquisition of securities made as part of (i) a tender or exchange offer by the Corporation to purchase securities of the same class made on the same terms to all holders of such securities and complying with the applicable requirements of the Exchange Act and the rules and regulations thereunder, or any successor rule or regulation or (ii) pursuant to an open-market purchase program conducted in accordance with the requirements of Rule 10b-18 promulgated by the Securities and Exchange Commission pursuant to the Exchange Act or any successor rule or regulation.

(b) A majority of the Continuing Directors shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article Eleventh including, without limitation, (i) whether a person is a Related Person, (ii) the number of shares of Voting Stock beneficially owned by any person and (iii) whether a price is in excess of Fair Market Value.

(c) Nothing contained in this Article Eleventh shall be construed to relieve any Related Person from any fiduciary obligation imposed by law.

(d) Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least two-thirds of the outstanding shares of Voting Stock, voting together as a single class, shall be required to alter, change, amend, repeal or adopt any provision inconsistent with this Article Eleventh.

TWELFTH : Except as otherwise provided in this Certificate of Incorporation, the By-laws, any designation of terms pursuant to Section 151 of the General Corporation Law of the State of Delaware, any vote required by stockholders pursuant to said General Corporation Law, other than the election of directors (which shall not be affected by this provision), shall be effective if recommended by a majority of the Continuing Directors and the vote of a majority of each class of stock outstanding and entitled to vote thereon; and if not recommended by a majority of the Continuing Directors, then by the vote of 80% of each class of stock outstanding and entitled to vote thereon.

THIRTEENTH :

Definitions

The following definitions shall apply for the purpose of Articles Eleventh and Twelfth only:

(a) “Affiliate” shall have the meaning given such term in Rule 12b-2 under the Exchange Act.

(b) “Associate” shall have the meaning given such term in Rule 12b-2 under the Exchange Act.

(c) “Continuing Director” shall mean any member of the Board of Directors who is not an Affiliate of any Related Person and who was a member of the Board of Directors prior to the time that any such Related Person became a Related Person, and any successor of a Continuing Director who is unaffiliated with any Related Person and is recommended to succeed a Continuing Director by a majority of the Continuing Directors then on the Board of Directors. Notwithstanding the above, a

majority of the then existing Continuing Directors can deem a new director to be a Continuing Director, even though such person is Affiliated with a Related Person.

(d) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, from time to time.

(e) “Fair Market Value” shall mean: (i) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the principal United States securities exchange registered under the Exchange Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use or, if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board of Directors in good faith; and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board of Directors in good faith.

(f) “Massachusetts Predecessor” shall mean UFP Technologies, Inc., a Massachusetts corporation.

(g) “Merger Date” shall mean the date upon which the Massachusetts predecessor merges with and into the Corporation.

(h) “Person” shall mean any individual, firm, corporation or other entity.

(i) “Related Person” shall mean any Person (other than the Corporation, any Subsidiary or any individual who is a stockholder of the Corporation on the Merger Date) which, together with its Affiliates and Associates and with any other Person (other than the Corporation, any Subsidiary or any individual who is a stockholder of the Corporation on the Merger Date) with which it or they have entered into, after the Merger Date, any agreement, arrangement or understanding with respect to acquiring, holding or disposing of Voting Stock, acquires beneficial ownership (as defined in Rule 13d-3 of the Exchange Act, except that such term shall include any Voting Stock which such person has the right to acquire, whether or not such right may be exercised within 60 days), directly or indirectly of more than 5% of the voting power of the outstanding Voting Stock after the Merger Date.

(j) “Subsidiary” shall mean any corporation in which a majority of the capital stock entitled to vote generally in the election of directors is owned, directly or indirectly, by the Corporation.

(k) “Voting Stock” shall mean all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors.

Signed on the 14 ^th day of October, 1993.


	/s/ Owen B. Lynch
	Owen B. Lynch
	Incorporator

(Article Fourth amended by the Board of Directors on April 18, 1996 and approved by the stockholders on June 6, 1996).

Exhibit 10.34

THE IOWA STATE BAR ASSOCIATION
Official Form No. 164

Christopher L. Farwell ISBA # 9191

FOR THE LEGAL EFFECT OF THE USE OF
THIS FORM, CONSULT YOUR LAWYER

Preparer Information	Christopher L. Farwell, 343 5th Avenue South, Clinton, (563) 242-6162
Preparer Information	Individual’s Name	Street Address	City	Phone

	SPACE ABOVE THIS LINE
	FOR RECORDER

[LOGO]

LEASE - BUSINESS PROPERTY

THIS LEASE AGREEMENT, is entered into this 11 ^th day of March, 2004 by Clinton Base Company, L.L.C.

(“Landlord”) whose address for the purpose of this lease is 1003 31st Avenue, Camanche, Iowa 52730 and
(Street and Number)		(City)		(State)		(Zip Code)

Moulded Fibre Technology, Inc.

(“Tenant”) whose address for the purpose of this lease is 1521 Windsor Drive, Clinton, Iowa 52732
(Street and Number)		(City)		(State)		(Zip Code)

1. PREMISES AND TERM. The Landlord, in consideration of the rents, agreements and conditions herein contained, leases to Tenant and Tenant leases from Landlord, according to the terms and provisions of this lease, the following described “ premises ”, situated in Clinton County, Iowa:

Lot 4, Manufacturing Meadows III 1st Addition, Clinton, Iowa, and also the East 35 feet of Lot 3, Manufacturing Meadows III 1st Addition, Clinton, Iowa

with the improvements thereon, and all rights, easements and appurtenances, existing or to be constructed, for a term of (ten) 10 years, commencing at midnight of the day previous to the first day of the lease term, which shall be on the day of , 2004 and ending at midnight on the last day of the lease term, which shall be on the day of , 2014, upon the condition that the Tenant pays rent thereof, and otherwise performs as in this lease provided.

2. RENTAL. Tenant agrees to pay to Landlord as rental for said term, as follows: See Addendum

All sums shall be paid at the address of Landlord, as above designated, or at such other place as the Landlord may, from time to time, designate in writing.

Delinquent payments shall draw interest at (seven) 7% per annum from the due date, until paid.

© The Iowa State Bar Association 2003		164 LEASE - BUSINESS PROPERTY
IOWADOCS ^®		Revised January, 1999

2(2). “TRIPLE NET” PROVISION. (OPTIONAL)

?? INITIAL IF APPLICABLE

Applicable	Tenant agrees that all duties and obligations to repair, maintain and provide utilities and services (paragraphs 6 and 7). In pay taxes and special assessments (paragraph 10) and to pay for casualty and liability insurance (paragraph 11) shall be borne solely by Tenant during the term of this lease. (If the parties select this provision, all duties and obligations set forth in paragraphs 6, 7, and 10 shall be performed by the Tenant)(except to the extent stated in paragraphs 6(G) and 6 (H)).
Landlord
Applcable
Tenant

3. POSSESSION. Tenant shall be entitled to possession on the first day of the term of this lease, and shall yield possession to the Landlord at the end of the lease term, except as herein otherwise expressly provided.

4. USE OF PREMISES. Tenant covenants and agrees during the term of this lease to use and to occupy the leased premises only for any legal use and occupancy

5. QUIET ENJOYMENT. Landlord covenants that its estate in the premises is in fee simple and that the Tenant, if not in default, shall peaceably have, hold and enjoy the premises for the term of this lease. Landlord shall have the right to mortgage all of its right, title, interest in said premises at any time without notice, subject to this lease.

