-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Cv7HtO480NaYb3brtZ84DojELN8e97U0PovpDiwIuPpuu30ZCMjsmuf9XMg9vAqE v5ebJQFPehIVBNHtkdKdgA== 0000892569-94-000265.txt : 19940915 0000892569-94-000265.hdr.sgml : 19940915 ACCESSION NUMBER: 0000892569-94-000265 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19940730 FILED AS OF DATE: 19940913 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FURON CO CENTRAL INDEX KEY: 0000037755 STANDARD INDUSTRIAL CLASSIFICATION: 3050 IRS NUMBER: 951947155 STATE OF INCORPORATION: CA FISCAL YEAR END: 0203 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08088 FILM NUMBER: 94548868 BUSINESS ADDRESS: STREET 1: 29982 IVY GLENN DR CITY: LAGUNA NIGUEL STATE: CA ZIP: 92677 BUSINESS PHONE: 7148315350 FORMER COMPANY: FORMER CONFORMED NAME: FLUOROCARBON CO DATE OF NAME CHANGE: 19900322 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JULY 30, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-8088 FURON COMPANY (Exact name of registrant as specified in its charter) California 95-1947155 - - ------------------------------------ ------------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 29982 Ivy Glenn Drive 92677 - - ------------------------------------ ------------------------- Laguna Niguel, CA (Zip Code) (Address of principal executive offices)
Registrant's telephone number, including area code: (714) 831-5350 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Number of shares of common stock outstanding as of July 30, 1994: 8,708,937 2 FURON COMPANY INDEX PART I ------
PAGE NO. -------- Financial Statements Condensed Consolidated Balance Sheets July 30, 1994 and January 29, 1994 3-4 Condensed Consolidated Statements of Income Three and Six Months Ended July 30, 1994 and July 31, 1993 5 Condensed Consolidated Statements of Cash Flows Six Months Ended July 30, 1994 and July 31, 1993 6 Notes to Condensed Consolidated Financial Statements 7-9 Management's Discussion and Analysis of Financial Condition and Results of Operations 10-12
PART II ------- Other Information 13-15 Exhibits 16-39
3 FURON COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS (Unaudited)
July 30, January 29, In thousands 1994 1994 - - ----------------------------------------------------------------------------------------------------------- Current assets: Cash and cash equivalents $ 16,261 $ 18,483 Accounts receivable, less allowance for doubtful accounts of $735 at July 30, 1994 and $632 at January 29, 1994 39,568 38,085 Inventories 28,216 26,279 Deferred tax benefit 9,123 9,154 Prepaid expenses and other assets 6,224 5,836 -------------- ------------- Total current assets 99,392 97,837 Property, plant & equipment, at cost: Land 453 448 Buildings and leasehold improvements 13,381 13,048 Machinery and equipment 92,431 87,599 -------------- ------------- 106,265 101,095 Less accumulated depreciation and amortization (56,784) (52,664) --------------- -------------- Net property, plant and equipment 49,481 48,431 Intangible assets at cost less accumulated amortization of $22,009 at July 30, 1994 and $20,308 at January 29, 1994 19,665 21,359 Other assets 7,336 7,597 -------------- ------------- Total assets $ 175,874 $ 175,224 ============== =============
See accompanying notes. 3 4 FURON COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
July 30, January 29, In thousands, except share amounts 1994 1994 - - ------------------------------------------------------------------------------------------------------------------ Current liabilities: Accounts payable $ 16,731 $ 15,465 Salaries, wages and related benefits payable 9,020 10,073 Current portion of long-term debt 7,008 6,013 Accrued restructuring charges 3,896 4,832 Income taxes payable 2,835 4,474 Other current liabilities 7,701 8,436 ------------- ------------- Total current liabilities 47,191 49,293 Long-term debt due after one year 16,753 20,750 Other long-term liabilities 16,286 14,950 Deferred taxes 9,246 9,416 Commitments and contingencies Stockholders' equity Capital stock: Preferred stock without par value, 2,000,000 shares authorized, none issued or outstanding - - Common stock without par value, 15,000,000 shares authorized, 8,708,937 shares issued and outstanding at July 30, 1994 and 8,625,706 at January 29, 1994 36,161 35,320 Foreign currency translation adjustment (113) (1,034) Unearned ESOP shares (2,521) (2,688) Unearned compensation (1,093) (709) Retained earnings 53,964 49,926 ------------- ------------- Total stockholders' equity 86,398 80,815 ------------- ------------- Total liabilities and stockholders' equity $ 175,874 $ 175,224 ============= =============
See accompanying notes. 4 5 FURON COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended Six months ended -------------------------------- ------------------------------- July 30, July 31, July 30, July 31, In thousands, except per share amounts 1994 1993 1994 1993 - - ------------------------------------------------------------------------------------------------------------------ Net sales $ 75,127 $ 70,211 $ 150,087 $ 147,384 Cost of sales 52,547 50,550 105,547 106,628 ------------- ----------- ------------- ------------- Gross profit 22,580 19,661 44,540 40,756 Selling, general and administrative expenses 18,433 16,606 36,254 34,174 Other (income), net (710) (501) (1,046) (870) Interest expense 623 892 1,266 1,810 ------------- ----------- ------------- ------------- Income before income taxes 4,234 2,664 8,066 5,642 Provision for income taxes 1,567 1,082 2,985 2,303 ------------- ----------- ------------- ------------- Net income $ 2,667 $ 1,582 $ 5,081 $ 3,339 ============= =========== ============= ============= Net income per share $ .30 $ .18 $ .57 $ .38 ============= =========== ============= =============
See accompanying notes. 5 6 FURON COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six months ended ------------------------------ July 30, July 31, In thousands 1994 1993 - - ------------------------------------------------------------------------------------------------------------------ OPERATING ACTIVITIES Net income $ 5,081 $ 3,339 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 4,358 4,255 Amortization 1,879 1,770 Provision for losses on accounts receivable 175 228 Increase (decrease) in deferred income taxes (139) 724 (Gain) loss on sale of assets (10) 126 Working capital changes: Accounts receivable (1,658) (1,945) Inventories (1,937) 775 Accounts payable and accrued liabilities 214 1,237 Accrued restructuring charges (618) (1,500) Income taxes payable (1,639) 955 Other current assets and liabilities, net (1,336) (1,681) Changes in other long-term operating assets and liabilities 829 (335) ------------ ----------- Net cash provided by operating activities 5,199 7,948 INVESTING ACTIVITIES Purchases of property, plant and equipment (5,253) (4,147) Proceeds from sale of equipment 142 31 Proceeds from sale of operations - 4,136 Proceeds from notes receivable 898 1,049 Increase in notes receivable (62) (1,000) ------------ ----------- Net cash (used) provided by investing activities (4,275) 69 FINANCING ACTIVITIES Proceeds from long-term debt 8 27 Principal payments on long-term debt (3,009) (2,575) Proceeds from issuance of common stock 131 332 Increase in loan to ESOP (218) - Principal payments received from loan to ESOP 384 384 Dividends paid on common stock (1,043) (1,034) ------------ ----------- Net cash used by financing activities (3,747) (2,866) Effect of exchange rate changes on cash 601 (1,133) ------------ ----------- Increase (decrease) in cash and cash equivalents (2,222) 4,018 ------------ ----------- Cash and cash equivalents at beginning of period 18,483 9,447 ------------ ----------- Cash and cash equivalents at end of period $ 16,261 $ 13,465 ============ ===========
See accompanying notes. 6 7 FURON COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS July 30, 1994 (Unaudited) 1. GENERAL The accompanying unaudited consolidated financial statements have been condensed in certain respects and should therefore, be read in conjunction with the consolidated financial statements and related notes contained in the Company's Annual Report to Shareholders on Form 10-K for the fiscal year ended January 29, 1994. Certain reclassifications have been made to prior year amounts in order to be consistent with the current year presentation. In the opinion of the Company, the accompanying unaudited, condensed consolidated financial statements contain all adjustments necessary (consisting only of normal recurring adjustments) to present fairly, the financial position of the Company as of July 30, 1994, results of operations for the three and six months ended July 30, 1994 and July 31, 1993 and cash flows for the six months ended July 30, 1994 and July 31, 1993. The results of its operations for the six months ended July 30, 1994 are not necessarily indicative of the results to be expected for the full year. Income taxes paid for the six months ended July 30, 1994 and July 31, 1993 were $4,500,000 and $925,000, respectively. 2. INVENTORIES Substantially all inventories are valued at the lower of cost (first-in, first out) or market, and are summarized as follows:
