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<ACCESSION-NUMBER>0000950116-02-001231
<TYPE>10KSB
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<PERIOD>20011231
<FILING-DATE>20020524
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<CONFORMED-NAME>CONMAT TECHNOLOGIES INC
<CIK>0001077445
<ASSIGNED-SIC>2820
<IRS-NUMBER>232999072
<STATE-OF-INCORPORATION>FL
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
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<FORM-TYPE>10KSB
<ACT>34
<FILE-NUMBER>000-30166
<FILM-NUMBER>02662378
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>FRANKLIN AVENUE AND GRANT STREET
<CITY>PHOENIXVILLE
<STATE>PA
<ZIP>19460
<PHONE>2155692140
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<FILENAME>tenksb.txt
<DESCRIPTION>FORM 10KSB
<TEXT>
<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB

         (Mark One)

[ X ]    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934.
         For the fiscal year ended   December 31, 2001
                                     -----------------

[   ]    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934.
         For the transition period from _____________ to ______________

                        Commission file number 000-30166
                                               ---------

                            ConMat Technologies, Inc.
                            -------------------------
                 (Name of Small Business Issuer in Its Charter)
<TABLE>
          <S>                                                                   <C>
                           Florida                                                         232999072
         -----------------------------------------------------------------         ---------------------------
         (State or Other Jurisdiction of  Incorporation or Organization)        (I.R.S. Employer Identification No.)

         Franklin Avenue and Grant Street, Phoenixville, PA                  19460
         -----------------------------------------------------         ------------------
         (Address of Principal Executive Offices)                          (Zip Code)
</TABLE>

                                 (610) 935-0225
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:            None.
Securities registered under Section 12(g) of the Exchange Act:

                         Common Stock, $0.001 par value
--------------------------------------------------------------------------------
                                (Title of Class)

Check whether the Issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
                                                               YES _X__  NO ____

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [ ]

The Issuer's revenues for its most recent fiscal year were $12,289,424.

The aggregate market value of the voting and non-voting common equity held by
non-affiliates as of March 31, 2002 was $123,533, based on the average of the
closing bid and asked prices of the Registrant's common stock as reported by the
Nasdaq OTC Bulletin Board.

As of March 31, 2002, the Registrant had outstanding, 2,607,758 shares of common
stock.

Transitional Small Business Disclosure Format (check one).   YES ____ NO __X__


                       DOCUMENTS INCORPORATED BY REFERENCE


None.




<PAGE>

                           FORWARD LOOKING STATEMENTS

         Some of the statements contained in this report discuss future
expectations, contain projections of results of operations or financial
condition or state other "forward-looking" information. Those statements are
subject to known and unknown risks, uncertainties and other factors that could
cause the actual results to differ materially from those contemplated by the
statements. The forward-looking information is based on various factors and was
derived using numerous assumptions.

         Important factors that may cause actual results to differ from
projections include, for example,

                 o        general economic conditions, including their impact
                          on capital expenditures;
                 o        business conditions in the material technology and
                          wastewater treatment industries;
                 o        the regulatory environment;
                 o        rapidly changing technology and evolving industry
                          standards;
                 o        new products and services offered by competitors; and
                 o        price pressures.

         In addition, in this report, the words "believe", "may", "will",
"estimate", "continue", "anticipate", "intend", "expect", "plan", and similar
expressions, as they relate to ConMat's business or management, are intended to
identify forward-looking statements.

         ConMat undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise after the date of this report. In light of these risks and
uncertainties, the forward-looking events and circumstances discussed in this
report may not occur and actual results could differ materially from those
anticipated or implied in the forward-looking statements.

                                     PART I

Item 1.  Description of Business.

General

ConMat Technologies, Inc., ("ConMat"), formerly known as EPL Systems, Inc. and
Phoenix Systems, Inc., was incorporated in Florida in 1986. ConMat is not an
operating company and does not have significant assets or conduct significant
business except through its wholly-owned subsidiary. In December 1998, ConMat
acquired 100% of the common stock of Polychem Corporation ("Polychem") from The
Eastwind Group, Inc. Polychem develops custom engineered plastic molded products
which are marketed to wastewater treatment plants and other industrial end
users. Product categories emphasized include those, which make the environment
cleaner, operations safer and improve operating efficiencies.

Polychem has agreed to outsource the manufacturing of its product lines to
Ensinger Vekton, Inc. and Putnam Precision Molding, Inc. (collectively,
"Supplier"), pursuant to a Supply and Equipment Purchase Agreement, dated March
20, 2002. Under the terms of the agreement, Polychem has agreed to purchase a
minimum of $2.5 million of products from Supplier each year and to sell to
Supplier certain of the equipment Polychem formerly used to manufacture its
products.

On March 20, 2002, ConMat entered into a License and Asset Purchase Agreement
(the "License and Asset Purchase Agreement") with Polychem and Ecesis LLC, a
business owned by former Polychem management ("Ecesis") which provides for the
sale of Polychem's specialty and water treatment product lines to Ecesis (the
"Sale"). The Sale is subject to the approval of ConMat's shareholders.

ConMat anticipates holding a special meeting of its shareholders in the near
future at which its shareholders will vote whether to approve the Sale and a
Plan of Liquidation for the remaining assets of Polychem (the "Liquidation").
ConMat believes that its shareholders will approve the Sale and the Liquidation.

Ecesis is a Delaware limited liability company which was formed to purchase
Polychem's specialty and water treatment lines. Two of ConMat's and Polychem's
former directors and officers, Paul A. DeJuliis and Richard R. Schutte, are
members of Ecesis. Messrs. DeJuliis and Schutte resigned as directors and
officers of ConMat and Polychem on March 13, 2002.




                                        1
<PAGE>

Pending the approval of the Sale by ConMat's shareholders, pursuant to the
License and Asset Purchase Agreement, Polychem has licensed its specialty and
water treatment product lines to Ecesis in exchange for all profits generated
from sales. In the event that the Sale is not approved by ConMat's shareholders,
the license will terminate and Polychem will resume developing and marketing its
product lines.

If ConMat's shareholders approve the Sale and Liquidation, ConMat will have no
assets (other than cash, if any, remaining after satisfaction of its and
Polychem's liabilities). In such event, the Board of Directors of ConMat will
seek to acquire an interest in one or more suitable operating businesses, which
may include assets or shares of another entity to be acquired by ConMat directly
or through a subsidiary, that the Board of Directors believes will be profitable
to ConMat and its shareholders.

The principal executive offices of ConMat are located at Franklin Avenue and
Grant Street, Phoenixville, PA 19460. The telephone number is (610) 935-0225.

ConMat

Business Strategy. If the Sale and Liquidation is approved by ConMat's
shareholders, ConMat's business strategy will be to acquire an interest in one
or more suitable operating businesses, which may include assets or shares of
another entity to be acquired by ConMat directly or through a subsidiary, that
the Board of Directors believes will be profitable to ConMat and its
shareholders.

If the Sale and Liquidation is not approved by ConMat's shareholders, ConMat's
business strategy will be to operate Polychem. The following is a description of
Polychem and its business.

Polychem

General. Polychem is a wholly-owned subsidiary of ConMat. Polychem was
originally formed in February 1995 by its former owner for the purpose of
acquiring substantially all of the assets and business of The Polychem Division
of The Budd Company. Polychem, which has been in business since 1955, develops
custom engineered plastic molded products, which are marketed primarily to
wastewater treatment plants, as well as to other industrial users.

Water Treatment Products. Polychem's primary products include, among others,
complete non-metallic rectangular clarifier component systems for water and
wastewater treatment operations. Polychem's clarifier component systems are
primarily used for the removal of sediment and solids from wastewater. The
clarifier systems are, in effect, settling tanks through which water passes,
allowing suspended solids to settle. These systems are comprised of non-metallic
chain, sprockets, stub shafts, wear shoes and other products fabricated to
customer specifications. The majority of the balance of Polychem's products are
produced for use in a complete system of wastewater treatment clarifier
equipment that Polychem sells to its customers. Such a complete system is
usually built to customer specifications and sold under an order selected from
competitive bids. The "reaction injection molded" nylon products and the
injected molded products account for between 80% and 90% of Polychem's sales;
compression molded products comprise the balance of the business. The average
life expectancy of Polychem's typical products is ten years. The cost of
Polychem's systems varies based on the scope of the system and the end user
modifications required. The cost of a system generally ranges from $20,000 to
$45,000. In addition to its existing products, Polychem continues to explore new
product applications. Polychem currently has two wastewater treatment products
in the feasibility study stage.

Wastewater treatment plants are primarily used to clean sewage and return water
to general public use. Wastewater treatment plants are generally owned by
municipalities or water authorities. There are over 15,000 wastewater treatment
plants in the United States. Polychem estimates that globally there are 30,000
to 50,000 plants. In the United States, an estimated $22 billion is spent on
wastewater treatment plants annually, while an estimated $83 billion is spent
annually on a global basis.





                                        2
<PAGE>

Polychem provides quotes to contractors for components for approximately 400
wastewater treatment projects each year. Project contracts typically are awarded
on a competitive bid basis. In some cases, the municipality or its engineer
determines, based on price, reliability, system flexibility or other factors,
that certain components must come from a specific manufacturer. If Polychem
products are so required, the successful bidder has to buy the specified
components from Polychem. In most cases a particular manufacturer is not
specified, and the successful bid is selected on such factors as price, system
adaptability and reputation. Historically, Polychem products are used in
approximately 25% of the projects for which Polychem provides quotes. Polychem
does not bid directly for new projects, but rather supplies its products to a
contracting engineer, who in turn bids for new projects. Polychem bids directly
for replacement products. Of the approximately 400 bids submitted annually,
approximately 50% are for replacement parts and 50% are new projects. New
projects account for approximately 60% of Polychem's revenues.

Manufacturing. Polychem, Ecesis and Ensinger Vekton, Inc. and Putnam Precision
Molding, Inc. (collectively, "Supplier") entered into a Supply and Equipment
Purchase Agreement on March 20, 2002, pursuant to which Polychem has outsourced
the manufacturing of its product lines to Supplier. Under the terms of the
agreement, Polychem and Ecesis agreed to purchase a minimum of $2,500,000 of
products from Supplier during each year of the agreement. The term of the
agreement is five years and will renew automatically thereafter for successive
one year terms unless terminated by one of the parties. In addition, the
agreement also provides that Polychem will sell to Supplier certain of its
manufacturing assets for a purchase price of $287,000, which amount shall be
paid monthly by Supplier to Polychem's senior secured lender, on Polychem's
behalf, at the rate of 15% of the invoice amount of purchased products. Under
the terms of the License and Asset Purchase Agreement, Ecesis has agreed to
assume all of Polychem's rights (other than the right to receive the purchase
price of equipment) and obligations under this agreement upon the consummation
of the Sale.

Marketing and Customers. Polychem was originally a manufacturer of a complete
line of industrial laminates, automotive timing gears, vulcanized fiber and
teflon and silicon tape. In the early 1980's, Polychem identified the wastewater
treatment industry as a potential market and began to shift its focus to
manufacturing products designed for such market. By 1992, wastewater products
became Polychem's dominant revenue producer and presently the revenues from
wastewater products comprise 85% of Polychem's annual sales volume. The
wastewater treatment market is global in nature, and Polychem presently sells
products internationally in Western Europe, Asia, South America, Eastern Europe,
the Middle East, Africa and Australia.

In addition to non-metallic clarifier component systems for wastewater
treatment, Polychem markets its traditional products (such as plastic chain,
compression molded phenolic and injection molded plastic components, "reaction
injection molded"-processed nylon buckets, phenolic bearings and corrugated
fiber products) to the food processing, electronics, steel, automotive,
chemical, printing, aerospace, and consumer products industries, among others.

Polychem markets its plastic chain, cast nylon buckets, steel mill bearings and
compression molded phenolics primarily through distributors. The balance of its
products, including its wastewater treatment component systems, are sold
primarily through Polychem's internal sales force, which consists of four
employees. Domestic distributors are paid a percentage of sales ranging from 5%
to 15%. Internationally, distributors are compensated principally on a buy and
sell basis. In effect, Polychem sells to the distributor who, in turns, resells
to the ultimate buyer. The distributor earns the difference between its purchase
price and the sales price to the buyer. Polychem's internal sales force receives
a base salary and a bonus based on their individual and ConMat's overall
performance. In its most recent fiscal year, Polychem's sales force generated
approximately 62% of its annual sales revenue, international distributors
accounted for approximately 11% and domestic distributors accounted for
approximately 27%. Domestic revenues were approximately 57% and international
revenues were approximately 43% in the 2000 fiscal year.

Competition and Strategy. Polychem's competition tends to be fragmented. Many
other companies, domestically and internationally, produce one or more products
similar to one or more of Polychem's products. Experienced competition exists in
each of Polychem's major markets and many of Polychem's competitors enjoy
excellent working relationships with their customers, produce a variety of
quality products and have access to significant resources. Such resources,
including capital, labor and product support, can result in faster response time
and lower prices. These factors, along with product characteristics,
reliability, servicing, and pricing form the major competitive factors in
Polychem's markets.

Polychem believes that it has four significant competitors in the area of
non-metallic rectangular wastewater clarifier systems, of which it considers
Envirex to be the most significant. Polychem believes that it and Envirex each
possess approximately 35% of this market. However, while Polychem provides
products only to clarifier systems in wastewater plants, Envirex has a much
broader line of wastewater treatment products that encompasses all of the major
processes in a treatment plant. Envirex's broader line allows it to bid for
larger portions of projects and to use certain products as loss leaders.
Tropodyne and NRG are Polychem's other competitors, and have smaller shares of
the clarifier market. Polychem believes that it has three competitors in the
market for nylon buckets and five competitors in the market for table-top
chains. Polychem has an approximate 50% share of the nylon bucket market, while
its closest competitor has an approximate 30% market share. The dominant
competitor in the table top chain market, Rexnard, holds an approximate 80%
market share, while Polychem has an approximate 5% share.





                                        3
<PAGE>

In the event the Sale is not approved, ConMat's long-term goals for Polychem
include solidifying Polychem's reputation as a leading provider of quality
wastewater treatment equipment products; increasing sales of its traditional
products by improving existing product lines; and seeking new wastewater
treatment products to supplement its current line. Additionally, ConMat seeks to
make Polychem the low cost provider and believes that the outsourcing of
manufacturing will help to achieve this goal.

Environmental Regulations. While no assurances can be given, Polychem does not
anticipate any material costs for environmental remediation projects. As a
result of its decision to cease manufacturing its products, it no longer will
incur such costs as oil reclamation, hauling of waste products and energy costs
associated with recycling and waste disposal. Polychem historically spent
approximately $50,000 annually to comply with environmental laws, including
hauling costs as well as general monitoring and compliance costs, and its costs
in the future should be significantly less. Polychem maintains seven above
ground storage tanks. Two were used to store phenolic resins inside the plant;
two stored fuel oil; and three outside tanks were used to store other chemicals.
There are spill containment systems in place throughout the facility.

Occasionally, there are minor and isolated spills of heat transfer oil,
capolactin and phenolic resins. The latter two quickly solidify at room
temperature and the hardened material is removed to an approved landfill; spills
of heat transfer oil are cleaned and properly disposed of with other waste
products by a licensed outside processor. Polychem submitted a revised spill
prevention and response plan to the Pennsylvania Department of Environmental
Resources in May 1994 to which no comments have been received as of the date of
this filing.

Polychem has occupied its Phoenixville, Pennsylvania property since 1974. The
property was first used as a silk mill in the early part of this century and
then as a manufacturing site for felt carpet padding. Three environmental audits
that have been conducted over the past five years as part of customary due
diligence in financing transactions have not revealed contamination. An
environmental audit was commissioned by Congress Financial Corporation in
conjunction with the purchase of Polychem by The Eastwind Group in 1995. A
second environmental study was commissioned by Fidelity Funding in connection
with a financing commitment in 1997. A third environmental study was
commissioned by GE Capital Corporation in connection with their refinancing in
1998.

Employees. Polychem employs 35 employees, of whom 8 are employed on an hourly
basis. Hourly employees are members of United Textile Workers of America,
AFL-CIO, Phoenixville Plastic Makers' Union, Local No. 130. Most are
semi-skilled workers. The current union contract expires at the end of September
2002.

ConMat has assumed all of Polychem's continuing obligations under its collective
bargaining agreement with the Union, which includes assumption of obligations
under a defined benefit retirement plan for hourly rated employees at its
Phoenixville, Pennsylvania plant. The plan is funded in accordance with certain
actuarial assumptions and to meet ERISA funding requirements. However, there can
be no assurances that market performance of plan investments will be sufficient
to meet all plan liabilities as they arise.

Equipment. Polychem has agreed to sell most of the equipment that it owns which
is required to manufacture its product lines to Supplier pursuant to the Supply
and Equipment Purchase Agreement. The purchase price for this equipment is
$287,000. Since Polychem has outsourced the manufacturing of its product lines
to Supplier, Polychem no longer has a use for this equipment.

Research and Development. Polychem is the owner of a number of United States and
foreign patents and patent applications relating to water treatment plastic
products, chain conveyor links, conveyor chain bearings, sprockets with locking
mechanisms and a bucket grit elevator system. The ownership of such patents
helps Polychem from a marketing standpoint by securing its continued reputation
as an innovative competitor in its industry. If the Sale is approved and
consummated, all of Polychem's patents will be assigned to Ecesis.





                                        4
<PAGE>

Polychem employs six application engineers who use computer aided design
equipment to design custom wastewater treatment non-metallic rectangular
clarifier systems or to alter existing clarifiers to meet changing specification
requirements. All new products are evaluated for patent protection. Recently,
Polychem was granted a patent for a grit bucket system, which is now undergoing
marketing development. To date, five successful applications for the system have
been found, the most significant of which is to function as part of a grit
collection system in wastewater treatment where it will be used to remove sand
and gravel from effluent before it reaches the clarifier. Polychem incurred
$226,000 and $225,000 on product research, engineering and development costs
during the years ended December 31, 2001 and 2000, respectively.

Debt and Encumbrances. On September 30, 1998, Polychem entered into a Loan and
Security Agreement with General Electric Capital Corporation ("GECC"), which
provides for a three-year, $3,500,000 revolving line of credit and a three-year
term loan of $1,500,000. On August 25, 1999, the revolving line of credit was
increased to $5,000,000. The revolving line of credit and the term loan
originally were secured by a mortgage on Polychem's Phoenixville, Pennsylvania
facility, which mortgage lien was released in connection with the Public School
Employees' Retirement Board financing described below. The term loan is secured
by Polychem's equipment. The revolving line of credit is secured by accounts
receivable and inventory. Advances under the revolving line of credit are
subject to a lending formula limiting the availability of funds to the total of
(i) 80% of eligible accounts receivable, less the amount by which contractual
holdbacks (i.e., amounts that customers are entitled to hold back until
completion of a project) in favor of account debtors on eligible accounts
exceeding $250,000, plus (ii) the lesser of $750,000 or 50% of eligible
inventory (less a $460,000 reserve). Interest rates on the loan are at a rate of
8.75% in excess of the 30 day dealer commercial paper rate on the revolving line
of credit, 10.77% at December 31, 2001, and 10.50% in excess of the 30 day
dealer commercial paper rate for the term loan, 12.52% at December 31, 2001.

Interest on the revolving line of credit and term loan is payable monthly.
Polychem's collections of accounts receivable are deposited with GECC under a
lockbox arrangement and applied to reduce the balance of the revolving line of
credit, which then may be drawn against subject to availability. As of December
31, 2001, availability under the line of credit was $2,872,893 and outstanding
borrowings were $2,818,893. In connection with the Public School Employees'
Retirement Board financing described below, GECC agreed to restructure the
payment schedule on the remaining balance of its term loan to provide for
monthly payments of $8,000. As of December 31, 2001 the outstanding balance of
the GECC term loan was $180,000.

On August 25, 1999, Polychem received a $1,880,000 term loan from the Public
Employees' Retirement Board, secured by a mortgage on Polychem's Phoenixville,
Pennsylvania facility. $813,000 of the net proceeds of the loan were applied to
reduce the outstanding balance of the GECC term loan and the remaining $996,000
of net proceeds were applied to reduce the outstanding balance of the GECC
revolving line of credit. The Public School Employees' Retirement Board loan is
for a term of 10 years. The interest rate on the Public School Employees'
Retirement Board loan is 8.5% for the first five years, and thereafter is 350
basis points above the 5 year U.S. Treasury Note Yield Rate as of the end of the
first five years. Principal and interest are payable in equal monthly
installments based on a 25 year amortization schedule, with a balloon payment
September 1, 2009 equal to outstanding principal balance plus accrued interest.
As of December 31, 2001, the outstanding balance of the Public School Employees'
Retirement Board term loan was $1,823,804.

Polychem executed a $1,626,294 promissory note to The Budd Company on March 10,
1995 as part of the purchase price of the Polychem Division of Budd. The
outstanding principal balance of this note as of December 31, 2001 was $813,148.
The note accrues interest at 8%, payable quarterly. Subsequent to December 31,
2001, Polychem was in default under this note for failure to make timely
payments. An agreement between the two parties provides for various payments of
principal and interest to be made during calendar year 2002.

                                  RISK FACTORS

         An investment in ConMat's common stock involves a high degree of risk.
Prospective investors should carefully consider the following risk factors
before making an investment.






                                        5
<PAGE>

RISKS FACTORS RELEVANT UPON SALE OF POLYCHEM

         If the sale of Polychem's specialty and water treatment product lines
pursuant to the License and Asset Purchase Agreement is approved by ConMat's
shareholders, ConMat will generate no income after the sale other than from
Polychem's collection of accounts receivable, sales of its remaining inventory
and income from the rental of its commercial property in Phoenixville,
Pennsylvania. Accordingly, ConMat's Board of Directors will liquidate and
dissolve Polychem and then will seek to acquire one or more suitable operating
business that the Board of Directors believes will be profitable to ConMat and
its shareholders. In such event, the following Risk Factors shall be applicable
with respect to an investment in ConMat's common stock.

         We will have no operating history and minimal assets and, as a result,
our prospects are difficult to evaluate.

         After the Sale, we will have no operating history or any revenues or
earnings from operations other than those of the business which we may acquire.
ConMat will have no significant assets or financial resources. We will incur
operating expenses without corresponding revenues, at least until the
consummation of a business combination. As a result we may incur a net operating
loss which will increase continuously until we can consummate a business
combination with a target entity. If we are unable to fund our business, we will
be forced to go out of business.

         Our proposed operations are speculative and our business may fail.

         The success of ConMat' proposed plan of operation will depend to a
great extent on the operations, financial condition and management of the target
entity. While management intends to seek business combinations with entities
having established operating histories, there can be no assurance that we will
be successful in locating candidates meeting our criteria. In the event we
complete a business combination, the success of our operations will be dependent
upon management of the target entity and numerous other factors beyond our
control. It is possible that our resources will be depleted prior to
consummating a business combination.

         Transactions involving "penny stocks" such as ConMat are highly
regulated.

         The Exchange Act of 1934, as amended (the "Exchange Act"), defines
"penny stock" as any equity security that has a market price of less than $5.00
per share, subject to certain exceptions. For any transaction involving a penny
stock, unless exempt, the rules require: (i) that a broker or dealer approve a
person's account for transactions in penny stocks and (ii) the broker or dealer
receive from the investor a written agreement to the transaction, setting forth
the identity and quantity of the penny stock to be purchased. In order to
approve a person's account for transactions in penny stocks, the broker or
dealer must (i) obtain financial information and investment experience and
objectives of the person; and (ii) make a reasonable determination that the
transactions in penny stocks are suitable for that person and that person has
sufficient knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks. The broker or dealer must
also deliver, prior to any transaction in a penny stock, a disclosure schedule
prepared by the SEC relating to the penny stock market, which, in highlight
form, (i) sets forth the basis on which the broker or dealer made the
suitability determination and (ii) certify that the broker or dealer received a
signed, written agreement from the investor prior to the transaction. Disclosure
is also required to be made about the risks of investing in penny stocks in both
public offerings and in secondary trading, and about commissions payable to both
the broker or dealer and the registered representative, current quotations for
the securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.

         There is a scarcity of and tremendous competition for target candidates
and combinations.

         ConMat is and will continue to be an insignificant participant in the
business of seeking mergers with and acquisitions of business entities. A large
number of established and well-financed entities, including venture capital
firms, are active in mergers and acquisitions of companies which may be merger
or acquisition target candidates for ConMat. Nearly all such entities have
significantly greater financial resources, technical expertise and managerial
capabilities than ConMat and, consequently, ConMat will be at a competitive
disadvantage in identifying possible target entities and successfully completing
a business combination. In addition, ConMat will also compete with numerous
other small public companies in seeking merger or acquisition candidates.





                                        6
<PAGE>

         We are not currently a party to and cannot guarantee that we will
         become a party to any arrangement which would result in a business
         combination.

         We currently have no arrangement or agreement with respect to engaging
in a merger with or acquisition of any business entity. We have not established
a specific length of operating history or a specified level of earnings, assets,
net worth or other criteria which we will require a target business opportunity
to have achieved, or without which we would not consider a business combination
with such business entity.

         We may be able to pursue only one business opportunity which would
restrict our ability to diversify into other areas.

         Our proposed operations, even if successful, will in all likelihood
result in us engaging in a business combination with only one business
opportunity. Consequently, our activities will be limited to those engaged in by
the business with which we merge or acquire. Our inability to diversify our
activities into a number of areas may subject us to economic fluctuations within
a particular business or industry and therefore increase the risks associated
with our operations.

         ConMat has, and will continue to have, minimal capital with which to
provide the owners of target entities.

         Although ConMat will not have sufficient capital to provide to target
entities, management believes that ConMat will be able to offer owners of target
entities the opportunity to acquire ownership interest in a publicly registered
company without incurring the cost and time required to conduct an initial
public offering. This, however, is no guarantee that the owners of a target
entity will enter into a business combination with ConMat.

         We depend on key individuals and they would be difficult to replace.

         Our officers and directors have not entered into written employment
agreements with us and are not expected to do so in the foreseeable future. We
have not obtained key man life insurance on our officers and directors. Loss of
the services of these individuals would adversely affect development of our
business and our likelihood of continuing operations.

         Our management may participate in other activities which may directly
         or indirectly conflict with the activities in which we are
         participating.

         Our officers and directors participate in other ventures which may
compete directly or indirectly with us. Additional conflicts of interest and
non-arms length transactions may also arise in the future. Management has
adopted a policy that requires full disclosure of any potentially conflicting
relationships.

         The reporting requirements of the Exchange Act may delay or preclude
the acquisition of some target entities.

         The Exchange Act requires companies whose securities are registered
under the Exchange Act to provide information about significant acquisitions
including audited financial statements for the acquired entity covering one or
two fiscal years, depending on the relative size of the acquisition. It is
likely that we will be required to prepare and file an information statement
with the SEC prior to the consummation of any transaction. Filing the
information statement will require us to prepare the financial statements for
any potential acquired company in conformity with generally accepted accounting
principles and to provide appropriate financial disclosure to ConMat
shareholders. The cost and effort of such an undertaking may make a potential
acquisition less attractive to us.

         The time and additional costs that may be incurred by some target
entities to prepare such audited financial statements may significantly delay or
essentially preclude our consummation of an otherwise desirable acquisition.
Acquisition prospects that do not have and are unable to obtain the required
audited financial statements will not be appropriate for acquisition.

         A business combination may result in a change in control and a change
in our management.

         A business combination involving the issuance of our common stock will,
in all likelihood, result in shareholders of a target entity obtaining a
controlling interest in us. Any such business combination may require our
officers and directors to sell or transfer all or a portion of our common stock
held by them, and to resign as members of the Board of Directors and as
officers. The resulting change in control could result in removal of our present
officers and directors and a corresponding reduction in or elimination of their
participation in our future affairs.





                                        7
<PAGE>

         There is no guarantee that a business combination would result in
tax-free treatment.

         Federal and state tax consequences will, in all likelihood, be major
considerations in any business combination we may undertake. Currently, such
transactions may be structured so as to result in tax-free treatment to both
companies, pursuant to various federal and state tax provisions. We intend to
structure any business combination so as to minimize the federal and state tax
consequences to us and the target entity; however, we cannot assure you that any
business combination will meet the statutory requirements of a tax-free
reorganization or that the parties will obtain the intended tax-free treatment
upon a transfer of stock or assets. A non-qualifying reorganization could result
in the imposition of both federal and state taxes which may have an adverse
effect on both parties to the transaction.

RISK FACTORS RELATING TO CURRENT OPERATION OF POLYCHEM.

         The following risk factors are relevant with respect to an investment
in ConMat's common stock in the event that the Sale and Liquidation are not
approved by ConMat's shareholders and ConMat resumes the operation of Polychem.

         We may not be able to obtain adequate financing for working capital.

         We have financed our working capital requirements and capital
expenditures primarily through bank debt and cash flow generated from
operations. In order to satisfy our existing obligations and support our
operations, we will require additional capital. There can be no assurance that
additional capital will be available or that, if available, we can obtain such
capital on satisfactory terms. Any additional equity financing may be dilutive
to stockholders, and debt financing may impose substantial restrictions on our
ability to operate and raise additional funds.

         We have a large amount of secured debt which we may not be able to
service and which restricts our activities. We have a large amount of debt in
relation to our assets and our revenues. At December 31, 2001, our aggregate
amount of secured indebtedness was $4.3 million. We may also incur additional
debt from time to time to finance acquisitions or capital expenditures or for
other purposes, subject to the restrictions in our existing debt instruments.
Our existing debt entails significant risks, including the following:

                 o        It may be difficult for us to satisfy our substantial
                          debt service obligations;
                 o        Our ability to obtain additional financing, if
                          necessary, for working capital, capital expenditures,
                          acquisitions or other purposes may be impaired or such
                          financing may not be available on favorable terms;
                 o        We will need a substantial portion of our cash flow to
                          pay the principal and interest on our debt, including
                          debt that we may incur in the future;
                 o        Payments on our debt will reduce the funds that would
                          otherwise be available for our operations and future
                          business opportunities;
                 o        A moderate decrease in our net operating cash flow
                          could make it difficult for us to meet our debt
                          service requirements and force us to modify our
                          operations;
                 o        We may be more highly leveraged than our competitors,
                          which may place us at a competitive disadvantage; and
                 o        We may be more generally vulnerable to a downturn in
                          our business or the economy generally.

         If we are unable to service our debt or obtain additional financing, as
needed, our business and financial condition would be materially adversely
affected. Our ability to satisfy our debt obligations will depend upon our
future financial and operating performance as well as the availability of
revolving credit borrowings under our credit facility, which is dependent on,
among other things, our compliance with covenants and specified borrowing base
prerequisites.






                                        8
<PAGE>

         Restrictive debt covenants in our loan instruments restrict our
activities.

         Our loan instruments restrict, among other things, our ability to:

                 o        incur additional debt;
                 o        pay dividends;
                 o        redeem capital stock;
                 o        create liens, dispose of assets, engage in mergers;
                          and
                 o        make contributions, loans or advances.

         We are controlled by a small group of stockholders.

         Our common stock is held by a small group of stockholders. Therefore,
our public stockholders may not have the power to elect ConMat's directors and
direct the policies of ConMat.

         There is a limited public market for our common stock. There is no
established active public trading market for our common stock. Our common stock
is traded in the over-the-counter market and "bid" and "asked" quotations
regularly appear on the Nasdaq OTC Bulletin Board under the symbol "CNMT." As of
March 31, 2002, the last reported sale price of ConMat's common stock was $0.07
and there were 11 firms listed as market makers for our common stock. There can
be no assurance that our common stock will trade at prices at or about its
present level, and an inactive or illiquid trading market may have an adverse
impact on the market price. Moreover, price fluctuations and the trading volume
in our common stock may not necessarily be dependent upon or reflective of our
financial performance.

         Holders of our common stock may experience substantial difficulty in
selling their securities. The trading price of our common stock could be subject
to significant fluctuations in response to variations in quarterly operating
results, changes in the analysts' estimates, announcements of technological
innovations, general industry conditions.

         The public sale of shares eligible for future sale may adversely affect
the price of our common stock. Future sales of shares by current stockholders,
including the selling stockholders, could cause the market price of our common
stock to decline.

         If we do not adapt to technological advances in our industry as quickly
as our competitors, our operating results and financial condition could be
adversely affected.

         We compete in markets and industries that require sophisticated
manufacturing systems and other advanced technology to deliver state-of-the-art
products. These systems and technologies will have to be refined and updated as
the underlying technologies advance. We cannot assure you that, as systems and
technologies become outdated, we will be able to replace them, to replace them
as quickly as our competitors or to develop and market new and better products
in the future. Higher overhead and manufacturing costs due to a failure to
update and improve processes could limit our competitive position. In addition,
failure to make technological advances could adversely affect our ability to
successfully market custom engineered plastics and composite products.

         Concentration of order backlog in a single project could expose us to
operating losses and cash flow problems.

         From time to time we have a significant percentage of our order backlog
concentrated in a single project. If construction or payment for shipped
materials is delayed on such a significant project, we could be exposed to
operating losses and restrictive cash flow problems. This could also hamper our
ability to pursue new business opportunities or result in credit shortages.

         The prices at which we have agreed to purchase products under the
Supply and Equipment Purchase Agreement are subject to increase. Any increase in
price may adversely affect our operating results and financial condition.

         Under the terms of the Supply and Equipment Purchase Agreement,
Polychem has agreed to purchase a minimum of $2.5 million of products from
Supplier each year. The prices of the products that Polychem has agreed to
purchase, however, are subject to increase under the terms of the Supply and
Equipment Purchase Agreement. Accordingly, even if Polychem could purchase the
products for less from another supplier, it would first have to purchase the
$2.5 million minimum of products from Supplier. This restriction, as well as a
general increase in the cost of raw materials which comprise the products, could
have a material adverse effect on our financial condition and results of
operation.





                                        9
<PAGE>

         Industry consolidation may result in pricing pressures or our exclusion
from bidding on larger projects, which could have an adverse affect on our
operating results.

         Major corporations with an international presence continue to
consolidate products and services within the wastewater treatment industry on a
global basis. This trend may result in more single source bidding for large
scale new wastewater treatment construction and may result in pricing pressures
for our core products or our exclusion from larger projects.

         Privatization of municipal wastewater treatment plants may limit our
ability to bid on projects. Until recently most wastewater facilities were owned
and operated by the municipal governments. As a result of a drop in federal
funding, municipalities are beginning to consider private management or
ownership as a financially attractive alternative. Consequently, some large
international corporations are becoming more involved in ownership or
management. Such arrangements could impact the exclusive supplier relationships
with our competitors thereby precluding us from bidding on projects. We are in
discussions with a number of these management companies in an attempt to become
an exclusive supplier. However, there can be no assurance that Polychem will be
successful in establishing such relationships.

         The markets in which Polychem competes are highly competitive.

         Experienced competition exists in each of Polychem's major markets, and
many of Polychem's competitors maintain good working relationships with their
customers and produce quality products and have access to significantly greater
financial resources. There can be no assurance that we will be able to keep pace
with the technological demands of the marketplace or successfully enhance our
products or develop new products, which are demanded by the industry. Our
operations and properties may expose us to material costs or liabilities related
to environmental regulations. Our operations and properties are subject to a
wide variety of federal, state and local laws and regulations, including those
governing the use, storage and handling, generation, treatment, emission,
remediation of contaminated soil and ground water, and the health and safety of
employees. There is no assurance that our operations or properties will comply
with applicable regulations. As such, our operations and properties expose us to
the risk of claims with respect to such matters and we may incur material costs
or liabilities in connection with such claims.

Item 2.  Description of Properties.

Polychem operates from a 220,000 square foot facility in Phoenixville,
Pennsylvania, which it owns, subject to a mortgage. See "ConMat-Polychem-Debt
and Encumbrances." In July 1998, the property was appraised at $2.4 million by
AccuVal Associates Incorporated, an independent appraiser. Since Polychem began
outsourcing the manufacturing of its products as of March 20, 2002, it presently
uses only approximately 15,000 square feet for warehousing, and 12,000 square
feet for offices. Polychem leases approximately 72,000 square feet of warehouse
space to three tenants at rental rates ranging from $3.01 through $3.24 per
square foot. Approximately 50,000 square feet is leased for five years with the
balance leased for one year. Polychem also leases a tower located on the
facility and approximately 1,000 square feet of warehouse space to three
cellular phone operators. Combined annual lease income from the tower is
$51,000. Two of the tower leases have ten year terms and one lease has a five
year term. An additional 5,000 square feet of warehouse space is available for
lease at the facility. Management believes that Polychem's properties are
adequately insured.





                                       10
<PAGE>

Item 3.  Legal Proceedings.

         ConMat is currently a defendant in an action originally filed on
January 28, 1999, in Pennsylvania state court captioned John R. Thach v. The
Eastwind Group, et al. On October 27, 2000, co-defendant, The Eastwind Group,
Inc., filed a voluntary petition for relief under Chapter 11 of Title 11 of the
Bankruptcy Code (U.S.B.C., E.D. Pa. Bankruptcy No. 00-33372 SR). The plaintiff
removed the state court action to the United States Bankruptcy Court for the
Eastern District of Pennsylvania on November 29, 2000 (U.S.B.C., E.D. Pa.
Adversary No. 00-906). Plaintiff maintains that Eastwind, his former employer,
breached the terms of his severance agreement and that the sale of Polychem
Corporation to ConMat was part of a conspiracy to avoid payments to him and has
violated Pennsylvania's Uniform Fraudulent Transfer Act. The plaintiff seeks
damages of at least $350,000 and punitive damages of at least $500,000. In
addition, the plaintiff seeks to have the December 8, 1998 acquisition of
Polychem declared null and void. Initially, the plaintiff sought a temporary
restraining order and preliminary injunction seeking to set aside the sale of
Polychem to ConMat. By Order dated February 19, 1999, the State Court denied
plaintiff's request for injunctive relief.

         On January 22, 2001 the Bankruptcy Court appointed a Chapter 11 trustee
to oversee and administer The Eastwind Group, Inc. bankruptcy. On May 24, 2001,
the bankruptcy trustee filed a substituted Complaint against ConMat. In his
complaint, the bankruptcy trustee asserted claims against ConMat, including
those originally raised in the John Thach complaint that the December 8, 1998
acquisition of Polychem was a fraudulent transaction.