6. EQUIPMENT, DECORATING, REPLACEMENT, REPAIR AND MAINTENANCE.

DEFINITIONS

“Maintain” means to clean and keep in good condition.

“Repair” means to fix and restore to good condition after damage, deterioration or partial destruction.

CONDITION OF PREMISES

A. Tenant takes the premises in its present condition, except for such repairs and alterations as may be expressly otherwise provided in this lease.

REPAIRS AND MAINTENANCE

B. Landlord shall replace and repair the structural parts of the building. For purposes of this lease, the structural parts of the building shall mean the foundation, exterior walls, load bearing components of interior floors and walls, the roof and all sewers, pipes, wiring and electrical fixtures outside of the structure

C. Repairs shall be performed and paid for by the parties as follows:

(except to the extent provided in paragraph 41 below)

	PERFORMANCE	PAYMENT
	L=Landlord T=Tenant	%Landlord	%Tenant

Interior walls, floors and ceilings	T		100
Sewer, plumbing fixtures, pipes, wiring, electrical fixtures within the structure	T		100
Heating equipment	T		100
Air conditioning equipment	T		100
Plate glass (replacement)	T		100
Sidewalks	T		100
Parking areas	T		100
Other common areas	T		100

D. Tenant shall be responsible for all maintenance.

E. Any repair or maintenance not specifically provided for above shall be performed and paid for by Tenant

F. Each party shall perform their responsibilities of repair and maintenance to the end that the premises will be kept in a safe and serviceable condition. Neither party will permit nor allow the premises to be damaged or depreciated in value by any act, omission to act, or negligence of itself, its agents or employees.

EQUIPMENT, DECORATING AND ALTERATIONS

G. The following items of equipment, furnishings and fixtures shall be supplied and replaced by the parties as follows:

	SUPPLIED	REPLACED
	L=Landlord T=Tenant	L=Landlord T=Tenant

Heating equipment*	L	T
Air conditioning equipment	T	T
Carpeting/floor covering	T	T
Drapes, shades, blinds	T	T

*(for warehouse purposes)

Any similar equipment, furnishings and fixtures not specifically provided for above shall be provided and paid for by Tenant.

Tenant shall provide all trade equipment, furnishings and fixtures used in connection with the operation of its business, such as telephones, computers, desks, chairs, shelving and similar items.

H. Landlord shall provide and pay for the following items of interior decorating:

None

Tenant shall be responsible for all interior decorating. Landlord shall provide and pay for the following items of interior fit-up: See Exhibit A (Specifications)

AMERICANS WITH DISABILITIES ACT

I. Tenant will make no unlawful use of said premises and agrees to comply with all valid regulations of the Board of Health, City Ordinances or applicable municipality, the laws of the State of Iowa and Federal government, but this provision shall not be construed as creating any duty by Tenant to members of the general public, provided, however, responsibility for compliance with the Americans with Disabilities Act shall be performed and paid for by the parties as follows:

	%Landlord	%Tenant
Common areas	100	0
Tenants area:
Initial compliance (specify)	0	100
Future compliance	0	100

7. UTILITIES AND SERVICES. Utilities and Services shall be furnished and paid for by the parties as follows:

	FURNISHED	PAYMENT
	L=Landlord T=Tenant	%Landlord	%Tenant

Electricity	T		100
Gas	T		100
Water and Sewer	T		100
Garbage/Trash	T		100
Janitor/Cleaning	T		100
Common areas	T		100
Other:

8. TERMINATION, SURRENDER OF PREMISES AT END OF TERM — REMOVAL OF FIXTURES.

(a) TERMINATION. This lease shall terminate upon expiration of the original term; or if this lease expressly provides for any option to renew, and if any such option is exercised by the Tenant, then this lease will terminate at the expiration of the option term or terms.

(c) SURRENDER. Tenant agrees that upon the termination of this lease it will surrender and deliver the premises in good and clean condition, except the effects of ordinary wear and tear and depreciation arising from lapse of time, or damage without fault or liability of Tenant.

(d) HOLDING OVER. Continued possession by Tenant, beyond the expiration of its tenancy, coupled with the receipt of the specified rental by the Landlord (and absent a written agreement by both parties for an extension of this lease, or for a new lease) shall constitute a month to month extension of this lease.

(e) See Addendum

9. ASSIGNMENT AND SUBLETTING. See Addendum.

10. REAL ESTATE TAXES.

A. All installments of real estate taxes would become delinquent if not paid during the term of this lease, shall be paid by the parties in the following proportions:

Landlord 0%

Tenant 100%

B. Any increase in such installments that exceeds the amount of the installment that would be delinquent if not paid by

4-1-04	shall be paid as follows:
Date

Landlord 0%

Tenant 100%

C. PERSONAL PROPERTY TAXES. Tenant agrees to timely pay all taxes, assessments or other public charges levied or assessed by lawful authority against its personal property on the premises during the term of this lease.

D. SPECIAL ASSESSMENTS. Special assessments that would be delinquent if not paid during the term of this lease shall be timely paid by the parties in the following proportions:

Landlord 0%

Tenant 100%

E. Each party reserves its right of protest of any assessment of taxes.

11. INSURANCE.

A. PROPERTY INSURANCE. Tenant agree to insure that real and personal property for the full insurable value. Such insurance shall cover losses included in the Insurance Services Office Special Form Causes of Loss. To the extent permitted by their policies the Landlord and Tenant waive all rights of recovery against each other.

B. LIABILITY INSURANCE. Tenant shall obtain commercial general liability insurance in the amounts of $ 1,000,000.00 each occurrence and $5,000,000.00 annual aggregate per location. Such policy shall include liability arising from premises operations, independent contractors, personal injury, products and completed operations and liability assumed under an insured contract. This policy shall be endorsed to include the Landlord as an additional insured.

C. CERTIFICATES OF INSURANCE. Prior to the time the lease takes effect the Tenant will provide the Landlord with a certificate of insurance with these property and liability insurance requirements, such certificate shall include 30 days advance notice of cancellation to the Landlord. A renewal certificate shall be provided prior to expiration of the current policies.

D. ACTS BY TENANT. Tenant will not do or omit doing of any act which would invalidate any insurance, or increase the insurance rates in force on the premises.

E. RECOMMENDATIONS - IOWA INSURANCE SERVICES OFFICE. Tenant further agrees to comply with recommendations of Iowa Insurance Services Office and to be liable for and to promptly pay, as if current rental, any increase in insurance rates on said premises and on the building of which said premises are a part, due to increased risks or hazards resulting from Tenant’s use of the premises otherwise than as herein contemplated and agreed.

F. Tenant shall provide a copy of this lease to their insurers.

12. LIABILITY FOR DAMAGE. Each party shall be liable to the other for all damage to the property of the other negligently, recklessly or intentionally caused by that party (or their agents, employees or invitees), except to the extent the loss is insured and subrogation is waived under the owner’s policy.

13. INDEMNITY. Except as provided in paragraph 21 (A) (5) and except for the negligence of Landlord, Tenant will protect, defend and indemnify Landlord from and against any and all loss, costs, damage and expenses occasioned by, or arising out of, any accident or other occurrence, causing or inflicting injury or damage to any person or property, happening or done in, upon or about the premises, or due directly or indirectly to the tenancy, use or occupancy thereof, or any part thereof by Tenant or any person claiming through or under Tenant.