July 30, January 29, In thousands 1994 1994 ---------------------------------------------------------------------------------------------------- Raw materials and purchased parts $ 11,803 $ 11,333 Work-in-process 8,474 6,865 Finished goods 7,939 8,081 ------------ ------------ $ 28,216 $ 26,279 ============ ============
3. INTANGIBLE ASSETS Intangible assets acquired in business combinations are summarized as follows:
July 30, January 29, In thousands 1994 1994 ---------------------------------------------------------------------------------------------------- Goodwill $ 331 $ 351 Other intangible assets 19,334 21,008 ------------ ------------ $ 19,665 $ 21,359 ============ ============
7 8 FURON COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS July 30, 1994 (Unaudited) 4. LONG-TERM DEBT Long-term debt is summarized as follows:
July 30, January 29, In thousands 1994 1994 --------------------------------------------------------------------------------------------------- Loans under bank credit agreements due through fiscal 1998 $ 23,750 $ 26,750 Other 11 13 ------------ ------------ Total long-term debt 23,761 26,763 Less current portion (7,008) (6,013) ------------ ------------ Due after one year $ 16,753 $ 20,750 ============ ============
At July 30, 1994, the weighted average interest rate on the loans under bank credit agreements was 9.4%. On August 29, 1988, the Company entered into an 8-year Interest Rate Swap agreement. The notional amount of the swap totaled $18 million at July 30, 1994. The swap agreement effectively changes the Company's interest rate exposure on the majority of its borrowings to a fixed interest rate of 9.938% plus a .75% spread on the notional portion of the facility. Interest paid for the six months ended July 30, 1994 and July 31, 1993, was $1,273,000 and $1,818,000, respectively. 5. STOCKHOLDERS' EQUITY During June, 1994 the Company contributed $562,000 to the Employee Stock Ownership Plan (ESOP) for the plan year ended April 30, 1994. Of this amount $384,000 served to reduce loans previously made to the plan. In addition, the Company advanced an additional $218,000 to the ESOP which has been presented as unearned ESOP shares in the accompanying condensed consolidated balance sheet. The ESOP used the funds to acquire 15,000 shares of the Company's common stock from a Director of the Company. Excluded from the Statement of Cash Flows is a noncash transaction that related to the issuance of restricted shares. This transaction resulted in a $711,000 increase to common stock and unearned compensation which is being amortized to expense over the shares' five year vesting period. 8 9 6. CONTINGENCIES At July 30, 1994, the Company had approximately $1,029,000 of foreign currency hedge contracts outstanding consisting of forward contracts. The contracts reflect the selective hedging of the Belgium Franc with varying maturities up to six months. Net unrealized losses from hedging activities totaled $63,000 at July 30, 1994. At July 30, 1994, the Company is obligated under irrevocable letters of credit totaling $3,232,000. The Company is currently involved in litigation arising in the normal course of business. Management of the Company is of the opinion that such litigation will have no material effect on the Company's consolidated financial position or results of operations. 9 10 FURON COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Sales for the three and six months ended July 30, 1994 increased 7% and 2%, respectively, as compared to the same periods of the prior year. When removing the effect of the businesses sold or to be divested, sales from continuing operations for the three and six months ended July 30, 1994 increased 12% and 9%, respectively, as compared to the same period of a year ago. The Company's sales benefited from general improvement in a broad range of industrial markets, including heavy duty truck, mobile equipment, industrial equipment, electronics and medical. In addition, despite a continued weak European economy, the Company's foreign group contributed to the increase in sales. The gross profit percentages for the three and six months ended July 30, 1994 have improve from 27.7% to 30.1%, and 27.7% to 29.7%, respectively, as compared to the same periods last year. Similarly, when removing the effect of the businesses sold or identified for divestiture gross profit margins from continuing operations increased from 29.0% to 30.8%, and from 28.9% to 30.2% for the three and six months ended July 31, 1993 and July 30, 1994, respectively. The improvements came from multiple areas, including process improvements and scrap reductions which lead to reduced material costs. Slightly lower labor costs, mainly due to process improvements, also contributed to improved results from consolidated and continuing operations. In general, the higher sales volume helped leverage down the fixed portion of cost of sales. Selling, general and administrative expenses increased $1.8 and $2.1 million, respectively, for the three and six months ended July 30, 1994, as compared to the same periods of the prior year. Approximately half of this increase is identified as selling expense and is attributed to the Company's efforts to improve its sales and marketing focus. The remainder of the increase is attributed to a number of general and administrative expenses. The most significant of these expenses included costs associated with the pursuit of potential acquisitions, as well as travel expenses associated with current reorganization efforts. Interest expense for the three and six months ended July 30, 1994 decreased 30% from the same periods of the prior year. Amounts owing under the Company's bank credit facility decreased by approximately $9 million from July 31, 1993. Pretax profits rose 43% for the six months ended July 30, 1994 as compared to the same period last year. For the quarter, pretax profits increased from $2.7 million to $4.2 million or 59%. The significant improvement in profitability, in spite of relatively modest revenue increases, is the result of substantial reductions in cost of sales as a percentage of sales, and interest expense, as noted above. Additionally, income before taxes also includes lower than expected group medical insurance expense resulting from a continued trend of lower than expected claims experience. 10 11 FURON COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table presents the Company's results of continuing operations and operations sold or to be divested during the second quarter of the current and prior years:
Three months ended - - -------------------------------------------------------------------------------------------------------- In thousands July 30, 1994 July 31, 1993 - - ---------------------------------------------------------------- ------------------------------------ Continuing Divestiture Continuing Divestiture Operations Operation Total Operations Operations Total ------------------------------------ ------------------------------------ Sales $72,402 $ 2,725 $75,127 $64,844 $ 5,367 $70,211 Cost of sales 50,067 2,480 52,547 46,050 4,500 50,550 ------- ------- ------- ------- ------- ------- Gross profit 22,335 245 22,580 18,794 867 19,661 Selling, general and administrative expenses 18,181 252 18,433 15,851 755 16,606 Other expense (income), net (703) (6) (709) (608) 107 (501) Interest expense (income), net 623 (1) 622 887 5 892 ------- ------- ------- ------- ------- ------- Income before income taxes $ 4,234 $ - $ 4,234 $ 2,664 $ - $ 2,664 ======= ======= ======= ======= ======= =======