         ConMat is currently a defendant in a federal district court action
filed on April 11, 2000, in the United States District Court for the Eastern
District of Pennsylvania captioned ProFutures Special Equities Fund, L.P. v. The
Eastwind Group, et al. (U.S.D.C., E.D. Pa. Civil Action No. 00-CV-1888).
ProFutures maintains that Eastwind and others violated federal and state
securities laws and committed common law fraud in connection with the June 1998
purchase by ProFutures of $750,000 in Series C Convertible Preferred Stock of
Eastwind. ProFutures seeks damages in the amount of $750,000 and seeks to have
the acquisition of Polychem by ConMat declared null and void. ConMat, Paul A.
DeJuliis and two other former officers of Eastwind filed a Motion to Dismiss the
Complaint on May 25, 2000 and ProFutures responded. Before the court issued a
ruling on that motion, co-defendant Eastwind filed for bankruptcy and the case
was stayed. Nothing further has occurred in this case since November 2000.

         To resolve the claims asserted by the bankruptcy trustee, John Thach
and ProFutures, management of ConMat negotiated the terms of a settlement
agreement with the bankruptcy trustee, which was filed with the bankruptcy court
on October 25, 2001. Thereafter, on December 13 and 17, 2001, the bankruptcy
court held a two-day hearing on the approval of the settlement agreement. On
February 27, 2002, the bankruptcy court approved the settlement agreement. The
settlement agreement requires the payment by ConMat of $1,500,000 to the
bankruptcy trustee, including $500,000 in cash and a promissory note in the
amount of $1,000,000. ConMat intends to fund the obligations under the
settlement agreement through the Sale and Liquidation.

         Subject to payment by ConMat of $1,500,000 to the bankruptcy trustee
pursuant to the settlement agreement and payment by Polychem of an IRS claim,
John Thach's claims will be released against, among others, ConMat. In addition,
the bankruptcy trustee has agreed to allocate and set aside a portion of the
settlement proceeds, not to exceed $200,000, to fund the indemnification
obligations from ConMat's share of liability, if any, in the ProFutures' action.
ConMat's wholly owned subsidiary, Polychem Corporation, is also a defendant in
the actions brought by the bankruptcy trustee and Thach and is also a party to
the various settlement agreements referenced above.

         In addition to the litigation arising out of the Eastwind bankruptcy
and the claims asserted by Thach, Polychem is a defendant in an action filed by
The Budd Company in the Court of Common Pleas of Chester County. The Budd
Company confessed judgment against Polychem under a note given by Polychem to
The Budd Company. At present, The Budd Company has taken no steps to execute on
its confession of judgment. The Budd Company has agreed to forbear from
executing on its judgment and has accepted periodic payments from Polychem. The
current balance due to The Budd Company is approximately $700,000.

Item 4.  Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of shareholders during the fourth quarter of
2001.

                                    PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.

The common stock of ConMat has been quoted on the Nasdaq OTC Bulletin Board
since December 21, 1998 under the symbol "CNMT". The following table shows
quarterly low and high bid information for the common stock from December 21,
1998 through March 31, 2002:

                                            Low Bid           High Bid
                                            -------           --------

                  2002
                  ----

                  First Quarter               $0.04            $0.15

                  2001
                  ----

                  Fourth Quarter                .02              .07
                  Third Quarter                 .07              .30
                  Second Quarter                .06              .78
                  First Quarter               $0.12            $0.49

                                       11
<PAGE>

                  2000
                  ----
                  Fourth Quarter               0.25                1.625
                  Third Quarter                1.125               4.00
                  Second Quarter               2.00                5.75
                  First Quarter               $3.125              $5.50

                  1999
                  ----
                  Fourth Quarter              $3.50               $5.00
                  Third Quarter                3.03                5.00
                  Second Quarter               3.00                3.00
                  First Quarter                1.63                4.00

                  1998
                  ----
                  Fourth Quarter (1)          $1.50               $2.125

(1)      Commencing December 21, 1998.

Market quotations reflect inter-dealer prices, without retail markups, markdown
or commissions and may not necessarily reflect actual transactions. As of March
31, 2001, there were 2,607,758 shares of common stock outstanding held by
approximately 20 holders of record.

ConMat has never paid a cash dividend on its common stock and does not plan to
pay any cash dividends on its common stock in the foreseeable future.

Item 6.  Management's Discussion and Analysis.

Background and Basis of Presentation

The following discussion and analysis should be read in conjunction with
ConMat's consolidated financial statements and the notes thereto contained
elsewhere in this report. The discussion of these results should not be
construed to imply any conclusion that any condition or circumstance discussed
herein will necessarily continue in the future.

Results of Operations

For the Fiscal Year Ended December 31, 2001 as compared to the Fiscal Year Ended
December 31, 2000.

The following table provides certain statement of operation items as a
percentage of net sales for the fiscal years indicated:

                                                      Twelve Months
                                                    Ended December 31
                                                 ------------------------
                                                   2001           2000
                                                 --------      ---------
Net Sales                                           100.0%        100.0%
Cost of Goods Sold                                   81.6          76.6
Gross Profit                                         18.4          23.4
Selling and Administration                           25.8          17.4
Interest Expense                                      4.0           3.8
Other Expense                                        18.5           2.0
Income Tax (Benefit) Expense                        (9.4)           0.2
                                                 --------      --------
Net Income                                         (20.5)%        (0.0)%
                                                 ========      ========

Cost of goods sold is determined as the sum of material costs, direct
manufacturing labor costs and an allocation of utilities and other overhead
costs attributable to manufacturing activities.






                                       12
<PAGE>

Total revenues decreased $1,406,000 or 10.3% from $13,695,000 for the year ended
December 31, 2000 to $12,289,000 for the year ended December 31, 2001. Polychem
ended the year 2001 with an order backlog of $7,200,000 compared to $7,700,000
at the end of 2000, a decrease of 6.5%.

Gross profit decreased by $934,000 or 29.2% to $2,267,000 for the year ended
December 31, 2001 from $3,201,000 for the comparable period in 2000. Gross
profit decreased as a percentage of sales to 18.4 % for the year ended December
31, 2001 from 23.4% from the year earlier period. The degradation in gross
margin is the result of lower revenues for the year ended December 31, 2001 and
not being unable to cover fixed manufacturing overheads. The decrease is also
the result of increased pricing pressures both domestically and internationally.
In the international marketplace, the strong US Dollar has created even more
pressure to lower selling price to compete with local manufacturers. Polychem
bids and invoices almost exclusively in US Dollars. Other factors causing
increases in the cost of sales are higher freight costs associated with partial
shipments and some unexpected inefficiencies in manufacturing labor.

Selling and administrative expenses increased by $792,000 or 33.3% to $3,172,000
for the year just ended from $2,380,000 for the comparable period in 2000. As a
percentage of revenues, selling and administrative expenses increased from 17.4%
for the year ended December 31, 2000 to 25.8% of total revenues for the year
ended December 31, 2001. This increase is the result of additions to the
administrative staff and increased travel related expenses. Polychem has been
increasing its expenditures in the cultivation of additional business
opportunities throughout the Pacific Rim. The administrative staff increases
resulted from strategic replacements of individuals who left the organization
during the preceding year. Also responsible for the increase was the provision
of an additional $220,000 for potential accounts receivable write-offs. Selling
and administrative expenses have also increased in comparison to prior years as
a result of the discontinuance of certain inter-departmental billings from
administration to the manufacturing departments.

Corporate expenses increased in excess of 100% from $526,000 for the year ended
December 31, 2000 to $1,051,000 for the year ended December 31, 2001. The
primary reason for this large change is an increase in professional fees
associated with the finalization of the legal actions relating to ConMat's
original acquisition of Polychem. During the twelve months ended December 31,
2001, the Company also wrote off the $193,000 receivable relating to the
Eastwind bankruptcy as it is now deemed to be unrecoverable. Additionally there
were also approximately $270,000 of prepaid expenses and advances that related
to certain acquisitions and stock-related activities that have been discontinued
and were therefore expensed.

The Company has accrued an expense of $1.5 million relating to the settlement of
the litigation associated with ConMat's acquisition of Polychem.

Interest expense for the year ended December 31, 2001 decreased slightly by
$31,000 or 6.0%, to $495,000 from $526,000 for the comparable period in 2000.
Interest costs as a percentage of total revenues increased to 4.0% in the year
ended December 31, 2001 compared to 3.8% in the year earlier period.

ConMat recognized a loss of $2,514,000 for fiscal year 2001 as compared to a
profit of $4,000 for the year ended December 31, 2000.

Liquidity and Capital Resources

ConMat's primary source of working capital is a credit facility of up to $3
million (as of December 31, 2001; since reduced to $1 million), subject to a
lending formula limit, secured by Polychem's receivables and inventory. As of
December 31, 2001, the maximum borrowing amount was $2,872,893 and the
outstanding balance was $2,818,893. The Company's credit facility expired on
September 30, 2001. The Company has been granted an interim extension of the
previous credit facility with GE Capital Corporation, the lender, through May
31, 2002. The extension has imposed some additional financial restrictions and
limitations on the Company generally in the form of additional reserves against
maximum borrowing amount. GE Capital Corporation's discontinuance of this
extension would have a material adverse effect on the Company's financial
condition.

In this section, the term "Current Ratio" means current assets divided by
current liabilities. "Working Capital" means current assets less current
liabilities. The company's current ratio for at December 31, 2001 was .64 as
compared to 1.01 at December 31, 2000. Working capital deficit at December 31,
2001 was ($3,301000) as compared to $59,000 at the end of the prior year. The
primary factors associated with the large decrease in working capital are the
degradation of accounts receivable, the legal settlement payable and an increase
in the Company's current portion of long-term debt.






                                       13
<PAGE>

ConMat's cash position decreased $69,000 during fiscal year 2001. Net cash used
in operating activities during fiscal year 2001 was $127,000 as compared to net
cash provided by operating activities in fiscal year 2000 of $586,000. The
change is principally attributable to the large operating loss incurred by the
Company. Net cash used in investing activities decreased from $447,000 in fiscal
year 2000 to $5,000 during the most recent fiscal year end as a result of very
limited capital spending on property and equipment at Polychem in fiscal year
2001. During fiscal year 2001, net cash provided by financing activities was
$63,000 as compared to $87,000 net cash used in financing activities in fiscal
year 2000.

The Company's financial condition is weak. Management is presently evaluating
various alternatives to improve the financial condition of the Company. Asset
sales, cost reductions and possible reorganizations are among those alternatives
being considered at this time. Failure of the occurrence of these events would
have a material adverse effect on the Company's financial condition. ConMat has
no commitments for significant capital expenditures in the foreseeable future.

Item 7.  Financial Statements.

ConMat's financial statements are attached to this report and begin on page F-1.

Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure.

On January 26, 2000, ConMat's board of directors approved the dismissal of Grant
Thornton LLP, the principal accountant previously engaged to audit ConMat's
financial statements. Neither of the reports provided by Grant Thornton LLP for
the past two years contained an adverse opinion or a disclaimer of opinion, or
was qualified or modified as to uncertainty, audit scope, or accounting
principles. During ConMat's two most recent fiscal years and the subsequent
period, there were no disagreements with the former accountant on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures, which disagreement, if not resolved to the satisfaction of
the former accountant, would have caused it to make reference to the subject
matter of the disagreement in connection with its report.

On January 26, 2000, ConMat's board of directors of ConMat approved the
engagement of Cogen Sklar LLP as the principal accountant to audit ConMat's
financial statements. During ConMat's two most recent fiscal years and the
subsequent period prior to such appointment, ConMat has not consulted Cogen
Sklar LLP regarding either the application of accounting principles to a
specified transaction or the type of audit opinion that might be rendered on the
Company's financial statements, nor on any matter that was either the subject of
a disagreement or a reportable event.

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act.

             Name and Age                             Description
             ------------                             ------------
 Edward F. Sager, Jr., 55.............  Mr. Sager has been a member of the Board
                                        of Directors of ConMat since December,
                                        1998. Mr. Sager has been the President
                                        of Mentor Management Company, and a
                                        general partner of Mentor Partners, the
                                        General Partner of Mentor Special
                                        Situation Fund LP, an investment fund,
                                        and President of Mentor Capital Partners
                                        Ltd., a venture capital firm, since
                                        1994. He is a graduate of Lafayette
                                        College with a B.S. degree in Mechanical
                                        Engineering and he received an MBA in
                                        finance from New York University.

 Kenneth W. Evans, Jr., 56............  Mr. Evans has been a member of the Board
                                        of Directors of ConMat since March,
                                        2002. Mr. Evans is the founder and
                                        managing director of Concordia Financial
                                        Group, Inc., which provides advisory
                                        services for mergers, acquisitions and
                                        divestitures and private placements and
                                        debt and equity for lower middle market
                                        firms. Mr. Evans founded Concordia
                                        Financial Group, Inc. in 1989. Mr. Evans
                                        is a graduate of Wasburn University with
                                        a B.S. degree in Political Science and
                                        History and attended Washburn University
                                        School of Law.






                                       14
<PAGE>

 John R. Toedtman, 57.................  Mr. Toedtman has been a member of the
                                        Board of Directors of ConMat since
                                        March, 2002. Mr. Toedtman is a seasoned
                                        senior executive with full profit and
                                        loss responsibilities in various markets
                                        and in companies ranging from start-ups
                                        to Fortune 100. From November 2001 to
                                        present, he has been a partner of
                                        Landmark Financial Corp., a merger and
                                        acquisition advisory firm for healthcare
                                        market companies. From October 2000 to
                                        September 2001, Mr. Toedtman served as
                                        the CEO of Albert, Inc. (Americas), the
                                        American subsidiary of a Swiss company,
                                        engaged in the start up and launch of
                                        highly advanced search and information
                                        retrieval software. From October 1998 to
                                        October 2000, Mr. Toedtman was the Chief
                                        Operating Officer and a Director of In
                                        Sage, Inc., which is engaged in the
                                        business of language translation
                                        services. From May 1997 to October 1998,
                                        Mr. Toedtman was the Managing Director
                                        of Corporate Finance of Blue Stone
                                        Capital Partners, LLC, which provides a
                                        full range of investment banking
                                        activity to small cap companies. Prior
                                        to that, from January 1990 to January
                                        1997, Mr. Toedtman served as the
                                        Chairman, CEO and Director of Gen/Rx,
                                        Inc., a company engaged in manufacturing
                                        generic injectible drugs for the
                                        veterinary and human markets. He is a
                                        graduate of Georgetown University with
                                        an A.B. in International Economics.

 Thomas C. Morral, Jr., 41............  Mr. Morral has served in his current
                                        position as Vice President, Chief
                                        Financial Officer of ConMat and Polychem
                                        since October, 2000. Prior to joining
                                        ConMat, Mr. Morral held several
                                        long-term interim assignments. From
                                        January, 2000 through September 2000,
                                        Mr. Morral was acting Chief Financial
                                        Officer for Physician Verification
                                        Services, Inc., a start-up Internet
                                        company. From January, 1999 through
                                        January, 2000, Mr. Morral was interim
                                        Chief Financial Officer for KVB-Enertec,
                                        Inc., a systems integrator in emissions
                                        monitoring. From May, 1997 through
                                        December, 1998, Mr. Morral was interim
                                        Director of Accounting for BetzDearborn,
                                        Inc., a leader in the area of specialty
                                        chemicals. From July, 1996 through May,
                                        1997, Mr. Morral was Vice President,
                                        Corporate Controller for National Media
                                        Corporation, a publicly traded
                                        infomercial company. Prior to such time,
                                        Mr. Morral had been Corporate Controller
                                        for DecisionOne Corporation, a publicly
                                        traded computer service and maintenance
                                        company and spent five years with Betz
                                        Laboratories, Inc., a publicly traded
                                        manufacturer of specialty chemicals,
                                        most recently as Assistant Vice
                                        President, Finance & Administration for
                                        the company's international based
                                        operations. Mr. Morral is a graduate of
                                        Elizabethtown College with a B.S. in
                                        Accounting and concentrations in
                                        computer science and economics. He is
                                        also a certified public accountant.


         Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a)
of the Exchange Act requires ConMat's directors, certain of its officers and
persons who own more than ten percent (10%) of ConMat's Common Stock
(collectively the "Reporting Persons") to file reports of ownership and changes
in ownership with the Securities and Exchange Commission and to furnish ConMat
with copies of these reports. Based on ConMat's review of the copies of these
reports received by it, and representation received from Reporting Persons,
ConMat believes that, all filings required to be made by the Reporting Persons
for the period January 1, 2000 through December 31, 2000 were made on a timely
basis.




                                       15
<PAGE>

Item 10. Executive Compensation.

The following summary compensation table sets forth the total annual
compensation for the periods indicated paid to Paul A. DeJuliis, ConMat's Chief
Executive Officer, the only executive officer who earned over $100,000 during
the fiscal year ended December 31, 2001.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                                                                      Securities
                                                Fiscal                                 Other          Underlying
          Name and Position                   Year Ended           Salary ($)      Compensation        Options
          -----------------                   ----------           ----------      ------------       ----------
-----------------------------------------------------------------------------------------------------------------
<S>                                     <C>                     <C>                <C>             <C>
Paul A. DeJuliis, Chairman & Chief      December 31, 2001           $192,000           9,006 (3)          - -
Executive Officer of ConMat and         December 31, 2000           $178,680           9,504 (3)          - -
Polychem(1)                             December 31, 1999           $170,240           4,072 (2)          - -

-----------------------------------------------------------------------------------------------------------------
Richard R. Schutte, President of        December 31, 2001           $124,914         9,588 (3)            - -
ConMat and Polychem(1)                  December 31, 2000           $ 95,593         6,044 (3)            - -
                                        December 31, 1999(4)        $ 52,641         1,250 (3)            - -

-----------------------------------------------------------------------------------------------------------------
Thomas C. Morral, Jr., Vice             December 31, 2001           $111,928         4,800 (3)            - -
President, Chief Financial Officer of   December 31, 2000(5)        $ 25,357         1,200 (3)            - -
ConMat and Polychem                     December 31, 1999             - -               - -               - -
-----------------------------------------------------------------------------------------------------------------
</TABLE>
(1)     Mr. DeJuliis and Mr. Schutte each resigned from the respective positions
        on March 13, 2002.
(2)     Consists of an automobile allowance.
(3)     Consists of an automobile allowance and 401(k) matching contributions.
(4)     Mr. Schutte began his employment with ConMat in May, 1999.
(5)     Mr. Morral began his employment with ConMat in October, 2000.


Item 11. Security Ownership of Certain Beneficial Owners and Management.

         The following table sets forth information concerning the beneficial
ownership of ConMat's common stock as of May 22, 2002, by each director and
ConMat's Chief Executive Officer, all directors and the Chief Executive Officer
as a group, and each person known to ConMat to beneficially own 5% or more of
its outstanding common stock.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------

              Name and Address of                    Amount and Nature of               Percentage of
                Beneficial Owner                   Beneficial Ownership (1)           Common Stock (1)
                ----------------                   ------------------------           ----------------
-----------------------------------------------------------------------------------------------------------------
<S>                                               <C>                          <C>
Kenneth W. Evans, Jr.                                         90,000                          3.01%
Franklin Avenue & Grant Street
Phoenixville, PA 19460
-----------------------------------------------------------------------------------------------------------------
Edward F. Sager, Jr.                                         397,492(2)                      12.48%
Franklin Avenue & Grant Street
Phoenixville, PA 19460
-----------------------------------------------------------------------------------------------------------------
John R. Toedtman                                              90,000                          3.01%
Franklin Avenue & Grant Street
Phoenixville, PA 19460
-----------------------------------------------------------------------------------------------------------------
Directors and Chief Executive Officer                        577,492(2)                      18.13%
(3 persons)
-----------------------------------------------------------------------------------------------------------------
The Eastwind Group, Inc.                                     735,000(3)                      19.74%
1525 Locust Street
17th Floor
Philadelphia, PA  19102
-----------------------------------------------------------------------------------------------------------------
Ecesis, LLC
Franklin Avenue & Grant Street                               382,500(4)                      11.35%
Phoenixville, PA  19460
-----------------------------------------------------------------------------------------------------------------
</TABLE>






                                       16
<PAGE>



<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------

              Name and Address of                    Amount and Nature of               Percentage of
                Beneficial Owner                   Beneficial Ownership (1)           Common Stock (1)
                ----------------                   ------------------------           ----------------
-----------------------------------------------------------------------------------------------------------------
<S>                                               <C>                          <C>
The Eastwind Group, Inc.                                     925,000                           31.29%
     Shareholder Trust
c/o Paul A. DeJuliis
Franklin Avenue & Grant Street
Phoenixville, PA  19460
-----------------------------------------------------------------------------------------------------------------
Mentor Special Situation Fund, L.P.                          166,667(5)                         5.28%
P.O. Box 560
Yardley, PA  19067
-----------------------------------------------------------------------------------------------------------------
The DAR Group, Inc.                                          240,000                            8.03%
30 Broad Street, 43rd Floor
New York, NY
-----------------------------------------------------------------------------------------------------------------
Paul A. DeJuliis                                             348,333(6)                        11.47%
1110 David Davis lane
West Chester, PA  19382
-----------------------------------------------------------------------------------------------------------------
</TABLE>
* Less than 1%

(1)       Based upon 2,988,083 shares of common stock issued as of April 30,
          2001, calculated in accordance with Rule 13d-3 promulgated under the
          Exchange Act. It also includes shares owned by (i) a spouse, minor
          children or by relatives sharing the same home, (ii) entities owned or
          controlled by the named person and (iii) other persons if the named
          person has the right to acquire such shares within 60 days by the
          exercise of any right or option. Unless otherwise noted, shares are
          owned of record and beneficially by the named person.


(2)       Includes 22,500 shares issuable upon the exercise of warrants held by
          Mr. Sager, 200,825 shares of common stock held by Mr. Sager, 166,667
          shares issuable upon the exercise of warrants held by Mentor Special
          Situation Fund, L.P., of which Mr. Sager is a general partner, and
          7,500 shares of common stock issuable upon exercise of warrants held
          by George Stasen, a partner of Mr. Sager.

(3)       Consists of shares issuable upon conversion of Series A Convertible
          Preferred Stock.

(4)       Consists of shares of common stock issuable upon exercise of warrants.

(5)       Edward F. Sager, Jr., a director of ConMat, is a general partner of
          Mentor Special Situation Fund, L.P.

(6)       Includes 50,000 Shares issuable upon the exercise of options.

Item 12. Certain Relationships and Related Transactions.

         None.




                                       17
<PAGE>

Item 13. Exhibits List and Reports on Form 8-K.

(A)      Exhibits

The following exhibits are filed as part of this report. Exhibit numbers
correspond to the exhibit requirements of Regulation S-B.

Exhibit
Number     Description
-------    -----------

3.1        Articles of Incorporation of ConMat Technologies, Inc.***
3.2        By-laws of ConMat Technologies, Inc.*
4.1        Specimen common stock certificate.*
4.2        Specimen series A preferred stock certificate.*
4.3        Specimen series B preferred stock certificate.*
4.4        Series A warrant from ConMat to Mentor Special Situation Fund, L.P.
           dated December 8, 1998.*
4.5        Series B warrant from ConMat to Mentor Management Company dated
           December 8, 1998.*
10.2       Loan and Security Agreement between Polychem and General Electric
           Capital Corporation dated September 30, 1998.*
10.3       $3,500,000 Revolving Credit Note payable by Polychem to General
           Electric Capital Corporation dated September 30, 1998.*
10.4       $1,500,000 Term Note payable by Polychem to General Electric Capital
           Corporation dated September 30, 1998.*
10.5       Stock Pledge Agreement between ConMat and General Electric Capital
           Corporation dated December 8, 1998.*
10.6       Guarantee dated December 8, 1998 between ConMat and General Electric
           Capital Corporation.*
10.7       Waiver and Amendment Agreement among General Electric Capital
           Corporation, ConMat, Polychem and Eastwind.*
10.8       $1,626,294 Term Note payable by Polychem to The Budd Company dated
           March 10, 1995.*
10.9       Mortgage and Security Agreement between Polychem and General Electric
           Capital Corporation.*
10.10      Share Exchange Agreement between ConMat and Eastwind dated December
           8, 1996.**
10.11      Eastwind Stockholder Trust Agreement between Eastwind and Paul A.
           DeJuliis dated December 7, 1998.**
10.12      Waiver and Amendment Agreement between General Electric Capital
           Corporation and Polychem dated August 25, 1999.**
10.13      Amended and Restated Term Note dated August 25, 1999 payable by
           Polychem to General Electric Capital Corporation.**
10.14      Amended and Restated Revolving Credit Note dated August 25, 1999
           payable by Polychem to General Electric Capital Corporation.**
10.15      Guarantor Reaffirmation Agreement dated August 25, 1999 between
           ConMat and General Electric Capital Corporation.**
10.16      Balloon Mortgage Note dated August 25, 1999 payable to Public School
           Employees' Retirement Board by Polychem.**
10.17      Open End Mortgage and Security Agreement between Polychem and Public
           School Employees' Retirement Board dated August 24, 1999.**
10.18      Loan Guaranty and Suretyship Agreement between Polychem and Public
           School Employees' Retirement Board dated August 24, 1999.**
10.19      Mortgagee's Waiver and Consent dated August 25, 1999 between Public
           School Employees' Retirement System, Polychem and General Electric
           Capital Corporation.**
10.20      License and Asset Purchase Agreement, dated March 20, 2002, by and
           among ConMat, Polychem and Ecesis.
10.21      Supply and Equipment Purchase Agreement, dated March 20, 2002, by and
           among Polychem, Ecesis, Ensinger Vekton, Inc. and Putman Precision
           Molding, Inc.
10.22      Settlement Agreement, dated October 25, 2001 and modified December 5,
           2001, among John W. Morris as the Chapter 11 Trustee for The Eastwind
           Group, Inc., Paul A. DeJuliis, ConMat and Polychem.
10.23      Seventh Amendment and Forbearance Agreement, dated September 21,
           2001, by and between Polychem and General Electric Capital
           Corporation
11         Computation of Per Share Earnings (included in Financial Statements
           on Pages F-5, F-12 and F-13
21         Subsidiaries of ConMat.***

---------
*        Incorporated by reference to Form 10-SB file no. 0-30114 filed April
         27, 1999 and Amendment No. 1 filed June 16, 1999.

**       Incorporated by reference to Amendment No. 1 to Form 10-SB file no.
         0-30166 filed August 30, 1999.

***      Incorporated by reference to Registration Statement on Form SB-2 (File
         No. 333-91753) filed on November 30, 1999.


         (B)      Reports on Form 8-K

         None.



                                       18
<PAGE>



                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Philadelphia,
Commonwealth of Pennsylvania on May 23, 2002.

                              CONMAT TECHNOLOGIES, INC.



                              By:    /s/ Edward F. Sager, Jr.
                                     -------------------------------------------
                                     Edward F. Sager, Jr., President


                              By:    /s/ Thomas C. Morral, Jr.
                                    --------------------------------------------
                                    Thomas C. Morral, Jr., Vice President and
                                    Chief Financial Officer
                                    (Principal Accounting and Financial Officer)

         In accordance with the Securities Exchange Act of 1934, this Report has
been duly signed below by the following persons on behalf of the Registrant in
the capacities and on May 23, 2002.




/s/ Edward F. Sager, Jr.                  President and Director
--------------------------------
Edward F. Sager, Jr.



 /s/ Kenneth W. Evans, Jr.                Director
--------------------------------
Kenneth W. Evans, Jr.


/s/ John R. Toedtman                      Director
--------------------------------
John R. Toedtman












                                       19
<PAGE>


<TABLE>
<CAPTION>
                                Table of Contents
                                -----------------
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                            <C>
PART  I..........................................................................................................1
  Item 1.  Description of Business...............................................................................1
  Item 2.  Description of Properties............................................................................10
  Item 3.  Legal Proceedings....................................................................................11
  Item 4.  Submission of Matters to a Vote of Security Holders..................................................11
PART II.........................................................................................................11
  Item 5.  Market for Common Equity and Related Stockholder Matters.............................................11
  Item 6.  Management's Discussion and Analysis.................................................................12
  Item 7.  Financial Statements.................................................................................14
  Item 8.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................14
PART III........................................................................................................14
  Item 9.  Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
                  Exchange Act..................................................................................14
  Item 10.  Executive Compensation..............................................................................16
  Item 11.  Security Ownership of Certain Beneficial Owners and Management......................................16
  Item 12.  Certain Relationships and Related Transactions......................................................18
  Item 13.  Exhibits List and Reports on Form 8-K...............................................................18
</TABLE>



                                       (i)


<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Index to Consolidated Financial Statements
                     Years ended December 31, 2001 and 2000
                       With Report of Independent Auditors

<TABLE>
<CAPTION>
                                                                                                Page
                                                                                                ----
<S>                                                                                             <C>
Report of Independent Auditors                                                                   F-1

Consolidated Financial Statements

     Consolidated Balance Sheets                                                                 F-2
     Consolidated Statements of Operations                                                       F-3
     Consolidated Statements of Changes in Stockholders' Equity (Deficiency)               F-4 & F-5
     Consolidated Statements of Cash Flows                                                       F-6
     Notes to Consolidated Financial Statements                                                  F-7
</TABLE>










<PAGE>



               Report of Independent Certified Public Accountants


Board of Directors
ConMat Technologies, Inc.


We have audited the accompanying consolidated balance sheets of ConMat
Technologies, Inc. and Subsidiary as of December 31, 2001 and 2000 and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the years then ended. The consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of ConMat
Technologies, Inc. and Subsidiary as of December 31, 2001 and 2000 and the
results of their operations and cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 4 to the
financial statements, the Company was informed by its primary lender that it was
no longer willing to provide working capital financing to support the Company's
operations. This coupled with the Company's significant operating losses raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.



                                                          COGEN SKLAR LLP

Bala Cynwyd, Pennsylvania
May 10, 2002








                                       F-1


<PAGE>



ConMat Technologies, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                        December 31       December 31
                               ASSETS                                      2001              2000
                                                                       ------------      ------------
<S>                                                                      <C>                     <C>
Current Assets:
   Cash and cash equivalents                                            $    84,315      $   153,038
   Accounts receivable - net                                              4,512,093        4,744,077
   Inventories                                                            1,048,607        1,478,185
   Prepaid expenses                                                         142,415          269,178
                                                                        -----------      -----------
                                                 Total Current Assets     5,787,430        6,644,478
Property, Plant & Equipment - net                                                 -        1,227,409
Property, Plant & Equipment - held for sale                               1,046,978                -
Deferred Income Taxes                                                     1,125,493           78,493
Other Assets                                                                216,285          270,858
                                                                        -----------      -----------
                                                         Total Assets   $ 8,176,186      $ 8,221,238
                                                                        ===========      ===========

                LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Line of credit                                                       $ 2,818,893      $ 2,469,031
   Current portion of long-term debt                                      1,020,846          789,338
   Current portion of capital lease obligations                              28,229           64,743
   Accounts payable                                                       3,227,633        2,711,097
   Legal settlement payable                                               1,500,000                -
   Accrued expenses                                                         492,490          551,219
                                                                        -----------      -----------
                                            Total Current Liabilities     9,088,091        6,585,428

Long-Term Debt                                                            1,796,106        2,149,064
Obligations Under Capital Leases                                             14,259           33,818
Other Liabilities                                                           479,095          168,969
                                                                        -----------      -----------
                                                    Total Liabilities    11,377,551        8,937,279

Stockholders' Equity (Deficiency):
   Series A preferred stock - $.001 par value, 1,500,000
      shares authorized, 713,250 shares issued and outstanding                  713              713
   Series B Preferred Stock - $.001 par value, 166,667
      shares authorized, issued and outstanding                             500,000          500,000
   Series C preferred stock - $.001 par value, 446,150
      shares authorized,  382,500 issued and outstanding                        383              383
   Common stock - $.001 par value, 40,000,000 shares
      authorized, 2,988,083 and 2,963,083 shares issued,
      2,607,758 and 2,742,258 outstanding                                     2,988            2,963
   Additional paid-in capital                                              (649,838)         195,687
   Accumulated deficit                                                   (2,839,471)        (300,949)
   Cost of common shares in treasury - 380,325 and 220,825 shares          (166,140)         (96,838)
   Less: Receivables for shares sold                                        (50,000)        (900,000)
              Receivable relating to Eastwind claim                               -         (118,000)
                                                                        -----------      -----------
                                       Total Stockholders' Deficiency    (3,201,365)        (716,041)
                                                                        -----------      -----------
                       Total Liabilities and Stockholders' Deficiency   $ 8,176,186      $ 8,221,238
                                                                        ===========      ===========
</TABLE>


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






                                       F-2
<PAGE>


ConMat Technologies, Inc. and Subsidiary
Consolidated Statements of Operations
<TABLE>
<CAPTION>

                                                                               Year Ended December 31
                                                                                 2001             2000
                                                                            -------------     ------------
<S>                                                                             <C>                 <C>
Net Sales to Customers                                                      $ 12,289,424      $ 13,695,058
Cost of Goods Sold                                                            10,022,205        10,493,578
                                                                            ------------      ------------
                                                            Gross Profit       2,267,219         3,201,480

Selling, General and Administrative Expenses                                   3,172,381         2,380,637
Corporate Expenses                                                             1,051,042           510,059
                                                                            ------------      ------------
                                                 Operating (Loss) Income      (1,956,204)          310,784

Other Income (Expense):
   Interest expense                                                             (495,106)         (526,462)
   Legal settlement                                                           (1,500,000)                -
   Rental income                                                                 282,748           247,096
                                                                            ------------      ------------
                              (Loss) Income Before Tax (Benefit) Expense      (3,668,562)           31,418

Income Tax (Benefit) Expense                                                  (1,155,000)           27,200
                                                                            ------------      ------------
                                                       Net (Loss) Income      (2,513,562)            4,218

Dividends on preferred shares
                                                                                (135,508)          (87,754)
                                                                            ------------      ------------
                             Net (loss) available to common shareholders    $ (2,649,070)     $    (83,536)
                                                                            ============      ============


Net loss per Common Share:
      Basic                                                                 $      (1.01)     $      (0.04)
                                                                            ============      ============
      Diluted                                                               $      (1.01)     $      (0.04)
                                                                            ============      ============

Weighted average number of common shares outstanding:

      Basic                                                                    2,613,286         2,365,371
                                                                            ============      ============
      Diluted                                                                  2,613,286         2,365,371
                                                                            ============      ============
</TABLE>






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




                                       F-3
<PAGE>



ConMat Technologies, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity (Deficiency)
Years Ended December 31, 2001 and 2000
<TABLE>
<CAPTION>

                                              Common stock            Series A preferred stock   Series B preferred stock
                                        --------------------------  ---------------------------  --------------------------
                                          Shares        Amount        Shares         Amount        Shares        Amount
                                        ------------  ------------  ------------  -------------  ------------  ------------
<S>                                     <C>           <C>           <C>           <C>            <C>           <C>
Balance, December 31, 1999                2,250,000       $ 2,250     1,073,333        $ 1,073       166,667      $500,000
Conversion of common shares
   and series A preferred shares
   for series C preferred shares            (75,000)          (75)     (285,000)          (285)
Conversion of series A preferred
   shares into common shares                313,000           313
Conversion of series A preferred
   shares into common shares                 75,083            75      (75,083)            (75)
Issuance of common shares
   in exchange for note                     400,000           400
                                        ------------  ------------  ------------  -------------  ------------  ------------
Balance, December 31, 2000                2,963,083         2,963      713,250             713       166,667       500,000
Issuance of common shares                    25,000            25
                                        ------------  ------------  ------------  -------------  ------------  ------------
Balance, December 31, 2001                2,988,083       $ 2,988       713,250         $  713       166,667      $500,000
                                        ============  ============  ============  =============  ============  ============
</TABLE>

<TABLE>
<CAPTION>
                                                                          Cost of common
                                         Series C preferred stock       shares in treasury
                                        --------------------------  ---------------------------
                                          Shares        Amount        Shares         Amount
                                        ------------  ------------  ------------  -------------
<S>                                     <C>           <C>           <C>           <C>
Balance, December 31, 1999                        -        $    -             -   $          -

Conversion of common shares
   and series A preferred shares
   for series C preferred shares            382,500           383
Purchase of treasury shares                                             220,825        (96,838)
                                        ------------  ------------  ------------  -------------
Balance, December 31, 2000                  382,500           383       220,825        (96,838)
Purchase of treasury shares                                             159,500        (69,302)
                                        ------------  ------------  ------------  -------------
Balance, December 31, 2001                  382,500        $  383       380,325    $  (166,140)
                                        ============  ============  ============  =============
</TABLE>







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






                                       F-4
<PAGE>


<TABLE>
<CAPTION>
ConMat Technologies, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity (Deficiency) - Continued
Years Ended December 31, 2001 and 2000



                                                                         Notes       Receivable       Total
                                         Additional     Accumulated    receivable    relating to   stockholders'
                                          paid-in        earnings      for shares     Eastwind        equity
                                        capital, net     (deficit)        sold          claim      (deficiency)
                                        ------------   ------------   -----------    -----------   -------------
<S>                                     <C>            <C>            <C>            <C>           <C>
Balance, December 31, 1999              $   (666,986)  $   (305,167)  $   (50,000)   $         -   $    (518,830)
Conversion of common shares
   and series A preferred shares
   for series C preferred shares                 (23)
Conversion of series A preferred
   shares into common shares                    (313)
Sale of common stock                         297,500                     (250,000)                        47,500
Purchase of treasury shares                                                                              (96,838)
Expenses associated with
   equity transactions                       (34,091)                                                    (34,091)
Issuance of common shares
   in exchange for note                      599,600                     (600,000)
Eastwind claim receivable                                                               (118,000)       (118,000)
Net income                                                    4,218                                        4,218
                                        ------------   ------------   -----------    -----------   -------------
Balance, December 31, 2000                   195,687       (300,949)     (900,000)      (118,000)       (716,041)

Issuance of common shares                      9,475                                                       9,500
Net loss                                                 (2,513,562)                                  (2,513,562)
Expenses associated with
   equity transactions                        (5,000)                                                     (5,000)
Payment of series C preferred
   dividends                                                (24,960)                                     (24,960)
Write-off of note receivable for shares
   sold                                     (850,000)                     850,000
Reversal of Eastwind claim receivable                                                    118,000         118,000
Purchase of treasury shares                                                                              (69,302)
                                        ------------   ------------   -----------    -----------   -------------
Balance, December 31, 2001              $   (649,838)  $ (2,839,471)  $   (50,000)   $         -   $  (3,201,365)
                                        ============   ============   ===========    ===========   =============
</TABLE>




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






                                       F-5
<PAGE>




ConMat Technologies, Inc. and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                    Year Ended December 31
                                                                  --------------------------
                                                                      2001            2000
                                                                  -----------      ---------
<S>                                                               <C>                 <C>
Cash Flows from Operating Activities:
   Net (loss) income                                              $(2,513,562)     $   4,218
   Adjustments to reconcile to net cash provided by (used in)
     operating activities:
         Depreciation and amortization                                269,983        263,116
         Provision for bad debt expense                               335,839              -
         Legal settlement expense                                   1,500,000              -
         Receivable relating to Eastwind claim                        118,000       (118,000)
         Provision for pension expense                                302,860              -
         Income tax benefit                                        (1,155,000)             -
   Changes in assets and liabilities:
      (Increase) decrease in assets
         Accounts receivable                                         (103,855)      (174,651)
         Inventories                                                  429,578       (203,138)
         Prepaid expenses                                             133,888       (210,837)
         Other assets                                                 (27,315)       (59,013)
      Increase (decrease) in liabilities
         Accounts payable                                             516,535        988,734
         Accrued expenses                                              66,537         95,506
                                                                  -----------      ---------
           Net Cash (Used In) Provided By Operating Activities       (126,512)       585,935

Cash Flows from Investing Activities:
   Purchase of property and equipment                                  (5,289)      (403,397)
   Patent costs                                                             -        (43,821)
                                                                  -----------      ---------
                         Net Cash Used In Investing Activities         (5,289)      (447,218)

Cash Flows from Financing Activities:
   Net borrowings under lines of credit                               349,862        341,403
   Repayments of term notes                                          (121,450)      (282,011)
   Repayments of capital lease obligations                            (56,073)       (83,526)
   Purchases of treasury stock                                        (69,302)       (96,838)
   Proceeds from sale of common stock                                       -         47,500
   Offering costs associated with equity transactions                       -        (34,091)
   Payments of Series B preferred dividends                           (10,000)             -
   Payments of Series C preferred dividends                           (24,959)             -
   Proceeds from capital lease obligations                                            20,292
   Recapitalization costs                                              (5,000)
                                                                  -----------      ---------
           Net Cash Provided By (Used In) Financing Activities         63,078        (87,271)

            Net (Decrease) Increase in Cash & Cash Equivalents        (68,723)        51,446

Cash and Cash Equivalents at Beginning of Period                      153,038        101,592
                                                                  -----------      ---------
Cash and Cash Equivalents at End of Period                        $    84,315      $ 153,038
                                                                  ===========      =========

Supplemental Cash Flow Information:
   Cash paid for interest                                         $   495,106      $ 520,862
                                                                  ===========      =========
   Cash paid for taxes                                            $         -      $  40,000
                                                                  ===========      =========
</TABLE>



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







                                       F-6
<PAGE>



                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000


NOTE 1 - NATURE OF BUSINESS

ConMat Technologies, Inc. (ConMat or the Company), organized under the laws of
the State of Florida, is engaged in the development and manufacture of
proprietary custom engineered plastics and composite products for industrial end
users with a special emphasis on the wastewater treatment marketplace. ConMat
conducts its operations through its wholly owned subsidiary, the Polychem
Corporation (Polychem), located in Phoenixville, Pennsylvania. Polychem
manufactures and sells clarifier components for wastewater treatment
applications and other plastic-molded products, including buckets, sprockets and
bearings. Subsequent to December 31, 2001, Polychem entered into an agreement to
outsource all of its manufacturing operations. The wastewater treatment market
is global in nature, and Polychem presently sells products internationally in
Western Europe, the Middle East, Asia and South America, as well as in the
United States.