14. FIRE AND CASUALTY, (a) PARTIAL DESTRUCTION OF PREMISES. In the event of a partial destruction or damage of the premises, which is a business interference which prevents the conducting of a normal business operation and which damage is reasonably repairable within 180 days after its occurrences, this lease shall not terminate but the rent for the premises shall abate during the time of such business interference. In the event of a partial destruction, Landlord shall repair such damages within 180 days of its occurrence unless prevented from so doing by acts of God, government regulations, or other causes beyond Landlord’s reasonable control.

(b) ZONING. Should the zoning ordinance of the municipality in which this property is located make it impossible for Landlord to repair or rebuild so that Tenant is not able to conduct its business on these premises, than such partial destruction shall be treated as a total destruction as provided in the next paragraph.

(c) TOTAL DESTRUCTION OF BUSINESS USE. In the event of a destruction or damage of the leased premises including the parking area (if parking area is a part of this lease) so that Tenant is not able to conduct its business on the premises or the then current legal use for which the premises are being used and which damages cannot be repaired within 180 days this lease may be terminated at the option of either the Landlord or Tenant. Such termination in such event shall be effected by written notice of one party to the other, within twenty 20 days after such destruction. Tenant shall surrender possession within ten 10 days after such notice issues and each party shall be released from all future obligations, and Tenant shall pay rent pro rata only to the date of such destruction. In the event of such termination of this lease, Landlord at its option, may rebuild or not, at its discretion.

15. CONDEMNATION.

(a) DISPOSITION OF AWARDS. Should the whole or any part of the premises be condemned or taken for any public or quasi-public purpose, each party shall be entitled to retain, as its own property, any award payable to it. Or in the event that a single entire award is made on account of condemnation, each party will then be entitled to take such proportion of said award as may be fair and reasonable.

(b) DATE OF LEASE TERMINATION. If the whole of the demised premises shall be so condemned or taken, the Landlord shall not be liable to the Tenant except and as its rights are preserved as in paragraph 14 (a) above.

16. DEFAULT, NOTICE OF DEFAULT AND REMEDIES.

EVENTS OF DEFAULT

A. Each of the following shall constitute an event of default by Tenant:

1. Failure to pay rent when due.

2. Failure to observe or perform any duties, obligations, agreements or conditions imposed on Tenant pursuant to the terms of the lease.

3. Abandonment of the premises, “Abandonment” means the Tenant has failed to engage in its usual and customary business activities on the premises for more than fifteen (15) consecutive business days.

4. Institution of voluntary bankruptcy proceedings by Tenant; institution of involuntary bankruptcy proceedings in which the Court orders relief against the Tenant as a debtor; assignment for the benefit of creditors of the interest of Tenant under this lease agreement; appointment of a receiver for the property or affairs of Tenant, where the receivership is not vacated within ten (10) days after the appointment of the receiver.

NOTICE OF DEFAULT

B. Landlord shall give Tenant a written notice specifying the default and giving the Tenant ten (10) days in which to correct the default. If there is a default (other than for nonpayment of a monetary obligation of Tenant, including rent) that cannot be remedied in ten (10) days by diligent efforts of the Tenant, Tenant shall propose an additional period of time in which to remedy the default. Consent to additional time shall not be unreasonably withheld by Landlord. Landlord shall not be required to give Tenant any more than three notices for the same default within any 365 day period.

REMEDIES

C. In the event Tenant has not remedied a default in a timely manner following a Notice of Default, Landlord may proceed with all available remedies at law or in equity, including but not limited to the following:

1. Termination. Landlord may declare this lease to be terminated and shall give Tenant a written notice of such termination. In the event of termination of this lease, Landlord shall be entitled to prove claim for and obtain judgment against Tenant for the balance of the rent agreed to be paid for the term herein provided, plus all expenses of Landlord in regaining possession of the premises and the reletting thereof, including attorney’s fees and court costs, crediting against such claim, however, any amount obtained by reason of reletting.

2. Forfeiture. If a default is not remedied in a timely manner, Landlord may then declare this lease to be forfeited and shall give Tenant a written notice of such forfeiture, and may, at the time, give Tenant the notice to quit provided for in Chapter 648 of the Code of Iowa.

17. RIGHT OF EITHER PARTY TO MAKE GOOD ANY DEFAULT OF THE OTHER. If default shall be made by either party in the performance of, or compliance with, any of the terms or conditions of this lease, and such default shall have continued for thirty (30) days after written notice thereof from one party to the other, the person aggrieved, in addition to all other remedies provided by law, may, but need not, perform such term or condition, or make good such default and any amount advanced shall be repaid forthwith on demand, together with interest at the rate of (seven) 7% per annum, from the date of advance.

18. SIGNS. (a) Tenant shall have the right of attaching, painting or exhibiting signs on the leased premises, provided only (1) that any sign shall comply with the ordinances of municipality in which the property is located and the laws of the State of Iowa; (2) such sign shall not change the structure of the building; (3) such sign, if and when removed, shall not damage the building; and (4) such sign shall be subject to the prior written approval of the Landlord, which approval shall not be unreasonably withheld.

(b) Landlord during the last ninety (90) days of this lease, or extension, shall have the right to maintain in the windows or on the building or on the premises either or both a “For Rent” or “For Sale” sign and Tenant will permit, at such time, prospective tenants or buyers to enter and examine the premises.

19. MECHANIC’S LIENS. Neither the Tenant nor anyone claming by, through, or under the Tenant, shall have the right to file or place any mechanic’s liens or other lien of any kind or character whatsoever, upon the premises or upon any building or improvement, or upon the leasehold interest of the Tenant, and notice is hereby given that no contractor, sub-contractor, or anyone else who may furnish any material, service or labor for any building, improvements, alteration, repairs or any paid thereof, shall at any time be or become entitled to any lien on the premises, and for the further security of the Landlord, the Tenant covenants and agrees to give actual notice thereof in advance, in any and all contractors and sub-contractors who may furnish or agree to furnish any such material, service or labor.

21. ENVIRONMENTAL.

A. Landlord . To the best of Landlord’s knowledge to date:

1. Neither Landlord nor Landlord’s former or present tenants are subject to any investigation concerning the premises by any governmental authority under any applicable federal, state, or local codes, rules and regulations pertaining to air and water quality, the handling, transportation, storage, treatment, usage, or disposal of toxic or hazardous substances, air emissions, other environmental matters, and all zoning and other land use matters.

2. Any handling, transportation, storage, treatment, or use of toxic or hazardous substances that has occurred on the premises has been in compliance with all applicable federal, state and local codes, rules and regulations.

3. No leak, spill release, discharge, emission or disposal of toxic or hazardous substances has occurred on the premises.

4. The soil, groundwater, and soil vapor on or under the premises is free of toxic or hazardous substances.

5. Landlord shall assume liability and shall indemnify and hold Tenant harmless against all liability or expense arising from any condition which existed, whether known or unknown, at the time of execution of the lease which condition is not a result of actions of the Tenant or which condition arises after date of execution but which is not a result of actions of the Tenant.

B. Tenant . Tenant expressly represents and agrees:

1. During the lease term, Tenant’s use of the property will not include the use of any hazardous substance without Tenant first obtaining the written consent of Landlord. Tenant understands and agrees that Landlord’s consent is at Landlord’s sole option and complete discretion and that such consent may be withheld or may be granted with any conditions or requirements that Landlord deems appropriate.

