<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/X/ Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
FURON COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
FURON COMPANY
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
----------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
----------------------------------------------------------------------
(3) Filing party:
----------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
[LOGO]
29982 Ivy Glenn Drive
Laguna Niguel, California 92677-2044
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD ON
JUNE 6, 1995
To the Shareholders of
Furon Company:
The Annual Meeting of the Shareholders of Furon Company, a California
corporation (the "Company"), will be held at The Center Club, 650 Town Center
Drive, Costa Mesa, California, on Tuesday, June 6, 1995, at 10:30 a.m., local
time, for the following purposes:
1. To elect three directors to the Board of Directors for a term of three
years. The nominees for election to the Board of Directors are named in
the attached Proxy Statement.
2. To approve the Furon Company 1995 Stock Incentive Plan.
3. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending February 3, 1996.
4. To transact such other business as may come before the Annual Meeting
and at any adjournment thereof.
Shareholders of record at the close of business on April 17, 1995 will be
entitled to notice of and to vote at the Annual Meeting and at any adjournment
thereof.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. HOWEVER, THE
COMPANY URGES YOU TO ASSURE YOUR REPRESENTATION AT THE MEETING BY SIGNING AND
RETURNING THE ENCLOSED PROXY IN THE POSTAGE PREPAID ENVELOPE PROVIDED AS
PROMPTLY AS POSSIBLE. THE GIVING OF THE PROXY DOES NOT AFFECT YOUR RIGHT TO VOTE
IN PERSON IF YOU ATTEND THE MEETING.
By Order of the Board of Directors
FURON COMPANY
/s/ Donald D. Bradley
---------------------------
Donald D. Bradley
General Counsel and
Secretary
May 1, 1995
Laguna Niguel, California
<PAGE> 3
FURON COMPANY
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS
JUNE 6, 1995
This Proxy Statement is furnished in connection with the solicitation of
the accompanying proxy by the Board of Directors of Furon Company, a California
corporation (the "Company"), for use at the Annual Meeting of Shareholders (the
"Annual Meeting") to be held at The Center Club, 650 Town Center Drive, Costa
Mesa, California, on Tuesday, June 6, 1995, at 10:30 a.m., local time. This
proxy solicitation material is being mailed to shareholders on or about May 1,
1995.
GENERAL INFORMATION
PROXY
All shares represented by each properly executed unrevoked proxy received
in time for the Annual Meeting will be voted in the manner specified therein.
Any shareholder has the power to revoke his or her proxy at any time before it
is voted. A proxy may be revoked by (i) delivering a written notice of
revocation to the Secretary of the Company, 29982 Ivy Glenn Drive, Laguna
Niguel, California 92677-2044, (ii) a subsequent proxy executed by the person
executing the prior proxy and presented to the Annual Meeting, or (iii)
attending the Annual Meeting and voting in person.
SOLICITATION OF PROXIES
The expenses of preparing and mailing the proxy materials will be paid by
the Company. In addition to the solicitation of proxies by mail, proxies may be
solicited by directors, officers and regular employees of the Company (who will
receive no additional compensation) by personal interviews, telephone and
telegraph. The Company has retained Beacon Hill Partners, Inc., for a fee of
$5,000, to assist in the solicitation and distribution of proxies to brokerage
houses and institutions. It is anticipated that banks, custodians, nominees and
fiduciaries will forward proxy solicitation materials to beneficial owners of
Common Stock and that such persons will be reimbursed by the Company for their
expenses incurred in this regard.
RECORD DATE AND VOTING RIGHTS
At the close of business on April 17, 1995, the record date with respect to
this solicitation (the "Record Date"), the Company had outstanding 8,847,514
shares of Common Stock. Only holders of Common Stock of record at the close of
business on the Record Date are entitled to notice of and to vote at the Annual
Meeting and at any adjournment thereof. Each share of Common Stock is entitled
to one vote.