NOTE 2 - BASIS OF PRESENTATION

The consolidated financial statements include the accounts of ConMat and its
wholly owned subsidiary, Polychem. Certain reclassifications to prior year
amounts, none of which effect the net income, have been made to conform to the
current year presentation.

On December 8, 1998, ConMat, a non-operating public company with 1,000,000
common shares outstanding and immaterial net assets, acquired 100% of the
outstanding common stock of Polychem from The Eastwind Group, Inc. (Eastwind)
(the Acquisition). The Acquisition resulted in the owners and management of
Polychem having effective operating control of the combined entity.

Under generally accepted accounting principles, the Acquisition is considered to
be a capital transaction in substance, rather than a business combination. That
is, the Acquisition is equivalent to the issuance of stock by Polychem for the
net monetary assets of ConMat, accompanied by a recapitalization, and is
accounted for as a change in capital structure. Accordingly, the accounting for
the Acquisition is identical to that resulting from a reverse acquisition,
except that no goodwill is recorded. Under reverse takeover accounting, the post
reverse-acquisition comparative historical financial statements of the "legal
acquirer" (ConMat), are those of the "legal acquiree" (Polychem) (i.e. the
accounting acquirer).


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

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, 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. Actual results
could differ from those estimates.

Comprehensive Income

The company adopted Statement of Financial Accounting Standard (SFAS No. 130,
"Reporting Comprehensive Income") beginning January 4, 1998. Comprehensive
income is a more inclusive financial reporting methodology that includes
disclosure of certain financial information that historically has not been
recognized in the calculation of net income (loss). Since the company had no
items of other comprehensive income (loss), no separate statement of
comprehensive income (loss) has been presented.


                                      F-7
<PAGE>


                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

Cash and Cash Equivalents

The Company's cash management system provides for the short-term investment of
cash and the transfer or deposit of sufficient funds to cover checks as they are
submitted for payment. The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents.

Concentration of Credit Risk Involving Cash

At December 31, 2001, the Company has no deposits with major financial
institutions that exceed Federal Depository Insurance limits.

Inventories

Inventories consist of raw materials, work-in-process, and finished goods.
Work-in-process and finished goods include raw materials, direct labor, and a
portion of manufacturing overhead. The Company's inventory is stated at the
lower of cost or market, with cost determined by the first-in, first-out (FIFO)
method.


Revenue Recognition

The Company recognizes operating revenue when title and risk of loss pass to
customers in accordance with Staff Accounting Bulletin No. 101, "Revenue
Recognition," issued by the Securities and Exchange Commission.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation.
Depreciation is recorded using the straight-line and accelerated depreciation
methods over the estimated useful lives of the assets. Leasehold improvements
are amortized over the term of the lease or estimated useful life, whichever is
shorter. Property, Plant & Equipment has been classified as "held for sale" as
of December 31, 2001. See Note 4 and Note 7 for further discussion.

Research and Development Costs

The Company expenses research and development costs as incurred. Research and
development costs were approximately $226,000 for the year ended December 31,
2001 and $225,000 for the year ended December 31, 2000.

Income Taxes

The Company accounts for its income taxes under the liability method specified
by Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes. Deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities as measured by the enacted tax rates which will be in effect when
these differences reverse. Deferred tax expense is the result of changes in
deferred tax assets and liabilities.

Shipping Costs

In September 2000, the Emerging Issues Task Force reached a consensus on Issue
00-10, "Accounting for Shipping and Handling Fees and Costs" (Issue 00-10).
Issue 00-10 requires that all amounts billed to customers related to shipping
and handling should be classified as revenues. In addition, Issue 00-10
specifies that the classification of shipping and handling cost is an accounting
policy decision that should be disclosed pursuant to APB #22, "Disclosure of
Accounting Policies". The Company's product costs includes amounts for shipping
and handling, therefore, it charges its customers shipping and handling fees at
the time the products are shipped or when services are performed. The cost of
shipping products to the customer is recognized at the time the products are
shipped to the customer and is included in Cost of Goods Sold.

                                       F-8
<PAGE>


                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

Recent Accounting Pronouncements

In October 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("Statement
144"), effective in fiscal years beginning after December 15, 2001, with early
adoption permitted, and in general are to be applied prospectively. Statement
144 establishes a single accounting model for the impairment or disposal of
long-lived assets, including discontinued operations. Statement 144 superseded
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," and APB Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." The Company expects that the provisions of Statement 144 will not
have a material impact on its results of operations and financial position upon
adoption.

The following recently issued accounting pronouncements are currently not
applicable to the Company.

In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" ("Statement 141"), effective for all business
combinations initiated after June 30, 2001. Statement 141 requires all business
combinations to be accounted for under the purchase method. Statement 141
supersedes APB Opinion No. 16, "Business Combinations," and Statement No. 38,
"Accounting for Preacquisition Contingencies of Purchased Enterprises."

In July 2001, the Financial Accounting Standards Board issued SFAS No. 142,
"Goodwill and Other Intangible Assets" ("Statement 142"), effective October 1,
2001. Statement 142 addresses the financial accounting and reporting for
acquired goodwill and other intangible assets. Under the new rules, the Company
is no longer required to amortize goodwill and other intangible assets with
indefinite lives, but will be subject to periodic testing for impairment.
Statement 142 supersedes APB No. 17, "Intangible Assets."

In August 2001, the Financial Accounting Standards Board issued SFAS No. 143,
"Accounting for Obligations Associated With the Retirement of Long-Lived Assets"
("Statement 143"), effective in fiscal years beginning after June 15, 2002, with
early adoption permitted. Statement 143 establishes accounting standards for the
recognition and measurement of an asset retirement obligation and its associated
asset retirement cost. It also provides accounting guidance for legal
obligations associated with the retirement of tangible long-lived assets.

Earnings (Loss) Per Share

The Company reports earnings per share in accordance with the provisions of SFAS
No. 128, Earnings Per Share. SFAS No. 128 requires presentation of basic and
diluted earnings per share in conjunction with the disclosure of the methodology
used in computing such earnings per share. Basic earnings per share excludes
dilution and is computed by dividing income available to common stockholders by
the weighted average common shares outstanding during the period. Diluted
earnings per share takes into account the potential dilution that could occur if
securities or other contracts to issue common stock were exercised and converted
into common stock.

The following are the basic and diluted earnings per share (EPS) computations
for the periods presented:

                                      F-9
<PAGE>


                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000


<TABLE>
<CAPTION>


                                                                          Year Ended December 31
                                                               ------------------------------------------
                                                                     2001                     2000
                                                               -----------------        -----------------
<S>                                                                <C>                         <C>
Earnings per Share - Basic:
   Net income                                                      $(2,513,562)              $     4,218
   Dividends on preferred shares                                      (135,508)                  (87,754)
                                                               -----------------        -----------------
   Net (loss) income available to common shareholders              $(2,649,070)              $   (83,536)
                                                               =================        =================

   Weighted average shares outstanding                                2,613,286                2,365,371
                                                               =================        =================

                            Basic (Loss) Earnings Per Share        $      (1.01)             $     (0.04)
                                                               =================        =================

Earnings per Share - Diluted:
   Net (loss) income available to common shareholders              $ (2,649,070)             $   (83,536)
   Dividends on preferred shares
                                                                              -                        -
   Income on common shares after
                                                               -----------------        -----------------
      assumed conversions                                          $ (2,649,070)             $   (83,536)
                                                               =================        =================

   Weighted average shares outstanding                                2,613,286                2,365,371
   Dilutive effect of preferred stock
                                                                              -                        -
   Dilutive effect of stock options and warrants
                                                                              -                        -
                                                               -----------------        -----------------
      Diluted average shares outstanding                              2,613,286                2,365,371
                                                               =================        =================

                          Diluted (Loss) Earnings Per Share        $      (1.01)             $     (0.04)
                                                               =================        =================

</TABLE>

Series A preferred stock, convertible into 798,875 shares of common stock was
outstanding during the fiscal years ended December 31, 2001 and 2000. Common
stock warrants associated with the Series B and Series C preferred stock
providing for the purchase of 579,167 and 196,667 common shares were outstanding
at December 31, 2001 and 2000, respectively. The exercise price of the warrants
is $3.00 per warrant. The Company had stock options for the purchase of 375,000
common shares outstanding at December 31, 2001 and 2000. The Series A preferred
stock, preferred stock warrants and the stock options were excluded from the
computation of diluted earnings per share for the year ended December 31, 2001
and 2000, since these securities were antidilutive as a result of the Company's
loss available to common shareholders.


NOTE 4 - MANAGEMENT'S PLAN

As shown in the accompanying financial statements, the Company incurred a net
loss of ($2,514,000) during the year ended December 31, 2001, and as of that
date, the Company's current liabilities exceeded its current assets by
$3,301,000 and its total liabilities exceeded its total assets by $3,201,000.
Those factors, as well as the inability of the Company to either restructure or
replace its financing (as discussed in Note 9), create an uncertainty about the
Company's ability to continue as a going concern. Management of the Company has
developed a plan that includes outsourcing the manufacturing of its product
lines to a supplier as well as plans to reduce its liabilities through the sale
of all of Polychem's assets. The ability of the Company to continue as a going
concern is dependent on acceptance of the plan by the Company's stockholders.
The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.

Polychem has agreed to outsource the manufacturing of its product lines to
Ensinger Vekton, Inc. and Putnam Precision Molding, Inc. (collectively,
"Supplier"), pursuant to a Supply and Equipment Purchase Agreement, dated March
20, 2002. Under the terms of the agreement, Polychem has agreed to purchase a
minimum of $2.5 million of products from Supplier each year and to sell to
Supplier the equipment Polychem formerly used to manufacture its products.

                                      F-10
<PAGE>


                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

On March 20, 2002, ConMat entered into a License and Asset Purchase Agreement
(the "License and Asset Purchase Agreement") with Polychem and Ecesis LLC
("Ecesis") which provides for the sale of Polychem's specialty and water
treatment product lines to Ecesis (the "Sale"). The Sale is subject to the
approval of ConMat's shareholders. The contemplated purchase price will be
$1,600,000, which has been supported by an appraisal of the business by an
independent third party.

ConMat anticipates holding a special meeting of its shareholders in the near
future at which its shareholders will vote whether to approval the Sale and a
Plan of Liquidation for the remaining assets of Polychem (the "Liquidation").
ConMat believes that its shareholders will approve the Sale and the Liquidation.
Ecesis is a Delaware limited liability company which was formed to purchase
Polychem's specialty and water treatment lines. Two of ConMat's and Polychem's
former directors and officers, Paul A. DeJuliis and Richard R. Schutte, are
members of Ecesis. Messrs. DeJuliis and Schutte resigned as directors and
officers of ConMat and Polychem on March 13, 2002.

Pending the approval of the Sale by ConMat's shareholders, pursuant to the
License and Asset Purchase Agreement, Polychem has licensed its specialty and
water treatment product lines to Ecesis in exchange for royalties based on
sales. In the event that the Sale is not approved by ConMat's shareholders, the
license will terminate and Polychem will resume developing and marketing its
product lines.

If ConMat's shareholders approve the Sale and Liquidation, ConMat will have no
assets (other than cash, if any, remaining after satisfaction of its and
Polychem's liabilities). In such event, the Board of Directors of ConMat will
seek to acquire an interest in one or more suitable operating businesses, which
may include assets or shares of another entity to be acquired by ConMat directly
or through a subsidiary, that the Board of Directors believes will be profitable
to ConMat and its shareholders. In the event the Sale and Liquidation is not
approved by ConMat's shareholders, the license to Ecesis shall terminate and
ConMat shall resume operation of Polychem.


NOTE 5 - ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>

                                                                        Year Ended December 31
                                                               ------------------------------------------
                                                                     2001                     2000
                                                               -----------------        -----------------

<S>                                                                 <C>                      <C>
Accounts receivable                                                 $ 3,947,058              $ 4,239,826
Retainage receivables                                                   960,874                  564,251
Allowance for doubtful accounts                                        (395,839)                 (60,000)
                                                               -----------------        -----------------
                                                                    $ 4,512,093              $ 4,744,077
                                                               =================        =================

</TABLE>

The Company sells clarifier components to general contractors for use in
building and maintaining wastewater treatment facilities operated by government
municipalities. Sales of these components under contracts generally require
retainage provisions, which become due upon completion of the entire contract.


NOTE 6 - INVENTORIES
<TABLE>
<CAPTION>

                                                                        Year Ended December 31
                                                               ------------------------------------------
                                                                     2001                     2000
                                                               -----------------        -----------------

<S>                                                                   <C>                      <C>
Raw Materials                                                       $   329,103              $   581,554
Work-in-process                                                         427,940                  630,314
Finished goods                                                          291,564                  266,317
                                                               -----------------        -----------------
                                                                    $ 1,048,607              $ 1,478,185
                                                               =================        =================

</TABLE>


                                      F-11

<PAGE>



                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

NOTE 7 - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>

                                                                               Year Ended December 31
                                                 Estimated            ------------------------------------------
                                               Useful Lives                 2001                     2000
                                            --------------------      -----------------        -----------------

<S>                                            <C>                            <C>                        <C>
Land                                                                       $    56,000              $    56,000
Buildings and equipment                        10 - 15 years                 1,058,325                  968,826
Machinery and equipment                         3 - 7 years                  1,091,397                  938,283
Construction in progress                                                       109,592                  346,917
                                                                      -----------------        -----------------
                                                                      -----------------        -----------------
                                                                             2,315,314                2,310,026
   Less accumulated depreciation                                            (1,268,336)              (1,082,617)
                                                                      -----------------        -----------------
                                                                      -----------------        -----------------
                                                                           $ 1,046,978              $ 1,227,409
                                                                      =================        =================
</TABLE>


Pursuant to the discussion in "Note 4 - Management's Plan" for the Polychem
operations, the Property, Plant & Equipment amounts as of December 31, 2001 have
been identified as "Held for Sale". Management estimates that the fair value
less costs to sell will be in excess of the carrying value of the assets.

Depreciation expense was $185,720 and $166,444 for the fiscal years ended
December 31, 2001 and 2000, respectively.

Machinery and equipment as of December 31, 2001 and 2000, includes $529,380 and
$514,569, respectively, of equipment under capital leases, with accumulated
depreciation of $427,547 and $344,976, respectively.


NOTE 8 - OTHER ASSETS
<TABLE>
<CAPTION>
                                                                        Year Ended December 31
                                                               ------------------------------------------
                                                                     2001                     2000
                                                               -----------------        -----------------

<S>                                                                   <C>                      <C>
Deferred financing, net                                               $  71,131                $ 145,794
Patents, net                                                            145,154                  125,064
                                                               -----------------        -----------------
                                                                      $ 216,285                $ 270,858
                                                               =================        =================
</TABLE>


NOTE 9 - LINE OF CREDIT AND LONG-TERM DEBT

On September 30, 1998, Polychem entered into a three year loan and security
agreement (the Agreement) with a commercial lender which provided to Polychem a
revolving credit line up to $3,500,000 based upon eligible accounts receivable
and inventory, as defined. On August 25, 1999, the revolving credit line was
increased to $5,000,000. The revolving credit line bears interest at the index
rate, based on the rate for 30-day dealer paper, plus 8.75% (10.77% at December
31, 2001). The Agreement also provided for a term loan for $1,500,000, secured
by equipment, with interest at the index rate plus 10.5% (12.52% at December 31,
2001). As of December 31, 2001 the outstanding balance on the revolving line of
credit was $2,818,893. The Agreement expired on September 30, 2001 as a result
of the unwillingness by GE Capital Corporation, the lender, to provide continued
working capital financing to Polychem to support its operations. Management does
not anticipate that Polychem will be able to obtain sufficient capital financing
on reasonable terms from another lender to replace the GE Capital financing. The
Company has been granted an interim extension of the previous credit facility by
the lender, through May 31, 2002. The extension has imposed some additional
financial restrictions and limitations on the Company generally in the form of
additional reserves against maximum borrowing amount.

On August 25, 1999, Polychem received proceeds of $1,880,000 pursuant to a
10-year mortgage loan containing a 25 year amortization schedule and a balloon
payment due September 1, 2009, secured by Polychem's land and

                                      F-12
<PAGE>


                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

building in Phoenixville, Pennsylvania. The mortgage loan bears interest at 8.5%
for the first five years and is adjusted to 3.5% above the 5-year U.S. Treasury
Note Yield Rate at the end of the first five years. Polychem used $813,000 of
the mortgage proceeds to reduce the term loan and $996,000 to reduce the
revolving credit line.

Subsequent to December 31, 2001, Polychem was in default of the provisions of
the term note payable to the Budd Company. An agreement between the two parties
provides for various payments of principal and interest to be made during the
period of January 1, 2002 through December 31, 2002.

At December 31, 2001, there was approximately $54,000 available for advances
under the revolving line of credit.
<TABLE>
<CAPTION>

                                                                               Year Ended December 31
                                                                      -----------------------------------------
                                                                           2001                     2000
                                                                      ----------------         ----------------
<S>                                                                            <C>                      <C>
Polychem term note payable to the Budd Company, interest
at 8%, principle payable in various installments during
Calendar year 2002.                                                       $   813,148              $   813,148

Polychem note payable, interest at index rate plus 10.5% at
December 31, 2001 (12.52%) plus 6.5% at December 31,
2000 (13.15%) in monthly installments of $8,000 plus interest,
with remaining balance to be paid during calendar year 2002.                  180,000                  276,000

Polychem 10-year mortgage note payable, interest at 8.5% for
the first five years, thereafter, 3.5% above the 5-year
Treasury Note yield at August 25, 2004, monthly payments based
upon a 25-year amortization schedule with a balloon Payment due
September, 2009 of outstanding principal and Interest                       1,823,804                1,849,254
                                                                      ----------------         ----------------
                                                                            2,816,952                2,938,402
Less current portion                                                      (1,020,846)                 (789,338)
                                                                      ----------------         ----------------
                                                                          $ 1,796,106              $ 2,149,064
                                                                      ================         ================
</TABLE>


Maturities on these obligations at December 31, 2001 are as follows:

                                2002                           $ 1,020,846
                                2003                                30,147
                                2004                                32,811
                                2005                                35,712
                                2006                                38,868
                                Thereafter                       1,658,568
                                                           ----------------
                                                               $ 2,816,952
                                                           ================

The carrying amounts of the Company's long-term debt approximate their fair
value as of December 31, 2001 and 2000. The fair value of the Company's
long-term debt is estimated using discounted cash flow analyses based on the
Company's incremental borrowing rate for similar types of borrowing
arrangements.

Interest expense of $481,767 and $502,045 related to the line of credit and
long-term debt was charged to operations for the years ended December 31, 2001
and 2000, respectively.


                                      F-13
<PAGE>


                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

NOTE 10 - CAPITALIZED LEASE OBLIGATIONS

The Company leases certain equipment under capital leases. The weighted average
interest rate related to these capital leases was 10% in both fiscal 2001 and
2000. Interest expense of $5,614 and $13,836 on the capitalized lease
obligations was charged to operations for the years ended December 31, 2001 and
2000, respectively. Future minimum lease payments as of December 31, 2001, are
as follows:

                                2002                         $  30,840
                                2003                            14,636
                                2004
                                2005                                 -
                                2006                                 -
                                Thereafter                           -
                                                             ----------
            Total minimum lease payments
                                                                45,476
            Less amounts representing interest                  (2,988)
                                                             ----------
                                                                42,488
            Less current portion                               (28,229)
                                                             ----------
                                                             $  14,259
                                                             ==========


NOTE 11 - EMPLOYEE BENEFIT PLANS

Defined Contribution Plans

Management and nonunion employees of Polychem participate in a qualified 401(k)
savings plan. Participants can contribute a portion of their pretax
compensation, and Polychem matches 50% of the first 4% of compensation
contributed by the employee. Contributions to the plan for the years ended
December 31, 2001 and 2000, were $34,276 and $37,889, respectively. Participants
vest in Polychem's contributions pro rata over two to five years. At the
direction of the Board of Directors, Polychem may elect to contribute a maximum
of 9% of each employee's compensation, in addition to the regular match, if
sufficient profits are generated. There were no discretionary contributions made
in fiscal years 2001 or 2000.

Defined Benefit Pension Plan

Polychem maintains a non-contributory defined benefit pension plan for hourly
union employees. The pension benefits are based on years of service and the
benefit rate in effect at the date of retirement.

         The plan status was as follows:
<TABLE>
<CAPTION>

                                                                    Year Ended December 31
                                                               --------------------------------
                                                                  2001                2000
                                                               ------------        ------------
<S>                                                            <C>                 <C>
Change in benefit obligation:
   Benefit obligation at beginning of year                     $ 2,210,961         $ 2,413,507
   Service cost                                                     32,104              30,559
   Interest cost                                                   154,004             158,541
   Actual gain                                                     (49,495)           (191,293)
   Benefits paid                                                  (199,521)           (200,353)
                                                               ------------        ------------
                          Benefit obligation at end of year      2,148,053           2,210,961

</TABLE>


                                      F-14
<PAGE>


                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000
<TABLE>
<CAPTION>


<S>                                                                   <C>               <C>
Change in plan assets:
   Fair value of plan assets at beginning of year               2,019,244           2,317,283
   Actual return on plan assets                                  (135,765)            (97,685)
   Employer contribution                                                0                   0
   Benefits paid                                                 (199,521)           (200,353)
                                                              ------------        ------------
                   Fair value of plan assets at end of year     1,683,958           2,019,245

   Funded status                                                 (464,095)           (191,716)
   Unrecognized net actuarial gain                                114,484            (143,792)
   Unrecognized prior service cost                                132,033             148,127
   Miniumum liability adjustment                                 (246,517)             (4,335)
                                                              ------------        ------------
                             Prepaid (accrued) benefit cost   $  (464,095)        $  (191,716)
                                                              ============        ============

Weighted average assumptions as of end of year:
   Discount rate                                                     7.50%               7.50%
   Expected return on plan assets                                    9.00%               9.00%

Components of net periodic benefit (cost) income:
   Service cost                                               $   (32,104)        $   (30,559)
   Interest cost                                                 (154,004)           (158,541)
   Actual return on plan assets                                  (135,765)            (97,685)
   Amortization of prior service cost                             (16,094)            (16,094)
   Recognized net gain (loss)                                     307,770             315,945
                                                              ------------        ------------
                         Net periodic benefit (cost) income   $  (30,197)         $    13,066
                                                              ============        ============

</TABLE>

Postretirement Life Insurance Benefits

Polychem provides postretirement life insurance benefits to all union employees.
The life insurance plan provides coverage ranging from $3,000 to $6,000 for
qualifying retired employees. A discount rate of 7% was used in determining the
present value of the obligations as of December 31, 2001 and 2000. The unfunded
accumulated postretirement benefit obligation as of December 31, 2001 and 2000,
was $15,000. The net periodic postretirement benefit cost for the years ended
December 31, 2001 and 2000, was not material.


NOTE 12 - INCOME TAXES

Under SFAS No. 109, Accounting for Income Taxes, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates.

The components of income tax expense are as follows:

                                           Year Ended December 31
                                     ------------------------------
                                         2001              2000
                                     -----------        -----------
Current
   Federal                           $ (108,000)         $  20,000
   State                                      0              4,000
                                     -----------        -----------

                                       (108,000)            24,000


                                      F-15
<PAGE>


                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

Deferred
   Federal                     (827,000)              3,200
   State                       (220,000)                  -
                            -------------         ----------
                             (1,047,000)              3,200
                            -------------         ----------
                            $(1,155,000)          $  27,200
                            =============         ==========



The reconciliation of the statutory federal rate to the Company's effective
income tax rate is as follows:
<TABLE>
<CAPTION>

                                                                          Year Ended December 31
                                                                 -----------------------------------------
                                                                      2001                     2000
                                                                 ----------------         ----------------

<S>                                                                  <C>                           <C>
Statutory tax provision                                               (1,247,311)                  10,682
State income tax provision, net of federal tax benefit                  (220,000)                   2,640
Increase (decrease) in valuation allowance                               306,974                    7,468
Nondeductable expense                                                      5,337                    8,500
Other                                                                          -                   (2,090)
                                                                 ----------------         ----------------
                                                                    $ (1,155,000)               $  27,200
                                                                 ================         ================
</TABLE>

The tax effect of temporary differences that give rise to deferred income taxes
is as follows:
<TABLE>
<CAPTION>

                                                                          Year Ended December 31
                                                                 -----------------------------------------
                                                                      2001                     2000
                                                                 ----------------         ----------------
<S>                                                                    <C>                      <C>
Deferred tax assets
   Accounts receivable                                               $   161,452                $  20,400
   Inventory                                                              83,550                   43,627
   Property, plant and equipment                                          58,438                   37,438
   Employee benefit plans                                                184,923                   57,722
   Legal settlement                                                      630,000                        -
   Net operating loss carryforwards                                      406,000                        0
   Valuation allowance on deferred tax asset                            (398,870)                 (80,694)
                                                                 ----------------         ----------------
                                                                     $ 1,125,493                $  78,493
                                                                 ================         ================
</TABLE>

A valuation allowance has been recorded to reduce the net deferred tax asset to
an amount that management believes is realizable in future tax years from income
from operations. The Company will have a net operating loss of approximately
$1,000,000 which will expire in 2021.


NOTE 13 - COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases certain facilities and equipment under noncancellable
operating leases that expire through May 2009. Rent expense of $21,980 and
$30,007 has been charged to operations for the years ended December 31, 2001 and
2000, respectively. Minimum future rental payments under leases as of December
31, 2001, are as follows:

                  2002                       $  34,749
                  2003                          27,828
                  2004                          12,789
                  2005                          12,789
                  2006                          12,789
                                             ----------
                                             $ 100,944
                                             ==========

                                      F-16
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

Litigation

ConMat is currently a defendant in an action originally filed on January 28,
1999, in Pennsylvania state court captioned John R. Thach v. The Eastwind Group,
et al. On October 27, 2000, co-defendant, The Eastwind Group, Inc., filed a
voluntary petition for relief under Chapter 11 of Title 11 of the Bankruptcy
Code (U.S.B.C., E.D. Pa. Bankruptcy No. 00-33372 SR). The plaintiff removed the
state court action to the United States Bankruptcy Court for the Eastern
District of Pennsylvania on November 29, 2000 (U.S.B.C., E.D. Pa. Adversary No.
00-906). Plaintiff maintains that Eastwind, his former employer, breached the
terms of his severance agreement and that the sale of Polychem Corporation to
ConMat was part of a conspiracy to avoid payments to him and has violated
Pennsylvania's Uniform Fraudulent Transfer Act. The plaintiff seeks damages of
at least $350,000 and punitive damages of at least $500,000. In addition, the
plaintiff seeks to have the December 8, 1998 acquisition of Polychem declared
null and void. Initially, the plaintiff sought a temporary restraining order and
preliminary injunction seeking to set aside the sale of Polychem to ConMat. By
Order dated February 19, 1999, the State Court denied plaintiff's request for
injunctive relief.

On January 22, 2001 the Bankruptcy Court appointed a Chapter 11 trustee to
oversee and administer The Eastwind Group, Inc. bankruptcy. On May 24, 2001, the
bankruptcy trustee filed a substituted Complaint against ConMat. In his
complaint, the bankruptcy trustee asserted claims against ConMat, including
those originally raised in the John Thach complaint that the December 8, 1998
acquisition of Polychem was a fraudulent transaction.

ConMat is currently a defendant in a federal district court action filed on
April 11, 2000, in the United States District Court for the Eastern District of
Pennsylvania captioned ProFutures Special Equities Fund, L.P. v. The Eastwind
Group, et al. (U.S.D.C., E.D. Pa. Civil Action No. 00-CV-1888). ProFutures
maintains that Eastwind and others violated federal and state securities laws
and committed common law fraud in connection with the June 1998 purchase by
ProFutures of $750,000 in Series C Convertible Preferred Stock of Eastwind.
ProFutures seeks damages in the amount of $750,000 and seeks to have the
acquisition of Polychem by ConMat declared null and void. ConMat, Paul A.
DeJuliis and two other former officers of Eastwind filed a Motion to Dismiss the
Complaint on May 25, 2000 and ProFutures responded. Before the court issued a
ruling on that motion, co-defendant Eastwind filed for bankruptcy and the case
was stayed.

To resolve the claims asserted by the bankruptcy trustee, John Thach and
ProFutures, management of ConMat negotiated the terms of a settlement agreement
with the bankruptcy trustee, which was filed with the bankruptcy court on
October 25, 2001. Thereafter, on December 13 and 17, 2001, the bankruptcy court
held a two-day hearing on the approval of the settlement agreement. On February
27, 2002, the bankruptcy court approved the settlement agreement. The settlement
agreement requires the payment by ConMat of $1,500,000 to the bankruptcy
trustee, including $500,000 in cash and a promissory note in the amount of
$1,000,000. ConMat is funding its obligations under the settlement agreement in
part by selling assets and effecting a management led buyout of Polychem's
specialty and water treatment product lines.

Subject to payment by ConMat of $1,500,000 to the bankruptcy trustee pursuant to
the settlement agreement and payment by Polychem of an IRS claim, John Thach's
claims will be released against, among others, ConMat. In addition, the
bankruptcy trustee has agreed to allocate and set aside a portion of the
settlement proceeds, not to exceed $200,000, to fund the indemnification
obligations from ConMat's share of liability, if any, in the ProFutures' action.
The $1,500,000 settlement payment has been accrued and reflected in the
Company's results of operations for the year ended December 31, 2001. ConMat's
wholly owned subsidiary, Polychem Corporation, is also a defendant in the
actions brought by the bankruptcy trustee and Thach and is also a party to the
various settlement agreements referenced above.

In addition to the litigation arising out of the Eastwind bankruptcy and the
claims asserted by Thach, Polychem is a defendant in an action filed by The Budd
Company in the Court of Common Pleas of Chester County. The Budd Company
confessed judgment against Polychem under a note given by Polychem to The Budd
Company. At present, The Budd Company has taken no steps to execute on its
judgment and has accepted periodic payments from Polychem. As of December 31,
2001, the balance due to The Budd Company was approximately $813,000.

From time to time, ConMat and its subsidiary are parties to routine litigation,
which arises in the normal course of business. In the opinion of management, the
resolution of these lawsuits would not have a material adverse effect on the
Company's consolidated financial position or consolidated results of operations.

NOTE 14 - INCENTIVE BASED COMPENSATION

In conjunction with the Acquisition, ConMat entered into an Employment Agreement
with ConMat's Chief Executive Officer and Chairman of the Board of Directors.
Under the agreement, he will be paid an annual base salary ranging from $170,000
to $250,000, depending on ConMat's annual net income. As additional incentive
compensation, upon executing the Employment Agreement, he received (i) 250,000

                                      F-17
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

shares of common stock for an aggregate purchase price of $50,000, paid by
delivery of a two-year promissory note at 5% interest; and (ii) 250,000 options
to purchase shares of common stock at an exercise price of $3.00 per share (the
Stock Option Award). 50,000 of the options were exercisable as of November 30,
1999. Another 100,000 options vest when ConMat realizes $750,000 in pre-tax
income during a fiscal year. The remaining 100,000 options are exercisable after
when ConMat realizes $1,000,000 in pre-tax income during a fiscal year. All of
the options expire ten years from the grant date and are immediately exercisable
upon a merger, sale of assets, or other transaction resulting in a change of
control in which the holders of shares of common stock receive not less than
$5.00 per share. During fiscal 1999 ConMat granted 175,000 employee stock
options at a price of $3.00 per share, with 87,500 options vesting if ConMat
realizes $750,000 in pre-tax income during a fiscal year. The balance of 87,500
options vest if ConMat realizes $1,000,000 in pre-tax income during a fiscal
year. During fiscal 2000, 75,000 of these options were forfeited. Also during
fiscal 2000 another 25,000 options at a price of $0.875, were granted with
similar vesting options as described above. No employee stock options were
exercised during fiscal 2001 or 2000. There were no stock options granted during
2001.

All stock option awards are accounted for under Accounting Principles Board
(APB) Opinion No. 25 and related interpretations. Had compensation cost for the
options been determined based on the fair value of the options on the grant date
consistent with the method of SFAS No. 123, Accounting for Stock Based
Compensation, the Company's net loss per share for the fiscal year ended
December 31, 2001 and 2000, would not be materially different from the amounts
reported.


NOTE 15 - INDUSTRY SEGMENT AND FOREIGN SALES INFORMATION

Management has determined that it operates in one industry segment (see note 1).

For the year ended December 31, 2001, Polychem's sales to foreign customers were
$5,295,258 or 43.1% of consolidated net sales, and consist principally of sales
to customers in Asia (27%) and Europe (10%). Receivables from foreign customers
were $2,034,000 as of December 31, 2001. For the year ended December 31, 2000,
Polychem's sales to foreign customers were $5,224,523 or 38% of consolidated net
sales, and consist principally of sales to customers in Asia (23%) and Europe
(10%). Receivables from foreign customers were $2,230,608 as of December 31,
2000.


NOTE 16 - MAJOR CUSTOMER

The Company sells a substantial portion of its products to one customer. During
fiscal 2001 and 2000, net revenue from that one customer aggregated
approximately $2,437,000 and $1,566,000, respectively. At December 31, 2001 and
2000 amounts due from that customer included in trade accounts receivable were
approximately $1,384,000 and $443,000, respectively.

NOTE 17 - EQUITY

Description of Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock. Of this
amount, 1,500,000 shares have been designated for Series A convertible preferred
stock, 166,667 shares have been designated for Series B preferred stock and
446,150 shares have been designated for Series C preferred stock.

Series A Preferred - Shares of the Series A convertible preferred stock rank
prior to the common stock and pari passu with the Series B preferred stock and
Series C preferred stock. The creation of any class or series of capital stock
ranking senior or pari passu with the Series A convertible preferred stock or
the Series C preferred stock requires the consent of a majority of the holders
of Series A convertible preferred stock. The holders of the shares of the Series
A convertible preferred stock are entitled to receive non-cumulative, cash
dividends at a rate of 2% per year, which dividends are payable in equal,
quarterly installments, as and if declared by the Board of Directors out of
funds legally available for the payment of dividends. The Company may, at its



                                      F-18
<PAGE>

                 ConMat Technologies, Inc. and Subsidiary Notes
                      to Consolidated Financial Statements
             For the fiscal years ended December 31, 2001 and 2000

sole discretion, pay any or all dividends in common stock rather than in cash.
Shares of Series A convertible preferred stock are convertible at the option of
the holder. The conversion price is equal to the greater of $3.00 or 80% of the
closing bid price of the common stock on the conversion date, subject to
adjustments due to stock splits, stock dividends, mergers, consolidations and
other events. The Company has the right, by written notice to each of the
holders of the Series A convertible preferred stock into shares of common stock
at any time on or after the first day on which the closing bid price has been
equal to or in excess of the conversion price for 45 consecutive calendar days.
The holders of the Series A convertible preferred stock have no voting rights,
except as otherwise required by the Florida Business Corporation Act.