2. During the lease term, Tenant shall be fully liable for all costs and expenses related to the use, storage, removal and disposal of hazardous substances used or kept on the property by Tenant, and Tenant shall give immediate notice to Landlord of any violation or any potential violation of any environmental regulation, rule, statute or ordinance relating to the use, storage or disposal of any hazardous substance.

3. Tenant, at its sole cost and expense, agrees to remediate, correct or remove from the premises any contamination of the property caused by any hazardous substances which have been used or permitted by Tenant on the premises during any term of this lease. Remediation, correction or removal shall be in a safe and reasonable manner, and in conformance with all applicable laws, rules and regulations. Tenant reserves all rights allowed by law to seek indemnity or contribution from any person, other than Landlord, who is or may be liable for any such cost and expense.

4. Tenant agrees to indemnify and hold Landlord harmless from and against all claims, causes of action, damages, loss, costs, expense, penalties, lines, lawsuits, liabilities, attorney fees, engineering and consulting fees, arising out of or in any manner connected with hazardous substances, which are caused or created by Tenant on or after the date of this lease and during any term of this lease, including, but not limited to, injury or death to persons or damage to property, and including any [ILLEGIBLE] of the value of any leased premises which may result from the foregoing. This indemnity shall survive the cessation, termination, abandonment or expiration of this lease.

(b) Nothing herein contained shall be construed as denying to Tenant the right to dispose of inventoried merchandise in the ordinary course of the Tenant’s trade of business.

23. RIGHTS CUMULATIVE. The various rights, powers, options, elections and remedies of either party, provided in this lease, shall be construed as cumulative and no one of them as exclusive of the others, or exclusive of any rights, remedies or priorities allowed either party by law, and shall in no way affect or impair the right of either party to pursue any other equitable or legal remedy to which either party may be entitled as long as any default remains in any way unremedied, unsatisfied or undischarged.

24. NOTICES AND DEMANDS. Notices as provided for in this lease shall be given to the respective parties hereto at the respective addresses designated on page one of this lease unless either party notices the other, in writing, of a different address. Without prejudice to any other method of notifying a party in writing or making a demand or other communication, such message shall be considered given under the terms of this lease when sent, addressed as above designated, postage prepaid, by certified mail deposited in a United States mail box.

25. PROVISIONS TO BIND AND BENEFIT SUCCESSORS, ASSIGNS, ETC. Each and every covenant and agreement herein contained shall extend to and be binding upon the respective successors, [ILLEGIBLE], administrators, executors and assigns of the parties; except that if any part of this lease is held in joint tenancy, the successor in interest shall be the surviving joint tenant.

26. CHANGES TO BE IN WRITING. None of the covenants, provisions, terms or conditions of this lease shall be modified, waived or abandoned, except by a written instrument duly signed by the parties. This lease together with the attached Addendum and Exhibits contains the whole agreement of the parties.

27. RELEASE OF DOWER. Spouse of Landlord appears as a signatory to this lease solely for the purpose of releasing dower, or distributive share, unless said spouse is also a co-owner of an interest in the leased premises.

28. CONSTRUCTION. Words and phrases herein, including acknowledgment hereof, shall be construed as in the singular or plural number, and as masculine, feminine or neuter gender according to the context.

Moulded Fibre Technology, Inc.			Clinton Base Company, L.L.C.


By:	/s/ Ronald J. Lataille		By:	/s/ Lynn V. Payne Member MGR
	Ronald J. Lataille - Treasurer	TENANT		Lynn V. Payne Member-Manager	LANDLORD
				(and spouse if 27 is applicable)

By:
	Tenant				SPOUSE

Exhibit A: Landlord’s Construction

A. Building No. 3

• Ceco Metal Warehouse - 30,000 square feet

-slab on grade approximately same floor elevation as Building No. 2 (floor weight)

• Enclosed runways to Building No. 2

B. Interior Build-out

• Lighting

• Heat

• Sprinklers

• Ventilation

• Three loading docks with levelers, bumpers, and door weather seals

• Two drive-through tunnels

• One unisex handicap restroom

• Security lighting

• Roll-up doors

• 120 volt outlets on interior of exterior walls of building (similar to Building No. 2)

Exhibit B

Prepared by and return to Christopher L. Farwell, Farwell & Bruhn, 343 5th Avenue South, Clinton, Iowa 52732

STATE OF IOWA

COUNTY OF CLINTON

MEMORANDUM OF LEASE

THIS MEMORANDUM OF LEASE (“Memorandum”) is executed this day of , 2004, by and between Clinton Base Company, L.L.C. (“Landlord”), whose mailing address is 1003 31st Avenue, Camanche, Iowa 52730, and , a corporation (“Tenant”), whose mailing address is .

WHEREAS, Landlord and Tenant executed and entered into a Lease (the “Lease”) dated , 2004, for the Premises (as hereinafter defined).

WHEREAS, the parties wish to provide a memorandum of the Lease.

NOW, THEREFORE, in consideration of the Lease and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

1. Lease Term. The term of the Lease shall be ten (10) years beginning on , 2004. (“the Commencement Date”) and terminating at midnight on the tenth (10th) anniversary of the Commencement Date (the “Term”).

2. Premises. Subject to the terms of the Lease, as may be amended from time to time, Landlord is the owner of the real property described in Exhibit “A” attached hereto (the “Property”) and Landlord has leased to Tenant the portion of the Property which is described in Exhibit B attached hereto (the “Premises”).

3. Notices and Demands. Notices as provided for in this Lease shall be given to the respective parties hereto at the respective addresses designated above unless either party notifies the other, in writing, of a different address. Without prejudice to any other method of notifying a party in writing or making a demand or other communication, such message shall be considered given under the terms of the Lease when sent, addressed as above designated, postage prepaid, by certified mail deposited in a United States mail box.

Landlord:			Tenant:

By:			By:
Lynn V. Payne, Member-Manager

			By:

ADDENDUM

29. Release of Mechanics Lien. If, notwithstanding paragraph 19 of the lease, any lien is filed against the premises as a result of any work performed by or on behalf of Tenant, Tenant shall cause the same to be released no later than thirty (30) days following the filing thereof. If Tenant fails or refuses to cause the release of any lien as provided above, Landlord may pay the demand of the lien claimant in full or otherwise cause the release of such lien, and Tenant shall reimburse Landlord for all such charges and costs upon demand, including attorneys’ fees. Nothing contained herein shall constitute a waiver of Tenant’s right to contest the validity of the underlying claim giving rise to any such lien.

30. Governing Law . This lease shall be deemed to be a contract made under the laws of the State of Iowa and for all purposes shall be governed by and construed, interpreted, and enforced in accordance with the laws of the State of Iowa, excluding and without regard to choice of law or conflict of law rules that would require the application of the laws of any other jurisdiction.