Included in Other expense (income) net, is the elimination of $19,000 of pretax loss for the three months ended July 30, 1994 and $107,000 of pretax profit for the three months ended July 31, 1993 from the divested or to be divested businesses. The Company's effective tax rate for the three and six months ended July 30, 1994 was 37%, compared to 41% for the same periods in the prior year. The decrease in the effective tax rate was primarily due to the increase in tax benefits realized from the amortization of certain intangible assets, acquired in fiscal 1990, as a result of the resolution of an Internal Revenue Service audit. LIQUIDITY AND CAPITAL RESOURCES During the six months ended July 30, 1994, net cash flow provided by operations was $5.2 million, a $2.7 million decrease from the same period of the prior year. The decrease is due, in part, to the $2.7 million unfavorable change in inventory levels, as well as $2.6 million of tax payments made in the first quarter of the current year pursuant to a settlement of prior Internal Revenue Service audits. This was partially offset by improved operating results and favorable changes in other areas of the balance sheet. 11 12 FURON COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net cash flow provided by operations for the three months ended July 30, 1994 totaled $7.0 million, essentially identical to that of the same period of the prior year. A portion of the net cash flow provided by operations for the six months ended July 30, 1994 was used to fund capital expenditures of $5.3 million, an increase of 27% over the first six months of 1993. In addition, the Company made principal payments on long-term debt of $3.0 million. At July 30, 1994 the Company's ratio of long-term debt to equity equaled .28:1, an improvement from .33:1 at January 29, 1994. At July 30, 1994, the Company's working capital was $52 million, an increase of $5 million from the prior year. At July 30, 1994, the Company's ratio of current assets to current liabilities was 2.1:1, an increase from 2:1 for the same period ended in the prior year. The Company continually reviews possible acquisitions and should the Company make a substantial acquisition, it could require the utilization of the remaining $30 million available from its existing credit facility, financing from other sources or utilization of balance sheet cash and cash equivalents of $16 million. One of the Company's subsidiaries was notified by the Environmental Protection Agency that it has been named as a potentially responsible party in connection with the clean up of hazardous wastes at two sites: The Solvents Recovery Service of New England site in Southington Connecticut (notified June 1992); and the Gallups Quarry site in Plainfield, Connecticut (notified April 1993). Since these matters are in their preliminary stages, no assurance can be given at this time concerning the ultimate outcome. However, based on preliminary investigations to determine the nature of the subsidiary's potential liability and the estimated amount of remedial costs necessary to clean up the sites, the Company presently does not expect these matters to have a material adverse effect on its consolidated financial position or operations. 12 13 FURON COMPANY PART II ------- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Not applicable. ITEM 2. CHANGES IN SECURITIES. Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Annual Meeting of the Shareholders of the registrant was held on June 7, 1994. The following matters were voted upon and approved at the meeting:
Votes Cast ------------------------------------ Broker Matter For Against Withheld Absentions Non-votes ------ --------- --------- -------- ---------- --------- 1. Election of Class III Directors: Terrence A. Noonan 8,071,546 - 46,988 - - R. David Threshie 8,086,341 - 21,195 - - Bruce E. Ranck 8,088,975 - 29,561 - - 2. Approval of Furon Company Employees' Stock Purchase Plan 7,124,019 888,676 - 105,841 - 3. Ratification of appointment of Ernst & Young LLP as independent auditors for fiscal year ending January 28, 1995 7,669,132 430,217 - 19,187 -
ITEM 5. OTHER INFORMATION. Not applicable. 13 14 FURON COMPANY PART II (CONTINUED) ------------------- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: Page Number ----------- The exhibits listed in the accompanying index are filed as part of this quarterly report. Exhibit 3.2 Bylaw Amendment effective June 7, 1994 16 Exhibit 10.1 1982 Stock Incentive Plan (As amended and restated March 22, 1994) 17 Exhibit 10.4A Amendment to SERP adopted August 23, 1994 37 Exhibit 11 Statement re: Computation of Net Income Per Share 38 Exhibit 27 Financial Data Schedule 39
(b) Reports on Form 8-K. There were no reports on Form 8-K filed for the three months ended July 30, 1994. 14 15 FURON COMPANY PART II (CONTINUED) ------------------- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FURON COMPANY ------------- REGISTRANT /s/ MONTY A. HOUDESHELL /s/ KOICHI HOSOKAWA - - ------------------------------- -------------------------------- Monty A. Houdeshell Koichi Hosokawa Vice President, Chief Financial Controller Officer and Treasurer Date: August 31, 1994 15 EX-3.2 2 BYLAW AMENDMENT EFFECTIVE JUNE 7, 1994 1 Exhibit 3.2 Bylaw Amendment Effective June 7, 1994 The last sentence of Section 2 of Article III of the Bylaws is amended to read in its entirety as follows: "The exact number of directors shall be nine until changed as provided in this Section 2." *** 16 EX-10.1 3 1982 STOCK INCENTIVE PLAN (AMENDED MARCH 22, 1994) 1 EXHIBIT 10.1 FURON COMPANY 1982 STOCK INCENTIVE PLAN (AMENDED AND RESTATED AS OF MARCH 22, 1994) This Furon Company 1982 Stock Incentive Plan is amended and restated effective as of January 1, 1991 to read as follows: 1. DEFINITIONS. 1.1 Definitions. (a) "Act" shall mean the Securities Exchange Act of 1934. (b) "Award" shall mean an Option, which may be designated as a Nonqualified Stock Option or an Incentive Stock Option, a Stock Appreciation Right, a Restricted Stock Award or Performance Share Award, in each case granted under this Plan. (c) "Award Agreement" shall mean a written agreement setting forth the terms of an Award. (d) "Award Date" shall mean the date upon which the Committee took the action granting an Award or such later date as is prescribed by the Committee. (e) "Award Period" shall mean the period beginning on an Award Date and ending on the expiration date of such Award. (f) "Beneficiary" shall mean the person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive the benefits specified under this Plan in the event of a Participant's death. (g) "Board" shall mean the Board of Directors of the Corporation. (h) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (i) "Commission" shall mean the Securities and Exchange Commission. (j) "Committee" shall mean the Compensation Committee appointed by the Board and consisting of three or more members each of whom shall be Disinterested. 17 2 (k) "Common Stock" shall mean the Common Stock of the Corporation. (l) "Company" shall mean, collectively, Furon Company, a California corporation, and its Subsidiaries. (m) "Corporation" shall mean Furon Company, a California corporation, and its successors. (n) "Disinterested" shall mean disinterested within the meaning of applicable regulatory requirements, including those promulgated under Section 16 of the Act. (o) "Eligible Employee" shall mean an officer or key employee of the Company. (p) "Event" shall mean any of the following: (i) Approval by the shareholders of the Corporation of the dissolution or liquidation of the Corporation; (ii) Approval by the shareholders of the Corporation of an agreement to merge or consolidate, or otherwise reorganize, with or into one or more entities which are not Subsidiaries, as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are, or are to be, owned by former shareholders of the Corporation; (iii) Approval by the shareholders of the Corporation of the sale or transfer of substantially all of the Corporation's business and/or assets to a person or entity which is not a Subsidiary; or (iv) A Change in Control. A "Change in Control" shall be deemed to have occurred if: (A) any "person", alone or together with all "affiliates" and "associates" of such person, is or becomes (1) an "Acquiring Person" as defined in the Rights Agreement, dated as of March 21, 1989, by and between the Company and Bank of America National Trust and Savings Association, Rights Agent or (2) the "beneficial owner" of 30% of the outstanding voting securities of the Corporation (the terms "person", "affiliates", "associates" and "beneficial owner" are used as such terms are used in the Securities Exchange Act of 1934 and the General Rules and Regulations thereunder); provided, however, that a "Change in Control" shall not be deemed to have occurred if such "person" is the Corporation, any Subsidiary or any 18 3 employee benefit plan or employee stock plan of the Corporation or of any Subsidiary, or any trust or other entity organized, established or holding shares of such voting securities by, for or pursuant to, the terms of any such plan; or (B) individuals who at the beginning of any period of two consecutive calendar years constitute the Board cease for any reason, during such period, to constitute at least a majority thereof, unless the election, or the nomination for election by the Corporation's