Series B Preferred - Shares of the Series B preferred stock rank prior to the
common stock and pari passu with the Series A convertible preferred stock and
Series C preferred stock. The creation of any class or series of capital stock
ranking senior or pari passu with the Series B preferred stock or the Series C
preferred stock requires the consent of a majority of the holders of Series B
preferred stock. The holders of the shares of the Series B preferred stock are
entitled to receive cash dividends at a rate of 8% per year, which dividends are
payable in equal, quarterly installments, as and if declared by the Board of
Directors out of funds legally available for the payment of dividends. Such
dividends will begin to accrue on the outstanding shares of the Series B
preferred stock from the date of issuance and will accrue from day to day,
whether or not earned or declared, until paid and shall be cumulative. The
Company may redeem the Series B preferred stock any time for a redemption price
of $3.00 per share, plus all accrued but unpaid dividends. The holders of the
Series B preferred stock have the right to elect one member of ConMat's Board of
Directors. Except as otherwise required by the Florida Business Corporation Act,
the holders of the Series B preferred stock have no other voting rights. As of
December 31, 2001 and 2000, there were $80,000 and $40,000, respectively of
dividends in arrears on the Series B preferred stock. The Series B preferred
stock has been reclassified as a part of the equity section of the Company's
balance sheet to reflect the elimination of certain shareholder redemption
provisions. These provisions were revised and eliminated in November 1999 in the
filing of revised Articles of Incorporation for ConMat.

Series C Preferred - Shares of the Series C preferred stock rank prior to the
common stock and pari passu with the Series A convertible preferred stock and
Series B preferred stock. The creation of any class or series of capital stock
ranking senior or pari passu with the Series C preferred stock or the Series B
preferred stock requires the consent of a majority of the holders of Series C
preferred stock. The holders of the shares of the Series C preferred stock are
entitled to receive cash dividends at a rate of 8% per year for three years and
increasing 2% per year up to a maximum of 16%, which dividends are payable in
equal, quarterly installments, as and if declared by the Board of Directors out
of funds legally available for the payment of dividends. Such dividends will
begin to accrue on the outstanding shares of the Series C preferred stock from
the date of issuance and will accrue from day to day, whether or not earned or
declared, until paid and shall be cumulative. Through June 30, 2000, dividends
on the Series C preferred stock may be paid in additional shares of Series C
preferred stock. The Company may redeem the Series C preferred stock any time
for a redemption price of $3.00 per share, plus all accrued but unpaid
dividends. Except as otherwise required by the Florida Business Corporation Act,
the holders of the Series C preferred stock have no other voting rights. For the
period January 1, 2000 through June 30, 2000 the shareholders of Series C
preferred stock were entitled to 15,453 additional shares of Series C preferred
stock as a stock dividend.

As of December 31, 2001 and December 31, 2000 there were $118,304 and $47,754,
respectively of dividends in arrears on the Series C preferred stock.

Warrants - As of December 31, 2001, there were outstanding warrants to purchase
579,167 shares of ConMat common stock at an exercise price of $3.00 per share,
subject to adjustment in the case of stock splits, stock dividends, below market
issuances or a merger or consolidation. The warrants are exercisable until
December 31, 2005. The warrants are associated with the Series B and Series C
preferred stock (196,667 and 382,500 warrants respectively).

Receivables from Sales of Stock

In addition the to $50,000 note receivable discussed in "Note 14 - Incentive
Based Compensation", the Company has two other receivables relating to the sale
of Company stock. During the fourth quarter of fiscal 2000 the Company entered
into an agreement to have its wholly-owned subsidiary, Polychem, sell 250,000


                                      F-19
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

shares of ConMat Technologies stock for proceeds totaling $250,000. Polychem
held these shares as a result of Eastwind's default on a note payable to
Polychem. The note payable from Eastwind had been collaterized by shares of
ConMat Technologies, Inc.

Additionally, on September 28, 2000, the Company entered into an option
agreement for the issuance of up to 400,000 shares of common stock in exchange
for a purchase price of approximately $600,000. The option was exercised on
November 6, 2000 and in exchange the Company accepted a note receivable for
$600,000 to be satisfied on or before May 31, 2001. The note is collateralized
by the Company's shares and should the note not be satisfied, the shares would
be returned to the Company.

As of December 31, 2001 the receivables relating to the 250,000 shares and the
400,000 shares remained outstanding. Management has determined that the
likelihood of collecting on these receivables is remote. Therefore, the
receivables have been written off and charged to additional paid-in capital. The
Company is attempting to have these shares returned and cancelled. If the shares
are not returned, the Company will pursue legal action since the notes were
collateralized by the shares in question. Also, since the notes receivable were
reflected as a contra-equity account, there is no dollar effect to the equity
position of the Company. However, the loss per share for the year ended December
31, 2001 reflects the shares as outstanding. If the 650,000 shares were
excluded, the basic and diluted loss per share would be $1.35.

Receivable Relating to Eastwind Bankruptcy Claim

In conjunction with bankruptcy proceedings initiated by Eastwind, the Company
has made various claims for financial reimbursement of certain expenses incurred
by the Company that are directly related to Eastwind's activities. One of the
primary assets held by Eastwind are preferred and common shares of ConMat
Technologies, Inc. The Company believes that it will receive cash reimbursement
for these claims. If however, cash is not made available through final
settlement, the Company anticipates that it will in return receive back all or a
portion of the ConMat shares held by Eastwind. During the year ended December
31, 2000, a $118,000 receivable relating to the Company's claims was classified
as a reduction of stockholders' equity. As a result of the final settlement
reached in the Eastwind Bankruptcy, this receivable was written off during the
year ended December 31, 2001.



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>ex10-20.txt
<DESCRIPTION>EXHIBIT 10.20
<TEXT>
<PAGE>

                                                                   Exhibit 10.20


                      LICENSE AND ASSET PURCHASE AGREEMENT

     LICENSE AND ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of March
20, 2002, by and between Ecesis LLC, a Delaware limited liability company
("Ecesis"), Polychem Corporation, a Pennsylvania corporation ("Polychem") and
ConMat Technologies, Inc., a Florida corporation (the "Shareholder").

                                    Recitals

     Polychem is engaged in the business of manufacturing a variety of plastic
products for water treatment plants and other specialty applications (as more
fully defined herein, the "Products"). Such business as conducted by Polychem on
the date hereof is referred to in this Agreement as the "Business." Shareholder
owns 100% of the outstanding capital stock of Polychem. Polychem and Shareholder
desire to license Ecesis to manufacture and sell the Products, and sell certain
assets and liabilities of Polychem to Ecesis, all upon the terms set forth
herein.

     Accordingly, in consideration of the mutual agreements contained herein,
and intending to be legally bound hereby, the parties hereto agree as follows:

                               ARTICLE I. LICENSE

     1.1 License.

          (a) Effective immediately upon execution of this Agreement and payment
by Ecesis of the Deposit (defined in Section 2.3), Polychem hereby grants to
Ecesis an exclusive, worldwide license and right to manufacture, market,
distribute and sell the Products, and in connection therewith grants to Ecesis a
license to use all of Polychem's tangible and intangible assets related to the
Business, including, without limitation, all Intellectual Property (as defined
in Article XII herein) (the "License"), and assigns to Ecesis all current
customer orders and contracts as set forth on Schedule 1.1(a) hereto. The
License shall be for a term ending on the Closing Date or termination of this
Agreement without Closing having occurred.

          (b) In the event that the License is terminated other than on the sale
of the Assets pursuant to this Agreement, Ecesis shall immediately return to
Polychem all tangible Assets and shall cease the use of any intangible Assets.

     1.2 Royalty; Rent.

          (a) In consideration of the grant of the License, Ecesis shall pay to
Polychem royalties equal to Ecesis' net operating profits from the sale of
Products. "Net operating profits" shall mean the gross revenues actually
received by Ecesis from the sale of the Products less the costs of the Products
sold and a reasonable allocation of Ecesis' overhead. Ecesis shall pay Polychem
by the tenth (10th) day of each month the royalties that accrued during the
previous month computed on the basis of payments received during such month. At
the time of such payment, Ecesis shall provide to Polychem a report of all sales
of Products completed during such month, the amount of payments received for
Products during such month, the cost of the Products sold in which payment was
received by Ecesis during such month, Ecesis allocation of its overhead with
respect to such Products and royalties paid to Polychem with respect thereto.

<PAGE>

          (b) Ecesis shall permit Polychem, or representatives of Polychem which
are reasonably acceptable to Ecesis, at Polychem's expense, to periodically
examine Ecesis's books, ledgers, and records during regular business hours for
the sole purpose of, and only to the extent necessary, to verify reports
furnished to Polychem pursuant to Subsection (a) above; provided that Polychem
delivers to Ecesis a written notice of Polychem's intention to conduct an
inspection not less than five (5) business days before the intended date of such
inspection. In the event that amounts due Polychem are determined to have been
underpaid by an amount greater than five percent (5%) of the amount actually
due, Ecesis shall pay the cost of such examination plus a penalty equal to
twenty-five percent (25%) of the underpayment. Any payment not made on or before
the due date shall accrue interest at a rate equal to one percent (1%) per
calendar month or, if less, the maximum rate permitted under applicable law.

          (c) Ecesis shall not have to pay Polychem rent for the use of
Polychem's real property located at Franklin Avenue and Grant Street,
Phoenixville, PA 19460 during the term of the License. On the Closing Date, the
parties shall enter into a short-term lease agreement for a portion of such real
property on commercially reasonable terms and market rental rates.

     1.3 Ownership. Subject to the License, Polychem shall continue to own all
right, title, and interest in and to all Intellectual Property, and no such
rights are granted to Ecesis under this Agreement, except as expressly provided
in this Agreement. Except to further the purposes contemplated under or to
exercise the rights expressly provided in this Agreement, the Intellectual
Property may not be sold, sublicensed, lent, leased, rented, assigned,
transferred, disassembled, reverse engineered or modified nor may any derivative
work be made of the Intellectual Property without the prior written agreement of
Polychem.

     1.4 Supply Agreement. During the term of the License, Polychem assigns to
Ecesis all of its rights under the Supply Agreement, dated March 20, 2002, among
Polychem, Ecesis, Ensinger Vekton, Inc. and Putnum Precision Molding, Inc. (the
"Supply Agreement") and Ecesis hereby assumes all of Polychem's duties and
obligations under the Supply Agreement.

     1.5 Confidentiality.

          (a) Polychem and Ecesis each agree that all information received by
one party from the other party (collectively, "Confidential Information"), shall
be received in strict confidence, used only for the express purposes set forth
in this Agreement, and not disclosed by the recipient party (except as required
by law or court order), its agents, or employees without the prior written
consent of the other party, unless such Confidential Information: (i) was in the
public domain at the time of disclosure; (ii) later became part of the public
domain through no act or omission of the recipient party, its employees, agents,
or permitted successors or assigns; (iii) was lawfully disclosed to the
recipient party by a third party having no obligation to the disclosing party;
(iv) was already known by the recipient party at the time of disclosure; (v) was
independently developed by the recipient without use of or access to such
Confidential Information; or (vi) is required to be disclosed to a government
agency or by law.

                                       2
<PAGE>

          (b) Each party's obligations of confidentiality, non-use, and
nondisclosure shall be fulfilled by using at least the same degree of care with
the other party's Confidential Information as it uses to protect its own
confidential information. This obligation shall continue in full force and
effect during the term of this Agreement and thereafter for a period of three
(3) years.

            ARTICLE II. PURCHASE AND SALE OF ASSETS AND LIABILITIES

     2.1 Sale of Assets.

          (a) Sale of Assets. At the Closing (as defined below), Polychem shall
transfer and sell to Ecesis all of Polychem's right, title and interest in and
to Polychem's Intellectual Property, customer orders and contracts, good will,
the name "Polychem" and all derivations thereof and other tangible and
intangible assets other than the assets set forth on Schedule 2.1 (the "Excluded
Assets") as of the Closing Date (the "Assets"), free of all liabilities,
obligations, claims, liens and encumbrances, whether absolute, accrued,
contingent or otherwise, except those expressly assumed by Ecesis as provided in
Section 2.4.

          (b) The aggregate consideration for the Assets (the "Purchase Price")
shall be (i) $500,000 in immediately available funds, (ii) $1,150,000 by
delivery of a Promissory Note in the form attached hereto as Exhibit "A" (the
"Promissory Note") (which Promissory Note shall be secured by a security
interest in the Assets of Ecesis pursuant to a Security Agreement in the form
attached hereto as Exhibit "B" (the "Security Agreement"), and (iii) by delivery
to Seller of 399,826 shares of Series C Preferred Stock of the Shareholder (the
"Series C Preferred") and warrants to purchase 382,500 shares of Common Stock of
the Shareholder (the "Warrant") held by Ecesis. As of December 31, 2001, the
Series C Preferred has a liquidation preference of $1,199,478 and accrued and
unpaid dividends of $118,303.

          (c) The transfer and sale of the Assets shall be effected by delivery
at the Closing of the following:

               (i) by Polychem to Ecesis, a bill of sale substantially in the
form attached hereto as Exhibit "C" (the "Bill of Sale");

               (ii) by Polychem to Ecesis, assignments with respect to all
customer orders and contracts (including without limitation the Supply
Agreement) and all Patents, Copyrights, Trade Secrets, Marks and Websites and
all applications therefor in which Polychem has any interest, all in recordable
form (each, an "Assignment," and collectively, the "Assignments");

               (iii) by Polychem and Shareholder, such other good and sufficient
instruments of conveyance and transfer as shall be necessary or appropriate in
Ecesis' sole discretion to vest in Ecesis good and valid title to the Assets
(collectively, the "Other Instruments"), as contemplated by this Agreement;

               (iv) by Ecesis to Polychem, the Purchase Price.

                                       3
<PAGE>

     2.2 Credits. In the event that Ecesis assumes any liability or obligation
of Polychem other than the Initial Assumed Liabilities and obtains a release of
Polychem's obligations with respect thereto, or otherwise discharges such
liability or obligations, the amount paid by Ecesis to discharge such liability
or obligation shall be credited against Ecesis' obligations under Section
2.1(b)(i) if occurring prior to the Closing Date and under the Promissory Note
as if Ecesis had made a prepayment thereunder in such amount if occurring
thereafter.

     2.3 Deposit. Contemporaneously with the execution and delivery of this
Agreement, Ecesis shall deposit with Polychem the sum of $150,000 (the
"Deposit"). At the Closing, the Deposit shall be released and credited toward
the Purchase Price as immediately available funds. If the Closing does not occur
as a result of a material breach of this Agreement by Ecesis, which such
material breach remains uncured for a period of 30 days following written notice
to Ecesis of such material breach, the Deposit shall be retained by Polychem as
liquidated damages for the failure of Ecesis to consummate the transactions
contemplated by this Agreement. If the Closing does not occur for any other
reason, the Deposit shall be promptly remitted to Ecesis. If the Closing does
not occur, the retention of the Deposit by Polychem shall be the sole and
exclusive remedy of Polychem and/or Shareholder for the failure of Ecesis to
consummate the transactions contemplated by this Agreement.

     2.4 Assumption of Liabilities. Subject to the terms and conditions of this
Agreement, at the Closing, Ecesis shall assume and agree to perform, pay or
discharge the liabilities and obligations of Polychem set forth in Schedule 2.4
(the "Initial Assumed Liabilities") and such other liabilities (the "Additional
Assumed Liabilities" and, together with the Initial Assumed Liabilities, the
"Assumed Liabilities") as Ecesis may voluntarily assume pursuant to Section 2.2
hereof pursuant to an assumption agreement, substantially in the form of Exhibit
"D" hereto (the "Assumption Agreement"). After the Closing, Ecesis may assume
further Additional Liabilities as provided in Section 2.2 pursuant to an
assumption agreement satisfactory to Ecesis and Polychem. Except as set forth in
this Section 2.4, the Assumption Agreement and any written agreements executed
by Ecesis and Polychem after the Closing, Ecesis shall not assume or be
responsible for any liabilities or obligations of Polychem. Following the
Closing, Polychem shall perform, pay or discharge when due all liabilities and
obligations relating to the Business, other than the Assumed Liabilities.

     2.5 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets as set forth on Schedule 2.5 which shall be prepared as of
Closing. Such Schedule shall be consistent with Section 1060 of the Code and the
applicable regulations related thereto. Such allocation shall be conclusive and
binding on Ecesis, Polychem and Shareholder for purposes of their respective
federal, state, local and foreign tax returns. Ecesis, Polychem and Shareholder
shall file all tax returns, including the forms required by Section 1060 of the
Internal Revenue Code of 1986, as amended consistent with such allocation.

                              ARTICLE III. CLOSING

     3.1 Closing. The closing of the transactions contemplated by this
Agreement, other than the license which shall take effect immediately in
accordance with Section 1.1, (the "Closing") shall take place at the offices of
Klehr, Harrison, Harvey, Branzburg & Ellers LLP, 260 South Broad Street,
Philadelphia, Pennsylvania, on the third (3rd) business day following approval
of such transactions by Shareholder's stockholders or such other date and place
as Ecesis and Polychem may agree. The date on which the Closing actually occurs
is referred to herein as the "Closing Date".

                                       4
<PAGE>

     3.2 Deliveries by Polychem and Shareholder. At the Closing, Polychem and
Shareholder shall deliver to Ecesis the following:

          (i) the Bill of Sale;

          (ii) the Assignments and Other Instruments;

          (iii) the officers' certificate referred to in Section 7.5;

          (iv) the secretary's certificates referred to in Section 7.6;

          (v) executed counterparts of any consents and approvals referred to in
Sections 4.6;

          (vi) all tangible Assets;

          (vii) all documents containing or relating to intellectual property
and other intangible Assets to be transferred and sold to Ecesis pursuant to
this Agreement;

          (viii) all books and records (including all computerized records and
other computerized storage media and the software used in connection therewith)
of the Business relating to the Assets (collectively, "Books and Records"),
including all Books and Records relating to the purchase of materials, supplies
and services for Polychem, dealings with customers and distributors of Polychem,
and employees of Polychem that Ecesis determines in its sole discretion to hire,
and duplicate copies of records relating to Polychem's bank accounts, but not
including any books and records that are or related to Excluded Assets;

          (ix) all other previously undelivered documents, instruments and
writings required to be delivered by Polychem or Shareholder to Ecesis at or
prior to the Closing pursuant to this Agreement or otherwise required in
connection herewith; and

          (x) evidence satisfactory to Ecesis that all liens and encumbrances on
the Assets have been removed.

     3.3 Deliveries by Ecesis. At the Closing, Ecesis shall deliver to Polychem
and Shareholder:

          (i) $500,000 (including full credit for the Deposit and any credits
under Section 2.4) by wire transfer of immediately available funds to an account
or accounts designated by Polychem;

          (ii) the fully executed Promissory Note and Security Agreement;

                                       5
<PAGE>

          (iii) certificates evidencing the Series C Preferred properly endorsed
for transfer and the original Warrant together with an executed assignment
thereof;

          (iv) an executed counterpart of the Assumption Agreement;

          (v) executed counterparts of any consents and approvals referred to in
Section 5.4; and

          (vi) all other previously undelivered documents, instruments and
writings required to be delivered by Ecesis to Polychem or Shareholder at or
prior to the Closing pursuant to this Agreement or otherwise required in
connection herewith.

                        ARTICLE IV. REPRESENTATIONS AND
                      WARRANTIES OF SELLER AND SHAREHOLDER

     Polychem and Shareholder jointly and severally represent and warrant to
Ecesis as follows:

     4.1 Organization, Etc. Polychem is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania. The Shareholder is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida. Polychem has the
power and authority to conduct its business as it is currently being conducted
and to own and lease the property and assets that it now owns and leases.
Polychem is qualified to do business in each jurisdiction in which the
properties owned or leased by it or the nature of its business makes
qualification or licensing as a foreign corporation necessary. The copies of the
certificate of incorporation and bylaws of Polychem, as previously delivered by
Polychem to Ecesis are complete and correct copies of such instruments as
currently in effect.

     4.2 Authorization. Each of Polychem and the Shareholder has all requisite
corporate power and authority to enter into, execute and deliver this Agreement
and any instruments and agreements contemplated herein (collectively, the
"Related Instruments") required to be executed and delivered by it pursuant to
this Agreement and to consummate the transactions contemplated hereby and
thereby. Each of Polychem and Shareholder has taken all action required by law,
its certificate of incorporation, bylaws, or other constitutive documents or
otherwise to authorize the execution and delivery of this Agreement and the
Related Instruments and the consummation of the transactions contemplated hereby
and thereby, except for the approval of the stockholders of the Shareholder. No
other act or proceeding on the part of Polychem or Shareholder is necessary to
authorize the execution and delivery of this Agreement or any of the Related
Instruments or the transactions contemplated hereby or thereby, except for the
approval of the stockholders of the Shareholder. This Agreement is, and each of
the Related Instruments, when executed and delivered by Polychem and Shareholder
to Ecesis at the Closing, will be a valid and binding obligation of Polychem and
Shareholder, enforceable against each of them in accordance with its terms.

     4.3 No Violation. Except as set forth on Schedule 4.3, neither the
execution and delivery by Polychem and Shareholder of this Agreement or any of
the Related Instruments, nor the consummation by Polychem and Shareholder of the
transactions contemplated hereby or thereby, will (i) violate any provision of
the certificate of incorporation, bylaws, or other

                                       6
<PAGE>

governing documents of Polychem, or (ii) violate, conflict with, or constitute a
default (or an event or condition which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or cause the acceleration of the
maturity of any liability or obligation pursuant to, or result in the creation
or imposition of any security interest, lien, charge or other encumbrance upon
any of the Assets under any note, bond, mortgage, indenture, deed of trust,
license, lease, contract, commitment, understanding, arrangement, agreement or
restriction of any kind to which Polychem or Shareholder is a party or by which
Polychem or Shareholder may be bound or affected or to which any of the Assets
may be subject, or (iii) violate any statute or law or any judgment, decree,
order, writ, injunction, regulation or rule of any court or governmental
authority.

     4.4 Capitalization; Subsidiaries. Shareholder owns 100% of the outstanding
capital stock of Polychem. Polychem does not, directly or indirectly, own or
control capital stock or other equity securities of any corporation,
partnership, limited liability company, limited liability partnership or other
entity or other right to purchase or any security convertible into or
exchangeable for, any such capital stock or other equity interest.

     4.5 No Undisclosed or Contingent Liabilities. Except for the Assumed
Liabilities, liabilities reflected on the balance sheet of Polychem dated as of
September 30, 2001 (the "Balance Sheet") and liabilities set forth on Schedule
4.5, Polychem has no liabilities or obligations of any nature (whether absolute,
accrued, contingent or otherwise and whether due or to become due) and, to
Polychem's and Shareholder's knowledge, there is no basis for the assertion
against Polychem of any such other liability or obligation except, in either
case, for liabilities and obligations of any nature (whether absolute, accrued,
contingent or otherwise and whether due or to become due) incurred in the
ordinary course of business since the date of the Balance Sheet.

     4.6 Consents and Approvals. Except for consents and approvals that have
been obtained and as set forth on Schedule 4.6 and the filing of the Proxy
Statement, Polychem is not required to obtain, transfer or cause to be
transferred any consent, approval, license, permit or authorization of, or make
any declaration, filing or registration with, any third party or any
governmental authority in connection with (a) the execution and delivery by
Polychem and Shareholder of this Agreement or the Related Instruments, (b) the
consummation by Polychem and Shareholder of the transactions contemplated hereby
or thereby or (c) the ownership and operation by Ecesis of the Assets.

     4.7 Good Title Conveyed, Etc. Except as set forth on Schedule 4.7 and
subject to obtaining the consents set forth in Schedule 4.6, Polychem has
complete and unrestricted power and the unqualified right to sell, assign,
transfer and deliver to Ecesis, and upon consummation of the transactions
contemplated by this Agreement, Ecesis will acquire good and valid title to, the
Assets, free and clear of all mortgages, pledges, liens, security interests,
conditional sales agreements, encumbrances or charges of any kind. Except as set
forth on Schedule 4.7, the Related Instruments, when duly executed and delivered
by Polychem to Ecesis at the Closing, will effectively vest in Ecesis good and
valid title to all of the Assets.

                                       7
<PAGE>

     4.8 No Brokers. Neither Polychem nor Shareholder has taken any action that
would give rise to any claim by any person for brokerage commissions, finder's
fees or similar payments relating to this Agreement or the transactions
contemplated hereby.

     4.9 Proxy Statement. The information supplied or to be supplied by Polychem
and Shareholder for inclusion in the proxy statement (the "Proxy Statement") to
be sent to the stockholders of the Shareholder in connection with the meeting of
stockholders to consider this Agreement, the sale of the Assets and the
transactions contemplated thereby (the "Shareholders' Meeting") shall not, on
the date the Proxy Statement is first mailed to the stockholders of the
Shareholder, at the time of the Shareholders' Meeting and on the Closing Date,
contain any statement which, at such time and in light of the circumstances
under which it is was made, is false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements made in the Proxy Statement not false or misleading, or omit to state
any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Shareholders'
Meeting which has become false or misleading. If at any time prior to the
Closing Date any event relating to Polychem, Shareholder or any of their
Affiliates, officers or directors should be discovered by Polychem which should
be set forth in any supplement to the Proxy Statement, Polychem shall promptly
inform Ecesis.

               ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER

     Ecesis represents and warrants to Polychem and Shareholder as follows:

     5.1 Organization, Etc. Ecesis is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Copies of the certificate of formation and initial operating agreement
of Ecesis have been delivered to Polychem, and such copies are complete and
correct and in full force and effect on the date of this Agreement.

     5.2 Authorization. Ecesis has all requisite power and authority to execute
and deliver this Agreement and the Related Instruments to which it is a party
and to consummate the transactions contemplated hereby and thereby. Ecesis has
taken all action required by law and its certificate of formation or initial
operating agreement or bylaws or otherwise to authorize the execution and
delivery of this Agreement and the Related Instruments to which it is a party
and to consummate the transactions contemplated hereby and thereby. This
Agreement is a valid and binding obligation of Ecesis, enforceable against
Ecesis in accordance with its terms. Each of the Related Instruments to which
Ecesis is a party, when executed and delivered by the parties thereto at the
Closing, will be a valid and binding obligation, enforceable against Ecesis in
accordance with its terms.

     5.3 No Violation. Neither the execution and delivery by Ecesis of this
Agreement and the Related Instruments to which it is a party, nor the
consummation by Ecesis of the transactions contemplated hereby or thereby, will
(i) violate any provision of the certificate of formation or initial operating
agreement of Ecesis or (ii) violate, conflict with, or constitute a default (or
an event or condition which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or cause the acceleration of the maturity of any
liability or obligation pursuant to, or result in the creation or imposition of
any security interest, lien, charge or other encumbrance upon any of the

                                       8
<PAGE>

property or assets of Ecesis under any note, bond, mortgage, indenture, deed of
trust, license, lease, contract, commitment, understanding, arrangement,
agreement or restriction of any kind or character to which Ecesis is a party or
by which it may be bound or affected or to which any of its property or assets
may be subject, or (iii) violate any statute or law or any judgment, decree,
order, writ, injunction, regulation or rule of any court or governmental
authority.

     5.4 Consents and Approvals. Except for consents and approvals that have
been obtained and as set forth on Schedule 5.4, Ecesis is not required to
obtain, transfer or cause to be transferred any consent, approval, license,
permit or authorization of, or make any declaration, filing or registration
with, any third party or any governmental authority in connection with (a) the
execution and delivery by Ecesis of this Agreement, (b) the consummation by
Ecesis of the transactions contemplated hereby or thereby, or (c) the ownership
and operation by Ecesis of the Assets.

     5.5 Good Title Conveyed, Etc. Ecesis has complete and unrestricted power
and the unqualified right to sell, assign, transfer and deliver to Polychem, and
upon consummation of the transactions contemplated by this Agreement, Polychem
will acquire good and valid title to, the Series A Preferred and the Warrant,
free and clear of all mortgages, pledges, liens, security interests, conditional
sales agreements, encumbrances or charges of any kind.

     5.6 No Brokers. Ecesis has not taken any action that would give rise to a
claim by any person for brokerage commissions, finder's fees or similar payments
relating to this Agreement or the transactions contemplated hereby.

                             ARTICLE VI. COVENANTS

     6.1 Access and Investigation. Between the date of this Agreement and the
Closing Date, Polychem and Shareholder will (a) afford Ecesis and its agents
full and free access to Polychem's personnel, properties, contracts, books and
records, and other documents and data, (b) furnish Ecesis and its agents with
copies of all such contracts, books and records, and other existing documents
and data as Ecesis may reasonably request and (c) furnish Ecesis and its agents
with such additional financial, operating and other data and information as
Ecesis may reasonably request.

     6.2 Operation of the Business. Between the date of this Agreement and the
Closing Date, Polychem and Shareholder will:

     (a) Conduct the Business only in the ordinary course of business;

     (b) Use commercially reasonable efforts to preserve intact the current
business organization, keep available the services of the current officers,
employees, and agents of Polychem, and maintain the relations and good will with
suppliers, customers, landlords, creditors, employees, agents, and others having
business relationships with Polychem;

     (c) Confer with Ecesis concerning operational matters of a material nature;
and

                                       9
<PAGE>

     (d) Otherwise report periodically to Ecesis concerning the status of the
Business, the Assets and the operations and finances of Polychem.

     6.3 Required Approvals. As promptly as practicable after the date of this
Agreement, Polychem and Shareholder will use commercially reasonable efforts to
obtain all consents and make any filings reasonably necessary in order to
consummate the transactions contemplated by this Agreement. Between the date of
this Agreement and the Closing Date, Ecesis, Polychem and Shareholder will (a)
cooperate with respect to all filings that any party hereto shall elect to make
or is required by law to make in connection with the transactions contemplated
by this Agreement and (b) cooperate in obtaining all consents identified in
Schedule 4.6 and Schedule 5.4.

     6.4 Exclusivity. Until such time, if any, as this Agreement is terminated
pursuant to Article IX, neither Polychem nor Shareholder will directly or
indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person relating
to any transaction involving the sale of the business or assets of Polychem or
any of the capital stock or membership interests of Polychem, or any merger,
consolidation, business combination, or similar transaction involving Polychem.

     6.5 Proxy Statement. As promptly as practicable after the execution of this
Agreement, Shareholder shall prepare and file with the Securities and Exchange
Commission (the "SEC") the Proxy Statement. The Proxy Statement shall include
the recommendations of the Board of Directors of Shareholder in favor of this
Agreement, the sale of the Assets and the transactions contemplated thereby.
Polychem and Shareholder shall use their reasonable efforts to cause the Proxy
Statement to be filed with the SEC and shall immediately deliver to Ecesis any
and all comments to the Proxy Statement received from the SEC upon receipt
thereof. As promptly as practicable after the filing of the final Proxy
Statement with the SEC, Polychem and Shareholder shall use their reasonable
efforts to cause the Proxy Statement to be disseminated to the stockholders of
Shareholder.

     6.6 Shareholders' Meeting. Shareholder shall take all necessary steps in
accordance with its articles of incorporation and by-laws to call, give notice
of, convene and hold the Shareholders' Meeting as soon as practicable after the
final Proxy Statement is filed and disseminated to the stockholders of
Shareholder for the purpose of approving this Agreement and the sale of the
Assets and for such other purposes as may be necessary. Unless this Agreement
shall have been validly terminated as provided herein, the Board of Directors of
Shareholder will (i) recommend to its stockholders the approval of this
Agreement, the sale of the Assets and the transactions contemplated thereby and
any other matters to be submitted to the stockholders of Shareholder in
connection therewith, to the extent that such approval is required by applicable
law in order to consummate such transactions, and (ii) use its reasonable, good
faith efforts to obtain the approval of its stockholders of this Agreement, the
sale of the Assets and the transactions contemplated thereby and to solicit from
its stockholders proxies in favor of such matters.

     6.7 Fiduciary Duty. Notwithstanding any other provision of this Agreement,
if the Board of Directors of Shareholder determines in good faith that it is
required to do so in order to comply with its fiduciary duties, the Board of
Directors may withdraw or modify its recommendation to the stockholders of
Shareholder and cause Shareholder or Polychem to take such action with respect
to the matters set forth in Sections 6.5 and 6.6 hereof as the Board of
Directors shall in good faith deem reasonably necessary or appropriate in
connection with such determination.

                                       10
<PAGE>

     6.8 Use of Name. At the Closing, Polychem shall cause an amendment to its
certificate of incorporation to be filed with the Secretary of State of the
Commonwealth of Pennsylvania changing its name to a name bearing no resemblance
and that is not confusingly similar to "Polychem." After the Closing, neither
Polychem nor Shareholder shall use or permit any of its or their Affiliates to
use such name or any variants or derivatives thereof or any other name that is
confusingly similar. Polychem shall execute and deliver to Ecesis, at or before
the Closing, all consents requested by Ecesis to enable Ecesis to use such name
and shall otherwise cooperate with Ecesis in connection therewith.

     6.9 Commercially Reasonable Efforts. Between the date of this Agreement and
the Closing Date, Ecesis, Polychem and Shareholder will use commercially
reasonable efforts to cause the conditions in Articles VII and VIII to be
satisfied.

                ARTICLE VII. CONDITIONS TO OBLIGATIONS OF ECESIS

     The obligations of Ecesis to purchase the Assets are subject to the
satisfaction, at or before the Closing, of each of the following conditions:

     7.1 Representations and Warranties. The representations and warranties of
Polychem and Shareholder contained herein, and the statements contained in any
schedule, instrument, list, certificate or writing delivered by Polychem and
Shareholder pursuant to this Agreement shall be true, complete and accurate in
all material respects as of the date when made and, as of the Closing Date as
though such representations and warranties were made at and as of such dates,
except for any changes expressly permitted by this Agreement.

     7.2 Performance. Polychem and Shareholder shall have performed and complied
in all material respects with all covenants, agreements, obligations and
conditions required by this Agreement to be performed or complied with by
Polychem and Shareholder at or prior to the Closing. Polychem and Shareholder
agree that the Assets are unique and that damages would not be an adequate
remedy for their breach of this Agreement. Therefore, in the event that Polychem
and/or Shareholder fail to refuse to satisfy conditions to Closing, or to
otherwise perform their obligations hereunder, Polychem and Shareholder agree
that Ecesis may enforce specific performance of this Agreement by appropriate
proceedings in any court.

     7.3 No Proceeding or Litigation. There shall not be threatened, instituted
or pending any suit, action, investigation, inquiry or other proceeding by or
before any court or governmental or other regulatory or administrative agency or
commission requesting or looking toward an order, judgment or decree that (a)
restrains or prohibits the consummation of the transactions contemplated hereby,
(b) could have a material adverse effect on Ecesis' ability to exercise control
over or manage the Assets after the Closing or (c) could have a Material Adverse
Effect.

                                       11
<PAGE>

     7.4 Officers' Certificate. Polychem shall have delivered to Ecesis a
certificate, dated as of the Closing Date, executed by its Chief Executive
Officer and Chief Financial Officer certifying the fulfillment of the conditions
specified in Sections 7.1, 7.2, and 7.3.

     7.5 Secretary's Certificates. Each of Polychem and Shareholder shall have
delivered to Ecesis a certificate, dated as of the Closing Date, executed by its
Secretary, certifying as to its certificate of incorporation, bylaws, or other
governing documents and resolutions adopted by its board of directors with
respect to the transactions contemplated hereby.

     7.6 Documents. The Related Instruments and all other documents to be
delivered by Polychem and Shareholder to Ecesis at the Closing shall have been
so delivered and shall be satisfactory in form and substance to Ecesis.

     7.7 Consents and Approvals. All licenses, permits, consents, approvals and
authorizations of all third parties and governmental bodies and agencies shall
have been obtained that are necessary in connection with (a) the execution and
delivery of this Agreement or the Related Instruments, (b) the consummation of
the transactions contemplated hereby or thereby or (c) the ownership and
operation by Ecesis of the Assets, and copies of all such licenses, permits,
consents, approvals and authorizations shall have been delivered to Ecesis.

     7.8 Shareholder Approval. The stockholders of Shareholder shall have
approved this Agreement, the sale of the Assets to Ecesis and the transactions
contemplated thereby.

                    ARTICLE VIII. CONDITIONS TO OBLIGATIONS
                           OF POLYCHEM AND SHAREHOLDER

     The obligations of Polychem and Shareholder under this Agreement are
subject to the satisfaction, at or before the Closing, of each of the following
conditions:

     8.1 Representations and Warranties. The representations and warranties of
Ecesis contained herein shall be true, complete and accurate in all material
respects as of the date when made and at and as of the Closing Date as though
such representations and warranties were made at and as of such date, except for
any changes expressly permitted by this Agreement. Notwithstanding anything to
the contrary set forth herein, if as of the Closing Date either party knew, or
through the exercise of reasonable diligence should have known, of any breach by
the other party of a representation or warranty and proceeds with Closing, such
breach shall be deemed waived.

     8.2 Performance. Ecesis shall have performed and complied in all material
respects with all covenants, agreements, obligations and conditions required by
this Agreement to be so performed or complied with by it at or prior to the
Closing, including without limitation timely payment of royalties.

     8.3 No Injunction. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or other order issued by a court
of competent jurisdiction restraining or prohibiting the consummation of the
transactions contemplated hereby.

                                       12
<PAGE>

     8.4 Shareholder Approval. The stockholders of Shareholder shall have
approved this Agreement, the sale of the Assets to Ecesis and the transactions
contemplated thereby.

                            ARTICLE IX. TERMINATION

     9.1 Termination Events. This Agreement may, by notice given prior to or at
the Closing, be terminated:

     (a) By either Ecesis or Polychem if a material breach of any provision of
this Agreement has been committed by the other party and such breach has not
been waived;

     (b) By either Ecesis or Polychem if the Board of Directors of Shareholder
determines in good faith that its fiduciary duties require that it refrain from
recommending (or withdraw or modify adversely to Ecesis its prior
recommendation) that the stockholders of Shareholder approve the transactions
contemplated by this Agreement;

     (c) (i) by Ecesis if any of the conditions in Article VI or VII has not
been satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Ecesis to comply with
its obligations under this Agreement) and Ecesis has not waived such condition
on or before the Closing Date; or (ii) by Polychem, if any of the conditions in
Article VIII has not been satisfied of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the failure of
Polychem or Shareholder to comply with its obligations under this Agreement) and
Polychem has not waived such condition on or before the Closing Date;

     (d) By mutual consent of Ecesis and Polychem; or

     (e) By either Ecesis or Polychem if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before 120 days
from the date hereof or such later date as the parties may agree upon.

     9.2 Effect of Termination. Each party's right of termination under Section
9.1 is in addition to any other rights it may have under this Agreement or
otherwise, and the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to Section 9.1, all further
obligations of the parties under this Agreement will terminate, except that the
obligations in Section 11.2 will survive; provided, however, that if this
Agreement is terminated by a party because of the breach of the Agreement by the
other party or because one or more of the conditions to the terminating party's
obligations under this Agreement is not satisfied as a result of the other
party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired. If the Closing does not occur (a) Ecesis' aggregate
liability for damages to Polychem or Shareholder for any breach of this
Agreement shall be limited to the amount of the Deposit plus reasonable
attorneys fees and costs and (b) the aggregate liability of Polychem and
Shareholder to Ecesis for damages for any breach of this Agreement shall be
limited to $150,000 plus reasonable attorneys fees and costs.