31. Subordination . Notwithstanding anything to the contrary stated herein, this lease is and shall be subject and subordinate to all mortgages, deeds of trust, and similar security documents which may now or hereafter be secured upon the premises, and to all advances, renewals, modifications, consolidations, replacements, and extensions relative thereto; provided, however, that in connection with Landlord’s execution of any mortgage, deed of trust, or similar security document which may now or hereafter be secured upon the premises, Landlord shall use its best efforts to negotiate a provision therein (as long as Tenant is not in default under the lease), whereby the holder of the such mortgage, deeds of trust, or similar security document shall agree to recognize the lease and the rights of Tenant hereunder and not to disturb Tenant in its use of the premises in the event of a foreclosure. This provision shall be self-operative and no further instrument of subordination shall be required of Landlord or any mortgagee, but in confirmation of such subordination, Tenant shall execute, within fifteen (15) days after Landlord’s request, any certificates that Landlord may reasonably require acknowledging such subordination; provided, however, that Tenant irrevocably appoints Landlord, as Tenant’s agent, to execute and deliver in the name of Tenant any such instruments of subordination if Tenant fails or refuses to do so. This authorization shall in no way relieve Tenant of the obligation to execute such instruments of subordination. Tenant’s failure or refusal to timely execute and deliver such instrument of subordination shall constitute a material default under this lease.

32. Counterparts . This lease may be executed in counterparts, each of which shall constitute an original and all of which together shall constitute but one and the same agreement. The original execution pages of counterpart copies of this lease may be attached to any one such copy to form a single, complete document.

33. Incorporation of Exhibits. All Exhibits to this lease are incorporated within and made a part of this lease by their reference herein.

34. Memorandum of Lease . At the request of either party, the other party agrees to execute a memorandum of this lease in substantially the same form as attached hereto as Exhibit B

in recordable form, setting forth a description of the premises, the general terms of this lease, and other information desired by Tenant for the purpose of giving public notice thereof to third parties.

35. Severability . If any provision of this lease is found by a court of competent jurisdiction to be invalid or unenforceable, then such provision shall be severed from this lease and the remainder will remain in full force and effect.

36. Survival . The provisions of this lease, which by their nature are continuing, including, without limitation, all indemnification and exculpation provisions, shall continue in full force and effect and shall to bind the parties beyond any termination of this lease (which shall include, for purposes of this lease, any forfeiture, termination, surrender, abandonment, or expiration of this lease).

37. Estoppel Certificate . Each of Landlord and Tenant agrees that it will from time to time, upon written request by the other, execute and deliver a written statement addressed to the requesting party (or to a third party designated by it), which statement shall, as applicable, identify the parties and this Lease, certify that this lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as so modified), confirm that neither Tenant nor Landlord is in default as to any obligations under this lease (or if either party is in default, specifying any default), and contain such other information or confirmations, as applicable, as the requesting party may reasonably require. Subject to the requesting party’s written approval as to form and content, the Estoppel Certificate shall be prepared by the other and furnished to the requesting party by the other or a third party designated by it.

38. Attornment . Tenant agrees to attorn to the transferee of Landlord’s interest in the premises by foreclosure, deed in lieu of foreclosure, exercise of any available remedy provided in any encumbrance or underlying lease, or by operation of law (without offset of deduction), if requested to do so by the transferee and to recognize the transferee as the landlord under the lease.

39. Authority . Each person executing this lease on behalf of any party hereto warrants that he or she has the right and authority to execute this lease, and that all the procedures and approvals that are necessary and required to enable him or her to properly execute this lease on behalf of a party hereto and to bind the person or entity whom he represents in accordance with the provisions hereof have been followed and secured. Each party agrees to execute and deliver all documents and to perform all further acts as may be reasonably necessary to carry out the provisions of this lease. This document is not effective as a lease or otherwise until executed by both Landlord and Tenant. At Landlord’s request, Tenant agrees to provide Landlord with an appropriate corporate resolution authorizing the execution of this lease by or on behalf of Tenant.

40. No Waiver . No failure or delay by either party to exercise their rights under this lease or to insist upon the strict compliance with any obligation imposed by this lease, and no course of dealing or custom or practice of either party contrary to the provisions of this lease, shall constitute

a waiver or modification of the provisions of this lease or the right to demand strict compliance with the provisions of this lease.

41. Condition of Premises/ Landlord’s Construction. A Ceco metal building and two “runways” shall be constructed by Landlord and/or Payne & Associates upon the demised premises at the expense of Lessor and/or Payne & Associates. The Ceco metal building shall be 30,000.00 square feet (or more) and the two runways shall be a total of 2,080 square feet (or more). The “runways” for the Ceco metal building (intended to be known as “Building No. 3”) shall be connected to “Building No . 2”.

Landlord covenants to complete “Building No. 3” and said runways (collectively “Landlord’s Construction”) and deliver them to Tenant with a certificate of occupancy, and subject to only minor matters, if any (to be noted on a written punchlist jointly prepared by the parties pursuant to a walk-through inspection of the premises by representatives of Landlord and Tenant, with the process of completing the matters identified on the said punchlist, if applicable, not materially interfering with Tenant’s occupation of the premises for the conduct of its business), no later than 12:00 noon one-hundred eighty (180) days after the closing on the real estate identified in paragraph 59 below (i.e., the real estate legally described as Lot 4, Manufacturing Meadows III 1st Addition, Clinton, Iowa, and also the East 35 feet of Lot 3, Manufacturing Meadows III 1st Addition, Clinton, Iowa).

In the event that a certificate of occupancy is not issued by 12:00 noon one-hundred eighty (180) days after the closing on the above-referenced real estate, Tenant shall be entitled to a rebate of pro-rata rental for each day which passes between such date and the actual date the certificate of occupancy is issued and a credit of one day’s rent for each day which passes between such date and the actual date the certificate of occupancy is issued, except where Landlord’s delay in this regard is a result of Tenant’s interference or other fault, or matters beyond Landlord’s reasonable control.

If Tenant has not delivered the punchlist to Landlord within ten (10) days following delivery of the premises to inspect the same and to identify in writing the punchlist items, Tenant shall be deemed to have accepted the premises as delivered by Landlord and Landlord shall have no further responsibility for the same.

After the commencement of the Lease Term, Landlord will repair or replace defective parts or components of the building or improvements which were supplied or installed by Landlord unless the defective condition was caused by Tenant’s abuse or failure to maintain the defective part or component.

Subject to Landlord’s construction, Tenant acknowledges that it has examined the premises and accepts the premises “As Is” and in its present condition . Subject to Landlord’s Construction, Landlord makes no representation or warranty whatsoever, express or implied, concerning the fitness or suitability of the premises for the conduct of Tenant’s operations or for any other reason and Tenant acknowledges that Tenant has made such investigations as it deems

reasonable and necessary with reference to such matters and assumes all responsibility therefor as the same relate to Tenant’s use and occupancy of the premises.

42. Indemnification, Exculpation, Duty to Defend .

a. Indemnification .

The indemnification provision set forth in paragraph 13 herein extends to and includes all reasonable attorneys’ fees incurred by or on behalf of Landlord (including its agents, employees, partners, members, managers, directors, officers, shareholders, successors, and assigns) and all claims, actions, causes of action, liabilities, obligations, damages, costs and expenses (whether at law or in equity), including court costs and reasonable attorney and expert witness fees (hereinafter collectively, “Claims”) relative to (a) injury to any persons (including death); (b) loss of, injury or damage to, or destruction of property (including all loss of use); (c) all economic losses and incidental, consequential, or resulting damages (including lost profits) of any kind from any cause; and (d) any penalties, damages, or charges imposed for a violation of any law, ordinance, or environmental law from any cause. The parties’ insurance obligations under the lease are independent of Tenant’s indemnification obligations and other obligations under the lease and shall not be interpreted or construed in any way to restrict, limit, or modify such obligations, or to limit the parties’ respective liabilities under the lease. The indemnification provision set forth in paragraph 13 herein extends to Landlord (including its agents, employees, partners, members, managers, directors, officers, shareholders, successors, and assigns).

b. Exculpation .