shareholders, of each new Board member was approved by a vote of at least three-quarters of the Board members then still in office who were Board members at the beginning of such period. (q) "Fair Market Value" shall mean (i) if the stock is listed or admitted to trade on a national securities exchange, the closing price of the stock on the Composite Tape, as published in the Western Edition of The Wall Street Journal, of the principal national securities exchange on which the stock is so listed or admitted to trade, on such date, or, if there is no trading of the stock on such date, then the closing price of the stock as quoted on such Composite Tape on the next preceding date on which there was trading in such shares; (ii) if the stock is not listed or admitted to trade on a national securities exchange, the last price for the stock on such date, as furnished by the National Association of Securities Dealers, Inc. ("NASD") through the NASDAQ National Market Reporting System or a similar organization if the NASD is no longer reporting such information; (iii) if the stock is not listed or admitted to trade on a national securities exchange and is not reported on the National Market Reporting System, the mean between the bid and asked prices for the stock on such date, as furnished by the NASD; (iv) if the stock is not listed or admitted to trade on a national securities exchange, is not reported on the National Market Reporting System and if bid and asked prices for the stock are not furnished by the NASD or a similar organization, the values established by the Committee for purposes of granting Options under the Plan. (r) "Incentive Stock Option" shall mean an option which is designated as an incentive stock option within the meaning of Section 422A of the Code, the award of which contains such provisions as are necessary to comply with that section. (s) "Nonqualified Stock Option" shall mean an option which is not designated as an Incentive Stock Option. 19 4 (t) "Option" shall mean an option to purchase Common Stock under this Plan. An Option shall be designated by the Committee as a Nonqualified Stock Option or an Incentive Stock Option. (u) "Participant" shall mean an Eligible Employee who has been awarded an Award. (v) "Performance Share Award" shall mean an award of shares of Common Stock issuance of which is contingent upon attainment of performance objectives specified by the Committee. (w) "Personal Representative" shall mean the person or persons who, upon the disability or incompetence of a Participant, shall have acquired on behalf of the Participant by legal proceeding or otherwise the power to exercise the rights and receive the benefits specified in this Plan. (x) "Plan" shall mean the Furon Company 1982 Stock Incentive Plan. (y) "Restricted Stock" shall mean those shares of Common Stock issued pursuant to a Restricted Stock Award which are subject to the restrictions set forth in the related Award Agreement. (z) "Restricted Stock Award" shall mean an award of a fixed number of shares of Common Stock to the Participant subject, however, to payment of such consideration, if any, and such forfeiture provisions, as are set forth in the Award Agreement. (aa) "Retirement" shall mean termination of a Participant's employment with the Company by reason of retirement on or following the Participant's 60th birthday. (ab) "Stock Appreciation Right" shall mean a right to receive a number of shares of Common Stock or an amount of cash, or a combination of shares and cash, determined as provided in Section 4.3(a). (ac) "Stock Depreciation Right" shall mean a right to receive a number of shares of Common Stock or an amount of cash, or a combination of shares and cash, determined as provided in Section 3.6(a). (ad) "Subsidiary" shall mean any corporation or other entity a majority or more of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Corporation. 20 5 (ae) "Tax-Offset Bonus" shall mean a bonus payable pursuant to a disqualifying disposition of Common Stock acquired pursuant to the exercise of an Incentive Stock Option, determined as provided in Section 3.6(b). (af) "Total Disability" shall mean a "permanent and total disability" within the meaning of Section 22(e)(3) of the Code. 2. THE PLAN. 2.1 Purpose. The purpose of this Plan is to promote the success of the Company by providing an additional means to attract and retain key personnel through added long term incentives for high levels of performance and for significant efforts to improve the financial performance of the Company by granting Awards. 2.2 Administration. (a) This Plan shall be administered by the Committee. Action of the Committee with respect to the administration of this Plan shall be taken pursuant to a majority vote or the written consent of a majority of its members. In the event action by the Committee is taken by written consent, the action shall be deemed to have been taken at the time specified in the consent or, if none is specified, at the time specified, at the time of the last signature. The Committee may delegate administrative functions to individuals who are officers or employees of the Company. (b) Subject to the express provisions of this Plan, the Committee shall have the authority to construe and interpret this Plan and any agreements defining the rights and obligations of the Company and Participants under this Plan, to further define the terms used in this Plan, to prescribe, amend and rescind rules and regulations relating to the administration of this Plan, to determine the duration and purposes of leaves of absence which may be granted to Participants without constituting a termination of their employment for purposes of this Plan and to make all other determinations necessary or advisable for the administration of this Plan. The determinations of the Committee on the foregoing matters shall be conclusive. (c) Any action taken by, or inaction of, the Corporation, any Subsidiary, the Board or the Committee relating to this Plan shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons. No member of the Board or 21 6 Committee, or officer of the Corporation or Subsidiary, shall be liable for any such action or inaction of the entity or body, of another person or, except in circumstances involving bad faith, of himself or herself. Subject only to compliance with the express provisions hereof, the Board and Committee may act in their absolute discretion in matters related to this Plan. 2.3 Participation. Awards may be granted only to Eligible Employees. An Eligible Employee who has been granted an Award may, if otherwise eligible, be granted additional Awards if the Committee shall so determine. Members of the Board who are not officers or employees of the Company and members of the Committee shall not be eligible to receive Awards. 2.4 Stock Subject to the Plan. The stock to be offered under this Plan shall be shares of the Corporation's authorized but unissued Common Stock. The aggregate amount of Common Stock that may be issued or transferred pursuant to Awards granted under this Plan shall not exceed 1,650,000 shares, subject to adjustment as set forth in Section 7.2. If any Option and any related Stock Appreciation Right shall lapse or terminate without having been exercised in full, or any Common Stock subject to a Restricted Stock Award shall not vest or any Common Stock subject to a Performance Share Award shall not have been transferred, the unpurchased shares subject thereto shall again be available for purposes of this Plan. 2.5 Grant of Awards. Subject to the express provisions of the Plan, the Committee shall determine from the class of Eligible Employees those individuals to whom Awards under the Plan shall be granted, the terms of Awards (which need not be identical) and the number of shares of Common Stock subject to each Award. Each Award shall be subject to the terms and conditions set forth in the Plan and such other terms and conditions established by the Committee as are not inconsistent with the purpose and provisions of the Plan. The grant of an Award is made on the Award Date. 2.6 Exercise of Awards. An Option or Stock Appreciation Right shall be deemed to be exercised when the Secretary of the Corporation receives written notice of such exercise from the Participant, together with payment of the purchase price made in accordance with Section 3.2(a). Notwithstanding any 22 7 other provision of this Plan, the Committee may impose, by rule and in Award Agreements, such conditions upon the exercise of Awards (including, without limitation, conditions limiting the time of exercise to specified periods) as may be required to satisfy applicable regulatory requirements, including without limitation Rule 16b-3 (or any successor rules) promulgated by the Commission pursuant to the Act. 3. OPTIONS. 