                                       13
<PAGE>

                  ARTICLE X. INDEMNIFICATION AND CONTRIBUTION

     10.1 Survival of Representations and Covenants. All representations and
warranties made by any party to this Agreement or pursuant hereto shall survive
the Closing hereunder and any investigation made by or on behalf of any party
hereto for a period of two years following the Closing Date; provided, however,
that in the case of fraud, all such representations and warranties shall survive
indefinitely and provided that the representations and warranties under Sections
4.1, 4.2, 4.3(i) and (iii), 4.8, 5.1, 5.2, 5.3(i) and (iii) and 5.6 shall
survive indefinitely. Subject to Section 9.2, the Closing shall not have the
effect of terminating any covenant or obligations of the parties hereto which
are applicable after the Closing.

     10.2 Indemnification.

     (a) Subject to the terms and conditions of this Article X, Polychem and
Shareholder shall indemnify, defend and hold harmless Ecesis from and against
all demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses, including interest, penalties and reasonable
attorneys' fees and expenses (collectively, "Damages"), asserted against,
resulting to, imposed upon or incurred by Ecesis, directly or indirectly, by
reason of or resulting from (i) other than the Assumed Liabilities, any
liabilities or obligations of Polychem (whether absolute, accrued, contingent or
otherwise) existing as of the Closing or arising out of facts, conditions or
circumstances existing at or prior thereto, whether or not such liabilities,
obligations or claims were known at the time of the Closing, including without
limitation, any liability or obligation arising out of the ownership of the
Assets or the conduct of the Business prior to the Closing; (ii) a breach of any
representation, warranty, covenant or agreement of Polychem contained in or made
pursuant to this Agreement or any Related Instrument; and (iii) any claim
asserted against Ecesis or any of its Affiliates with respect to any taxes
relating to Polychem's operations or properties (collectively, "Ecesis'
Claims").

     (b) Subject to the terms and conditions of this Article X, Ecesis shall
indemnify, defend and hold harmless Polychem and Shareholder from and against
all Damages asserted against, resulting to, imposed upon or incurred by
Polychem, directly or indirectly, by reason of or resulting from (i) the Assumed
Liabilities; and (ii) a breach of any representation, warranty, covenant or
agreement of Ecesis contained in or made pursuant to this Agreement
(collectively, "Polychem's Claims") (Ecesis' Claims and Polychem's Claims
collectively referred to as "Claims," each, a "Claim").

     (c) Notwithstanding any provision in this Article X to the contrary, no
party hereto shall be required to indemnify any Person pursuant to this Article
X unless and until the aggregate amount of Claims as to which indemnification
would be required from such party (but for the provisions of this Section
10.2(c)) exceeds $25,000 (the "Indemnity Threshold"), and thereafter such party
shall be required in the manner and to the extent otherwise provided in this
Article X, to indemnify any Person and to pay all amounts required to be paid by
such party in respect of such Claims, irrespective of the Indemnity Threshold.
The amount of each Claim shall be adjusted to provide the Indemnifying Party (as
defined below) the benefit of (i) any insurance coverage provided with respect
to a Claim and (ii) any tax benefit realized by the Indemnified Party (as
defined below) with respect to a Claim.

                                       14
<PAGE>

     10.3 Third Party Claims. The obligations and liabilities of Ecesis, on the
one hand, and Polychem and Shareholder, on the other hand, as indemnifying
parties (each, an "Indemnifying Party") to indemnify Polychem and the
Shareholders and Ecesis, respectively (each, an "Indemnified Party"), under
Section 10.2 with respect to Claims made by third parties shall be subject to
the terms and conditions set forth in this Section 10.3. The Indemnified Party
shall give written notice to the Indemnifying Party of any Claim with respect to
which it seeks indemnification promptly after the discovery by such party of any
matters giving rise to such Claim for indemnification; provided that the failure
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under Section 10.2 unless it shall have
been prejudiced by the omission to provide such notice. In case any action,
suit, claim or proceeding is brought against an Indemnified Party, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
to the extent that it may wish, to assume the defense thereof, with counsel
reasonably satisfactory to the Indemnified Party. After notice from the
Indemnifying Party of its election so to assume the defense thereof, the
Indemnifying Party will not be liable to the Indemnified Party under Section
10.2 for any legal or other expense subsequently incurred by the Indemnified
Party in connection with the defense thereof; provided, however, that (a) if the
Indemnifying Party shall elect not to assume the defense of such claim or action
or (b) if the Indemnified Party reasonably determines that there may be a
conflict between the positions of the Indemnifying Party and the Indemnified
Party in defending such claim or action, then separate counsel shall be entitled
to participate in and conduct such defense, and the Indemnifying Party shall be
liable for any reasonable legal or other expenses incurred by the Indemnified
Party in connection with such defense. The Indemnifying Party shall not be
liable for any settlement of any action, suit, claim or proceeding effected
without its written consent, which consent shall not be unreasonably withheld or
delayed. The Indemnifying Party shall not, without the Indemnified Party's prior
written consent, settle or compromise any action, suit, claim or proceeding to
which the Indemnified Party is a party or consent to entry of any judgment in
respect thereof, unless the Indemnifying Party discharges or assumes any and all
liabilities or obligations in connection with such settlement and the settlement
(i) includes an unconditional release of the Indemnified Party from all
liability, (ii) requires only the payment of money and (iii) does not include an
admission of guilt.

     10.4 Contribution. In the event that the foregoing indemnity is unavailable
to an Indemnified Party for any reason, the Indemnifying Party shall contribute
to any such Damages and shall do so in such proportion as is appropriate to
reflect the relative fault of each party in connection with the conduct that
resulted in the Damages. The parties agree that it would not be just or
equitable if contributions were determined by pro rata allocation or by any
other method of allocation that does not take account of relative fault and
other equitable considerations.

     10.5 Remedies Cumulative. Except as expressly provided in this Agreement,
the remedies provided herein shall be cumulative and shall not preclude
assertion by any party hereto of any other rights or the seeking of any other
remedies against any other party hereto.

                    ARTICLE XI. NONCOMPETE AND NONDISCLOSURE

     11.1 Noncompetition. Polychem and the Shareholder covenant and agree that,
for a period of five (5) years after the Closing Date, Polychem and the
Shareholder shall not, anywhere in the world, directly or indirectly engage in,
assist or have an interest in (whether as

                                       15
<PAGE>

proprietor, partner, investor, lender, shareholder, member, officer, director or
any other type of owner or principal whatsoever), or enter into the employment
of or act as an agent for, or advisor or consultant to, any Person engaged in
the business of manufacturing, marketing and distributing products which compete
with the Products. For purposes hereof, the term "shareholder" shall not include
beneficial ownership of less than three percent (3%) of the combined voting
power of all issued and outstanding voting securities of a publicly-held
corporation whose stock is, or at the time of acquisition of such securities
was, traded on a major stock exchange or quoted on NASDAQ.

     11.2 Nondisclosure. Polychem and the Shareholder covenant and agree that
they will not at any time following disclose, directly or indirectly, or make
available to any Person, or in any manner use for their own benefit, any
Confidential Information or trade secrets relating to the Products or the
Business, including, without limitation, business strategies, operating plans,
acquisition strategies (including the identities of (and any other information
concerning) possible acquisition candidates), pro forma financial information,
market analysis, acquisition terms and conditions, personnel information,
product information (whether existing, former, or proposed), trade secrets,
sources of leads and methods of obtaining new business, know-how, customer lists
and relationships, supplier lists and relationships, manufacturing and
distribution methods or any other methods of doing and operating the Business,
or other non-public proprietary and confidential information relating to the
Business, except to the extent that such information (i) is obtained from a
third party whom the disclosing party has no reason to believe is bound by a
duty of confidentiality, (ii) relates to information that is or becomes
generally known to the public other than as a result of a breach of this
Agreement, or (iii) is required to be disclosed by law or judicial
administrative process (in which case prior to such disclosure the disclosing
party shall promptly provide prior written notice of such required disclosure to
Ecesis in order to afford Ecesis the opportunity to seek an appropriate
protective order preventing such disclosure).

     11.3 Injunctive Relief. Polychem and the Shareholder agree that any breach
of this Article XI by them will cause irreparable damage to the business of
Ecesis and that in the event of such breach Ecesis shall have, in addition to
any and all remedies of law, the right to an injunction, specific performance or
other equitable relief in any court of competent jurisdiction to prevent the
violation of his obligations hereunder. Nothing herein contained shall be
construed as prohibiting Ecesis from pursuing any other remedy available for
such breach or threatened breach. The prevailing party in any litigation arising
under this Article XI shall be entitled to recover his or its attorneys' fees
and expenses in addition to all other available remedies.

                           ARTICLE XII. MISCELLANEOUS

     12.1 Press Releases and Public Announcements. The parties shall cooperate
in the preparation of a joint press release to be issued following the Closing.
Unless required by law, Ecesis, on the one hand, nor Polychem or Shareholder, on
the other hand, shall issue any press release or make any public announcement
relating to the subject matter of this Agreement prior to the Closing without
the prior written approval of the other party.

     12.2 Confidentiality. Polychem, Shareholder and Ecesis shall hold, and
shall cause their respective members, employees, consultants and advisors to
hold, in strict confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of

                                       16
<PAGE>

law, all documents and information concerning the other parties furnished to it
by any other party or its representatives in connection with the transactions
contemplated by this Agreement (except to the extent that such information shall
be shown to have been (a) previously known by the party to which it was
furnished, (b) in the public domain through no fault of such party or (c) later
lawfully acquired from other sources by the party to which it was furnished),
and each party shall not release or disclose such information to any other
person, except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors in connection with the transactions contemplated by
this Agreement. Each party shall be deemed to have satisfied its obligation to
hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.

     12.3 Further Assurances. From time to time, at the request of Ecesis and
without further consideration, Polychem and Shareholder shall execute and
deliver to Ecesis such documents and take such other action as Ecesis may
reasonably request in order to consummate the transactions contemplated hereby
and to vest in Ecesis good and valid title to the Assets.

     12.4 Parties in Interest. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by the respective successors and permitted
assigns of the parties hereto. Except as otherwise expressly provided herein,
the rights and obligations of Ecesis hereunder may not be assigned without the
prior written consent of Polychem and Shareholder, and the rights and
obligations of Polychem and Shareholder hereunder may not be assigned without
the prior written consent of Ecesis.

     12.5 Entire Agreement. This Agreement, the exhibits, the schedules and
other writings among the parties hereto contain the entire understanding of the
parties with respect to the subject matter hereof and thereof and supersede all
prior understandings and agreements with respect to the subject matter hereof
and thereof, including without limitation, any and all term sheets between the
parties hereto.

     12.6 Amendments and Waivers. No consent hereunder may be given and no
provision hereof may be waived except by a written instrument signed by the
party to be charged with such consent or waiver. This Agreement may not be
amended except by a written instrument duly executed by all of the parties
hereto. Any amendment or waiver effected in accordance with this Section 12.6
shall be binding upon all of the parties hereto.

     12.7 Headings. The Article and Section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

     12.8 Notices. All notices, claims, certificates, requests, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given if delivered personally, mailed (registered or certified mail,
postage prepaid, return receipt requested) or by facsimile transmission with
written confirmation (if a copy of such facsimile transmission is
contemporaneous sent by first class mail) as follows:

                                       17
<PAGE>

<TABLE>
<CAPTION>
<S>                                              <C>
If to Ecesis:                                   Ecesis LLC
                                                Franklin Avenue and Grant Street
                                                Phoenixville, PA  19460
                                                Attention: Paul A. DeJuliis, President
                                                Facsimile No.:  (610) 935-7151

with a copy to:                                 McCausland, Keen & Buckman
                                                Radnor Court, Suite 160
                                                259 North Radnor-Chester Road
                                                Radnor, PA 19087
                                                Attention:  Marc S. Maser, Esquire
                                                Facsimile No.:  (610) 341-1099

If to Polychem or Shareholder:                  Polychem Corporation
                                                Franklin Avenue and Grant Street
                                                Phoenixville, PA  19460
                                                Attention:  Edward F. Sager, Jr., President
                                                Facsimile No.:  (610) 935-7151

with a copy to:                                 Klehr, Harrison, Harvey, Branzburg & Ellers LLP
                                                260 South Broad Street
                                                Philadelphia, PA  19102
                                                Attention:  Lawrence D. Rovin, Esquire
                                                Facsimile No.:  (215) 568-6603
</TABLE>

or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above,
provided that notice of a change of address shall be deemed given only upon
receipt.

     12.9 Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania,
without regard to its or any other jurisdiction's conflicts of laws principles.
Any legal action or proceeding with respect to this Agreement or for recognition
and enforcement of any judgment in respect hereof brought by any party hereto or
its successors or assigns shall be brought and determined in the federal or
state courts located in Philadelphia, Pennsylvania, and each party hereto
submits with regard to any such action or proceeding for itself and in respect
to its property, generally and unconditionally, to the exclusive jurisdiction of
such courts, and agrees that service of process in any such action or proceeding
shall be effective if mailed to such party at the address specified herein. To
the fullest extent permitted by law, each party hereto irrevocably waives, and
agrees not to assert, by way of motion, as a defense, counterclaim or otherwise,
in any action or proceeding with respect to this Agreement any claim that (a) it
is not personally subject to the jurisdiction of such courts for any reason, (b)
that it or its property is exempt or immune from jurisdiction of any court or
from any legal process commenced in such courts (whether through service of
notice, attachment prior to judgment, attachment in aid of execution of
judgment, execution of judgment or otherwise), (c) the suit, action or
proceeding in any such court is brought in an inconvenient forum, (d) the venue
of such suit, action or proceeding is improper and (e) this Agreement, or the
subject matter hereof, may not be enforced in or by such courts.

                                       18
<PAGE>

     12.10 Third Parties. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give to any person, other than the parties
hereto and their successors or permitted assigns, any rights or remedies under
or by reason of this Agreement.

     12.11 Counterparts. This Agreement may be executed by facsimile and in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

     12.12 Expenses. Each party hereto will bear its own costs and expenses
(including fees and expenses of legal counsel, accountants, investment bankers,
brokers or other representatives or consultants) incurred in connection with
this Agreement and the transactions contemplated hereby.

     12.13 Construction. Ecesis, Polychem and Shareholder have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement will be
construed as if drafted jointly by the parties hereto and no presumption or
burden of proof will arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.

     12.14 Incorporation of Exhibits and Schedules. The exhibits and the
schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.

     12.15 Right of Set-off. Notwithstanding any provision hereof to the
contrary, Ecesis shall be entitled to set-off (i) any amounts due to Ecesis from
Polychem or from Shareholder hereunder, whether by reason of indemnification
under Section 10.2(a), or otherwise, against (ii) amounts due to Polychem
hereunder (including without limitation indemnification under Section 10.2(b) or
amounts due under the Promissory Note). Any set-off shall be applied against
amounts payable to Polychem or Shareholder in the chronological order all
amounts of every kind payable to Polychem or Shareholder are due until the
set-off is complete. Amounts due to Polychem or Shareholder may be set off
against amounts due from Polychem or Shareholder. Notwithstanding any provision
hereof or of the Promissory Note to the contrary, upon the occurrence of any
event or existence of any condition which Ecesis reasonably believes will result
in a claim for indemnification under Section 10.2(a), Ecesis may withhold from
amounts otherwise due under the Promissory Note an amount equal to Ecesis'
reasonable estimate of the amount of such claim until such time as the actual
amount of Ecesis' indemnification claim, and right of set-off hereunder, is
determined.

                       ARTICLE XIII. OTHER DEFINED TERMS

     13.1 Other Defined Terms. As used in this Agreement, the following terms
have the meanings indicated:

          "Affiliate" of a specified person means a person that directly or
     indirectly through one or more intermediaries, controls, is controlled by,
     or is under common control with, the person specified.

          "control", for the purposes of the definitions of Affiliate and
     Related Person, means the possession, direct or indirect, of the power to
     direct or cause the direction of the management and policies of a Person,
     whether through the ownership of voting securities, by contract or
     otherwise, and shall be construed as such term is used in the rules
     promulgated under the Securities Act.

                                       19
<PAGE>

          "Copyrights" means all registered and unregistered copyrights in both
     published works and unpublished works.

          "including" means including but not limited to.

          "Intellectual Property" shall mean any and all intellectual property
     now or hereafter owned by or licensed to Polychem by third parties
     including, without limitation, any and all inventions, Patents, know-how
     (including without limitation formulas, processes, techniques, methods,
     technology, products, apparatuses, materials and compositions), trademarks,
     trademark registrations, trademark applications, service marks, trade names
     and all other names and slogans embodying business or product, goodwill (or
     both), copyrights, mask works, Trade Secrets, computer software,
     documentation, instruction manuals, operating manuals, method plans,
     procedures, models, molds, specifications, Websites and all other
     intellectual property rights, whether or not subject to statutory
     registration or protection.

          "Marks" means Polychem's name, all assumed fictional business names,
     trading names, registered and unregistered trademarks, service marks, and
     applications therefore.

          "Material Adverse Effect" means any material adverse effect on the
     operations, financial condition, assets, liabilities, earnings or prospects
     of the Business, the Assets or the ownership or operation of the Business
     or the Assets by the Ecesis.

          "Patents" means all patents, patent applications, and inventions and
     discoveries that may be patentable.

          "Person" means an individual, a partnership, corporation, limited
     liability company, limited liability partnership, trust, unincorporated
     organization, other entity or group.

          "Products" means those plastic products currently being produced and
     sold by Polychem, as described on Exhibit "E" hereto.

          "Trade Secrets" means all know-how, trade secrets, confidential or
     proprietary information, customer lists, software, technical information,
     data, process technology, plans, drawings, designs, blue prints and molds.

          "Websites " means all rights in internet websites (including the
     content thereof) and internet domain names presently used by Polychem.

                                       20
<PAGE>

         IN WITNESS WHEREOF, this License and Asset Purchase Agreement has been
duly executed and delivered by the undersigned as of the date first written
above.



                                           Ecesis LLC


                                           By:__________________________________
                                              Name: Paul A. DeJuliis
                                              Title: President

                                           Polychem Corporation


                                           By:__________________________________
                                              Name: Edward F. Sager, Jr.
                                              Title: President


                                           ConMat Technologies, Inc.


                                           By:__________________________________
                                              Name: Edward F. Sager, Jr.
                                              Title: President



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>ex10-21.txt
<DESCRIPTION>EXHIBIT 10.21
<TEXT>
<PAGE>

                                                                   Exhibit 10.21

                          SUPPLY AND EQUIPMENT PURCHASE
                                    AGREEMENT


         This Supply and Equipment Purchase Agreement (this "Agreement") is made
and entered into as of March __, 2002 (the "Effective Date") among ENSINGER
VEKTON, INC., a New Jersey corporation ("Vekton"), PUTNAM PRECISION MOLDING,
INC., a Connecticut corporation ("PPM" and, together with Vekton, "Supplier"),
POLYCHEM CORPORATION, a Pennsylvania corporation ("Polychem"), and ECESIS, LLC,
a Delaware limited liability company ("ECESIS" and, together with Polychem,
"Purchaser").

                                    PREAMBLE


         Polychem, as part of its business, engages in the manufacturing of
molded plastic products, including wastewater treatment and cast nylon buckets
(the "Polychem Products"). Polychem's business of manufacturing Polychem
Products is referred to hereinafter as the "Business".

         Purchaser desires to purchase from Supplier, during the term of this
Agreement, all of its requirements of the products listed on Exhibit A (as such
schedule may be amended from time to time in accordance with the terms hereof or
by mutual agreement of the parties, the "Products"), and Supplier desires to
supply, sell and provide the Products to Purchaser, all upon the terms and
conditions of this Agreement;

         In addition, in order to enable Supplier to produce sufficient
quantities of Products to meet its obligations hereunder, Polychem desires to
sell to Supplier, and Supplier desires to purchase from Polychem, certain of
Polychem's assets as identified in Section 12 hereof, all upon the terms and
subject to the conditions set forth herein.

         Therefore, the parties agree as follows with the intent to be legally
bound.

                                    AGREEMENT

         1.       Purchase and Sale of Products.

         1.1 General. During the Term (as defined in Section 7.1 below),
Purchaser will place orders for and will purchase from Supplier all of its
requirements and all requirements of the Affiliates (as defined below) of
Polychem and ECESIS for Products, which purchases shall not total less than
$2,500,000 during any Contract Year (as defined below) during the Initial Term
(as defined in Section 7.1 below) (the "Purchase Commitment"). The Purchase
Commitment will be on a take-or-pay basis. If, during any Contract Year, the
Purchaser fails to meet the Purchase Commitment for such year, Purchaser shall
pay the Supplier, within 15 days after the end of such Contract Year, an amount
(the "Penalty Amount") equal to the difference between (a) the full Purchase
Commitment ($2,500,000) less the Direct Cost (as defined below) that Supplier in
good faith determines it would have incurred in order to produce $2,500,000 of
Products during such Contract Year (assuming that Purchaser had purchased the
full Purchase Commitment by ordering the respective Products in the same
proportion as the Products that Purchaser actually ordered during such Contract
Year), and (b) the amount of Products actually purchased by Purchaser during
such Contract Year less Supplier's actual Direct Cost for such purchased
Products; provided, however, that the Penalty Amount for any Contract Year shall
not be less than 15% of the difference between (x) the full Purchase Commitment
($2,500,000) and (y) the actual purchases made by Purchaser during such Contract
Year. For purposes of calculating the amount of Products actually Purchased by
Purchaser during any given Contract Year (other than the first Contract Year),
Purchaser shall be entitled to include any purchases of Products actually made
during the previous Contract Year to the extent that such purchases exceeded the
Purchase Commitment during such Contract Year.


<PAGE>

         For purposes of this Agreement, (i) "Direct Cost" means the standard
cost for each Product, comprised of the sum of material, direct labor and
overhead costs; (ii) "Contract Year" shall mean the twelve-month (12) period
commencing on March 1 of a calendar year (or, in the case of the initial
Contract Year, the Effective Date) and ending on the last day of February of the
following calendar year; and (iii) "Affiliate" of Purchaser shall mean Polychem,
ECESIS, Conmat Technologies, Inc. d/b/a Conmatech.com, the parent of Polychem
("Parent"), and any other person or entity controlling, controlled by or under
common control with Polychem or ECESIS.

         1.2 Delivery Term. Except as may be otherwise agreed between the
parties, all Products are sold to Purchaser FCA (INCOTERMS 2000) ("FCA") the
facility of Vekton located at Grenloch, New Jersey or the facility of PPM
located at Putnam, Connecticut (as applicable) (the "Supplier Facility").

         1.3 Terms and Conditions of Sale. Unless otherwise stated in this
Agreement, all sales of Products to Purchaser shall be governed by the
Supplier's then applicable Standard Terms and Conditions of Sale, a copy of the
current version of which is attached hereto as Exhibit B (the "Terms and
Conditions"), as the same may be amended from time to time.

         1.4 Credit for Purchases. For purposes of Section 1.1, Products shall
be deemed to have been purchased on the date on which such Products are shipped
by Supplier, provided that Products shipped to Purchaser during such Contract
Year pursuant to an invoice that is not paid within 60 days from the date of the
invoice shall not be deemed to have been purchased during such Contract Year. If
any Products are scheduled to be shipped during a given Contract Year but are
not actually shipped until the following Contract Year and such delay in
shipping did not result from any act or failure to act of Purchaser, then, for
purposes of this Section only, the Products shall be deemed to have been shipped
as of the originally scheduled shipping date.

         1.5 Molds. The parties acknowledge that Purchaser will provide Supplier
with certain proprietary molds owner by Purchaser (the "Molds") to enable
Supplier to perform its obligations under this Agreement and hereby grants
Supplier the full right to use such Molds to provide Purchaser with Products
hereunder. Purchaser shall retain full responsibility for maintenance and repair
of the Molds at its sole expense. The Molds will be stored and used at the
Supplier's facility or facilities but shall remain the sole property of the
Purchaser except as otherwise set forth herein. Notwithstanding the foregoing,
during the term of this Agreement, Purchaser shall not be entitled to, and shall
not, move the Molds from Supplier's facility or facilities.

                                      -2-
<PAGE>

         2. Purchase Orders. Products may be purchased by Purchaser at any time
and from time to time through the issuance of purchase orders. Notwithstanding
that a purchase order may not refer to this Agreement, any purchase order for
Products issued during the Term will be deemed to have been issued pursuant to
this Agreement and will be governed by the terms and conditions of this
Agreement; provided that in the event any terms and conditions of a purchase
order are contrary to or in conflict in any manner with the terms and conditions
of this Agreement, this Agreement will control and supersede to the extent of
any such conflicting terms and conditions, unless the parties expressly agree to
the contrary in writing. All purchase orders for Products submitted will state
the following information as applicable:

                  (i) purchase order number by which such order shall be
identified;

                  (ii) description of Products by type, name or number, which
may include drawings and/or specifications;

                  (iii) quantity or lots and assortments ordered, including
packaging and inspection requirements;

                  (iv) desired delivery dates and quantities or lots to be
received on each such date; and

                  (v) the shipping address to which the Products are to be
delivered.

         3. Delivery, Taxes and Inspection.

         3.1. Delivery and Inspection. Supplier will arrange for delivery of the
Products (at Purchaser's cost) in accordance with Purchaser's written
instructions, to the address specified in the purchase order, and title to, and
risk of loss or damage to, the Products will pass to Purchaser upon delivery by
Supplier, FCA Supplier Facility. The Initial Price (as defined in Section 4.1)
and any Reset Price exclude any and all insurance, shipping, freight, packing
and other delivery charges, all of which charges shall be paid by Purchaser upon
receipt of an invoice therefor from the Supplier. Delivery of the Products to
the first carrier shall constitute delivery to Purchaser, whereupon risk of loss
is transferred to Purchaser, and all claims for loss or damage in transit or for
non-delivery shall be made by Purchaser against the carrier. At Supplier's
option, Products may be shipped in advance of the requested shipment date or in
installments unless otherwise instructed in the purchase order. All delivery
information (including time for shipment) is approximate. Supplier's sole
responsibility is to use reasonable commercial efforts to meet specified
shipment dates. Purchaser expressly absolves Supplier from any liability for any
loss or damage resulting from a failure to deliver or delays in delivery caused
by any conditions related to, or caused by, failure to process or inaccurate
processing of time-sensitive information and/or mechanisms, a labor dispute
(e.g. strike, slowdown or lockout), fire, flood, governmental act or regulation
(e.g. denial of export licenses), riot, inability to obtain supplies or shipping
space, plant breakdown, power failure, delay or interruption of carriers,
accidents, acts of God or other causes beyond Supplier's control.
notwithstanding the above, Supplier shall not be liable for any damage or
penalties whatsoever, whether indirect, incidental, special or consequential,
resulting from Supplier's failure to deliver or delay in delivery for any
reason. Overages and shortages of 10% or less ("Permitted Shortages") are
allowed. Within 30 business days of receipt, Purchaser shall inspect the
Products. Unless Purchaser notifies Supplier in writing of any nonconformities
within 45 business days of receipt, Purchaser shall be deemed to have accepted
the Products without qualification, and cannot, thereafter, reject any Products.
Once used, Products are deemed to be fully conforming to this Agreement.

         3.2. Taxes and Other Charges. Purchaser will be responsible for and
will reimburse Supplier upon receipt of invoice or shall pay directly if so
requested by Supplier all taxes, charges, levies and assessments (including all
applicable sales and use taxes) imposed by any federal, state or local
governmental or taxing authority upon and relating to the purchase or sale of
Products or the use or possession of Products, excluding, however, any and all
taxes computed on the income of Supplier. To the extent Supplier is required by
law to collect such taxes (federal, state or local), one hundred percent (100%)
thereof shall be added to invoices as separately stated charges and paid in full
by Purchaser unless Purchaser is exempt from such taxes and furnishes Supplier
with a certificate of exemption in a form reasonably acceptable to Supplier
prior to issuance of such invoice.

                                      -3-
<PAGE>

         4. Purchase Price.

         4.1. Initial Price. Purchaser agrees to pay Supplier, and Supplier
agrees to accept, as full payment for any Product sold and delivered to
Purchaser hereunder, the Initial Price unless and until increased or decreased
from time to time as provided in Section 4.2 (the "Reset Price"), or as
otherwise provided under Section 6. "Initial Price" means the purchase price
with respect to each applicable Product as set forth on Schedule 4.1 unless and
until adjusted in accordance with the terms and conditions of this Agreement.

         4.2. Price Adjustment.

                  (a) Annual Price Adjustment. Effective on the first day of
each Contract Year, the Initial Price or then applicable Reset Price for such
Product shall be increased in direct proportion to the increase (if any) in the
Producer Price Index [announced by the United States Department of Commerce as
published in the Wall Street Journal] (the "Index") as of the end of the
calendar month immediately prior to the first day of such Contract Year as
compared to the Index as of the end of the last calendar month of the previous
Contract Year. Notwithstanding any contrary provision hereof, the Reset Price
for a Product resulting from an adjustment under this Section 4.2(a) (i) shall
in no event be less than the last Reset Price established during the preceding
Contract Year for such Product pursuant to Section 4.2(b), and (ii) shall in no
event be less than the price in effect on the last day of the prior Contract
Year increased proportionately to reflect any increase in raw materials costs
(which increase shall be supported by reasonable documentation delivered by
Supplier to Purchaser) that has not been reflected in a previous price
adjustment under Section 4.2(b).

                  (b) Interim Price Adjustment. In the event Supplier incurs an
increase in raw materials costs with respect to any Product of an amount shown
in the table set forth below since the date of the most recent price adjustment
under Section 4.2(a) or this Section 4.2(b), Supplier shall have the right to
increase the Initial Price or the then-prevailing Reset Price so that the new
applicable Reset Price reflects such increase:

              Injection molded chain P/N 631-10559 (Celanex material)   5%
              Other injection molded items                              7%
              Cast nylon stub shafts and bull sprockets                 10%
              Other cast nylon items                                    15%


Supplier shall provide Purchaser with written notice of any such price increase
together with reasonable documentation evidencing the increase in raw material
costs. Any increase from the Initial Price or Reset Price, if any, for a Product
in accordance with this subsection shall be effective only upon thirty (30) days
prior written notice to Purchaser and shall apply to each order for such Product
received after such effective date. Such increase also shall also apply to (i)
each order for such Product received prior to the date of Supplier's notice of
such price increase, but only to the extent the Products ordered are to be
delivered on or after the date three (3) months following the date of Supplier's
notice of such price increase, and (ii) to each order received after the date of
such notice but before the effective date of such price increase, but only to
the extent the Products ordered are to be delivered on or prior to the effective
date of such price increase.

                                      -4-
<PAGE>

         5. Payment. Terms of payment by Purchase to Supplier for Products will
be net sixty days (60) days from the date of invoice. The total aggregate amount
of invoices of Purchaser outstanding at any time shall not exceed $400,000 (the
"Credit Limit"). Supplier may reject any order from Purchaser, without liability
or penalty, if any invoice of Purchaser is past due or if accepting such order
would cause the total aggregate amount of outstanding invoices of Purchaser to
exceed the Credit Limit. In addition, if payment is not made when due, Supplier
may suspend all future delivery or other performance with respect to Purchaser
without liability or penalty and, in addition to all other sums payable
hereunder, Purchaser shall pay to Supplier (i) the reasonable costs and expenses
incurred by Supplier in connection with all actions taken to enforce collection
or to preserve and protect Supplier's rights hereunder, whether by legal
proceedings or otherwise, including without limitation reasonable attorneys'
fees, court costs and other expenses and (ii) interest on all amounts unpaid
after 60 days charged at the monthly rate of 1-1/2% or the highest rate
permitted by law, whichever is lower. Notwithstanding the foregoing, prior to
the date on which all amounts outstanding under the Note (as defined in Section
12.5 below) have been paid in full (the "Discharge Date"), Purchaser shall be
entitled to withhold an amount equal to 15% of the amount due under any invoice
hereunder. Such withheld amount shall be held or transferred to Polychem (or to
a third party, including GE Capital Corporation ("GE Capital"), The Budd Company
("Budd") and Textron Financial Corporation ("Textron")), pursuant to Section
12(c) below), and such withheld amount shall automatically be credited against
Supplier's payment obligation under the Note. Supplier may, in its sole
discretion, adjust the Credit Limit based on Purchaser's payment history with
Supplier and purchase levels under this Agreement.

         6. New Products and Improved Products; Packaging Changes.

         6.1. New Products. Supplier will promptly offer and make available to
Purchaser, on the same pricing terms as set forth in Section 4 above, any
alternative or new or subsequent generation products or versions thereof
manufactured, sold or supplied by Supplier which are in the same product line as
the Products or, but only at Supplier's election, in a product line
complimentary to the Products (in any case, collectively, the "New Products"),
which New Products shall be deemed Products hereunder upon the parties' good
faith agreement as to revised specifications with respect to such New Products.

         6.2. Improved Products. Any proposed improvements, upgrades,
enhancements, developments and changes to any Product (collectively, the
"Improved Products") will be promptly offered and made available to Purchaser
and shall be incorporated in and deemed to be Products hereunder upon the
parties' good faith agreement as to revised specifications with respect to such
Improved Products.

         6.3. Testing. Purchaser reserves the right, at Purchaser's sole cost,
and Supplier shall provide Purchaser all such necessary information, data,
samples and materials as Purchaser may request or require to enable Purchaser
to, inspect, test, evaluate and confirm fully to Purchaser's satisfaction the
performance and quality of any proposed New Products or Improved Products.

                                      -5-
<PAGE>


         7. Term and Termination.

         7.1. Term. This Agreement will be for an initial term of five (5) years
following the Effective Date (the "Initial Term") and will be automatically
extended for successive one (1) year periods (each a "Renewal Term" and,
together with the Initial Term, the "Term"), unless either party elects to
terminate this Agreement upon written notice to the other party no less than one
hundred and eighty (180) days prior to the end of Initial Term or any Renewal
Term (as applicable), or unless earlier terminated as set forth herein.

         7.2. Termination. This Agreement may be terminated, in whole or in
applicable part relating to the Product(s) affected and other relevant portions
of this Agreement (all of which, the parties acknowledge and agree, are
severable and divisible), by either party (or the indicated party) upon the
occurrence of any of the following:

                  (a) Upon written notice if a material default or breach by the
other party has not been cured within thirty (30) days after written notice has
been provided to the defaulting party.

                  (b) Immediately if and upon the occurrence of any one of the
following events: (i) the other party hereto files a voluntary petition in
bankruptcy; (ii) an involuntary petition in bankruptcy is filed against such
other party hereto and is not removed within sixty (60) days after the filing
thereof; (iii) such other party hereto is adjudicated bankrupt; (iv) such other
party hereto makes an assignment for the benefit of its creditors; (v) a court
assumes jurisdiction of the assets of such other party hereto under a federal
bankruptcy or reorganization act or otherwise; or (vi) a trustee or receiver is
appointed by a court for all or a substantial portion of the assets of such
other party hereto.

                  (c) By Supplier immediately upon written notice to Purchaser
if (i) the letter agreements described in Section 12.2(b) below have not been
delivered to Supplier on or before April 30, 2002, or (ii) if the instruments
described in Section 12.2(c) below have not been delivered to Supplier on or
before May 31, 2002.

         8. Warranty, Limitation; Remedy; and Insurance.

         8.1. Warranty. Subject to the warranty limitation set forth in Section
8.2 below, Supplier warrants that the Products sold hereunder will substantially
conform to the applicable specifications and will be free from defects in
material and workmanship for one year after shipment FCA, under normal and
proper use and service. Drawings prepared by Supplier and approved by Purchaser
shall be deemed the correct interpretations of the work to be performed even if
inconsistent with the plans and specifications. Upon resale, Purchaser agrees to
extend to its customers no greater warranties, and limit its liability and
remedies to the same extent, as those set forth herein.

                                      -6-
<PAGE>

         8.2 Warranty Limitation. The warranty and remedies for breach of
warranty provided for in this Agreement do not cover, and Supplier shall not be
liable for, (i) abnormal wear and tear or damage caused by use or handling which
is improper or contrary to the instructions published by Supplier, (ii) improper
storage of Products, including storage of Products unprotected from weather and
other job conditions, (iii) any cause beyond the control of Supplier, including
without limitation conditions caused by movement, settlement or structural
defects of the environment in which the Products are installed, fire, wind,
hail, flood, lightning or other acts of God, any conditions related to, or
caused by, failure to process or inaccurate processing of time-sensitive
information and/or mechanisms, intentional acts, accidents, negligence or
exposure to harmful chemicals, pollutants or other foreign matter or energy, or
(iv) any damage to the finish of the Products after they leave Supplier's
facility. Items repaired or replaced and designs corrected under warranty are
warranted only for the remainder of the original warranty period. All Product
literature is for illustrative purposes only and does not contain a warranty of
any kind. Supplier's advice relating to the technical usage of the Products or
the intellectual property rights of others, whether provided orally or in
writing or through the provision of test results, is given in accordance with
Supplier's best knowledge at that time, but shall at all times be deemed to be
non-binding. Such advice does not relieve Purchaser from the obligation, and
Purchaser accepts full responsibility, to confirm for himself the suitability of
the Products for the intended purpose(s). THE WARRANTY SET FORTH IN SECTION 8.1
IS STRICTLY LIMITED TO ITS TERMS AND IS IN LIEU OF ALL OTHER WARRANTIES,
GUARANTEES, EXPRESS OR IMPLIED, ARISING BY OPERATION OF LAW, COURSE OF DEALING,
USAGE OF TRADE OR OTHERWISE, SPECIFICALLY EXCLUDING ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

         8.3 Remedy. Purchaser's sole and exclusive remedy, and Supplier's only
obligation for breach of warranty hereunder, shall be, at Supplier's option in
its sole discretion, to (i) repair or replace the defective Product which fails
within the one year warranty period, free of charge, provided that Purchaser
promptly notifies Supplier of such failure and, after receipt of prior written
authorization from Supplier, returns such Product to the place requested by
Supplier, freight prepaid, and thereupon Supplier finds such to be defective or
(ii) issue a credit equal to the price of the defective Product which fails
within the one year warranty period. Purchaser must pay all related costs of
repair or replacement, including removal, installation or reinstallation costs.
Supplier's personnel must be granted access to inspect the Products claimed to
be defective at the site of their installation or use.