Notwithstanding anything to the contrary stated herein, to the fullest extent permitted by law, Tenant waives and relinquishes all Claims (whether at law or in equity) against Landlord (including its agents, employees, partners, members, managers, directors, officers, shareholders, successors, and assigns) arising out of, and agrees that Landlord shall not be liable to Tenant for (and Tenant knowingly and voluntarily assumes the risk of), the following: (i) injury to or death of any person from any cause; (ii) loss of, injury or damage to, or destruction of any tangible or intangible property, including the resulting loss of use, economic loss, and incidental, consequential, or resulting damages (including lost profits) of any kind from any cause; (iii) any loss, damage, or expense, including the resulting loss of use, economic loss, and incidental, consequential, or resulting damages (including lost profits) of any kind arising out or resulting from a loss, interruption, or impairment of services (including, without limitation, electrical, telephone, or telecommunication), or for diminution in the quality of such services; (iv) any loss, damage, or expense, including the resulting loss of use, economic loss, and incidental, consequential, or resulting damages (including lost profits) of any kind arising out or resulting from any acts or omissions of Tenant’s employees, agents, contractors, suppliers, subcontractors, subtenants, licensees, customers, or invitees; or (v) any loss, damage, or expense, including the resulting loss of use, economic loss, and incidental, consequential, or resulting damages (including lost profits) of any kind arising out or resulting from a power failure, vandalism, fire, theft, or destruction or damage to the improvements on the

premises; provided, however, that this exculpation provision shall not apply to Claims of Tenant against Landlord to the extent that a final judgment of a court of competent jurisdiction establishes that the injury, loss, or damage was proximately caused by Landlord’s negligent, reckless, or intentional injury to person or property; and further provided that, notwithstanding the foregoing, Tenant waives all rights of recovery against Landlord to the extent the injury, loss, or damage is insured. The parties’ insurance obligations under the lease are independent of Tenant’s exculpation obligations and other obligations under the lease and shall not be interpreted or construed in any way to restrict, limit, or modify such obligations, or to limit the parties’ respective liabilities under the lease.

c. Duty to Defend .

Tenant’s duty to defend Landlord is separate and independent of Tenant’s duty to indemnify Landlord. The duty to defend applies regardless of whether the issues of negligence, liability, fault, default, or other obligation on the part of Tenant (or Tenant’s agents, employees, contractors, subcontractors, subtenants, licensees, customers, or invitees) have been determined. The duty to defend applies immediately, regardless of whether Landlord has paid any sums or incurred any detriment arising out of or relating (directly or indirectly) to any Claims.

In the event Tenant is required to defend, hold harmless, or indemnify Landlord hereunder, the indemnifying party shall have the right to defend and control the defense of any action giving rise to such indemnity using the legal resources of the indemnifying party; provided, however, that the indemnifying party shall not take any action which unreasonably exposes the other party to a risk of damage which would not be covered by such indemnity, and may not settle any matter without the consent of the indemnified party.

43. Additional Insureds . The additional insured endorsement referenced in paragraph 11B of the lease must be on a form reasonably acceptable to Landlord. Tenant’s commercial general liability policy or policies shall be endorsed as needed to provide that the insurance afforded by such policy or policies to the additional insured is primary and that all insurance carried by Landlord is strictly excess and secondary and shall not contribute with Tenant’s liability insurance. Tenant shall name Landlord as loss payee and building owner relative to the insurance of real property required in paragraph 11 A.

43A. Blanket Insurance Coverage . Any insurance required to be maintained by Tenant under this lease may be provided and maintained by blanket insurance covering the demised premises and other locations of the Tenant, Tenant’s subsidiaries, or affiliated companies provided that the coverage obtained by such blanket policy shall be sufficient to satisfy the insurance obligation of Tenant under this lease and provided further that in such blanket policy or policies, Landlord and the premises as well as Tenant shall be specifically named and described and absolutely insured for the amounts set forth, herein without diminution by reason of other persons or property being named or mentioned in said blanket policy.

44. Negotiated Lease . This lease is a result of negotiations of the parties, each of which has had the opportunity to be represented by counsel, and all of the provisions have been agreed to by both Landlord and Tenant after negotiations. Accordingly, any rule of law or legal decision that would require interpretation or construction of any provision of this lease against the party that has drafted it is not applicable and is waived.

45. No Partnership . No provision of this lease and no actions or omissions of the parties hereto shall be construed to create a partnership or joint venture between Landlord and Tenant, or make cither party responsible for the debts of the other.

46. Additional Rent . All amounts payable by Tenant pursuant to the provisions of this lease shall be deemed to be obligations in the nature of rental, irrespective of whether such amounts are or are not expressly identified as rental in any specific provision of this lease. Such amounts shall be collectible by Landlord as rental and upon default in payment thereof, Landlord shall have the same rights and remedies as for failure to pay rental.

47. Environmental . For purposes of this lease, “hazardous substances” shall mean any pollutant, contaminant, hazardous, toxic, or dangerous waste, substance, or material, or any other substance or material regulated or controlled pursuant to any environmental laws. For purposes of this lease, “environmental laws” shall mean all federal, state, and local laws applicable to the premises and relating to pollution or protection of the environment, including laws relating to emissions, discharges, releases, or threatened releases of any hazardous substance into the environment or the generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of hazardous substances and any and all regulations, codes, standards, plans, orders, decrees, judgments, injunctions, notices, or demand letters issued, entered, adopted, or approved thereunder. Pursuant to the requirements of Paragraph 21 .B.1 above, Landlord hereby consents to Tenant’s use at the premises of hazardous substances of types and in quantities associated with normal office and warehouse activities; provided that the same are used, stored, and disposed of in accordance with the requirements of applicable law.

48. Improvements . Notwithstanding any contrary provision of statutory or common law, title to all alterations and/or improvements erected, constructed, or installed by or on behalf of Landlord (e.g., runways) or Tenant on the premises shall at all times be and remain the property of Landlord, regardless of whether such improvements are attached or affixed to the premises; provided, however, that Tenant may remove any trade fixture and freestanding equipment belonging to Tenant. Tenant shall repair any damage to the premises caused by such removal; provided, however, that as it pertains to the removal of the runway(s), in the event either or each runway is removed, Landlord shall restore the premises (where runway attaches to Building No. 2), the real estate located within the boundaries of the leased premises, the real estate located outside the boundaries of the leased premises relative to either or each runway, and Building No. 3 (where runway attaches to Building No. 3) to their original configuration and condition before either or each runway was installed.

By written notice to Tenant before expiration of the lease term, or within a reasonable time after any sooner termination, Landlord may require Tenant, at Tenant’s sole expense, to remove any improvements or alterations (but specifically excluding the runways, including that portion of the runways which are constructed and existing outside the boundaries of the leased premises), and restore the premises to their original configuration and condition before the improvement or alteration was made. If Tenant fails to complete such restoration within thirty (30) days after written notice from Landlord requesting the restoration, Landlord may do so and charge the cost of restoration to Tenant.