3.1 Grants. One or more Options may be granted to any Eligible Employee. Each Option so granted shall be designated by the Committee as either a Nonqualified Stock Option or an Incentive Stock Option. 3.2 Option Price. (a) The purchase price per share of the Common Stock covered by each Option shall be determined by the Committee, but in the case of Incentive Stock Options shall not be less than 100% (110% in the case of a Participant who owns more than 10% of the total combined voting power of all classes of stock of the Company) of the Fair Market Value of the Common Stock on the date the Incentive Stock Option is granted. The purchase price of any shares purchased shall be paid in full at the time of each purchase in one or a combination of the following methods: (i) in cash, or by certified or cashier's check payable to the order of the Corporation, (ii) if authorized by the Committee or specified in the Option being exercised, by a promissory note made by the Participant in favor of the Corporation, upon the terms and conditions determined by the Committee, and secured by the Common Stock issuable upon exercise in compliance with applicable law (including, without limitation, state corporate law and federal margin requirements), or (iii) by shares of Common Stock of the Corporation already owned by the Participant; provided, however, that any shares delivered which were initially acquired upon exercise of a stock option must have been owned by the Participant at least six months as of the date of delivery. Shares of Common Stock used to satisfy the exercise price of an Option shall be valued at their Fair Market Value on the date of exercise. (b) In addition to the payment methods described in subsection (a), the Option may provide that the Option can be exercised and payment made by delivering a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Corporation the amount of sale or loan proceeds necessary to 23 8 pay the exercise price and, unless otherwise allowed by the Committee, any applicable tax withholding under Section 7.6. The Corporation shall not be obligated to deliver certificates for the shares unless and until it receives full payment of the exercise price therefor. 3.3 Option Period. Each Option and all rights or obligations thereunder shall expire on such date as shall be determined by the Committee, but not later than ten years and one day after the Award Date, and shall be subject to earlier termination as hereinafter provided. 3.4 Exercise of Options. (a) Except as otherwise provided in Section 7.4 or paragraph (b) below, an Option may become exercisable, in whole or in part, on the date or dates specified in the Award Agreement which date(s) shall not be earlier than six months after the Award Date and thereafter shall remain exercisable until the expiration or earlier termination of the Participant's Option. The Committee may, at any time after grant of the Option and from time to time, increase the number of shares purchasable at any time so long as the total number of shares subject to the Option is not increased. No Option shall be exercisable except in respect of whole shares, and fractional share interests shall be disregarded. Not less than 10 shares of Common Stock may be purchased at one time unless the number purchased is the total number at the time available for purchase under the terms of the Option. (b) Notwithstanding any other provision of the Plan, each Incentive Stock Option with an Award Date earlier than January 1, 1987 shall by its terms not be exercisable by the Participant at any time while there remains outstanding any previously awarded Incentive Stock Option. 3.5 Limitations on Grant of Incentive Stock Options. (a) The aggregate Fair Market Value (determined as of the Award Date) of the Common Stock for which Incentive Stock Options may first become exercisable by any Participant during any calendar year under this Plan, together with that of common stock subject to incentive stock options first exercisable (other than as a result of acceleration pursuant to Section 7.4 or 7.2) by such Participant under any other plan of the Corporation or any Subsidiary, shall not exceed $100,000. 24 9 (b) There shall be imposed in the Award Agreement relating to Incentive Stock Options such terms and conditions as are required in order that the Option be an "incentive stock option" as that term is defined in Section 422A of the Code. (c) No Incentive Stock Option may be granted to any person who, at the time the Incentive Stock Option is granted, owns shares of outstanding Common Stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, unless the exercise price of such Option is at least 110% of the Fair Market Value of the stock subject to the Option and such Option by its terms is not exercisable after the expiration of five years from the date such Option is granted. 3.6 Additional Rights. (a) The Committee may grant Stock Depreciation Rights to an officer or director subject to Section 16(b) of the Act. Such Stock Depreciation Rights shall be granted concurrently with the grant of an Option and shall be evidenced in the Award Agreement. Notwithstanding the preceding sentence, Stock Depreciation Rights may also be granted subsequent to the grant of an Option, by means of an amendment to the Award Agreement, in the event an employee becomes an officer or director subject to Section 16(b) of the Act subsequent to the date of grant of the Option. A Stock Depreciation Right shall entitle such officer or director to a payment by the Company, in the event that the Fair Market Value of Common Stock issued pursuant to the exercise of an Option declines during the six month period after exercise while such Common Stock is still held by the Participant. Payment may be made in cash in an amount per covered share equal to the lesser of (i) the difference between the Fair Market Value of a share of Common Stock on the date of expiration of such six month period and the Fair Market Value of a share of Common Stock on the date of exercise, (ii) the difference between the Fair Market Value of a share of Common Stock on the date of disposition of the covered share and the Fair Market Value of a share of Common Stock on the date of exercise and (iii) the difference between the Fair Market Value of a share of Common Stock on the date of exercise and the exercise price. This amount per share shall become payable subsequent to the disposition of the covered shares on or after the expiration of the six month period subject to such conditions, limits and rules as the Committee may impose, including, without limitation, conditions required to satisfy the applicable regulatory requirements under Rule 16b-3 promulgated by the Commission pursuant to the Act. 25 10 (b) In its discretion the Committee may, in the Award Agreement, provide for a Tax-Offset Bonus to any Participant who elects to make a disqualifying disposition (as defined in Section 422A(a)(1) of the Code) of Common Stock acquired pursuant to the exercise of an Incentive Stock Option. The Tax-Offset Bonus shall be in the form of a cash payment equal to a percentage of the difference between the exercise price and the Fair Market Value on the date of exercise of the Common Stock with respect to which the disqualifying disposition occurs. Such percentage shall be set out in the Award Agreement and shall be designed to offset the impact of additional taxes which result from the disqualifying disposition. Notwithstanding the preceding sentence, the Committee may reserve the right to from time to time change the percentage applicable with respect to the Award Agreement. 4. STOCK APPRECIATION RIGHTS. 4.1 Grants. In its discretion, the Committee may grant Stock Appreciation Rights concurrently with the grant of Options. A Stock Appreciation Right shall extend to all or a portion of the shares covered by the related Option. A Stock Appreciation Right shall entitle the Participant who holds the related Option, upon exercise of the Stock Appreciation Right and surrender of the related Option, or portion thereof, to the extent the Stock Appreciation Right and related Option each were previously unexercised, to receive payment of an amount determined pursuant to Section 4.3. Any Stock Appreciation Right granted in connection with an Incentive Stock Option shall contain such terms as may be required to comply with the provisions of Section 422A of the Code and the regulations promulgated thereunder. 