         8.4 Disclaimer; Limitation of Liability, Time For Claims. Purchaser
agrees that Supplier shall not be liable for incidental, special, INDIRECT or
consequential or other similar damages including but not limited to loss of
profit or revenues, damage for loss of use of the Products, damage to property,
claims of third parties, including personal injury or death on account of use of
the Products or failure of Supplier to warn against or instruct on, or
adequately warn against or instruct on, the dangers of the Products or the safe
and proper use of the Products, whether or not Supplier has been advised of the
potential for such damages. Supplier's total liability hereunder from any cause
whatsoever (except liability from personal injury caused by Supplier's
negligence), whether arising under contract, warranty, tort (including
negligence), strict liability, products liability or any other theory of
liability, will be limited to the lesser of Purchaser's actual damages or the
price paid to Supplier for the Products that are the subject of Purchaser's
claim. All claims against Supplier must be brought within one year after the
cause of action arises, and Purchaser expressly waives any longer statute of
limitations.

         8.5 Insurance. During the term of this Agreement, Supplier shall
maintain comprehensive product liability insurance with respect to the supply of
the Product by Supplier which is reasonable as to amount and coverage as are
adequate to cover the obligations under this Agreement and as are appropriate
for companies of like size, taking into account the scope of activities
contemplated herein.

                                      -7-
<PAGE>

         9. Force Majeure.

         9.1 Occurrence of Force Majeure. No party is liable for any failure to
perform its obligations under this Agreement (other than obligations to make
payments of money) if such performance has been delayed, interfered with or
prevented by an event of Force Majeure.

         9.2 Definition. As used in this Agreement, "Force Majeure" means any
circumstances whatsoever which are not within the reasonable control of the
party affected thereby, including without limitation an act of God, war,
insurrection, riot, strike or labor dispute, shortage of materials, fire,
explosion, flood, government requisition or allocation, breakdown of or damage
to plant, equipment or facilities, interruption or delay in transportation, fuel
supplies or electrical power, embargo, boycott, order or act of civil or
military authority, legislation, regulation or administrative rules, or any
inability to obtain or maintain any governmental permit or approval. The party
who declares Force Majeure will give prompt notice to the other party of such
declaration.

         9.3 Removal of Force Majeure. If the performance of any obligation has
been delayed, interfered with or prevented by an event of Force Majeure, then
the party affected by such event will take such actions as are reasonably
available to remove the event of Force Majeure or to mitigate the effect of such
occurrence, except that labor disputes will be settled at the sole discretion of
the party affected thereby.

         9.4 Obligations Suspended. If an event of Force Majeure occurs, the
obligations of the parties under this Agreement (other than obligations to make
payments of money) will be suspended during, but not longer than, the
continuance of the event of Force Majeure. Neither Supplier nor Purchaser will
be liable for any delay in or failure of performance to the extent due to causes
which are beyond its reasonable control and not reasonably foreseeable and
avoidable, including, but not limited to, an act of governmental or military
authorities, war, riot, strike, lockout, catastrophic "acts of God," including,
without limitation, fire, earthquake, flood, disaster and accident, embargo,
import quotas or other import restrictions. When either Supplier or Purchaser
claims an excuse for non-performance under this Section, it shall give prompt
notice in writing to the other party specifying the nature and extent of such
force majeure event, when it commenced and the estimated duration thereof and
shall use all reasonable efforts to avoid or remove such causes or mitigate the
effects of non-performance. If and to the extent of any delay which is excused
pursuant to this Section, the relevant delivery dates for the Products and other
excused performance dates will be deemed extended for a period of time equal to
the period of such excused delay and the parties may mutually agree on new
delivery or performance dates to apply at the conclusion of such extension
period. When only a part of Supplier's capacity to perform is affected by the
conditions described in or contemplated by this Section, then during such period
in which Supplier is unable to fully perform, Supplier shall allocate available
products to Purchaser on a first priority basis and thereafter may allocate
available products among its various other customers. Notwithstanding any of the
foregoing, Purchaser shall be permitted, without regard for the provisions of
this Agreement, to purchase the remainder of its requirements not supplied by
Supplier, even if such non-supply is excused hereunder, from a third-party
supplier until such time as Supplier can adequately fill Purchaser's orders for
Product.

                                      -8-
<PAGE>

         10. Confidentiality.

         10.1. Confidentiality. Each party (the "Recipient") acknowledges that
by reason of its relationship to the other party (the "Disclosing Party")
hereunder, it and its affiliates will have access during the Term to certain
confidential and/or proprietary information and materials concerning the
Disclosing Party's and the Disclosing Party affiliates' business and operations,
business, product plans, technical or non-technical data, specifications,
formulae, patterns, compilations, devices, methods, techniques, drawings,
processes, designs, lists of actual or potential customers, suppliers or vendors
(the "Confidential Information") which is of substantial value to the Disclosing
Party and such affiliates, the value of which would be significantly impaired if
such information were disclosed to third parties. The Disclosing Party and its
affiliates retain for themselves all of their respective ownership rights in and
to all such Confidential Information except to the extent licensed or otherwise
transferred to Disclosing Party as expressly provided by this Agreement.
Throughout the Term and indefinitely thereafter, the Recipient shall keep, and
shall ensure that its affiliates, directors, officers, employees, subcontractors
and agents keep all Confidential Information acquired from the Disclosing Party
pursuant to this Agreement, including the contents of this Agreement, except
"Confidential Information" shall not include information that (i) is or
hereafter becomes generally available to the public other than by reason of a
default with respect to a confidentiality obligation under this Agreement; or
(ii) was already known to, or independently developed without use of the
Disclosing Party's Confidential Information by, the Recipient as evidenced by
prior written documents in the Recipient's possession that were received or
obtained without violating any provision of this Agreement or any
confidentiality obligation owed by a third party to the Disclosing Party; or
(iii) is disclosed to the Recipient by a person who is not in default of any
confidentiality obligation to the Disclosing Party; or (iv) is required to be
disclosed in compliance with the applicable law of any governmental of competent
jurisdiction. Each Recipient agrees to take all commercially reasonable action
or, if greater, use the same amount of care to protect the rights of the
Disclosing Party in the Confidential Information as Recipient exercises with
respect to its own similar confidential and proprietary information.

         10.2. Disclosure to Personnel. Neither party will, and will cause its
directors, officers, employees and agents not to, disclose to any Non-Essential
Personnel (defined below), or otherwise use for its own benefit (except as may
be consistent with its rights expressly granted in this Agreement and in the
performance of its obligations hereunder) any Confidential Information.
"Non-Essential Personnel" means, with respect to any particular information, any
and all persons who are not involved in the design, manufacture, sale, purchase
or resale of Products, such party's performance of its other obligations
hereunder or otherwise do not have a need to know such information.

         10.3. Return of Confidential Information. Upon the expiration or any
earlier termination of this Agreement, each Recipient shall return all
Confidential Information and all copies thereof to the Disclosing Party or
destroy the same and, in either and both cases, certify to such return or
destruction, as the case may be, to the Disclosing Party.

         10.4. Survival of Obligations. The obligations set forth in this
Article 10 will survive until the termination or expiration of this Agreement
for any reason.

         10.5. Acknowledgement. The parties acknowledge and agree that any
breach of the terms of this Section would cause irreparable harm to the injured
party and agree that the injured party shall be entitled, in addition to
whatever remedies may otherwise be available under this Agreement or at law, to
injunctive relief or other applicable equitable remedies with respect to any
such actual or threatened breach.

                                      -9-
<PAGE>

         11. [Intentionally Omitted]

         12. Purchase and Sale of Assets.

         12.1 Lease, Purchase and Sale of Assets. Polychem hereby agrees to sell
to Supplier, and Supplier agrees to purchase from Polychem, on the Discharge
Date, all of Polychem's right, title and interest in and to the following assets
of Polychem (collectively, the "Assets"):

                  (a) all equipment, machinery, fixtures, tools, dies, patterns,
vehicles, computer hardware and software and furniture listed on Schedule
12.1(a) (collectively, the "Equipment"), and all supplies, spare parts and
warranties relating to any of the Equipment;

                  (b) all patents, inventions, discoveries, techniques,
processes, methods, formulae, designs, trade secrets, confidential information,
know-how and ideas used or useful in connection with the Business to the extent
related to the manufacturing process (the "Intellectual Property"); and

                  (c) all books, records, files, ledgers, drawings,
specifications and manuals relating to the Business or any of the Assets and all
other information relating to the Business or any of the Assets, regardless of
the form in which such information appears.

All assets of Polychem other than the Assets are referred to herein as the
"Excluded Assets."

         In addition, Polychem has granted Supplier the right to use the Molds
as set forth in Section 1.5. As security for the Performance by Polychem of its
obligations hereunder, Polychem hereby grants Supplier a security interest in
the Molds and the Equipment and all of Polychem's right, title and interest
therein and thereto subject, in the case of the Equipment, to the prior liens of
GE Capital, Budd, Textron (as to certain items of the Equipment as set forth on
Schedule 13.12 hereto) and Public School Employees' Retirement System ("PSERS").

         12.2 Title to Assets.

                  (a) The parties acknowledge that as of the date hereof, the
Equipment is subject to the following liens:

                  (i) Liens in favor of GE Capital securing certain purchase
         money indebtedness of Polychem to GE Capital in the aggregate
         outstanding principal amount of $164,000 as of March 1, 2002 (the "GE
         Debt") and other indebtedness of Polychem to GE Capital;

                  (ii) A lien in favor of Budd securing certain obligations of
         Polychem to Budd (the "Budd Obligations") under a Foreclosure and Note
         Restructuring Agreement dated as of November 20, 2001 among Polychem,
         Budd and Paul DeJuliis (the "Budd Agreement") and a judgment lien in
         favor of Budd arising from a judgment entered in the Court of Common
         Pleas of Chester County, Pennsylvania in October, 2001;

                  (iii) As to certain items of Equipment, a purchase money lien
         in favor of Textron securing purchase money obligations to Textron in
         the outstanding principal amount of $______ (the "Textron
         Obligations"); and

                  (iv) A lien in favor of PSERS granted pursuant to an Open End
         Mortgage and Security Agreement dated as of August 24, 1999 between
         Polychem and PSERS (the "PSERS Lien").

                                      -10-
<PAGE>

Effective as of the date hereof and continuing until the date on which the Note
has been paid in full (the "Discharge Date") and the transfer of title to
Supplier on the Discharge Date has occurred, Polychem hereby leases to Supplier
and grants to Supplier the exclusive right to use the Equipment. On or before
the date on which the GE Debt has been paid in full, Polychem shall cause GE
Capital to execute and deliver to Supplier a release of its lien on the
Equipment and the Molds, and on or before the Discharge Date, Polychem shall
cause Budd, Textron, PSERS and any other person or entity holding a lien or
security interest in the Equipment or the Molds to execute and deliver to
Supplier a release of its lien on the Equipment and the Molds. On the Discharge
Date, Polychem shall execute and deliver to Supplier a bill of sale in form and
substance acceptable to Supplier transferring title to the Assets to Supplier
free and clear of any and all liens and encumbrances.

                  (b) Notwithstanding any contrary provision of this Agreement,
this Agreement and the obligations of Supplier hereunder shall not become
effective until Polychem has delivered to Supplier the following (and Supplier
shall be entitled to terminate this Agreement as provided in Section 7.2(c)
above if the following have not been delivered to Supplier by April 30, 2002):

                  (i) A letter agreement executed by GE Capital in favor of
         Supplier, in form acceptable to Supplier, to the effect that GE Capital
         will release and terminate any and all liens it may have against the
         Equipment or the Molds on or before the earlier to occur of (x) the
         Discharge Date and (y) the payment in full of the GE Debt;

                  (ii) A letter agreement executed by Budd in favor of Supplier,
         in form acceptable to Supplier, to the effect that Budd will release
         and terminate any and all liens it may have against the Equipment or
         the Molds on or before the earlier to occur of (x) the Discharge Date
         and (y) the payment in full of the Budd Obligations;

                  (iii) Copies, certified by the Secretary or Assistant
         Secretary of Polychem, of the Articles of Incorporation and Bylaws of
         Polychem and resolutions duly adopted by the Board of Directors and (if
         required by law) shareholders of Polychem approving the transactions
         contemplated hereby; and

                  (iv) Copies, certified by the Secretary or Assistant Secretary
         or other appropriate officer of ECESIS, of the Certificate of
         Organization and Operating Agreement of ECESIS and resolutions duly
         adopted by the Board of Directors (or equivalent governing body) and
         (if required by law) members of ECESIS approving the transactions
         contemplated hereby.

                  (c) Notwithstanding any contrary provision of this Agreement,
Supplier shall be entitled to withhold payment of the Purchase Price until
Purchaser has delivered to Supplier, and may terminate this Agreement as
provided in Section 7.2(c) above unless Purchaser has delivered to Supplier on
or before May 31, 2002, the following:

                  (i) A letter agreement executed by Textron in favor of
         Supplier, in form acceptable to Supplier, to the effect that Textron
         will release and terminate any and all liens it may have against the
         Equipment on or before the earlier to occur of (x) the Discharge Date
         and (y) the payment in full of the Textron Obligations; provided that
         if Supplier agrees to assume the outstanding Textron Obligations from
         Polychem, Textron shall not be required to release its lien on the
         Equipment and Polychem instead shall deliver to Supplier Textron's
         consent to such assumption as set forth in Section 12(f) below; and

                  (ii) A release executed by PSERS, in form acceptable to
         Supplier, releasing and terminating the PSERS Lien.


                                      -11-
<PAGE>

The applicable date on which GE Capital, Budd, Textron or PSERS releases its
liens as set forth in Sections 12(b) and 12(c) above is referred to herein as
the "Release Date".

                  (d) Polychem acknowledges and agrees that until the release of
all of the liens described in Sections 12(b) and 12(c) above on the respective
Release Dates, all payments to which Polychem is entitled under the Note shall
be made by Supplier as follows:

                  (i) first, directly to GE Capital in repayment of the GE Debt
         until the earlier of the Discharge Date and the date of payment in full
         of the GE Debt;

                  (ii) second, upon payment in full of the GE Debt, directly to
         Textron in payment of the Textron Obligations until the earlier of the
         Discharge Date and the date of payment in full of the Textron
         Obligations unless Supplier has elected to assume the Textron
         Obligations pursuant to paragraph (f) below,

                  (iii) third, upon payment in full or assumption by Supplier of
         the Textron Obligations, directly to Budd in payment of the Budd
         Obligations until the earlier of the Discharge Date and the date of
         payment in full of the Budd Obligations; and

                  (iv) thereafter to Polychem as set forth herein and in the
         Note (as defined herein).

All such payments to GE Capital, Textron or Budd shall be deemed to be payments
of Purchase Price to Polychem for purposes of this Agreement and the Note.

                  (e) In the event that Purchaser defaults in the performance of
its obligations under any of the Transaction Documents (defined below), any of
its agreements creating or relating to the GE Debt or the security interest of
GE Capital in the Equipment, any agreement with Textron with respect to the
Textron Obligations, or the Budd Agreement, Supplier shall have the option (the
"Option"), but not the obligation, upon written notice to Polychem, GE Capital,
Textron and Budd, to pay the outstanding unpaid balance of the Purchase Price
directly to GE Capital to the extent of the remaining balance of the GE Debt,
then to Textron to the extent of any remaining balance of the Textron
Obligations (unless Supplier elects to assume the Textron Obligations pursuant
to paragraph (f) below), and then to pay any remaining portion of the Purchase
Price to Budd in partial payment of the Budd Obligations (such payments are
referred to collectively as the "Pay-Off Payment"), and such Pay-Off Payment to
GE Capital, Textron and/or Budd, together with any prior payments of the
Purchase Price made or deemed to have been made by Supplier to Polychem, GE
Capital, Textron or Budd, shall be deemed full payment of the Purchase Price.
Exercise by Supplier of the Option shall not be deemed a waiver by Supplier of
any default by Purchaser hereunder and Supplier shall continue to have all
remedies available to it under this Agreement.

                  (f) In lieu of making the payments to Textron on the Textron
Obligations described in Section 12(c)(ii) above, Supplier may elect, upon
written notice to Polychem on or prior to April 30, 2002, to assume the Textron
Obligations, in which event Polychem shall cause Textron to consent to an
assignment to Supplier of the Textron Obligations, and Supplier shall receive
credit against its Purchase Price obligations under the Note in an amount equal
to the obligations assumed by Supplier.

                  (g) Upon exercise of the Option, or upon termination of this
Agreement pursuant to Section 7.2(c)(ii) above, Supplier may exercise its
remedies as a secured party with respect to the Molds and shall have the right
to use the Molds to produce Products for any customer, including, without
limitation, any past or present customer of Purchaser.

                                      -12-
<PAGE>

         12.3 [Omitted.]

         12.4 No Assumption of Liabilities. Supplier shall assume and become
liable only for such liabilities as arise out of or relate to its ownership or
operation of the Assets or its conduct of the Business as conducted by Supplier
after the Closing Date and (b) arise out of events first occurring or conditions
first existing after the date on which Supplier receives title to all of the
Assets free and clear of any and all liens and encumbrances (collectively, the
"Assumed Liabilities"). All liabilities which arise out of or relate to the
Excluded Assets or, except for the Assumed Liabilities, which arise out of or
relate to the Assets or the Business (collectively, the "Excluded Liabilities")
shall continue to be liabilities of Polychem. Without limiting the foregoing,
Polychem shall remain liable for all product liability claims made with respect
to products of the Business manufactured by Polychem sold on or before the
Closing Date or and any taxes relating to the Business or the Assets prior to
the Closing Date.

         12.5 Purchase Price. The purchase price for the Assets (the "Purchase
Price") shall be TWO HUNDRED EIGHTY SEVEN THOUSAND and 00/100 U.S. Dollars
($287,000), which amount shall be payable by Supplier by delivery to Polychem at
the closing under this Agreement (the "Closing") of a Promissory Note of
Supplier in substantially the form of Exhibit C hereto (the "Note"). The Note
shall be payable solely from a portion of the payments made, or deemed to have
been made, by Polychem to Supplier under this Agreement. Polychem acknowledges
that one item of Equipment a 3-axis CNC milling machine currently requires
repair. Polychem agrees to cause such item of Equipment to be repaired prior to
shipping it to Supplier, and agrees that if Polychem fails to repair the item,
Supplier shall be entitled to cause it to be repaired and the Purchase Price
shall be reduced by an amount equal to the cost incurred by Supplier with
respect to such repair notwithstanding any contrary provision hereof or of the
Note.

         12.6 Assignment of Value. Supplier and Polychem shall use their best
efforts to comply with the applicable requirements of the Internal Revenue Code
of 1986, as amended (the "Code"), by preparing a schedule to be executed
following the transfer of the Assets to Supplier reflecting the allocation of
the Purchase Price to the respective Assets, which allocation shall be used by
them in preparing their respective income tax returns; provided, that any
failure to agree on such allocation shall not relieve either party of its
obligations hereunder.

         12.7 Non-Competition. As a condition to Supplier's obligations to pay
the Purchase Price, each Purchaser shall have entered into a non-competition
agreement (the "Non-Competition Agreement" and, together with this Agreement and
the Note and each other document contemplated thereby or hereby, the
"Transaction Documents") in substantially the form of Exhibit D attached hereto.

         13. Representations and Warranties of Polychem and ECESIS. Polychem and
ECESIS hereby jointly and severally represent and warrant to the Supplier as
follows:

         13.1 Organization and Qualification. Polychem is a corporation duly
organized, validly existing and in good standing in the Commonwealth of
Pennsylvania. ECESIS is a limited liability company duly organized validly
existing and in good standing in the State of Delaware. Each of Polychem and
ECESIS is duly qualified to do business as a foreign corporation and is in good
standing in all jurisdictions in which the ownership of its properties or the
nature of its business makes such qualification necessary, except to the extent
that the failure to be so qualified has not resulted in, and is not likely to
result in, a material adverse change in the business, operations, financial
condition or prospects of the Business (a "Material Adverse Change").

         13.2 Power and Authority. Each of Polychem and ECESIS has the corporate
power and authority to own its properties and assets, to conduct its business as
presently conducted and to execute, deliver and perform this Agreement.

         13.3 Execution and Binding Effect. This Agreement and each of the
Transaction Documents to which it is a party have been duly and validly executed
and delivered by Polychem and constitute legal, valid and binding obligations of
Polychem enforceable against Polychem in accordance with their respective terms.

                                      -13-
<PAGE>

         13.4 No Breach, Default, Violation or Consent. The execution, delivery
and performance by Polychem of this Agreement and the other Transaction
Documents to which it is a party do not and will not:

                  (a) violate Polychem's charter, or ECESIS's certificate of
organization or operating agreement or by-laws;

                  (b) breach or otherwise violate any order, writ, judgment,
injunction or decree issued by any governmental entity (each a "Governmental
Order") which names Polychem or ECESIS or is directed to Polychem or ECESIS, the
Business or any of the Assets;

                  (c) violate any law, rule, regulation, ordinance or code of
any governmental entity (each a "Governmental Rule"); or

                  (d) require any consent, authorization, approval, exemption or
other action by, or any filing, registration or qualification with, any
governmental entity.

         13.5 Financial Information. Polychem has previously delivered to
Supplier correct and complete information setting forth, in reasonable detail,
Polychem's sales information and operational costs and expenses, as they related
to the Business, for the fiscal years ended December 31, 2000 and 1999 and the
six months ended June 30, 2001 (the "Operational Statements"). The information
contained in the Operational Statements is accurate and correct and represents
fairly the operations of Polychem with respect to the Business for the period
covered thereby.

         13.6 Litigation. Except as otherwise disclosed on Schedule 13.6, there
is no pending or, to the best of Polychem's and ECESIS's knowledge, threatened
investigation, action or proceeding against Polychem or ECESIS related to the
Business, any of the Polychem Products or any of the Assets by or before any
governmental entity or arbitrator, and neither Polychem nor ECESIS has no
knowledge of any basis for any such action or proceeding. Schedule 13.6 sets
forth a correct and complete list of each investigation, action and proceeding
described in the preceding sentence, the parties thereto, the alleged basis
therefor, the relief sought therein and the current status thereof.

         13.7 Absence of Certain Changes and Events. Since June 30, 2001:

                  (a) no casualty, loss or damage has occurred with respect to
any of the Assets, whether or not the same is covered by insurance;

                  (b) except for write downs not exceeding $10,000 in the
aggregate with respect to all the Assets, Polychem has not written down the
value of any of the Assets, except in each case in the ordinary course of
business and at a rate no greater than during the 12-month period ending on June
30, 2001;

                  (c) Polychem has not waived or released any of its rights with
respect to the Business or the Assets or permitted any of such rights to lapse;

                  (d) Polychem has not introduced any material change with
respect to the Business, including without limitation with respect to the
products or services it sells, the areas in which such products or services are
sold, its methods of manufacturing or distributing its products, its marketing
techniques or its accounting methods; and

                  (e) no Material Adverse Change, and no event which is likely
to result in a Material Adverse Change, has occurred.

                                      -14-
<PAGE>

         13.8 Governmental Orders. Schedule 13.8 sets forth a correct and
complete list of all Governmental Orders which name Polychem or are directed to
Polychem and which relate to the Business or any of the Assets, together with
the governmental entity who issued the same and the subject matter thereof.
Polychem is in compliance with all such Governmental Orders.

         13.9 Business Permits. There are no governmental permits, licenses,
franchises, certificates, authorizations, consents or approvals necessary under
applicable Governmental Rules held by Polychem with respect to the Business or
the Assets ("Business Permits") which are required to be transferred to Supplier
or obtained by Supplier in order for Supplier to carry on the Business as now
being conducted or to own, occupy or use the Assets. No violations have been
recorded against any Business Permit held by Polychem, no citation, notice or
warning has been issued by any governmental entity with respect to any such
Business Permit, no investigation or hearing has been held by or before any
governmental entity with respect to any such Business Permit, Polychem has not
received any notice from any governmental entity that it intends to cancel,
revoke, terminate, suspend or not renew any such Business Permit and Polychem
has no knowledge of any basis for any of the foregoing. Polychem is in
compliance with all such Business Permits.

         13.10 Condition of Personal Property. The Equipment is in good repair
and operating condition, is suitable for the purposes for which it is used and
constitutes all Equipment necessary to conduct the Business as currently
conducted. All of the Equipment is located at Polychem's facility located at
Franklin Avenue and Grant Street, Phoenixville, PA 19460.

         13.11 Intellectual Property. There are no patents or registered and
unregistered copyrights, or any applications therefor, included in the
Intellectual Property, (b) licenses or other agreements pursuant to which any
Person has the right to use any Intellectual Property owned by Polychem, (c)
licenses or other agreements pursuant to which Polychem has the right to use any
Intellectual Property owned by others in manufacturing the Products, or any
consents which must be obtained, any filings which must be made, or any other
actions which must be taken in order to assign or otherwise transfer Polychem's
rights in any of the foregoing to Supplier. Polychem has the lawful right to use
all of the Intellectual Property, and no such use infringes upon the lawful
rights of any other Person. To the best of Polychem's knowledge, no Person is
using any intellectual property in a manner which infringes upon the lawful
rights of Polychem with respect to the Business or the manufacture of the
Products.

         13.12 Title Matters. Except as otherwise disclosed on Schedule 13.12,
Polychem has good and marketable title to all Assets, in each case free and
clear of all liens, claims and encumbrances of any nature whatsoever
(collectively, "Liens").

         13.13 Insurance. Schedule 13.13 sets forth a correct and complete list
of all insurance policies of which Polychem is the owner, insured, loss payee or
beneficiary and which relate to the Business or any of the Assets and indicates
for each such policy any pending claims thereunder. Polychem and ECESIS
represent and warrant, with respect to such policies, that (a) there has been no
failure to give any notice or present any material claim under any such policy
in a timely fashion or as otherwise required by such policy; (b) all premiums
under such policies which were due and payable on or prior to the date hereof
have been paid in full; (c) no such policy provides for retrospective or
retroactive premium adjustments; (d) Polychem has not received notice of any
material increase in the premium under, cancellation or non-renewal of or
disallowance of any claim under any such policy; (e) Polychem has not been
refused any insurance, nor has its coverage been limited by any carrier; and (f)
since January 1, 1999, Polychem has maintained, or been the beneficiary of,
general liability and product liability policies reasonable, in both scope and
amount, in light of the risks attendant to the Business and which provide
coverage comparable to coverage customarily maintained by others in similar
lines of business, and such policies have been "occurrence" policies and not
"claims made" policies.

                                      -15-
<PAGE>

         13.14 Warranty and Product Liability. Polychem has previously made
available to Supplier a correct and complete copy of each express warranty under
which it has any warranty obligations and which relate to the Business. No
warranty or product liability claims have been made against Polychem with
respect to the Business during the five-year period ended December 31, 2001 or
between December 31, 2001 and the Closing Date.

         13.15 Brokers. Polychem has not employed or retained, and has no
liability to, any broker, agent or finder on account of this Agreement or any of
the other Transaction Documents or the transactions contemplated hereby or
thereby.

         13.16 Delivery of Documents; Accurate Disclosure. Polychem has
previously delivered to Supplier correct and complete copies of each agreement,
document and instrument which Supplier (or its accountants or attorneys) has
requested in writing. To Polychem's knowledge, none of the information furnished
or to be furnished by Polychem to Supplier or any of its representatives in
connection with this Agreement and the other Transaction Documents, and none of
the representations and warranties of Polychem set forth herein, in any other
Transaction Document or in any certificate delivered in connection herewith or
therewith, (a) is or will be false or misleading in any material respect, (b)
contains or will contain any untrue statement of a material fact or (c) omits or
will omit any statement of material fact necessary to make the same not
misleading.

         13.17 Solvency of Polychem. The fair salable value of the business and
assets of Polychem, after giving effect to the transactions contemplated by the
Transaction Documents, will be in excess of the amount that will be required to
pay Polychem's probable liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities) on existing debts as they may become
absolute and matured. Polychem, after giving effect to such transactions, will
not be engaged in any business or transactions, or about to engage in any
business or transaction, for which it has taken as a whole an unreasonably small
capital, and Polychem has no intent (a) to hinder, delay or defraud any entity
to which it is, or will become, on or after the Closing Date, indebted, or (b)
to incur debts that would be beyond its ability to pay as they mature.

         14. Representations and Warranties of Supplier. Supplier hereby
represents and warrants to Polychem as follows:

         14.1 Organization. PPM is a corporation duly organized, validly
existing and in good standing in the State of Connecticut, and Vekton is a
corporation duly organized, validly existing and in goodstanding in the State of
New Jersey.

         14.2 Power and Authority. Each of PPM and Vekton has the corporate
power and authority to own its properties and assets, to conduct its business as
presently conducted and to execute, deliver and perform this Agreement and the
other Transaction Documents to which it is a party.

         14.3 Execution and Binding Effect. This Agreement and each of the
Transaction Documents to which it is a party, has been or will be duly and
validly executed and delivered by PPM and Vekton and constitute (or upon such
execution and delivery will constitute) legal, valid and binding obligations of
PPM and Vekton enforceable against PPM and Vekton in accordance with their
respective terms.

                                      -16-
<PAGE>

         14.4 No Breach, Default, Violation or Consent. The execution, delivery
and performance by Supplier of this Agreement and the other Transaction
Documents do not and will not:

                  (a) violate the charter or by-laws of PPM or Vekton;

                  (b) breach or result in a default (or an event which, with the
giving of notice or the passage of time, or both, would constitute a default)
under, require any consent under or give to others any rights of termination,
acceleration, suspension, revocation, cancellation or amendment of any contract,
agreement, instrument or document to which PPM or Vekton is a party or by which
PPM or Vekton or any of their respective properties or assets is bound;

                  (c) breach or otherwise violate any Governmental Order which
names PPM or Vekton or is directed to PPM or Vekton or any of their respective
properties or assets;

                  (d) violate any Governmental Rule; or

                  (e) require any consent, authorization, approval, exemption or
other action by, or any filing, registration or qualification with, any
governmental entity.

         14.5 Brokers. Neither PPM nor Vekton has employed or retained, and has
no liability to, any broker, agent or finder on account of this Agreement or any
of the other Transaction Documents or the transactions contemplated hereby or
thereby.

         14.6 Solvency of Supplier. The fair salable value of the business and
assets of PPM and Vekton, after giving effect to the transactions contemplated
by the Transaction Documents, will be in excess of the amount that will be
required to pay their respective probable liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities) on existing debts as they
may become absolute and matured. Neither PPM nor Vekton, after giving effect to
such transactions, will be engaged in any business or transactions, or about to
engage in any business or transaction, for which it has taken as a whole an
unreasonably small capital, and neither PPM nor Vekton has any intent (a) to
hinder, delay or defraud any entity to which it is, or will become, on or after
the Closing Date, indebted, or (b) to incur debts that would be beyond its
ability to pay as they mature.

         15. Indemnification.

         15.1 Indemnification by Polychem and ECESIS. Polychem and ECESIS shall
jointly and severally defend, indemnify and hold harmless PPM and Vekton and
their respective directors, officers, employees and agents (each a "Purchaser
Indemnitee") from and against any and all claims (including without limitation
any investigation, action or other proceeding, whether instituted by a third
party against a Purchaser Indemnitee or by a Purchaser Indemnitee for the
purpose of enforcing its rights hereunder), damages, losses, liabilities, costs
and expenses (including without limitation reasonable attorneys' fees and court
costs) that constitute, or arise out of or in connection with:

                                      -17-
<PAGE>

                  (a) any Excluded Assets or Excluded Liabilities;

                  (b) any misrepresentation or breach of warranty under Section
13 (a "Polychem Warranty Breach");

                  (c) any violation of an Environmental Rule (defined below) and
any audit or investigation relating to or arising our of an Environmental Rule
and, in each case, relating to the Business and/or the Assets prior to the
Closing; or

                  (d) any default by Purchaser in the performance or observance
of any of its covenants or agreements hereunder or under any other Transaction
Document.

         For purposes of this Section, "Environmental Rule" means any
Governmental Rule which relates to Hazardous Substances, pollution or protection
of the environment, natural resources or public health or safety, including
without limitation any Governmental Rule relating to the generation, use,
processing, treatment, storage, release, transport or disposal of Hazardous
Substances and any common laws of nuisance, negligence and strict liability
relating thereto, together with all rules, regulations and orders issued
thereunder, as any of the same may be amended.

         "Hazardous Substance" means any substance which constitutes, in whole
or in part, a pollutant, contaminant or toxic or hazardous substance or waste
under, or the generation, use, processing, treatment, storage, release,
transport or disposal of which is regulated by, any Governmental Rule.

         15.2 Indemnification by Supplier. PPM and Vekton shall jointly and
severally defend, indemnify and hold harmless Polychem and its directors,
officers, employees, shareholders and agents (each a "Supplier Indemnitee") from
and against any and all claims (including without limitation any investigation,
action or other proceeding, whether instituted by a third party against a
Supplier Indemnitee or by a Supplier Indemnitee for the purpose of enforcing its
rights hereunder), damages, losses, liabilities, costs and expenses (including
without limitation reasonable attorneys' fees and court costs) that constitute,
or arise out of or in connection with:

                  (a) any of the Assets or Assumed Liabilities or Supplier's
operation of the Business after the Closing;

                  (b) any misrepresentation or breach of warranty under Section
14 (a "Supplier Warranty Breach");

                  (c) any default by Supplier in the performance or observance
of any of its covenants or agreements hereunder or under any other Transaction
Document.

         15.3 Representation, Settlement and Cooperation. If any investigation,
action or other proceeding (each a "Proceeding") is initiated against any
Purchaser Indemnitee or Supplier Indemnitee (each an "Indemnitee") and such
Indemnitee intends to seek indemnification from Polychem or Supplier (each an
"Indemnitor"), as applicable, under this Article on account of its involvement
in such Proceeding, then such Indemnitee shall give prompt notice to the
applicable Indemnitor of such Proceeding; provided, that the failure to so
notify such Indemnitor shall not relieve such Indemnitor of its obligations
under this Article. Upon receipt of such notice, such Indemnitor shall
diligently defend against such Proceeding on behalf of such Indemnitee at its
own expense using counsel reasonably acceptable to such Indemnitee; provided,
that if such Indemnitor shall fail or refuse to conduct such defense, or such
Indemnitee has been advised by counsel that it may have defenses available to it
which are different from or in addition to those available to such Indemnitor,
or that its interests in such Proceeding are adverse to such Indemnitor's
interests, then such Indemnitee may defend against such Proceeding at such
Indemnitor's expense. Such Indemnitor or Indemnitee, as applicable, may
participate in any Proceeding being defended against by the other at its own
expense, and shall not settle any Proceeding without the prior consent of the
other, which consent shall not be unreasonably withheld. Such Indemnitor and
Indemnitee shall cooperate with each other in the conduct of any such
Proceeding.

                                      -18-
<PAGE>

         15.4 Notice and Satisfaction of Indemnification Claims. Indemnification
claims against Polychem and/or ECESIS shall be satisfied by set-off against any
amounts due pursuant to Section 12.5 or otherwise due under the Note, prior to
being satisfied out of any other funds of Polychem and/or ECESIS. No
indemnification claim shall be deemed to have been asserted until the applicable
Indemnitor has been given notice by the Indemnitee of the amount of such claim
and the facts on which such claim is based. For purposes of Section 15.5, notice
of an indemnification claim shall be deemed to cover claims arising out of all
related Proceedings so long as, in the case of Proceedings instituted by third
parties, the Indemnitee complies with Section 15.3. If the Indemnitee is not
Supplier, Polychem or ECESIS, then such notice shall be given on behalf of such
Indemnitee by Supplier or Polychem, as applicable. Indemnification claims shall
be paid within 30 days after the Indemnitor's receipt of such notice and such
evidence of the amount of such claim and the Indemnitor's liability therefor as
the Indemnitor may reasonably request.

         15.5 Duration of Certain Indemnification Obligations. Claims for
indemnification under Section 15.1 may only be asserted within the following
time periods:

                  (a) claims arising out of any Purchaser Warranty Breach under
Section 13.12 (Title Matters) may be asserted at any time;

                  (b) claims arising out of or in connection with any Purchaser
Warranty Breach may be asserted at any time if the applicable representation or
warranty was fraudulently made; and

                  (c) all other claims may be asserted until the third
anniversary of the date hereof.

         16. Miscellaneous.

         16.1 Amendments. This Agreement may be amended only by a writing signed
by each of the parties, and any such amendment shall be effective only to the
extent specifically set forth in such writing.

         16.2 Assignment. Neither this Agreement nor any right, interest or
obligation hereunder may be assigned, pledged or otherwise transferred by any
party, whether by operation of law or otherwise, without the prior consent of
the other party or parties; provided, that Supplier may assign its rights
hereunder to any affiliated company of the Supplier, to a successor by merger,
and to any purchaser of substantially all of the assets, and may collaterally
assign its rights hereunder to any lender.



                                      -19-
<PAGE>

         16.3 Consent to Jurisdiction and Service of Process.

                  (a) Each of the parties hereby:

                           (i) irrevocably submits to the jurisdiction of the
Court of Common Pleas of Allegheny County, Pennsylvania and to the jurisdiction
of the United States District Court for the Western District of Pennsylvania for
the purposes of any action or proceeding arising out of or relating to this
Agreement or the other Transaction Documents or the subject matter hereof or
thereof and brought by any other party;

                           (ii) waives and agrees not to assert, by way of
motion, as a defense or otherwise, in any such action or proceeding, any claim
that (x) it is not personally subject to the jurisdiction or such courts, (y)
the action or proceeding is brought in an inconvenient forum or (z) the venue of
the action or proceeding is improper; and

                           (iii) agrees that, notwithstanding any right or
privilege it may possess at any time, such party and its property are and shall
be generally subject to suit on account of the obligations assumed by it
hereunder.

                  (b) Each party agrees that service in person or by certified
or registered U.S. mail to its address set forth in Section 16.9 shall
constitute valid in personam service upon such party and its successors and
assigns in any action or proceeding with respect to any matter as to which it
has submitted to jurisdiction hereunder.

                  (c) Notwithstanding the foregoing, any party may at its option
bring any action or other proceeding arising out of or relating to this
Agreement or any other Transaction Document or the subject matter hereof or
thereof against any other party or any of its assets in the courts of any
jurisdiction or place where such other party or such assets may be found or
where such other party may be subject to personal jurisdiction, and may effect
service of process as provided under any applicable Governmental Rule.

                  (d) Each party hereby acknowledges that this is a commercial
transaction, that the foregoing provisions for consent to jurisdiction and
service of process have been read, understood and voluntarily agreed to by each
party and that by agreeing to such provisions each party is waiving important
legal rights.