Tenant shall not make any improvements or alterations to the premises without Landlord’s prior written consent, which consent shall not be unreasonably withheld or delayed. In the event Landlord gives Tenant prior written consent, no such improvements or alterations shall proceed without Landlord’s prior written approval (which may not be unreasonably withheld or delayed) of (i) Tenant’s contractor; (ii) insurance policies of Tenant’s contractor’s for liability insurance and worker’s compensation coverage. All work relating to improvements or alterations performed by or on behalf of Tenant shall (i) be at Tenant’s expense; (ii) be done in a good and workmanlike manner; and (iii) comply with all applicable laws and ordinances.

Unless otherwise agreed to in writing by Landlord and Tenant, Tenant’s “trade fixtures” shall not include floor coverings, lighting fixtures, runways, and ceilings.

49. Security Deposit . Tenant shall provide a security deposit to Landlord in the sum of Ten Thousand Dollars ($10,000.00). Upon expiration of the lease term, or sooner termination of the lease, the security deposit shall be returned to Tenant; provided, however, that Landlord may withhold the security deposit, or such amounts thereof, (i) to remedy any defaults of Tenant under the lease; (ii) to restore the premises to the condition existing at the commencement of the tenancy, ordinary wear and tear excepted; and (iii) for any other purpose allowed by law.

50. Tenant’s Option to Terminate Lease . Tenant may, at its option, terminate the lease at any time during years four through eight upon the following terms and conditions. Any notice to exercise this option to terminate must be given by Tenant in writing not less than one-hundred eighty (180) days prior to the effective termination date, which shall be specified in the said notice. If Tenant exercises this option to terminate for purposes of terminating the Lease effective during year four, then Tenant shall pay to Landlord the sum of $446,417.28. If Tenant exercises this option to terminate for purposes terminating the Lease effective during year five, then Tenant shall pay to Landlord the sum of $111,604.32. If Tenant exercises this option to terminate for purposes of terminating the Lease effective during year six, then Tenant shall pay to Landlord the sum of $91,604.00. If Tenant exercises this option to terminate for purposes of terminating the Lease effective during year seven, then Tenant shall pay to Landlord the sum of $61,604.00. If Tenant exercises this option to terminate for purposes of terminating the Lease effective during year eight, then Tenant shall pay to Landlord the sum of $36,604.00.

51. Change of Status of Landlord . In the event Landlord subsequently changes its status to a corporation, limited liability company, or other entity, the terms, provisions, and conditions of the lease shall be fully applicable to such status, whether as a corporation, limited liability company, or otherwise.

52. Tenant’s Termination of Lease Prior to Possession . Notwithstanding anything to the contrary stated herein, if Tenant, for any or no reason, terminates the lease after the execution of the lease, but prior to possession by Tenant, Tenant agrees to pay Landlord the sum of $355,100.00, based, in part, on the dirt work, purchase of real estate, obtaining of building materials, and obtaining of building permit. Termination of this lease shall include, without limitation, any forfeiture, surrender, or abandonment of this lease.

53. Lease Term . The first day of the lease term for purposes of paragraph 1 of the lease shall be (a) the date of the issuance of the certificate of occupancy referenced in paragraph 41 above, or (b) the date Tenant occupies the premises for the conduct of its business (including warehouse purposes), whichever first occurs.

Landlord and Tenant shall amend the lease to reflect the first day of the lease term and the last day of the lease term in paragraph 1 of the lease. The lease term shall be for a period of ten (10) years. Landlord shall not be liable for any loss, damage, expense, or claim of any nature arising out of or resulting from any delay in completion of any of Landlord’s work or in delivering possession of the premises to Tenant (provided that Landlord shall be subject to paragraph 41 above), nor shall the validity of this Lease be affected by any such delay and Tenant’s only remedy shall be a rebate of pro-rata rental for each day which passes between such date and the actual date the certificate of occupancy is issued and a credit of one day’s rent for each day which passes between such date and the actual date the certificate of occupancy is issued, except where Landlord’s delay in this regard is a result of Tenant’s interference or other fault, or matters beyond Landlord’s reasonable control, as provided in paragraph 41 above.

54. Entry Made at Tenant’s Risk . Subject to appropriate coordination with Landlord and its contractors, Tenant shall have the right to enter the premises prior to date the certificate of occupancy is issued, only for the purpose of installing Tenant’s improvements, fixtures, and equipment, provided, however, that any such entry into the premises by Tenant, its agents, contractors, employees, or anyone acting by or through Tenant during the construction of the improvements by Landlord shall be at the sole risk of such parties, and Tenant hereby releases Landlord (including its agents, employees, partners, members, managers, directors, officers, shareholders, successors, and assigns), from any and all claims, actions, causes of action, liabilities, obligations, damages, costs and expenses (whether at law or in equity), including court costs and attorney and expert witness fees (hereinafter collectively, “Claims”) relative to any injury (including bodily injury, death, or property damage) incurred or suffered by Tenant in or about the premises during the construction of the improvements by Landlord. Tenant shall indemnify, defend, and hold harmless Landlord (including its agents, employees, partners, members, managers, directors, officers, shareholders, successors, and assigns) harmless from and against any and all Claims made or existing

against Landlord by anyone as a result of any entry into the premises by Tenant, its agents, contractors, employees, or anyone acting by or through Tenant prior to date the certificate of occupancy is issued.

55. Rental . Tenant agrees to pay Landlord as rental for the term set forth herein, as follows: SEVEN THOUSAND NINE HUNDRED EIGHTY SEVEN AND NINETY TWO HUNDREDTHS DOLLARS ($7,987.92) per month, in advance, without offset or deduction, the first payment becoming due and payable on (a) the date of the issuance of the certificate of occupancy referenced in paragraph 41 above, or (b) the date Tenant occupies the premises for the conduct of its business (including warehouse purposes), whichever first occurs, and the same amount, in advance, without deduction or offset, becoming due and payable on the day of each month thereafter, during the term of this lease. As indicated in paragraph 53 herein, Landlord and Tenant shall amend the lease to reflect the first day of the lease term and the last day of the lease term in paragraph 1 of the lease. Additionally, paragraph 55 herein shall be amended to reflect the omitted day of each month on which the rental is due and payable, above referenced.

56. Repairs and Maintenance of Runways . Tenant shall be responsible for all repairs and maintenance of the runways, including that portion of the runways which are constructed and existing outside the boundaries of the leased premises.

57. Assignment and Subletting. Any assignment of this Lease or subletting of the premises or any part thereof, without the Landlord’s prior written permission shall, at the option of the Landlord, make the rental for the balance of the lease term due and payable at once. Such written permission shall not be unreasonably withheld or delayed, and no such permission shall be required in connection with a subletting or assignment to any affiliated entity or successor to Tenant by merger, consolidation or acquisition of substantially all of the assets of Tenant, provided, however, that such written permission shall be required if Tenant is in default after any required notice and the expiration of any applicable cure period under this Lease, and further provided that in the event of an assignment, the assignee has a tangible net worth, as evidenced by reasonably satisfactory financial statements delivered to Landlord, at least equal to Tenant’s net worth immediately before the transfer.