4.2 Exercise of Stock Appreciation Rights. (a) A Stock Appreciation Right shall be exercisable only at such time or times, and to the extent, that the related Option shall be exercisable and only when the Fair Market Value of the stock subject to the related Option exceeds the exercise price of the related Option. (b) In the event that a Stock Appreciation Right is exercised, the number of shares of Common Stock subject to the related Option shall be charged against the maximum amount of Common Stock that may be issued or transferred pursuant to Awards under this Plan. The number of shares subject to the Stock Appreciation Right and the related Option of the Participant shall be reduced by such number of shares. 26 11 (c) If a Stock Appreciation Right extends to less than all the shares covered by the related Option and if a portion of the related Option is thereafter exercised, the number of shares subject to the unexercised Stock Appreciation Right shall be reduced only if and to the extent that the remaining number of shares covered by such related Option is less than the remaining number of shares subject to such Stock Appreciation Right. 4.3 Payment. (a) Upon exercise of a Stock Appreciation Right and surrender of an exercisable portion of the related Option, the Participant shall be entitled to receive payment of an amount determined by multiplying (i) the difference obtained by subtracting the exercise price per share of Common Stock under the related Option from the Fair Market Value of a share of Common Stock on the date of exercise of the Stock Appreciation Right, by (ii) the number of shares with respect to which the Stock Appreciation Right shall have been exercised. (b) The Committee, in its sole discretion, may settle the amount determined under paragraph (a) above solely in cash, solely in shares of Common Stock (valued at Fair Market Value on the date of exercise of the Stock Appreciation Right), or partly in such shares and partly in cash, provided that the Committee shall have determined that such exercise and payment are consistent with applicable law. In any event, cash shall be paid in lieu of fractional shares. Absent a determination to the contrary, all Stock Appreciation Rights shall be settled in cash as soon as practicable after exercise. The exercise price for the Stock Appreciation Right shall be the exercise price of the related Option. Notwithstanding the foregoing, the Committee may, in the Award Agreement, determine the maximum amount of cash or stock or a combination thereof which may be delivered upon exercise of a Stock Appreciation Right. 5. RESTRICTED STOCK AWARDS. 5.1 Grants. Subject to Section 2.4, the Committee may, in its discretion, grant one or more Restricted Stock Awards to any Eligible Employee. Each Restricted Stock Award Agreement shall specify the number of shares of Common Stock to be issued to the Participant, the date of such issuance, the price, if any, to be paid for such shares by the Participant 27 12 and the restrictions imposed on such shares, which restrictions shall not terminate earlier than six months after the Award Date. Shares of Restricted Stock shall be evidenced by a stock certificate registered only in the name of the Participant, which stock certificate shall bear a legend making appropriate reference to the restrictions imposed and shall be held by the Corporation until the restrictions on such shares shall have lapsed and those shares have thereby vested. 5.2 Restrictions. (a) Shares of Common Stock included in Restricted Stock Awards may not be sold, assigned, transferred, pledged or otherwise disposed of or encumbered, either voluntarily or involuntarily, until such shares have vested. (b) Participants receiving Restricted Stock shall be entitled to dividend and voting rights for the shares issued even though they are not vested, provided that such rights shall terminate immediately as to any forfeited Restricted Stock. (c) In the event that the Participant shall have paid cash in connection with the Restricted Stock Award, the Award Agreement shall specify whether and to what extent such cash shall be returned upon a forfeiture (with or without an earnings factor). 6. PERFORMANCE SHARE AWARDS. 6.1 Grants. The Committee may, in its discretion, grant Performance Share Awards to Eligible Employees based upon such factors as the Committee shall determine. A Performance Share Award Agreement shall specify the number of shares of Common Stock subject to the Performance Share Award, the price, if any, to be paid for such shares by the Participant and the conditions upon which issuance to the Participant shall be based, which issuance shall not be earlier than six months after the Award Date. 7. OTHER PROVISIONS. 7.1 Rights of Eligible Employees, Participants and Beneficiaries. (a) Status as an Eligible Employee shall not be construed as a commitment that any Award will be made under this Plan to an Eligible Employee or to Eligible Employees generally. 28 13 (b) Nothing contained in this Plan (or in Award Agreements or in any other documents related to this Plan or to Awards) shall confer upon any Eligible Employee or Participant any right to continue in the employ of the Company or constitute any contract or agreement of employment, or interfere in any way with the right of the Company to reduce such person's compensation or to terminate the employment of such Eligible Employee or Participant, with or without cause, but nothing contained in this Plan or any document related thereto shall affect any other contractual right of any Eligible Employee or Participant. (c) Amounts payable to an Award shall be paid only to the Participant or, in the event of the Participant's death, to the Participant's Beneficiary or, in the event of the Participant's Total Disability, to the Participant's Personal Representative or, if there is none, to the Participant. Other than by will or the laws of descent and distribution, no benefit payable under, or interest in, this Plan or in any Award shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge and any such attempted action shall be void and no such benefit or interest shall be, in any manner, liable for, or subject to, debts, contracts, liabilities, engagements or torts of any Eligible Employee, Participant or Beneficiary. The Committee shall disregard any attempted transfer, assignment or other alienation prohibited by the preceding sentence and shall pay or deliver such cash or shares of Common Stock in accordance with the provisions of this Plan. (d) No Participant, Beneficiary or other person shall have any right, title or interest in any fund or in any specific asset (including shares of Common Stock) of the Company by reason of any Award granted hereunder. Neither the provisions of this Plan (or of any documents related hereto), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship between the Company and any Participant, Beneficiary or other person. To the extent that a Participant, Beneficiary or other person acquires a right to receive an Award hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company. 7.2 Adjustments Upon Changes in Capitalization. (a) If the outstanding shares of Common Stock are increased, decreased or changed into, or exchanged for, a different number or kind of shares or securities of the Corporation through a reorganization or merger in which the Corporation is the surviving entity, or through a 29 14 combination, recapitalization, reclassification, stock split, stock dividend, stock consolidation or otherwise, an appropriate adjustment shall be made in the number and kind of shares that may be issued pursuant to Awards. A corresponding adjustment to the consideration payable with respect to Awards granted prior to any such change and to the price, if any, paid in connection with Restricted Stock Awards shall also be made. Any such adjustment, however, shall be made without change in the total payment, if any, applicable to the portion of the Award not exercised but with a corresponding adjustment in the price for each share. Corresponding adjustments shall be made with respect to Stock Appreciation Rights based upon the adjustments made to the Options to which they are related. (b) Upon the dissolution or liquidation of the Corporation, or upon a reorganization, merger or consolidation of the Corporation with one or more corporations as a result of which the Corporation is not the surviving corporation, the Plan shall terminate, and any outstanding Awards shall terminate and be forfeited. Notwithstanding the foregoing, the Board may provide in writing in connection with, or in contemplation of, any such transaction for any or all of the following alternatives (separately or in combinations): (i) for the assumption by the successor corporation of the Awards theretofore granted or the substitution by such corporation for such Awards of awards covering the stock of the successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; (ii) for the continuance of the Plan by such successor corporation in which event the Plan and the Awards shall continue in the manner and under the terms so provided; or (iii) for the payment in cash or shares of Common Stock in lieu of and in complete satisfaction of such Awards; provided, however, that the rights of Participants under Section 7.4 to acceleration of Awards under certain circumstances shall not in any way be modified, amended, altered or impaired by virtue of this Section 7.2(b). (c) In adjusting Awards to reflect the changes described in this Section 7.2, or in determining that no such adjustment is necessary, the Board may rely upon the advice of independent counsel and accountants of the Corporation, and the determination of the Board shall be conclusive. No fractional shares of stock shall be issued under this Plan on account of any such adjustment. 