         16.4 Counterparts; Telefacsimile Execution. This Agreement may be
executed in any number of counterparts, and by each of the parties on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all of which shall constitute but one and the same instrument. Delivery of an
executed counterpart of this Agreement by telefacsimile shall be equally as
effective as delivery of a manually executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile also
shall deliver a manually executed counterpart of this Agreement, but the failure
to deliver a manually executed counterpart shall not affect the validity,
enforceability or binding effect of this Agreement.

         16.5 Entire Agreement. This Agreement and the Transaction Documents
contain the entire agreement of the parties with respect to the transactions
contemplated hereby and supersedes all prior written and oral agreements, and
all contemporaneous oral agreements, relating to such transactions.

         16.6 Expenses. Except as otherwise specifically provided herein or in
any other Transaction Document, each party shall be responsible for such
expenses as it may incur in connection with the negotiation, preparation,
execution, delivery, performance and enforcement of this Agreement and the other
Transaction Documents.

         16.7 Further Assurances. The parties shall from time to time do and
perform such additional acts and execute and deliver such additional documents
and instruments as may be required by applicable Governmental Rules or
reasonably requested by any party to establish, maintain or protect its rights
and remedies or to effect the intents and purposes of this Agreement and the
other Transaction Documents. Without limiting the generality of the foregoing,
each party agrees to endorse (if necessary) and deliver to the other, promptly
after its receipt thereof, any payment or document which it receives after the
Closing and which is the property of the other.

                                      -20-
<PAGE>

         16.8 Governing Law. This Agreement shall be a contract under the laws
of the Commonwealth of Pennsylvania and for all purposes shall be governed by
and construed and enforced in accordance with the laws of said Commonwealth.

         16.9 Notices. Unless otherwise specifically provided herein, all
notices, consents, requests, demands and other communications required or
permitted hereunder:

                  (a) shall be in writing;

                  (b) shall be sent by messenger, certified or registered U.S.
mail, a reliable express delivery service or telecopier (with a copy sent by one
of the foregoing means), charges prepaid as applicable, to the appropriate
address(es) or number(s) set forth below; and

                  (c) shall be deemed to have been given on the date of receipt
by the addressee (or, if the date of receipt is not a business day, on the first
business day after the date of receipt), as evidenced by (i) a receipt executed
by the addressee (or a responsible person in his or her office), the records of
the Person delivering such communication or a notice to the effect that such
addressee refused to claim or accept such communication, if sent by messenger,
U.S. mail or express delivery service, or (ii) a receipt generated by the
sender's telecopier showing that such communication was sent to the appropriate
number on a specified date, if sent by telecopier.

All such communications shall be sent to the following addresses or numbers, or
to such other addresses or numbers as any party may inform the others by giving
five business days' prior notice:

If to Polychem or ECESIS:               With a copy to:

ECESIS, LLC                             McCausland, Keen & Buckman
Franklin Avenue and Grant Street        Radnor Court, Suite 160
Phoenixville, PA  19460                 259 North Radnor - Chester Road
Attn: Mr. Rex Schutte                   Radnor, PA  19087
Telecopier No.: (610) 935-7151          Attn:  Nancy D. Weisberg
                                        Telecopier No.: (610) 341-1099

If to PPM or Vekton:                    With a copy to:

c/o Ensinger, Inc.                      Cohen & Grigsby, P.C.
365 Meadowlands Blvd.                   11 Stanwix Street, 15th Floor
Washington, PA  15301                   Pittsburgh, Pennsylvania  15222
Attn: Rick Phillips                     Attn: Christopher J. Rayl, Esq.
Telecopier No.: (724)746-4212           Telecopier No.(412) 209-0672

         16.10 Publicity. None of the parties to this Agreement shall make any
press release or other public announcement regarding this Agreement or the other
Transaction Documents or any transaction contemplated hereby or thereby until
the text of such release or announcement has been submitted to the other party
and the other party has approved the same.

         16.11 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.

         16.12 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties and their respective heirs,
successors and permitted assigns.

                                      -21-
<PAGE>

         16.13 Waivers. The due performance or observance by the parties of
their respective obligations hereunder and under the other Transaction Documents
shall not be waived, and the rights and remedies of the parties hereunder and
under the other Transaction Documents shall not be affected, by any course of
dealing or performance or by any delay or failure of any party in exercising any
such right or remedy. The due performance or observance by a party of any of its
obligations hereunder or under any other Transaction Document may be waived only
by a writing signed by the party against whom enforcement of such waiver is
sought, and any such waiver shall be effective only to the extent specifically
set forth in such writing.

         16.14 Certain Employee Matters.

                  (a) Nothing in this Agreement (i) requires Supplier to hire,
or to offer to hire, any employees of Polychem or ECESIS, (ii) constitutes an
offer to employ such employees or (iii) requires Supplier to pay any such
persons severance pay in the event of termination of employment.

                  (b) Supplier does not and shall not assume or be responsible
for any obligations or liabilities arising out of any employment relationship
between Polychem or ECESIS and any employee or former employee. Without limiting
the generality of the foregoing, Supplier shall have no liability or obligation
in connection with Polychem's or ECESIS's employees or former employees and
their beneficiaries for (i) contributions to or payments under employee benefit
plans, stock options, programs, arrangements or understandings, (ii) accrued,
but unused, sick leave, vacation pay and severance pay, if any, (iii)
liabilities or obligations under any collective bargaining agreement or
bargaining relationship or (iv) claims, demands, administrative proceedings or
suits arising out of or in connection with alleged unlawful employment practices
of Polychem or ECESIS.




                            [SIGNATURE PAGE FOLLOWS]



                                      -22-
<PAGE>


           [SIGNATURE PAGE TO SUPPLY AND EQUIPMENT PURCHASE AGREEMENT]

                                   ECESIS, LLC


                                   By:
                                      -----------------------------------------
                                   Name:
                                        ---------------------------------------
                                   Title:
                                         --------------------------------------


                                   POLYCHEM CORPORATION

                                   By:
                                      -----------------------------------------
                                   Name:
                                        ---------------------------------------
                                   Title:
                                         --------------------------------------


                                   ENSINGER VEKTON, INC.


                                   By:
                                      -----------------------------------------
                                   Name:  Rick Phillips
                                   Title:  President


                                   PUTNAM PRECISION MOLDING, INC.


                                   By:
                                      -----------------------------------------
                                   Name:  Rick Phillips
                                   Title:  President





                                      -23-
<PAGE>

                                                                SCHEDULE 12.1(a)

                                    EQUIPMENT

Injection molding:

1.       500 Ton HPM, S/N ES-500-V011, 1987
2.       400 Ton HPM, Mod. # 400-TP-30, 1987
3.       350 Ton Van Dorn, S/N 350 RS-30F-849, 1979
4.       200 Ton Van Dorn, S/N 200 RS-14F-1553, 1977
5.       Downstream equipment, auxillary equipment for above

Casting:

6.       Large spinner, condition good (newest of spinners at Polychem)
7.       Option for up to 3 tanks plus nozzles/static mixers
8.       Bucket presses to be used for bucket molds

Machining:

9.       Bandsaw, Tannewitz mod.  GV1E, Approx. 1950, 36" x 36" x 18"
10.      Radial drill press, Ooya Mod. RE-1225H, S/N N79F5D58, age unknown,
         9" x 16"
11.      Tapemate - Fanuc CNC Mill
12.      M.M.P. CNC Machining Center, MHP Mod. B-18, S/N 3277, Approx. 1991, 16
         tool changer, 30" x 16" x 15"
13.      CNC Lathe, Pratt & Whitney Starturn 1200 Universal Lathe S/N 5074-0115,
         approx. 1980, 8 tool changer, 20" swinger x 42" L
14.      CNC Machining Center, Cincinatti Mod. 10vc-1000-B, S/N 50316, approx.
         1979, 24 tool changer, 40" x 20" x 25"
15.      CNC lathe, Cinturn 18C NC chucking center, S/N 5305C18-76-009, approx.
         1985 w/new controller 1999, 30" swing x 36" L, 16x2 tool changer
16.      Vertical turret lathe, Cincinatti make, approx. 1940??, 48" swing
         x 30" H
17.      Cincinatti CNC Machining center, Mod. #10VC-1000, Approx. 1979,
         good condition
18.      Ovilar of Adrian Tool Grinder
19.      Boyer Schultz Surface Grinder
20.      Two portable cable routers
21.      Darex drill sharpener
22.      Large surface grinder
23.      Vacu-move lifter
24.      Ex Cello Tool Grinder
25.      Buffalo multihead drill press - bull sprockets
26.      Doall C-916 Horizontal saw
27.      Morrison Keyseater
28.      Broach
29.       Miscellaneous tools: Machine vices, tool holders, chucks, angle
          plates, toolmaker knee, and mills, cutters, drills, clamps, dividing
          head, measuring tools, fixtures, cabinets for tools, overhead jib
          cranes, and anything else useful for machining Polychem wastewater
          treatment parts.


<PAGE>
                                                                   SCHEDULE 13.6

                                   LITIGATION


1.       Judgment entered in the Court of Common Pleas of Chester County, Pa in
         favor of Budd against Polychem (by way of confession of judgment).
         Judgment relates to an alleged default by Polychem under a Term Note
         dated March 10, 1995. Polychem filed a petition dated 11/14/01 to open
         the judgment. Budd and Polychem subsequently entered into the Budd
         Agreement pursuant to which Budd agreed, among other things, not to
         exercise remedies so long as no default occurs under the Budd
         Agreement.

2.       The following open lawsuits:

         o    DDP Contracting Company, Inc. v. Polychem ($13,731.10, dispute
              over invoice for roof repair).

         o    Anderson Metals suit ($1,224.77 plus interest and attorney's fees
              seeking payment of an unpaid invoice relating to a part made for
              Polychem which Polychem claims was defective).

         o    Sterling Publications Ltd. v. Polychem (filed 1/25/02, seeking
              $6,628 on an unpaid invoice for a transaction that is the subject
              of a dispute by Polychem).

         o    Resources Connection Corp. ($25,970, seeking payment of unpaid
              balance on personnel services contract which Polychem is disputing
              based on nonperformance).

3.       The Eastwind Group, Inc. ("Eastwind"), formerly the parent of Polychem,
         filed a Chapter 11 bankruptcy petition in the U.S. Bankruptcy Court for
         the Eastern District of Pennsylvania on 10/27/00. Eastwind is a
         guarantor of Polychem's obligations to Budd.




<PAGE>


                                                                   SCHEDULE 13.8

                               GOVERNMENTAL ORDERS


1.       The Eastwind bankruptcy filing (See Schedule 13.6)

2.       The Budd judgment described on Schedule 13.6.



<PAGE>


                                                                  SCHEDULE 13.12


                                  TITLE MATTERS

1.       Liens in favor of GE Capital (see Section 12.1 of the Agreement).

2.       Liens in favor of Budd, including a lien granted under a security
         agreement entered into by Polychem pursuant to the Budd Agreement and
         the judgment lien entered 12/3/01 in the Court of Common Pleas of
         Chester County, PA (see Schedule 13.6 and Section 12.1 of the
         Agreement)

3.       Lien (equipment purchase/lease) on Refurb. 1976 Cincinnati CNC Lathe
         Model 18C in favor of Textron Financial Corporation, as described in
         Section 12.1 of this Agreement.

4.       The PSERS Lien.



<PAGE>


                                                                  SCHEDULE 13.13


                                    INSURANCE
<TABLE>
<CAPTION>
             CATEGORY                               CARRIER                              INSURED LIMITS
<S>                                 <C>                                    <C>
Property, Contents, Stock            FGIC Fidelity Guaranty                 Blanket - $12,148,000
                                                                            $10,000 Deductible
                                                                            Business Income & Extra Exp. -
                                                                            $2,000,000

Boiler & Machinery                   Hartford Steam Boiler                  Combined Limit - $10,000,000

General Liability                    FGIC Fidelity Guaranty                 General Aggregate - $2,000,000
                                                                            Products - $1,000,000
                                                                            Personal Injury - $1,000,000
                                                                            Each Occurrence - $1,000,000
                                                                            Fire Damage (Any one fire) -
                                                                            $100,000
                                                                            Medical Exp. (Any one person) -
                                                                            $10,000

Excess Liability                     American International Group           Aggregate - $10,000,000
  (Umbrella Form)                                                           Each Occurrence - $10,000,000

</TABLE>


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<FILENAME>ex10-22.txt
<DESCRIPTION>EXHIBIT 10.22
<TEXT>
<PAGE>

                                                                   Exhibit 10.22

                              SETTLEMENT AGREEMENT
                              --------------------



         This Settlement Agreement (the "Agreement") is entered into as of this
____ day of October, 2001, as modified as of this 5th day of December, 2001, by
and between the following parties:

         1. John W. Morris, Esquire, Chapter 11 Trustee for The Eastwind Group,
Inc. (the "Trustee");

         2. Paul A. DeJuliis ("DeJuliis");

         3. ConMat Technologies, Inc. ("ConMat"); and

         4. Polychem Corporation ("Polychem;" DeJuliis, ConMat and Polychem are
sometimes collectively referred to hereafter as the "Settling Defendants").

                                   Background
                                   ----------

         A. On October 27, 2000, the Eastwind Group, Inc. (the "Debtor") filed a
voluntary petition for reorganization pursuant to Chapter 11 of Title 11 of the
United States Code (the "Bankruptcy Code").

         B. The Trustee was thereafter appointed by Order of the United States
Bankruptcy Court for the Eastern District of Pennsylvania dated February 2,
2001.

         C. The Trustee has standing to commence and prosecute certain actions
arising under the Bankruptcy Code.

         D. On May 24, 2001, the Trustee became the substituted plaintiff in an
adversary proceeding that substituted for and amended a proceeding commenced by
John R. Thach against the Settling Defendants and others by filing the
Substituted Complaint of John W. Morris, Chapter 11 Trustee of The Eastwind
Group, Inc. (the "Complaint").


                                      -1-
<PAGE>


         E. In the Complaint, the Trustee asserted claims against the Settling
Defendants and others to recover certain alleged fraudulent transfers, to
turnover property of the estate and to recover damages.

         F. In the Complaint, in addition to the Settling Defendants, the
Trustee named as defendants Howard M. Appel, William B. Miller, Edward F. Sager,
Jr., Andrew P. Panzo, HMA Associates, a/k/a HMA Associates, Inc. HMA
Investments, Inc., SPH Investments, Inc., SPH Equities, Inc. Stephen P.
Harrington, F.A.C. Enterprises, Inc., IP Services, Inc., a/k/a IF Consulting,
Ltd., Millworth Investments, Inc., Exchequer Services Corp., ESC Services,
Corp., a/k/a ESC, Cecile T. Coady, Centaur Financial Group, The D.A.R. Group,
Inc., Michael J. Cirillo, Clifton Capital, Ltd., Mentor Capital Partners, Ltd.,
Mentor Management Company, Mentor Special Situation Fund, LP, Sager &
Associates, George P. Stasen and Odyssey Capital Group, LP (collectively
referred to hereafter as the "Non-Settling Defendants").

         G. The Settling Defendants dispute the Trustee's right to recover such
transfers and otherwise assert defenses to the Trustee's claims and causes of
action.

         H. In addition to the Trustee's claims against Settling Defendants,
John R. Thach ("Thach"), ProFutures Special Equities Fund, L.P. ("ProFutures"),
and John Park ("Park") (Thach, ProFutures and Park are sometimes collectively
referred to hereafter as the "Claimants") have asserted various claims against
the Settling Defendants and others and those claims are the subject of pending
litigation captioned as:

                  (1) John R. Thach v. The Eastwind Group, Inc., et al., Bkrtcy
Ct., E.D. Pa. No. 00-33372SR, adv. No. 00-906 (the "Thach Action").

                                      -2-
<PAGE>

                  (2) ProFutures Special Equities Fund, L.P. v. The Eastwind
Group, Inc., et al., U.S.D.C., E.D. Pa., No. 00-CV-1888 (the "ProFutures
Action").

                  (3) John Park v. The Eastwind Group, Inc., et al., Mont. Co.
CCP, No. 2000-08245 (the "Park Action").


         (Hereafter collectively, the "Pending Actions").

         I. The Settling Defendants deny any liability to the Claimants on the
claims asserted in the Pending Actions.

         J. The Trustee and the Settling Defendants have determined to resolve
all claims, causes of action and disputes existing between them, all without
admission of liability, on the terms and conditions hereinafter described,
subject to Bankruptcy Court approval.

         NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:

                                   Covenants
                                   ---------

         1. Execution and Effective Date. The parties hereto shall sign this
Agreement no later than five (5) business days after counsel for the Trustee and
the Settling Defendants agree on the form of this Agreement. The Effective Date
of this Agreement will be the date on which (1) no further appeals from an order
approving the settlement, in accordance with and subject to paragraph 2 below,
may be taken; and (2) the Trustee has satisfied or the parties have waived the
conditions set out in paragraph 3 below.

         2. Contingency on Court Approval. This Agreement shall have no force or
effect unless and until this Agreement is approved by the Bankruptcy Court and
either (i) no further appeals from such order may be taken or (ii) the Trustee
and Settling Defendants have jointly elected to treat the bankruptcy court


                                      -3-
<PAGE>

approval date as the Effective Date, notwithstanding the pendency of an appeal.
If there is any appeal and the foregoing election is not made to treat the
agreement as effective from bankruptcy court approval, or if the agreement or
payments or performances thereunder are stayed or delayed pending appeal, or
upon any order vacating or reversing the approval of the bankruptcy court, then
the Trustee elect thereupon to rescind this agreement by written notice to the
Settling Defendants within 15 days of such occurrence. If, for any reason, this
Agreement is not approved by the Bankruptcy Court, this Agreement is null and
void and of no further force and effect, and all litigation shall resume and
proceed as if no settlement ever had been negotiated.

         3. Condition Relating to Settlement of Pending Actions. As set forth
below, the Trustee, with the cooperation of the Settling Defendants, shall seek
to settle the Pending Actions, either in full, or in such manner as resolves or
otherwise limits the exposure of the Settling Defendants on the claims asserted
in the Pending Actions to the satisfaction of the Trustee and the Settling
Defendants. Notwithstanding the foregoing, if (a) a settlement of the Thach
Action has not been achieved by the date that is thirty (30) days after the date
of the Bankruptcy Court's approval of this Agreement, or, in the Trustee's
judgment is not achievable by such time without terms that would be, in the
Trustee's judgment, unduly adverse to the estate and its creditors and parties
in interest; and if (b) the absence of such settlement is, in the Trustee's
judgment, likely to result in unduly burdensome costs and expense to the estate
(for indemnification and otherwise under this Agreement), then either the
Trustee or the Settling Defendants may, at their option, enforce the condition
set out in this paragraph and rescind this Agreement by delivering written
notice to the other, such notice to be delivered not later than thirty-five (35)


                                      -4-
<PAGE>

days after the date of the Bankruptcy Court's approval of this Agreement. Upon
receipt of such notice, this Agreement would be rendered null and void, and all
funds or other deliveries made by the Settling Defendants to the Trustee would
be returned to them immediately without prejudice, along with interest earned on
any funds delivered. On other hand, if such settlement of the Thach Action has
not been achieved by thirty (30) days after the date of the Bankruptcy Court's
approval of this Agreement, and the Trustee and/or the Settling Defendants have
not delivered written notice of rescission of this Agreement within thirty-five
(35) days after the date of the Bankruptcy Court's approval of this Agreement,
then the parties will be deemed to have waived the condition set forth in this
paragraph and this Agreement will be enforced. If the parties have waived the
condition set forth in this paragraph, the parties agree and acknowledge that
the Trustee has indemnification obligations as to the Thach Action that are in
addition to its obligations as to the other Pending Actions, as is set forth in
paragraphs 10, 11, and 12 of this Agreement.

         4. Settlement Payment. Upon satisfaction of the conditions set forth in
paragraphs 1, 2 and 3, above, and the Trustee's satisfaction or waiver of the
condition set out in paragraph 3, ConMat shall pay, and the Settling Defendants
shall cause ConMat to pay to the Trustee, the sum of $1,500,000 (the "Settlement
Payment"), payable as follows:


                  (a) $150,000 (the "Initial Payment") shall be paid, by wire
transfer to the Trustee's DIP account, within ten (10) days after satisfaction
of the conditions set forth in paragraph 2 above and the Trustee's waiver of the
condition set forth in paragraph 3 above.

                  (b) $350,000 (the "Second Payment") shall be paid, by wire
transfer to the Trustee's DIP account, within ten (10) days from the earlier of
(i) ninety (90) days from the date the Bankruptcy Court approves this Agreement


                                      -5-
<PAGE>


or (ii) ConMat shareholders formally approve a management buyout (the
"Management Buyout") of Polychem's specialty and water treatment product lines
and related patents, technologies, customer lists, distribution, backlog,
industry names and molds, on substantially the terms set forth on Exhibit "A"
attached hereto.

                  (c) The balance of $1,000,000 (the "Remaining Balance") shall
be evidenced by a promissory note in the form attached hereto as Exhibit "B"
(the "Note") to be executed and delivered by ConMat and Polychem no later than
five (5) business days from the date the Bankruptcy Court approves the
Agreement. As set forth in the Collateral Pledge of Stock Agreement by Eastwind
Stockholder's Trust, Collateral Pledge of Stock Agreement by ConMat
Technologies, Inc., ConMat Security Agreement, Polychem Security Agreement, and
Polychem Mortgage, copies of which are attached to the Note as Exhibits B-1
through B-5, the Note shall be secured by (I) the capital stock of ConMat owned,
controlled, or held in trust or alleged trust for shareholders of Debtor subject
to the condition that the order approving this Agreement shall also approve such
turnover; (II) all of the assets of ConMat; (III) all of the capital stock and
all of the assets of Polychem; (IV) and a mortgage on Polychem's property (the
"Collateral"), with Item I of the aforesaid security being free and clear of any
other interest lien or claim of any party other than the claims asserted in this
pending adversary proceeding; and Items II, III and IV of the aforesaid security
being subordinate only to (a) the security interests of General Electric Capital
Corporation ("GECC") under its revolving trade credit facility for Polychem in
the current outstanding amount of $2,750,000 (the "GECC Loan"), (b) the security
interests and judgment lien of the Budd Company, ("Budd") against Polychem,
under its security agreement with Polychem dated October _____, 2001 (the "Budd
Security Agreement") as security for Polychem's prior principal and judgment



                                      -6-
<PAGE>




indebtedness to Budd of approximately $906,436 (the "Budd debt") and (c) the
first mortgage held by Pennsylvania Public School Employees' Retirement Board
("PSERS") as security for its real estate loan to Polychem in the current
outstanding amount of $1,830,370.38 (the "PSERS Loan"), under their respective
loan and security documents with Polychem. It shall be a condition to the
effectiveness of this Agreement, waivable only by the Trustee, that GECC, PSERS
and Budd have confirmed, in a form acceptable to the Trustee, including but not
limited to appropriate intercreditor agreement(s) consistent herewith, that they
do not object to this Agreement or the security documents. Recourse under the
Note shall be limited to the Collateral. The principal balance due and owing
under the Note shall be due and payable upon the earlier of (i) July 15, 2002;
or (ii) to the extent of net proceeds therefrom and subject to the rights of
GECC, PSERS and Budd as set out above, upon consummation of any sale of the
capital stock of Polychem, the management buyout described in Section 4(b) or
any other material portion of the business or assets thereof, whether by way of
merger, consolidation, sale of stock, sale of assets or similar transaction.

                  (d) In addition to, and not in limitation of the rights set
out in the attached security and collateral documents, the foregoing payments
dates shall be accelerated, and shall be deemed due and payable in full, without
need for further action by or notice from the Trustee, upon the bankruptcy or
receivership of Polychem or ConMat or the taking of possession, receivership,
control execution, or entry of judgment against Polychem or ConMat, or their
assets or capital stock by GECC, PSERS or Budd.


                                      -7-
<PAGE>

                  (e) (e) The Trustee and the Settling Defendants confirm, as
clarification, that the attached security and collateral documents are intended,
inter alia, to forbid the Settling Defendants from causing or permitting a
dilution of the Trustee's interest and collateral position in the stock or
assets of ConMat during the pendency of this Settlement Agreement.

         5. Turnover of Shares in Eastwind Stockholder's Trust. As is set forth
in paragraph 4(c)(I), above, in connection with the approval of this Agreement
the Trustee shall obtain an order from the Bankruptcy Court directing (a)
DeJuliis to turnover the ConMat stock certificate held in the Eastwind
Stockholder's Trust ("Trust"); and (b) relieving DeJuliis of any further
obligations under the Trust from and after entry of the Bankruptcy Court's order
approving this Agreement. Upon entry of such Order, DeJuliis will immediately
deliver possession of the Trust shares to Trustee subject to paragraph 7 of this
Agreement.

         6. Apportionment of Settlement Payment for ProFutures and Park. Unless
the ProFutures and/or Park Actions have been otherwise settled and released,
then the parties agree and acknowledge that a portion of the Settlement Payment
payable to the Trustee in such amount as the Trustee may establish as reasonable
for this purpose, but not to exceed $200,000, is to be allocated and set aside
by the Trustee to be used toward payment of the claims in the ProFutures and
Park Actions, through settlement or otherwise, and to fund the indemnification
obligations of the Trustee with respect to these actions, as is set forth in
paragraphs 10, 11 and 12 of this Agreement. The Trustee agrees that Settling
Defendants responsibility to settle the Pending Actions is limited to the
Settlement Payment only. The aforesaid allocation and amount set aside, and the
related indemnification obligations of the Trustee shall be reduced dollar for
dollar to the extent that the Settlement Payment is not paid in full.


                                      -8-
<PAGE>


         7. Return of ConMat Stock. Upon satisfaction of the Note, the Trustee
shall return the Collateral and shall transfer, assign and convey to ConMat all
shares of ConMat common or preferred stock owned or controlled by the Debtor,
including without limitation, the shares of ConMat common stock held in the
Eastwind Stockholder's Trust, by delivery of stock certificates representing
such shares, endorsed by the Trustee without recourse for transfer. This
transfer of ConMat stock by the Trustee to ConMat shall not include any shares
acquired or transferred to the Trustee by Non-Settling Defendants at any time
from or after September 1, 2001.

         8. Release of Settling Defendants by Trustee and Debtor. For and in
consideration of the Settlement Payment (and subject to the condition that the
full amount thereof be paid in good funds to the Trustee, including but not
limited to the Remaining Balance under the Note) and releases, conditions and
other mutual covenants set forth in this Agreement, the Trustee, on his own
behalf and on behalf of the Debtor, its estate and parties in interest thereto,
and the Trustee's, the estate's, the Debtor's or its subsidiaries' current and
former shareholders, officers, directors, predecessors, other trustees,
advisors, employees, agents, consultants, representatives and attorneys, and the
Debtor's respective administrators, successors and assigns, and anyone claiming
through them or on their behalf (collectively, the "Trustee Releasing Parties"),
hereby remises, releases and forever discharges the Settling Defendants,
together with their officers, directors, employees, agents, consultants, current
attorneys, heirs, spouses, executors, administrators, successors and assigns
(collectively, the "ConMat Released Parties"), from and against all claims that
the Trustee or Eastwind has, or could have asserted in the Complaint or in the

                                      -9-
<PAGE>


Pending Actions, against the ConMat Released Parties or any of them, singly or
in any combination. Nothing in the foregoing release shall be deemed to release
claims against the Non-Settling Defendants, or persons or entities owned,
controlled, operated or managed by them, or their respective attorneys,
advisors, insurers, officers, directors, shareholders (other than the Settling
Defendants), subsidiaries and affiliates (other than the Settling Defendants),
or their heirs, spouses, executors, administrators, successors and assigns
(collectively, the "Non-Released Parties").

         9. Release of Trustee and Debtor by the Settling Defendants. For and in
consideration of the release of the claims against them set forth in the
Complaint and the releases and other mutual covenants set forth in this
Agreement, each of the Settling Defendants, together with their parents,
subsidiaries, affiliates, shareholders, officers, directors, employees, agents,
representatives, attorneys, heirs, spouses, executors, administrators,
successors and assigns, and anyone claiming through them or on their behalf
(collectively, the "ConMat Releasing Parties"), hereby remise, release and
forever discharge the Trustee, the Debtor and its estate, together with the
Trustee and the Debtor's subsidiaries and/or affiliated companies, and the
current and former shareholders, officers, directors, predecessors, trustees,
advisors, partners, employees, agents, consultants, representatives and
attorneys of each of the foregoing (collectively, the "Trustee Released
Parties") and the Trustee Released Parties' respective administrators,
successors and assigns, from and against all claims that the Settling Defendants
have, or could have asserted against the Trustee Released Parties, or some or
any of them, singly or in any combination, in connection with (i) the Complaint
or the Pending Actions, subject to any claims for indemnification by Settling


                                      -10-
<PAGE>


Defendants as set forth in paragraphs 10, 11 and 12 below; (ii) any claim that
has been or could be raised in any filed or unfiled proof of claim (or other
administrative, secured, priority, unsecured, rejection, or other claim asserted
or assertable) in Eastwind's bankruptcy case, regardless of whether such claim
relates in any way to the Complaint or the Pending Actions.


         10. Judgment Reduction and Joint Tortfeasor Indemnification Provisions.
If any of the Non-Settling Defendants assert and/or ultimately establish a claim
against any of the Settling Defendants for contribution or indemnification in
connection with any claim or cause of action instituted by the Trustee against
the Non-Settling Defendants involving or relating to any claim arising out of or
relating to the Complaint, the Pending Actions or the Debtor or that otherwise
is released pursuant to this Agreement, then the Trustee specifically agrees to:
(a) defend, indemnify and hold harmless the Settling Defendants to the extent of
their liability for such contribution and indemnification. (b) to eliminate to
the extent reasonably possible the need for Settling Defendants to incur legal
fees in defense of such contribution or indemnification claims; and (c) reduce
the amount of any judgment, settlement or other award obtained by the Trustee to
eliminate the right of any person or entity to collect any claim, demand or
judgment for contribution or indemnification from the Settling Defendants
arising out of the Complaint or any future action the Trustee may assert against
such person or entity.


         11. Thach Settlement/Indemnification. The Trustee shall use vigorous
and reasonable efforts to obtain a release of the Settling Defendants from Thach
for all claims in the Thach Action. If the Trustee obtains a release of the
claims in the Thach Action, the Settling Defendants will enter into mutual
releases with Thach, in substantially similar form to the mutual releases



                                      -11-
<PAGE>


exchanged hereunder between the Trustee and the Settling Defendants. If the
Trustee cannot obtain a release from Thach of the Thach Action then pursuant to
paragraph 3 above, either the Trustee or the Settling Defendants may elect to
rescind the Agreement on or before the dates set out in paragraph 3 above.
Otherwise, the Trustee will agree to indemnify the Settling Defendants from
their share of liability in the Thach Action. The foregoing indemnification
obligations and obligations to save harmless from claims raised in the Thach
Action shall include an obligation by the Trustee to provide a defense to the
Settling Defendants, or, if not, to pay or reimburse reasonable attorney's fees
or costs incurred or to be incurred in connection therewith. The Trustee's
motion for approval of this Agreement shall set out, and such approval shall be
a condition to the effectiveness of this Agreement, that this Agreement bars
Thach from separately pursuing the Debtor and/or Trustee's claims against any of
the Settling Defendants.

         12. ProFutures and Park Settlements/Indemnifications. The Trustee shall
use vigorous and reasonable efforts to obtain a release of the Settling
Defendants from ProFutures and Park for all claims in the ProFutures and Park
Actions. If the Trustee obtains a release of the claims in the ProFutures and
Park Actions, the Settling Defendants will enter into mutual releases with
ProFutures and/or Park, in substantially similar form to the mutual releases
exchanged hereunder between the Trustee and the Settling Defendants. If the
Trustee cannot obtain a release from the claims in the ProFutures and/or Park
Actions, then, pursuant to paragraph 6, above, the Trustee will agree to
indemnify the Settling Defendants from their share of liability on the claims in
the ProFutures and Park Actions up to the $200,000 limit set forth in paragraph
6 above. To the extent that such funds are not used by the Trustee to settle or
pay the ProFutures and Park claims they are available for the reasonable defense
costs of the Settling Defendants hereafter incurred in the defense of the


                                      -12-
<PAGE>


ProFutures and Park Actions. The Trustee's motion for approval of this Agreement
shall set out and, to the extent required, similar motion(s) before any other
applicable courts shall set out that this Agreement bars Park and ProFutures
from separately pursuing the Debtor and/or Trustee's claims against any of the
Settling Defendants.

         13. Covenant Not to Sue. Other than actions upon and to enforce this
Agreement , and subject to the condition as to the Trustee's covenant that the
full amount thereof be paid in good funds to the Trustee, including but not
limited to the Remaining Balance under the Note, The Trustee and the Settling
Defendants covenant and agree that they shall not ever commence any actions or
proceedings of any kind against one another to recover upon claims that are
released under this Agreement and, further, that all such claims and causes of
action are deemed fully, finally and completely settled hereby.

         14. Parties to Bear Own Expenses. The Trustee and the Settling
Defendants agree, unless provided otherwise as to events from and after approval
of this Agreement under the annexed collateral and security documents, to bear
their own expenses, including attorney fees, in connection with the negotiation
and entry into this Agreement and all related matters.

         15. General Representations and Warranties. Each party represents and
warrants to the others as follows, subject to the requirement that the Trustee
must seek and obtain Court approval for this Agreement:

                  (a) Power and Authorization. It has all requisite power and
authority (corporate and otherwise) to enter into this Agreement, and is duly
authorized by all necessary action the execution and delivery hereof by the
officer or individual whose name is signed on its behalf below.

                                      -13-
<PAGE>

                  (b) No Conflict. Its execution and delivery of this Agreement
and the performance of its obligations hereunder, do not and will not conflict
with or result in a breach of or a default under its organizational instruments
or any other agreement, instrument, order, law or regulation applicable to it or
by which it may be bound.

                  (c) Enforceability. This Agreement has been duly and validly
executed and delivered by it and constitutes its valid and legally binding
obligation, enforceable in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency or other laws of general application
relating to or affecting the enforcement of creditors' rights and except as
enforcement is subject to general equitable principles. If any term or provision
of this Agreement shall be judicially determined to be illegal, unenforceable,
or invalid or otherwise void, the parties intend that the remaining provisions
shall continue in full force and effect.

         16. Entire Agreement. This Agreement contains the entire understanding
of the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, whether written or oral, between them with
respect to the subject matter hereof. Each party has executed this Agreement
without reliance upon any promise, representation or warranty other than those
expressly set forth herein. Each party acknowledges that (i) it has carefully
read this Agreement, (ii) it has had the assistance of legal counsel of its
choosing (and such other professionals and advisors as it has deemed necessary)
in the review and execution hereof, (iii) the meaning and effect of the various
terms and provision hereof have been fully explained to it by such counsel, (iv)
it has conducted such investigation, review and analysis as it has deemed
necessary to understand the provisions of this Agreement and the transactions
contemplated hereby, and (v) it has executed this Agreement of its own free
will.

                                      -14-
<PAGE>

         17. Amendment. No amendment of this Agreement shall be effective unless
embodied in a written instrument executed by all of the parties.

         18. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal substantive and procedural laws of the Commonwealth
of Pennsylvania without regard to conflict of laws principles.

         19. Dispute Resolution. Exclusive jurisdiction to resolve any dispute
arising out of this Agreement shall be retained by the United States Bankruptcy
Court for the Eastern District of Pennsylvania, and all parties hereby consent
to the jurisdiction of that Court to resolve any such dispute.

         20. Headings. The headings of sections and subsections have been
included for convenience only and shall not be considered in interpreting this
Agreement.

         21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, and all of which
together shall constitute one and the same Agreement. This Agreement may be
executed and delivered via electronic facsimile transmission with the same force
and effect as if it were executed and delivered by the parties simultaneously in
the presence of one another.

         22. Interpretation and Construction. This Agreement has been fully and
freely negotiated by the parties hereto, shall be considered as having been
drafted jointly by the parties hereto, and shall be interpreted and construed as
if so drafted, without construction in favor of or against any party on account
of its participation in the drafting hereof.

                                      -15-
<PAGE>



         23. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective heirs, personal representatives,
successors and assigns.

         24. Assignment of Rights Under Insurance Policies. As of the Effective
Date, Settling Defendants, individually and collectively, irrevocably assign,
convey and transfer to the Trustee any and all rights they have under, arising
from, or relating to the following policies of insurance, and any successor,
renewal or amendatory policies thereto:

                  (a) National Union Fire Insurance Company of Pittsburgh, Pa.
Directors, Officers and Corporate Liability Insurance Policy number 856-56-64.

                  (b) National Union Fire Insurance Company of Pittsburgh, Pa.
Directors, Officers and Corporate Liability Insurance Policy number 485-98-75.

                  (c) Zurich American Insurance Company, Directors and Officers
Liability and Reimbursement Policy number DOC 3770836 00 (to the extent relating
to the Pending Actions and the claims raised in the Trustee's Complaint, and the
events and occurrences therein).

         This assignment expressly includes any right of reimbursement, payment,
indemnification or otherwise of each of the Settling Defendants, including but
not limited to all claims and rights to reimbursement, payment, indemnification,
recovery or otherwise with respect to these policies for defense and litigation
costs and attorney's fees, whether heretofore or hereafter incurred by any of
them or on their behalf.

                                      -16-
<PAGE>


         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the date first written above.

                                     /s/ John W. Morris
                                     ----------------------------------------
                                     John W. Morris, Esq., Chapter 11 Trustee
                                     for The Eastwind Bankruptcy

                                     /s/ Paul A. DeJuliis
                                     --------------------------------
                                     Paul A. DeJuliis

                                     CONMAT TECHNOLOGIES, INC

                                     /s/ Paul A. DeJuliis
                                     -------------------------------
                                     By: Paul A. DeJuliis, President


                                     POLYCHEM CORPORATION

                                     /s/ Paul A. DeJuliis
                                     --------------------------------
                                     By: Paul A. DeJuliis








</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>6
<FILENAME>ex10-23.txt
<DESCRIPTION>EXHIBIT 10.23
<TEXT>
<PAGE>

                                                                  Exhibit 10.23



                   SEVENTH AMENDMENT AND FORBEARANCE AGREEMENT

         SEVENTH AMENDMENT AND FORBEARANCE AGREEMENT referred to below
("Agreement"), dated as of September 28, 2001, by and between POLYCHEM
CORPORATION, a Pennsylvania corporation ("Borrower"), and GENERAL ELECTRIC
CAPITAL CORPORATION, a Delaware corporation, successor by merger to General
Electric Capital Corporation, a New York corporation ("Lender").