Tenant shall deliver to Landlord an original assignment or sublease executed by Tenant and the transferee which shall expressly provide: (a) that such transferee shall he bound by all the provisions of this Lease, and shall assume all the obligations of Tenant under this Lease relating to the portion or the whole of the premises, as the case may be, acquired by such party; (b) that Tenant and the transferee shall be jointly and severally liable for Tenant’s obligations to Landlord under paragraph 42 of this Lease and such paragraph 42 shall be applicable to any assignee or subtenant; (c) that in no event shall Tenant be deemed relieved of any obligation or liability under this lease; and (d) that any transfer shall not be deemed effective for any purpose unless and until compliance with the foregoing is obtained. Tenant shall pay Landlord, as condition to any permitted transfer becoming effective, all reasonable attorneys’ fees and costs incurred by Landlord in connection therewith.

Without waiving any obligations of Tenant hereunder, if this lease is assigned, Landlord may collect rent directly from the transferee. If the premises are subleased and Tenant defaults, Landlord may collect rent directly from the transferee. Landlord shall apply the amount collected from the transferee to Tenant’s monetary obligations under this lease.

If Landlord duly terminates this lease on account of any default by Tenant, Landlord may: (i) terminate any sublease, license, concession, or other consensual arrangement for possession entered into by Tenant and affecting the premises; or (ii) choose to succeed to Tenant’s interest in such an arrangement. If Landlord elects to succeed to Tenant’s interest in such an arrangement, Tenant shall, as of the date of written notice by Landlord of that election, have no further right to, or interest in, the rent or any other consideration receivable under that arrangement.

58. Closing on real estate. In connection with this lease, Landlord intends on purchasing certain real estate situated in Clinton County, Iowa and legally described as Lot 4, Manufacturing Meadows III 1st Addition, Clinton, Iowa, and also the East 35 feet of Lot 3, Manufacturing Meadows III 1st Addition, Clinton, Iowa to Moulded Fibre Technology, Inc. (“Tenant”). At the closing of Landlord’s purchase of the real estate, above-referenced, upon which the Ceco metal building and a portion of the “runway(s)” will be constructed, the parties shall execute this lease.

59. Counterparts. This lease (with attached Addendum and Exhibits) may be executed in counterparts, each of which shall constitute an original and all of which together shall constitute but one and the same agreement. The original execution pages of counterpart copies of this lease may be attached to any one such copy to form a single, complete document.

60. Lease Contingency . This lease is contingent upon the closing on Landlord’s purchase of the real estate described herein and Landlord’s agreement with Millcreek Investments, L.C. as to the location of the runways and the execution of any necessary casements with Millcreek Investments, L.C., if deemed appropriate by Landlord. In the event that Landlord has not completed the said land purchase and execution of easements (if deemed appropriate by Landlord) by 5:00 PM on March 26, 2004, Tenant shall have the right to terminate this lease, at no cost or liability to Tenant, by giving written notice of termination to Landlord no later than 5:00 PM on March 31, 2004, and should Tenant not give such notice this lease shall continue in full force and effect.

61. Insurance Proceeds. In connection with paragraph 14(a) of this lease, Tenant acknowledges and agrees that any insurance proceeds payable to Tenant shall be assigned to Landlord as loss payee or otherwise and otherwise be paid to Landlord for purposes of Landlord effecting the repairs required by the said paragraph 14(a) of the lease. In connection with paragraphs 2(2), 11A, and 11B of the lease, Tenant acknowledges and agrees that Tenant shall pay for the cost of the insurance Tenant obtains. Tenant’s policy of insurance under paragraph 11A above shall contain a loss of rents coverage for the benefit of Landlord, equal to one year’s rent.

THE IOWA STATE BAR ASSOCIATION
Official Form No. 193

Christopher L. Farwell ISBA # 9191

FOR THE LEGAL EFFECT OF THE USE OF
THIS FORM, CONSULT YOUR LAWYER

[LOGO]

STATE OF IOWA, COUNTY OF CLINTON, ss:

On this day of , 2004, before me, a Notary Public in and for the said State, personally appeared Lynn V. Payne, to me personally known, who being by me duly sworn did say that that person is Member-Manager (Insert title of executing member) of said limited liability company, that (no seal has been procured by the said) limited liability company and that said instrument was signed on behalf of the said limited liability company by authority of its managers and the said Lynn V. Payne acknowledged the execution of said instrument to be the voluntary act and deed of said limited liability company by it voluntarily executed.

	/s/ Lynn V. Payne, Member MGR

	/s/ A. John Frey Jr.	Notary Public in and for said State.
	A. JOHN FREY JR.
[LOGO]	COMMISSION NO. 010044	(Section 558.39, Code of Iowa)
	MY COMMISSION EXPIRES
	9-22-04

Acknowledgement: For use in the case of limited liability companies

© The Iowa State Bar Association 2003		193 ACKNOWLEDGMENT
IOWADOCS ^®		Revised January, 1999

THE IOWA STATE BAR ASSOCIATION
Official Form No. 182

Christopher L. Farwell ISBA # 9191

FOR THE LEGAL EFFECT OF THE USE OF
THIS FORM, CONSULT YOUR LAWYER

[LOGO]

STATE OF MASSACHUSSETS, COUNTY OF ESSEX, ss:

On this 28 day of January, 2004, before me, the undersigned, a Notary Public in and for the said State, personally appeared Ronald J. Lataille and , to me personally known, who being by me duly sworn, did say that they are the Treasurer and , respectively, of the corporation executing the within and foregoing instrument to which this is attached, that (no seal has been procured by the) (the seal affixed thereto is the seal of the) corporation; that the instrument was signed (and sealed) on behalf of the corporation by authority of its Board of Directors; and that Ronald J. Lataille and R. Jeffrey Bailly as officers acknowledged the execution of the foregoing instrument to be the voluntary act and deed of the corporation, by it and by them voluntarily executed.

	/s/ Joan F. Young

	State of Massachusetts, Notary Public in and for said State.

	expires: 1/22/10	(Section 558.39 Code Iowa)

Acknowledgment: For use in the case of corporations

© The Iowa State Bar Association 2003		182 ACKNOWLEDGMENT
IOWADOCS ^®		Revised January, 1999

EXHIBIT 31

CERTIFICATIONS

I, R. Jeffrey Bailly, do certify that:

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

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

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

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

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

b. Omitted;

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

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

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

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

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

		/s/ R. Jeffrey Bailly
		R. Jeffrey Bailly
		Chief Executive Officer

Date:	/s/ May 14, 2004

I, Ronald J. Lataille, do certify that:

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

b. Omitted;

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

		/s/ Ronald J. Lataille
		Ronald J. Lataille
		Chief Financial Officer

Date:	/s/ May 14, 2004

EXHIBIT 32

Certification

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

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

I, R. Jeffrey Bailly, President and Chief Executive Officer of UFP Technologies, Inc., a Delaware corporation (the “Company”), do hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) that, to the best of my knowledge and belief:

(1) The Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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

Date:	/s/ May 14, 2004	/s/ R. Jeffrey Bailly
		R. Jeffrey Bailly,
		President and Chief Executive Officer

Certification

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

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

I, Ronald J. Lataille, Chief Financial Officer of UFP Technologies, Inc., a Delaware corporation (the “Company”), do hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) that, to the best of my knowledge and belief:

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

Date:	/s/ May 14, 2004	Ronald J. Lataille
		Ronald J. Lataille,
		Chief Financial Officer

A signed original of these written statements required by Section 906 has been provided to UFP Technologies, Inc. and will be retained by UFP Technologies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.