30 15 7.3 Termination of Employment. (a) If the Participant's employment by the Company terminates for any reason other than Retirement, death or Total Disability, the Participant shall have, subject to earlier termination pursuant to or as contemplated by Section 3.3, three months from the date of termination of employment to exercise any Option to the extent it shall have become exercisable on that date, and any Option not exercisable on that date shall terminate. Notwithstanding the preceding sentence, in the event the Participant is discharged for cause as determined by the Committee in its sole discretion, all Options shall lapse immediately upon such termination of employment. (b) If the Participant's employment by the Company terminates as a result of Total Disability, the Participant or Participant's Personal Representative, as the case may be, shall have, subject to earlier termination pursuant to or as contemplated by Section 3.3, twelve (12) months from the date of termination of employment to exercise any Option to the extent it shall have become exercisable by that date and any Option not exercisable on that date shall terminate. If the Participant's employment by the company terminates as a result of Retirement, the Participant shall have, subject to earlier termination pursuant to or as contemplated by Section 3.3, thirty-six (36) months from the date of termination of employment to exercise any Option. Provided, further, that upon the date of termination of a Participant's employment as a result of Retirement all Options outstanding shall become immediately exercisable, except if such Option has been awarded within six months of the date of termination of employment as a result of Retirement. In such case, the Options so awarded shall become fully exercisable after the expiration of six months from the date of the Award. Provided, further, notwithstanding any other provision of the Plan, each Incentive Stock Option with an Award Date earlier than January 1, 1987 shall by its terms not be exercisable by the Participant at any time while there remains outstanding any previously awarded Incentive Stock Option. (c) If the Participant's employment by the Company terminates as a result of death while the Participant is employed by the Company or during either the twelve (12) or thirty-six (36) month period referred to in Section 7.3(b) above, the Participant's Option shall be exercisable by the Participant Beneficiary, subject to earlier termination pursuant to or as contemplated by Section 3.3, during the twelve (12) month period following the Participant's death, as to all or any part of the shares for Common Stock covered thereby including all shares as to which the Option could not otherwise be exercisable. 31 16 (d) Each Stock Appreciation Right shall have the same termination provisions and exercisability periods as the Option to which it relates. The exercisability period of a Stock Appreciation Right or of an Option shall not exceed that provided in Section 3.3 or in the related Award Agreement. Each Option and Stock Appreciation Right shall expire at the end of that exercisability period. (e) In the event of termination of employment with the Company for any reason, (i) shares of Common Stock subject to the Participant's Restricted Stock Award shall be forfeited in accordance with the provisions of the related Award Agreement to the extent such shares have not become vested on that date; and (ii) shares of Common Stock subject to the Participant's Performance Share Award shall be forfeited in accordance with the provisions of the related Award Agreement to the extent such shares have not been issued or become issuable on that date. (f) In the event of termination of employment with the Company for any reason, other than discharge for cause, the Committee may, in its discretion, increase the portion of the Participant's Award available to the Participant, or Participant's Beneficiary or Personal Representative, as the case may be, upon such terms as the Committee shall determine. (g) If an entity ceases to be a Subsidiary, such action shall be deemed for purposes of this Section 7.3 to be a termination of employment of each employee of that entity. (h) Upon forfeiture of a Restricted Stock Award pursuant to this Section 7.3, the Participant, or his or her Beneficiary or Personal Representative, as the case may be, shall transfer to the Corporation the portion of the Restricted Stock Award not vested at the date of termination of employment, without payment of any consideration by the Company for such transfer unless the Participant paid a purchase price in which case repayment, if any, of that price shall be governed by the Award Agreement. Notwithstanding any such transfer to the Corporation, or failure, refusal or neglect to transfer, by the Participant, or his or her Beneficiary or Personal Representative, as the case may be, such nonvested portion of any Restricted Stock Award shall be deemed transferred automatically to the Corporation on the date of termination of employment. The Participant's original acceptance of the Restricted Stock Award shall constitute his or her appointment of the Corporation and each of its authorized representatives as attorney(s)-in-fact to effect such transfer and to execute such documents as the Corporation or such representatives 32 17 deem necessary or advisable in connection with such transfer. 7.4 Acceleration of Awards. Except as otherwise explicitly provided in an Award Agreement, upon the occurrence of an Event (i) each Option and each related Stock Appreciation Right shall become immediately exercisable to the full extent theretofore not exercisable, (ii) Restricted Stock shall immediately vest free of restrictions and (iii) the number of shares covered by each Performance Share Award shall be issued to the Participant; provided, however, that Awards shall not in any event be so accelerated to a date less than six months after the Award Date. Acceleration of Awards shall comply with applicable regulatory requirements, including without limitation Rule 16b-3 promulgated by the Commission pursuant to the Act and Section 422A of the Code. Notwithstanding the foregoing, this Section 7.4 shall not apply to any Participant who alone or together with one or more other persons acting as a partnership, limited partnership, syndicate, or other group for the purpose of acquiring, holding or disposing of securities of the Corporation triggers a "Change in Control" under Section 1.1(p)(iv)(A) which causes the occurrence of the Event. 7.5 Government Regulations. This Plan, the granting of Awards under this Plan and the issuance or transfer of shares of Common Stock (and/or the payment of money) pursuant thereto are subject to all applicable federal and state laws, rules and regulations and to such approvals by any regulatory or governmental agency (including without limitation "no action" positions of the Commission) which may, in the opinion of counsel for the Corporation, be necessary or advisable in connection therewith. Without limiting the generality of the foregoing, no Awards may be granted under this Plan, and no shares shall be issued by the Corporation, nor cash payments made by the Corporation, pursuant to or in connection with any such Award, unless and until, in each such case, all legal requirements applicable to the issuance or payment have, in the opinion of counsel to the Corporation, been complied with. In connection with any stock issuance or transfer, the person acquiring the shares shall, if requested by the Corporation, give assurance satisfactory to counsel to the Corporation in respect of such matters as the Corporation may deem desirable to assure compliance with all applicable legal requirements. 