                              W I T N E S S E T H:

         WHEREAS, Lender and Borrower have entered into certain financing
arrangements pursuant to the Loan and Security Agreement dated September 30,
1998 by and between Lender and Borrower (and as amended hereby, and as the same
may have heretofore been or may hereafter be further amended, modified,
supplemented, extended, renewed, restated or replaced, the "Loan Agreement", and
together with all agreements, documents and instruments at any time executed
and/or delivered in connection therewith or related thereto, collectively, the
"Financing Agreements"); and

         WHEREAS, as of the date hereof, Borrower is in default under the
Financing Agreements as more particularly described below; and

         WHEREAS, the circumstances described herein constitute Events of
Default under the Loan Agreement and the other Financing Agreements; and

         WHEREAS, Borrower has requested that Lender forbear from exercising its
rights as a result of such Events of Default, certain of which are continuing,
and that Lender provide further Revolving Credit Loans and other financial
accommodations to Borrower notwithstanding such Events of Default; and

         WHEREAS, Borrower has requested that Lender agree to extend the term of
the Loan Agreement and the other Financing Agreements; and

         WHEREAS, Lender is willing to agree to temporarily forbear from
exercising certain of its rights and remedies, extend the term of the Loan
Agreement and the other Financing Agreements and provide certain further
Revolving Credit Loans and other financial accommodations to Borrower for the
period and on the terms and conditions specified herein;

         NOW, THEREFORE, in consideration of the foregoing, and the respective
agreements, warranties and covenants contained herein, the parties hereto agree,
covenant and warrant as follows:



<PAGE>

SECTION 1. DEFINITIONS.

         1.1 Interpretation. All capitalized terms used herein (including the
recitals hereto) shall have the respective meanings assigned thereto in the Loan
Agreement unless otherwise defined herein.

         1.2 Additional Definition. As used herein, the following term shall
have the meaning given to it below and the Loan Agreement is hereby amended to
include, in addition and not in limitation, the following definition:

                  "Existing Defaults" shall mean the following Events of
Default: (i) Borrower's failure to meet the required Fixed Charge Coverage Ratio
for each of the Fiscal Quarters ended March 31, 2001 and June 30, 2001, and (ii)
Borrower's failure to meet the required Minimum Tangible Net Worth Covenant for
each of the Fiscal Quarters ended March 31, 2001 and June 30, 2001.

SECTION 2. ACKNOWLEDGMENT

         2.1 Acknowledgment of Obligations. Borrower hereby acknowledges,
confirms and agrees that as of the close of business on September 28, 2001,
Borrower is indebted to Lender in respect of the Loans in the principal amount
of $2,634,073.54. All such Loans, together with interest accrued and accruing
thereon, and fees, costs, expenses and other charges now or hereafter payable by
Borrower to Lender, are unconditionally owing by Borrower to Lender, without
offset, defense or counterclaim of any kind, nature or description whatsoever.

         2.2 Acknowledgment of Security Interests. Borrower hereby acknowledges,
confirms and agrees that Lender has and shall continue to have valid,
enforceable and perfected liens upon and security interests in the Collateral
heretofore granted to Lender pursuant to the Financing Agreements or otherwise
granted to or held by Lender.

         2.3 Binding Effect of Documents. The Borrower hereby acknowledges,
confirms and agrees that: (a) each of the Financing Agreements to which it is a
party has been duly executed and delivered to Lender by Borrower, and each is in
full force and effect as of the date hereof, (b) the agreements and obligations
of Borrower contained in such documents and in this Agreement constitute the
legal, valid and binding Obligations of Borrower, enforceable against it in
accordance with their respective terms, and Borrower has no valid defense to the
enforcement of such Obligations, and (c) Lender is and shall be entitled to the
rights, remedies and benefits provided for in the Financing Agreements and
applicable law.


                                       2
<PAGE>

SECTION 3. FORBEARANCE IN RESPECT OF CERTAIN EVENTS OF DEFAULT


         3.1 Acknowledgment of Default. Borrower hereby acknowledges and agrees
         that the Existing Defaults have occurred and are continuing, each of
         which constitutes an Event of Default and entitles Lender to exercise
         its rights and remedies under the Financing Agreements, applicable law
         or otherwise and Borrower further represents and warrants that as of
         the date hereof no other Events of Default under the Financing
         Agreements exist. Lender has not waived, presently does not intend to
         waive and may never waive such Existing Defaults and nothing contained
         herein or the transactions contemplated hereby shall be deemed to
         constitute any such waiver. Borrower hereby acknowledges and agrees
         that Lender has the presently exercisable right to declare the
         Obligations to be immediately due and payable under the terms of the
         Financing Agreements before the effectiveness of the forbearance
         contained in Section 3.2, such right and all other rights and remedies
         against the Borrower, the Collateral and/or the Guarantors available to
         Lender under the Financing Agreements and under applicable law without
         notice to the Borrower or Guarantor.

         3.2      Forbearance.

                  (a) In reliance upon the representations, warranties and
                  covenants of Borrower and Guarantor contained in this
                  Agreement, and subject to the terms and conditions of this
                  Agreement and any documents or instruments executed in
                  connection herewith, Lender agrees to forbear from exercising
                  its rights and remedies under the Financing Agreements or
                  applicable law in respect of or arising out of the Existing
                  Defaults, subject to the conditions, amendments and
                  modifications contained herein for the period (the
                  "Forbearance Period") commencing on the date hereof and ending
                  on the earlier of: (i) January 31, 2002 or (ii) the occurrence
                  or existence of any Event of Default, other than the Existing
                  Defaults.

                  (b) Upon the termination of the Forbearance Period, the
                  agreement of Lender to forbear shall automatically and without
                  further action terminate and be of no force and effect, it
                  being expressly agreed that the effect of such termination
                  will be to permit Lender to exercise such rights and remedies
                  immediately, including, but not limited to, (i) ceasing to
                  make any further Loans, (ii) the acceleration of all of the
                  Obligations; and (iii) enforce any or all of its rights
                  against the Collateral, Borrower or Guarantors; in each case
                  without any further notice, passage of time or forbearance of
                  any kind.



                                       3
<PAGE>

         3.3      No Waivers; Reservation of Rights.

                  (a) Lender has not waived, is not by this Agreement waiving,
                  and has no intention of waiving, any Events of Default which
                  may be continuing on the date hereof or any Events of Default
                  which may occur after the date hereof (whether the same or
                  similar to the Existing Defaults or otherwise), and Lender has
                  not agreed to forbear with respect to any of its rights or
                  remedies concerning any Events of Default (other than, during
                  the Forbearance Period, the Existing Defaults to the extent
                  expressly set forth herein), which may have occurred or are
                  continuing as of the date hereof or which may occur after the
                  date hereof.

                  (b) Subject to Section 3.2 above (solely with respect to the
                  Existing Defaults), Lender reserves the right, in its
                  discretion, to exercise any or all of its rights and remedies
                  under the Loan Agreement and the other Financing Agreements as
                  a result of any Events of Default which may be continuing on
                  the date hereof or any Event of Default which may occur after
                  the date hereof, and Lender has not waived any of such rights
                  or remedies, and nothing in this Agreement, and no delay on
                  its part in exercising any such rights or remedies, should be
                  construed as a waiver of any such rights or remedies.


SECTION 4. AMENDMENTS AND SUPPLEMENTARY PROVISIONS

         4.1      Interest. Section 1.5(a) of the Loan Agreement is hereby
                  amended and restated in its entirety as follows:

                  "1.5 Interest. (a) Borrower shall pay interest to Lender on
                  the aggregate outstanding Revolving Credit Advances at a
                  floating rate equal to the Index Rate plus six and
                  three-quarters (6 3/4%) percent per annum (the "Revolving
                  Credit Rate"), and on the aggregate outstanding balance of the
                  Term Loan at a floating rate equal to the Index Rate plus
                  eight and one-half (8 1/2%) percent per annum (the "Term Loan
                  Rate").

         4.2      Representations and Warranties. The first sentence of Section
                  3.2 of the Loan Agreement is hereby deleted in its entirety
                  and the following new sentence is hereby inserted in lieu
                  thereof:



                                       4
<PAGE>


                  "Each Corporate Credit Party's name as it appears in official
                  filing in the state of its incorporation or organization, the
                  type of entity of each Corporate Credit Party, organizational
                  identification number issued by each such Credit Party state
                  of incorporation or organization or a statement that no such
                  number has been issued, each Corporate Credit Party's state of
                  organization or incorporation, the location of each Corporate
                  Credit Party's chief executive office, corporate offices,
                  warehouses, other locations of Collateral and locations where
                  records with respect to Collateral are kept (including in each
                  case the county of such locations) are as set forth in
                  Disclosure Schedule (3.2) and, except as set forth in such
                  Disclosure Schedule, such locations have not changed during
                  the preceding twelve months."

         4.3      Grant of Security Interest.

                  (a) Section 6.1(a) of the Loan Agreement is hereby amended and
                      restated in its entirety to read as follows:

                   "(a) As collateral security for the prompt and complete
                  payment and performance of the Obligations, each of the
                  Borrower and any other Credit Party executing this Agreement
                  hereby grants to the Lender a security interest in and Lien
                  upon all of its property and assets, whether real or personal,
                  tangible or intangible, and whether now owned or hereafter
                  acquired, or in which it now has or at any time in the future
                  may acquire any right, title, or interest, including all of
                  the following property in which it now has or at any time in
                  the future may acquire any right, title or interest: all
                  Accounts; all Deposit Accounts, other bank accounts and all
                  funds on deposit therein; all money, cash and cash
                  equivalents; all Investment Property; all Stock; all Goods
                  (including Inventory, Equipment and Fixtures); all Chattel
                  Paper, Documents and Instruments; all Books and Records; all
                  General Intangibles (including all Intellectual Property,
                  contract rights, choses in action, payment intangibles and
                  Software); all Letter-of-Credit Rights; all Supporting
                  Obligations; and to the extent not otherwise included, all
                  Proceeds, tort claims, insurance claims and other rights to
                  payment not otherwise included in the foregoing and products
                  of all and any of the foregoing and all accessions to,
                  substitutions and replacements for, and rents and profits of,
                  each of the foregoing, but excluding in all events Hazardous
                  Waste (all of the foregoing, together with any other
                  collateral pledged to the Lender pursuant to any other Loan
                  Document, collectively, the "Collateral")."

                  (b) Section 6.1(b) is hereby amended by inserting the
                      following new sentence at the end thereof:

                                       5
<PAGE>

                  "Each Credit Party executing this Agreement shall promptly,
                  and in any event within two (2) Business Days after the same
                  is acquired by it, notify Lender of any commercial tort claim
                  (as defined in the Code) acquired by it and unless otherwise
                  consented by Lender, such Credit Party shall enter into a
                  supplement to this Loan Agreement granting to Lender a Lien in
                  such commercial tort claim."

                  4.4 Attorney-in-Fact. The last sentence of Section 6.3 of the
                  Loan Agreement is hereby deleted in its entirety and the
                  following new sentences are hereby inserted in lieu thereof:

                  "Notwithstanding the foregoing, the Borrower and each other
                  Credit Party executing this Agreement also hereby (i)
                  authorizes Lender to file any financing statement,
                  continuation statement or amendment thereto that (x) indicate
                  the Collateral (1) as all assets of such Credit Party or words
                  of similar effect or (2) as being of an equal or lesser scope
                  or with greater detail and (y) contains any other information
                  required by Part 5 of Revised Article 9 of the Code for the
                  sufficiency or filing office acceptance of any financing
                  statement, continuation statement or amendment, in each case,
                  without the signature of Borrower or such Credit Party and
                  (ii) ratifies its authorization for Lender to have filed any
                  initial financial statements, or amendments thereto if filed
                  prior to the date hereof. The Borrower and each other Credit
                  Party executing this Agreement acknowledges that it is not
                  authorized to file any financing statement or amendment or
                  termination statement with respect to any financing statement
                  without the prior written consent of Lender and agrees that it
                  will not do so without the prior written consent of Lender,
                  subject to such Credit Party's rights under Section
                  9-509(d)(2) of the Code."

         4.5      Schedule A - Definitions.

                  (a)      Each definition from Schedule A to the Loan Agreement
                           set forth on Schedule A hereto is hereby amended and
                           restated in its entirety to read as set forth on
                           Schedule A hereto.

                  (b)      The following defined terms are hereby added to
                           Schedule A to the Loan Agreement in appropriate
                           alphabetical order:

                           "Deposit Accounts" means all "deposit accounts" as
                           such term is defined in the Code, now or hereafter
                           held in the name of any Person.

                                       6
<PAGE>

                           "Letter-of-Credit Rights" means "letter-of-credit
                           rights" as such term is defined in the Code, now
                           owned or hereafter acquired by any Person, including
                           rights to payment or performance under a letter of
                           credit, whether or not such Person, as beneficiary,
                           has demanded or is entitled to demand payment or
                           performance.

                           "Software" shall mean all "software" as such term is
                           defined in the Code, now owned or hereafter acquired
                           by any Person, other than software embedded in any
                           category of Goods, including all computer programs
                           and all supporting information provided in connection
                           with a transaction related to any program.

                           "Supporting Obligations" means all "supporting
                           obligations" as such term is defined in the Code,
                           including letters of credit and guaranties issued in
                           support of Accounts, Chattel Paper, Documents,
                           General Intangibles, Instruments, or Investment
                           Property.


         4.6      Borrowing Base. Section (b) of the definition of the term
                  "Borrowing Base", as set forth on Schedule A - Definitions to
                  the Loan Agreement, is hereby amended and restated as follows:

                  "(b) the lesser of (i) $750,000 minus the amount of proceeds
                  received by Lender from the sale by Borrower of Borrower's
                  machinery, equipment and inventory outside the ordinary course
                  of business from and after September 28, 2001 and (ii) up to
                  fifty percent (50%)(less reserves established by Lender
                  pursuant to Section 1.13) of the value of Borrower's Eligible
                  Inventory consisting of raw material and finished goods, in
                  each case as determined by Lender, valued on a first-in,
                  first-out basis (at the lower of cost or market), less a
                  reserve equal to $300,000 against availability."


         4.7      Maximum Amount. The definition of the term "Maximum Amount",
                  as set forth on Schedule A - Definitions to the Loan
                  Agreement, is hereby amended and restated as follows:

                  ""Maximum Amount" shall mean $3,000,000, provided that, the
                  Maximum Amount shall be further reduced by the amount of
                  proceeds received by Lender from the sale by Borrower of its
                  machinery, equipment and inventory outside the ordinary course
                  of business from and after September 28, 2001, excluding the
                  amount of such proceeds received by Lender and applied to the
                  outstanding principal balance of the Term Loan."

                                       7
<PAGE>

         4.8      Stated Maturity Date. The definition of the term "Stated
                  Maturity Date", as set forth on Schedule A - Definitions to
                  the Loan Agreement, is hereby amended and restated as follows:

                  ""Stated Maturity Date" shall mean January 31, 2002."

         4.9      Fixed Charge Coverage Ratio. The first sentence of Section 1
                  of "Fixed Charge Coverage Ratio", as set forth on Schedule G -
                  Financial Covenants to the Loan Agreement, is hereby amended
                  and restated in its entirety as follows:

                  "1. [Intentionally omitted.]"

         4.10     Minimum Tangible Net Worth. Section 3 of Schedule G -
                  Financial Covenants to the Loan Agreement is hereby amended
                  and restated in its entirety as follows:

                  "3. [Intentionally omitted.]"

         4.11     Disclosure Schedule 3.2. Attached hereto is Disclosure
                  Schedule 3.2 reflecting the information required by Section
                  3.2 of the Loan Agreement, as amended hereby.

SECTION 5. Additional Amendments and Supplementary Provisions.

         5.1      Pretax Income. Borrower covenants and agrees that Borrower
                  shall maintain aggregate Net Income, prior to the effect of
                  taxes on income, for each month set forth below in an amount
                  exceeding the amount set forth opposite such month.

                        --------------------------------
                        Month               Amount
                        --------------------------------
                        September 2001      $11,900
                        --------------------------------
                        October 2001        $10,150
                        --------------------------------
                        November 2001       $30,450
                        --------------------------------
                        December 2001       $26,950
                        --------------------------------

         5.2 Additional Reserves. In addition to, and not in limitation of,
Lender's continuing right to establish reserves under the Financing Agreements
and in addition to all reserves established prior to the date of this Agreement
including, without limitation, the reserve in the amount of $25,000 established
on or about September, 2001, and the reserve in the amount of $25,000
established, or to be established, on or about September 28, 2001. Borrower
hereby acknowledges and confirms that from and after October 1, 2001, Borrower
hereby consents to the daily establishment of additional reserves against
Borrower in the amount of $2,500 per day on each Business Day. Such reserves
shall continue in effect until Lender determines otherwise in its sole
discretion.

                                       8
<PAGE>

         5.3      Eastwind Settlement.

                  (a)      Attached hereto as Exhibit B is a draft settlement
                           agreement ("the "Eastwind Settlement Agreement") in
                           the matter of John M. Morris, Esq., Chapter 11
                           Trustee for the Eastwind Group, Inc. v. Conmat
                           Technologies, Inc., et al. Case No. 00-33372 (SR)
                           pending in the United States Bankruptcy Court for the
                           Eastern District of Pennsylvania (the "Eastwind
                           Lawsuit"), and Borrower has advised Lender that
                           Borrower expects to enter into a substantially
                           similar agreement, satisfactory to Lender in Lender's
                           sole discretion (the "Eastwind Settlement
                           Agreement"), and any such agreement shall include,
                           without limitation, payment by Borrower in full
                           settlement of the Eastwind Lawsuit of not more than
                           $500,000 prior to January 31, 2002, and not more than
                           $1,500,000 in the aggregate.

                  (b)      By not later than October 12, 2001, Borrower shall
                           deliver to Lender evidence satisfactory to Lender
                           that the Eastwind Settlement Agreement has been
                           submitted to the United States Bankruptcy Court for
                           the Eastern District of Pennsylvania for approval.

                  (c)      By not later than October 31, 2001, Borrower shall
                           deliver to Lender evidence satisfactory to Lender
                           that the Eastwind Settlement Agreement has been
                           approved by the United States Bankruptcy Court for
                           the Eastern District of Pennsylvania.

         5.4      Asset Sales. Borrower represents, covenants and agrees that in
                  connection with the sale by Borrower of substantially all of
                  Borrower's machinery, equipment and inventory (the
                  "Manufacturing Assets") and the sale by Borrower of
                  substantially all of its intellectual property, including
                  patents, customer lists and product technology (the "Sales
                  Assets"):

                  (a)      (i) By not later than October 22, 2001 Borrower shall
                           deliver to Lender a copy of a fully executed letter
                           of intent or similar agreement with a third party
                           purchaser satisfactory to Lender, providing for the
                           sale by Borrower of the Manufacturing Assets on terms
                           and conditions satisfactory to Lender.(ii) By not
                           later than October 22, 2001 Borrower shall deliver to
                           Lender a copy of a fully executed letter of intent or
                           similar agreement with a third party purchaser
                           satisfactory to Lender, providing for the sale by
                           Borrower of the Sales Assets on terms and conditions
                           satisfactory to Lender.

                                       9
<PAGE>

                  (b)      (i) By not later than the earlier of (i) November 30,
                           2001, and (ii) thirty days after execution and
                           delivery of the Eastwind Settlement Agreement,
                           Borrower shall deliver to Lender, a copy of a fully
                           executed asset sale agreement with respect to the
                           Manufacturing Assets, with a third party purchaser or
                           purchasers satisfactory to Lender in its sole
                           discretion, on terms and conditions satisfactory to
                           Lender in its sole discretion, including application
                           to the Obligations of any amounts payable at closing
                           in immediately available funds, and a promissory note
                           for the remaining balance, which shall be assigned to
                           Lender as collateral for the Obligations. Borrower
                           shall execute and deliver all documents, instruments
                           and agreements requested by Lender in order to assign
                           all such proceeds to Lender, and to perfect Lender's
                           security interests therein.

                           (ii) By not later than the earlier of (i) November
                           30, 2001, and (ii) thirty days after execution and
                           delivery of the Eastwind Settlement Agreement,
                           Borrower shall deliver to Lender, a copy of a fully
                           executed asset sale agreement with respect to the
                           Sales Assets, with a third party purchaser
                           satisfactory to Lender, providing that the Sales
                           Assets shall remain subject to the first priority
                           Lien of Lender and such other terms and conditions
                           satisfactory to Lender in its sole discretion
                           including, without limitation, a purchase price of
                           not less than $2,900,000, including not less than
                           $500,000 payable at closing of such sale in
                           immediately available funds, for application to the
                           settlement of the Eastwind Lawsuit, Stock of the
                           Sales Asset purchaser valued at not less than
                           $1,250,000 and a promissory note for not less than
                           $1,150,000 of the remaining balance for application
                           to the settlement of the Eastwind Lawsuit.

                  (c)      By not later than October 31, 2001, Borrower shall
                           deliver to Lender a copy of Borrower's proxy
                           statement or other documents filed with the United
                           States Securities and Exchange Commission ("SEC")
                           seeking SEC approval of Borrower's sale of the
                           Manufacturing Assets and Borrower's sale of the Sales
                           Assets.

                  (d)      By not later than December 31, 2001, Borrower shall
                           deliver to Lender evidence satisfactory to Lender of
                           the SEC's approval of Borrower's sale, upon terms and
                           conditions satisfactory to Lender, of the
                           Manufacturing Assets and the Sales Assets.

                                       10
<PAGE>

                  (e)      By not later than five (5) days after receipt of each
                           of the SEC approvals described in Section (d) above,
                           Borrower shall deliver to Lender evidence
                           satisfactory to Lender of the submission for approval
                           to the shareholders of Conmat Technologies, Inc. of
                           such planned sales of the Manufacturing Assets and
                           the Sales Assets.

                  (f)      By not later than thirty (30) days after submission
                           of such planned sales to the shareholders of Conmat
                           Technologies, Inc., Borrower shall deliver to Lender
                           evidence satisfactory to Lender of the approval by
                           the shareholders of Conmat Technologies, Inc. of such
                           planned sales of the Manufacturing Assets and the
                           Sales Assets.

                  (g)      By not later than October 31, 2001, Borrower shall
                           deliver to Lender a term sheet or proposal letter
                           from a lender satisfactory to Lender with respect to
                           proposed financing of each of the proposed purchaser
                           of the Manufacturing Assets and the proposed
                           purchaser of the Sales Assets, each containing terms
                           and conditions satisfactory to Lender.

                  (h)      By not later than December 15, 2001, Borrower shall
                           deliver to Lender a fully executed commitment letter
                           from a Lender satisfactory to Lender with respect to
                           proposed financing of each of the proposed purchaser
                           of the Manufacturing Assets and the proposed
                           Purchaser of the Sales Assets, each containing Terms
                           and Conditions satisfactory to Lender.

                  5.5      Additional Reporting. Borrower shall deliver, or
                           cause to be delivered, to Lender, on or before the
                           close of business on the second Business Day of each
                           week, a report of Borrower's raw materials for the
                           immediately prior week, in form and detail
                           satisfactory to Lender. Without limiting any
                           provision of the Financing Agreements, Borrower shall
                           additionally provide to Lender and Lender's auditors
                           and field examiners all information necessary or
                           requested by Lender to analyze and verify Borrower's
                           standard costs and standard cost adjustments.

                                       11
<PAGE>

SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS

         Borrower hereby represents, warrants and covenants with and to Lender
as follows:

         6.1 Representations in Financing Agreements. Each of the
         representations and warranties made by or on behalf of Borrower to
         Lender in any of the Financing Agreements was true and correct when
         made and in all material respects is, except for the representation and
         warranty set forth in the Loan Agreement relating to the non-existence
         of an Event of Default, true and correct on and as of the date of this
         Agreement with the same full force and effect as if each of such
         representations and warranties had been made by Borrower on the date
         hereof and in this Agreement.

         6.2 Binding Effect of Documents. This Agreement and the other Financing
         Agreements have been duly executed and delivered to the Lender by
         Borrower and are in full force and effect, as modified hereby.

         6.3 No Conflict, Etc. The execution and delivery and performance of
         this Agreement by Borrower will not violate any Requirement of Law or
         Contractual Obligation of Borrower and will not result in, or require,
         the creation or imposition of any Lien on any of its properties or
         revenues.

         6.4 Additional Events of Default. The parties hereto acknowledge,
         confirm and agree that any misrepresentation by Borrower, or any
         failure of Borrower to comply with the covenants, conditions and
         agreements contained in any Financing Agreement, herein or in any other
         agreement, document or instrument at any time executed and/or delivered
         by Borrower with, to or in favor of Lender shall constitute an Event of
         Default hereunder, under the Loan Agreement and the other Financing
         Agreements. In the event any Person, other than Lender, shall at any
         time exercise for any reason (including by reason of any Existing
         Default, any other present or future Event of Default, or otherwise)
         any of its rights or remedies against Borrower or any obligor providing
         credit support for Borrower's obligations to such other Person, or
         against Borrower or such obligor's properties or assets, such event
         shall constitute an Event of Default hereunder.

SECTION 7. CONDITIONS TO EFFECTIVENESS OF CERTAIN PROVISIONS OF THIS AGREEMENT

         The effectiveness of the terms and provisions of Section 3 of this
Agreement shall be subject to the receipt by Lender of each of the following, in
form and substance satisfactory to Lender:

                  (a)      an original of this Agreement, duly authorized,
                           executed and delivered by Borrower; and

                  (b)      original UCC financing statements and such other
                           documents as Lender in its sole discretion deems
                           necessary;

                  (c)      payment of the fee set forth in Section 8.1 of this
                           Agreement; and

                  (d)      payment of the fees and disbursements of counsel to
                           Lender incurred in connection with the preparation,
                           negotiation, execution and delivery of this Agreement
                           and the transactions hereunder; and

                                       12
<PAGE>

SECTION 8. PROVISIONS OF GENERAL APPLICATION

         8.1      In consideration of the agreements set forth herein, Borrower
                  shall pay to Lender a fee in the amount of $50,000, which fee
                  shall be fully earned as of the date hereof and shall be
                  payable in five separate installments, with the first
                  installment in the amount of $10,000 payable contemporaneously
                  with the execution of this Agreement, the second, third and
                  fourth installments in the amount of $10,000 each payable on
                  October 31, 2001, November 30, 2001 and December 31, 2001,
                  respectively, and the fifth and final installment in the
                  amount of the entire then outstanding balance of such fee
                  payable on January 31, 2002, provided that the entire unpaid
                  balance of the earned and unpaid amendment fee shall be
                  subject to acceleration, demand and payment on the same terms
                  and conditions as the other Obligations upon an Event of
                  Default or the termination of this Agreement. Such fee is in
                  addition to all other fees, interest, costs and expenses
                  payable in connection with the Financing Agreements and may be
                  charged by Lender to any account of Borrower maintained by
                  Lender. The fee shall be fully earned by Lender
                  notwithstanding any failure by Borrower to comply with any
                  other term of this Agreement.

         8.2      Effect of this Agreement. Except as modified pursuant hereto,
                  no other changes or modifications to the Financing Agreements
                  are intended or implied and in all other respects the
                  Financing Agreements are hereby specifically ratified,
                  restated and confirmed by all parties hereto as of the
                  effective date hereof. To the extent of conflict between the
                  terms of this Agreement and the other Financing Agreements,
                  the terms of this Agreement shall control. The Loan Agreement
                  and this Agreement shall be read and construed as one
                  agreement.

         8.3      Costs and Expenses. Borrower absolutely and unconditionally
                  agrees to pay to the Lender, on demand by the Lender at any
                  time and as often as the occasion therefor may require,
                  whether or not all or any of the transactions contemplated by
                  this Agreement are consummated: all fees and disbursements of
                  any counsel to Lender in connection with the preparation,
                  negotiation, execution, or delivery of this Agreement and any
                  agreements delivered in connection with the transactions
                  contemplated hereby and expenses which shall at any time be
                  incurred or sustained by the Lender or any participant of
                  Lender or any of their respective directors, officers,
                  employees or agents as a consequence of or in any way in
                  connection with the preparation, negotiation, execution, or
                  delivery of this Agreement and any agreements prepared,
                  negotiated, executed or delivered in connection with the
                  transactions contemplated hereby.

                                       13
<PAGE>

         8.4      Further Assurances. The parties hereto shall execute and
                  deliver such additional documents and take such additional
                  action as may be necessary or desirable to effectuate the
                  provisions and purposes of this Agreement.

         8.5      Binding Effect. This Agreement shall be binding upon and inure
                  to the benefit of each of the parties hereto and their
                  respective successors and assigns.

         8.6      Survival of Representations and Warranties. All
                  representations and warranties made in this Agreement or any
                  other document furnished in connection with this Agreement
                  shall survive the execution and delivery of this Agreement and
                  the other documents, and no investigation by Lender or any
                  closing shall affect the representations and warranties or the
                  right of Lender to rely upon them.

         8.7      Severability. Any provision of this Agreement held by a court
                  of competent jurisdiction to be invalid or unenforceable shall
                  not impair or invalidate the remainder of this Agreement and
                  the effect thereof shall be confirmed to the provision so held
                  to be invalid or unenforceable.

         8.8      Reviewed by Attorneys. Borrower represents and warrants to
                  Lender that it (a) understands fully the terms of this
                  Agreement and the consequences of the execution and delivery
                  of this Agreement, (b) has been afforded an opportunity to
                  have this Agreement reviewed by, and to discuss this Agreement
                  and document executed in connection herewith with, such
                  attorneys and other persons as Borrower may wish, and (c) has
                  entered into this Agreement and executed and delivered all
                  documents in connection herewith of its own free will and
                  accord and without threat, duress or other coercion of any
                  kind by any Person. The parties hereto acknowledge and agree
                  that neither this Agreement nor the other documents executed
                  pursuant hereto shall be construed more favorably in favor of
                  one than the other based upon which party drafted the same, it
                  being acknowledged that all parties hereto contributed
                  substantially to the negotiation and preparation of this
                  Agreement and the other documents executed pursuant hereto or
                  in connection herewith.


                                       14
<PAGE>

         8.9      Governing Law: Consent to Jurisdiction and Venue. EXCEPT AS
                  OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE FINANCING
                  AGREEMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
                  CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE
                  OTHER FINANCING AGREEMENTS AND THE OBLIGATIONS ARISING UNDER
                  THE FINANCING AGREEMENTS SHALL BE GOVERNED BY, AND CONSTRUED
                  AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
                  YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE,
                  WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS
                  OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
                  AMERICA. BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE OR
                  FEDERAL COURTS LOCATED IN NEW YORK SHALL HAVE EXCLUSIVE
                  JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
                  BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT OR
                  ANY OF THE OTHER FINANCING AGREEMENTS OR TO ANY MATTER ARISING
                  OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER
                  FINANCING AGREEMENTS; PROVIDED, THAT LENDER AND BORROWER
                  ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
                  HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK; AND FURTHER
                  PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
                  OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER
                  LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE
                  OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER
                  SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR
                  OTHER COURT ORDER IN FAVOR OF LENDER. BORROWER EXPRESSLY
                  SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
                  ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER
                  HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK
                  OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
                  CONVENIENS AND HEREBY CONSENT TO THE GRANTING OF SUCH LEGAL OR
                  EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
                  BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
                  COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT
                  AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER
                  PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED
                  TO BORROWER AT THE ADDRESS SET FORTH IN SCHEDULE 1.1 OF THE
                  LOAN AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
                  COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL RECEIPT
                  THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS,
                  PROPER POSTAGE PREPAID.

                                       15
<PAGE>

                  8.10 Mutual Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN
                  CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST
                  QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT
                  PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS
                  TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE
                  THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
                  APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF
                  THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
                  PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY
                  ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
                  WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN LENDER
                  AND BORROWER ARISING OUT OF, CONNECTED WITH, RELATED OR
                  INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
                  CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER FINANCING
                  AGREEMENTS OR THE TRANSACTIONS RELATED THERETO.

         8.11     Counterparts. This Agreement may be executed in any number of
                  counterparts, but all of such counterparts shall together
                  constitute but one and the same agreement. In making proof of
                  this Agreement, it shall not be necessary to produce or
                  account for more than one counterpart thereof signed by each
                  of the parties hereto.



                                       16
<PAGE>

         IN WITNESS WHEREOF, this Agreement is executed and delivered as of the
day and year first above written.

                                        POLYCHEM CORPORATION


                                        By:
                                            -----------------------------------
                                            Paul DeJuliis

                                        Title:
                                              ---------------------------------

                                        GENERAL ELECTRIC CAPITAL CORPORATION

                                        By:
                                            -----------------------------------

                                        Title: Duly Authorized Signatory
                                               --------------------------------


                                       17
<PAGE>

The terms and provisions of the foregoing Agreement are hereby acknowledged,
confirmed and agreed to and the undersigned hereby ratifies and confirms the
terms and provisions of the undersigned's Guarantee dated December 8, 1998 which
Guarantee remains in full force and effect in accordance with its terms without
offset, defense or counterclaim of any kind, nature or description whatsoever.

                                                     CONMAT TECHNOLOGIES, INC.


                                        By:
                                            -----------------------------------
                                            Paul DeJuliis

                                        Title:
                                              ---------------------------------





                                   SCHEDULE A

                                       18
<PAGE>


"Account Debtor" means any Person who is or may become obligated with respect
to, or on account of, an Account, Chattel Paper or General Intangibles
(including a payment intangible).

"Accounts" means all "accounts," as such term is defined in the Code, now owned
or hereafter acquired by any Person, including: (i) all accounts receivable,
other receivables, book debts and other forms of obligations (other than forms
of obligations evidenced by Chattel Paper or Instruments) (including any such
obligations that may be characterized as an account or contract right under the
Code); (ii) all of such Person's rights in, to and under all purchase orders or
receipts for goods or services; (iii) all of such Person's rights to any goods
represented by any of the foregoing (including unpaid sellers' rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods); (iv) all right to payment due to such
Person for property sold, leased, licensed, assigned or otherwise disposed of,
for a policy of insurance issued or to be issued, for a secondary obligation
incurred or to be incurred, for energy provided or to be provided, for the use
or hire of a vessel under a charter or other contract, arising out of the use of
a credit card or charge card, or for services rendered or to be rendered by such
Person or in connection with any other transaction (whether or not yet earned by
performance on the part of such Person), ; (v) all health care insurance
receivables; and (vi) all collateral security of any kind given by any Account
Debtor or any other Person with respect to any of the foregoing.

"Chattel Paper" means all "chattel paper," as such term is defined in the Code,
including electronic chattel paper, now owned or hereafter acquired by any
Person.

"Code" means the Uniform Commercial Code as the same may, from time to time, be
in effect in the State of New York; provided, that to the extent that the Code
is used to define any term herein or in any Loan Document and such term is
defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection or priority of, or remedies with
respect to, Lender's Lien on any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of New York,
the term "Code" shall mean the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions of this Agreement relating to
such attachment, perfection, priority or remedies and for purposes of
definitions related to such provisions.

"Fixtures" means all "fixtures" as such term is defined in the Code, now owned
or hereafter acquired by any Person.



                                       19
<PAGE>

"General Intangibles" means all "general intangibles," as such term is defined
in the Code, now owned or hereafter acquired by any Person, including all right,
title and interest that such Person may now or hereafter have in or under any
Contract, all payment intangibles, customer lists, Licenses, Intellectual
Property, interests in partnerships, joint ventures and other business
associations, permits, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials, Books and Records, Goodwill
(including the Goodwill associated with any Intellectual Property), all rights
and claims in or under insurance policies (including insurance for fire, damage,
loss, and casualty, whether covering personal property, real property, tangible
rights or intangible rights, all liability, life, key-person, and business
interruption insurance, and all unearned premiums), uncertificated securities,
chooses in action, deposit accounts, rights to receive tax refunds and other
payments, rights to received dividends, distributions, cash, Instruments and
other property in respect of or in exchange for pledged Stock and Investment
Property, and rights of indemnification.

"Goods" means all "goods," as such term is defined in the Code, now owned or
hereafter acquired by any Person, wherever located, including embedded software
to the extent included in "goods" as defined in the Code, manufactured homes,
standing timber that is cut and removed for sale and unborn young of animals.

"Inventory" means all "inventory," as such term is defined in the Code, now
owned or hereafter acquired by any Person, wherever located, including all
inventory, merchandise, goods and other personal property that are held by or on
behalf of such Person for sale or lease or are furnished or are to be furnished
under a contract of service or that constitute raw materials, work in process,
finished goods, returned goods, or materials or supplies of any kind, nature or
description used or consumed or to be used or consumed in such Person's business
or in the processing, production, packaging, promotion, delivery or shipping of
the same, including all supplies and embedded software.

"Proceeds" means "proceeds," as such term is defined in the Code and, in any
event, shall include: (i) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to Borrower or any other Credit Party from time to
time with respect to any Collateral; (ii) any and all payments (in any form
whatsoever) made or due and payable to Borrower or any other Credit Party from
time to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of any Collateral by any governmental body, authority,
bureau or agency (or any person acting under color of governmental authority);
(iii) any claim of Borrower or any other Credit Party against third parties (a)
for past, present or future infringement of any Intellectual Property or (b) for
past, present or future infringement or dilution of any Trademark or Trademark
License or for injury to the goodwill associated with any Trademark, Trademark
registration or Trademark licensed under any Trademark License; (iv) any
recoveries by Borrower or any other Credit Party against third parties with
respect to any litigation or dispute concerning any Collateral, including claims
arising out of the loss or nonconformity of, interference with the use of,
defects in, or infringement of rights in, or damage to, Collateral; (v) all
amounts collected on, or distributed on account of, other Collateral, including
dividends, interest, distributions and Instruments with respect to Investment
Property and pledged Stock; and (vi) any and all other amounts , rights to
payment or other property acquired upon the sale, lease, license, exchange or
other disposition of Collateral and all rights arising out of Collateral.

                                       20
<PAGE>

                                    EXHIBIT B
                       Draft Eastwind Settlement Agreement


                          [To be provided by Borrower]



                                       21
<PAGE>



                            DISCLOSURE SCHEDULE (3.2)

                    CHIEF EXECUTIVE OFFICE & CORPORATE NAMES

                          [To be completed by Borrower]

Official Name                             Type of Entity (e.g., corporation,
                                          partnership, limited partnership,
                                          limited liability company)


Organization Identification Number
Issued by State of Incorporation or
Organization Or Statement that no such
number has been issued                    State of Incorporation or Organization




Chief Executive Office                               County/State






Locations of Inventory and other Collateral                   County/State




                                        22









</TEXT>
</DOCUMENT>
</SUBMISSION>