33 18 7.6 Tax Withholding. (a) Upon the disposition by a Participant or other person of shares of Common Stock acquired pursuant to the exercise of an Incentive Stock Option prior to satisfaction of the holding period requirements of Section 422A of the Code, or upon the exercise of a Nonqualified Stock Option, the exercise of a Stock Appreciation Right, the vesting of a Restricted Stock Award, the payment of a Performance Share Award, payment pursuant to a Stock Depreciation Right or payment of a Tax-Offset Bonus, the Company shall have the right to (i) require such Participant or such other person to pay by cash, or certified or cashier's check payable to the Company, the amount of any taxes which the Company may be required to withhold with respect to such transactions or (ii) deduct from amounts paid in cash the amount of any taxes which the Company may be required to withhold with respect to such cash amounts. The above notwithstanding, in any case where a tax is required to be withheld in connection with the issuance or transfer of shares of Common Stock under this Plan, the Participant may elect, pursuant to such rules as the Committee may establish, to have the Company reduce the number of such shares issued or transferred by the appropriate number of shares to accomplish such withholding; provided, the Committee may impose such conditions on the payment of any withholding obligation as may be required to satisfy applicable regulatory requirements, including, without limitation, Rule 16b-3 promulgated by the Commission pursuant to the Act. (b) The Committee may, in its discretion, permit a loan from the Company to a Participant in the amount of any taxes which the Company may be required to withhold with respect to shares of Common Stock received pursuant to a transaction described in subsection (a) above. Such loan will be for a term, at a rate of interest and pursuant to such other terms and rules as the Committee may establish. 7.7 Amendment, Termination, and Suspension. (a) The Board may, at any time, terminate or, from time to time, amend, modify or suspend this Plan (or any part hereof). In addition, the Committee may, from time to time, amend or modify any provision of this Plan except Section 7.4 and, with the consent of the Participant, make such modifications of the terms and conditions of such Participant's Award as it shall deem advisable. The Committee, with the consent of the Participant, may also amend the terms of any Option to provide that the Option price of the shares remaining subject to the original Award shall be reestablished at a price not less than 100% of the Fair Market Value of the Common Stock on the effective date 34 19 of the amendment. No modification of any other term or provision of any Option which is amended in accordance with the foregoing shall be required, although the Committee may, in its discretion, make such further modifications of any such Option as are not inconsistent with or prohibited by the Plan. No Awards may be granted during any suspension of this Plan or after its termination. (b) If an amendment would materially (i) increase the benefits accruing to Participants within the meaning of Rule 16b-3(a) under the Act or any successor thereto, (ii) increase the aggregate number of shares which may be issued under this Plan, or (iii) modify the requirements of eligibility for participation in this Plan, the amendment shall be approved by the Board or the Committee and by a majority of the shareholders. (c) In the case of Awards issued before the effective date of any amendment, suspension or termination of this Plan, such amendment, suspension or termination of the Plan shall not, without specific action of the Board or the Committee and the consent of the Participant, in any way modify, amend, alter or impair any rights or obligations under any Award previously granted under the Plan. 7.8 Privileges of Stock Ownership; Nondistributive Intent. A Participant shall not be entitled to the privilege of stock ownership as to any shares of Common Stock not actually issued to him. Upon the issuance and transfer of shares to the Participant, unless a registration statement is in effect under the Securities Act of 1933, as amended ("1933 Act"), relating to such issued and transferred Common Stock and there is available for delivery a prospectus meeting the requirements of Section 10 of the 1933 Act, the Common Stock may be issued and transferred to the Participant only if he represents and warrants in writing to the Corporation that the shares are being acquired for investment and not with a view to the resale or distribution thereof. No shares shall be issued and transferred unless and until there shall have been full compliance with any then applicable regulatory requirements (including those of exchanges upon which any Common Stock of the Corporation may be listed). 7.9 Effective Date of the Plan. This Plan shall be effective upon its approval by the Board, subject to approval by the shareholders of the Corporation within 12 months from the date the Plan is adopted by the Board. 35 20 7.10 Term of the Plan. Unless previously terminated by the Board, this Plan shall terminate at the close of business on March 8, 1997, and no Award shall be granted under it thereafter, but such termination shall not affect any Award theretofore granted. 7.11 Governing Law. This Plan and the documents evidencing Awards and all other related documents shall be governed by, and construed in accordance with, the laws of the State of California. If any provision shall be held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions of this Plan shall continue to be fully effective. 36 EX-10.4A 4 AMENDMENT TO SERP ADOPTED AUGUST 23, 1994 1 EXHIBIT 10.4A APPENDIX A FURON COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Whereas, Furon Company (the "Company") maintains the Furon Company Supplemental Executive Retirement Plan ("Plan"); and Whereas, the Company has the right to amend the Plan. Now, therefore, notwithstanding any other provisions of this Plan, this Appendix will apply specifically to Larry K. Hanson. "Final Average Earnings" means Mr. Hanson's average earnings over the highest three years of service for calendar years 1989 through 1994. This Appendix shall be considered as part of the Plan. IN WITNESS WHEREOF, this Appendix is hereby adopted this 23rd day of August, 1994. FURON COMPANY By: /s/ J. MICHAEL HAGAN -------------------------------- Its: Chairman -------------------------------- 37 EX-11 5 COMPUTATION OF NET INCOME PER SHARE 1 EXHIBIT 11 FURON COMPANY Computation of Net Income Per Share
Three months ended Six months ended -------------------------------- -------------------------------- July 30, July 31, July 30, July 31, 1994 1993 1994 1993 - - --------------------------------------------------------------------------------------------------------------------- PRIMARY NET INCOME PER SHARE Earnings Net income $ 2,667,000 $ 1,582,000 $ 5,081,000 $ 3,339,000 ============== ============== =============== =============== Shares Weighted average number of common shares outstanding 8,691,429 8,621,562 8,673,046 8,608,222 Shares issuable from assumed exercise of stock options 229,981 263,056 259,523 294,558 --------------- --------------- --------------- --------------- Average shares as adjusted 8,921,410 8,884,618 8,932,569 8,902,780 =============== =============== =============== =============== Primary net income per share $ .30 $ .18 $ .57 $ .38 =============== =============== =============== =============== FULLY DILUTED NET INCOME PER SHARE Earnings Net income $ 2,667,000 $ 1,582,000 $ 5,081,000 $ 3,339,000 =============== =============== =============== =============== Shares Weighted average number of common shares outstanding 8,691,429 8,621,562 8,673,046 8,608,222 Shares issuable from assumed exercise of stock options 308,962 263,063 312,373 294,585 --------------- --------------- --------------- --------------- Average shares as adjusted for full dilution 9,000,391 8,884,625 8,985,419 8,902,807 --------------- --------------- --------------- --------------- Fully diluted net income per share $ .30 $ .18 $ .57 $ .38 =============== =============== =============== ===============
38 EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF CASH FLOW AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED WITHIN THE COMPANY'S FORM 10-Q FOR THE QUARTER ENDED JULY 30,1994. 1 U.S. DOLLARS 6-MOS JAN-28-1995 JUL-30-1994 1 16,261 0 40,303 735 28,216 99,392 106,265 56,784 175,874 47,191 0 36,161 0 0 50,237 175,874 150,087 150,087 105,547 105,547 0 175 1,266 8,066 2,985 5,081 0 0 0 5,081 .57 .57
-----END PRIVACY-ENHANCED MESSAGE-----