Votes cast by proxy or in person at the Annual Meeting will be counted by
an election inspector appointed for the meeting. The election inspector will
treat shares represented by proxies that reflect abstentions as shares that are
present and entitled to vote for purposes of determining the outcome of any
matter submitted to the shareholders for a vote. Abstentions, however, do not
constitute a vote "for" or "against" any matter and thus will be disregarded in
the calculation of a plurality or of "votes cast."
The election inspector will treat shares referred to as "broker non-votes"
(i.e., shares held by brokers or nominees that the broker or nominee does not
have discretionary power to vote on a particular matter and as to which
instructions have not been received from the beneficial owners or
<PAGE> 4
persons entitled to vote) as shares that are present and entitled to vote for
purposes of determining the presence of a quorum. However, for purposes of
determining the outcome of any matter as to which the broker has physically
indicated on the proxy that it does not have discretionary authority to vote,
those shares will be treated as not present and not entitled to vote with
respect to that matter (even though those shares are considered entitled to vote
for quorum purposes and may be entitled to vote on other matters). Any unmarked
proxies, including those submitted by brokers or nominees, will be voted as
indicated in the accompanying proxy card.
In the election of directors, shares present but not voting will be
disregarded (except for quorum purposes). For each share of Common Stock owned,
each shareholder is entitled to one vote for each of the offices of director to
be elected. The candidates receiving the highest number of votes will be elected
and votes withheld will have no legal effect.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information as of March 31, 1995
concerning the beneficial ownership of the Company's Common Stock by (i) the
only persons known by the Company to own beneficially more than five percent of
the outstanding shares of Common Stock, (ii) the Company's current executive
officers and a former executive officer, and (iii) all current directors and
executive officers of the Company as a group. Except as otherwise indicated,
beneficial ownership includes both voting and dispositive or investment power.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
NAME AND ADDRESS -----------------------
OF BENEFICIAL OWNER NUMBER PERCENT
------------------- ------ -------
<S> <C> <C>
PRINCIPAL SHAREHOLDERS:
Peter Churm.......................................... 486,183(1) 5.5%
c/o Furon Company
29982 Ivy Glenn Drive
Laguna Niguel, California 92677
RCM Capital Management............................... 867,500(2) 9.8
Four Embarcadero Center
Suite 2900
San Francisco, California 94111
State of Wisconsin................................... 523,400(2) 5.9
Investment Board
121 East Wilson
Madison, Wisconsin 53702
David L. Babson & Company, Inc....................... 475,600(2) 5.4
One Memorial Drive
Suite 1100
Cambridge, Massachusetts 02142
EXECUTIVE OFFICERS:
J. Michael Hagan..................................... 267,586(3) 3.0
Terrence A. Noonan................................... 91,567(3) 1.0
Monty A. Houdeshell.................................. 74,059(3) *
Larry K. Hanson...................................... 55,494(3) *
GROUP:
Directors and Executive Officers as a
Group (10 persons)................................. 946,535(3) 10.3
</TABLE>
- ---------------
* Less than one percent.
(1) Includes 461,665 shares held of record by Mr. Churm as Trustee of the Churm
Community Property Trust and 390 shares held for Mr. Churm's account under
the Company's Employee Stock Ownership Plan.
2
<PAGE> 5
(2) Based upon information provided by RCM Capital Management (a registered
investment advisor), the State of Wisconsin Investment Board (an independent
agency of the State of Wisconsin) and David L. Babson & Company, Inc. (a
registered investment advisor). RCM Capital Management has no voting power
with respect to 65,000 of the shares shown as beneficially owned by it and
shared dispositive power with respect to 20,000 shares. David L. Babson &
Company, Inc. has shared voting power with respect to 117,900 of the shares
shown as beneficially owned by it.
(3) Includes for Messrs. Hagan, Noonan, Houdeshell, Hanson (a former executive
officer) and the group, respectively, 192,948 shares, 79,875 shares, 69,125
shares, 54,875 shares and 341,948 shares subject to stock options which are
exercisable within 60 days and were granted under the Company's 1982 Stock
Incentive Plan; 690 shares, 629 shares, 616 shares, 587 shares and 2,325
shares held under the Company's Employee Stock Ownership Plan; and 8,119
shares, 7,319 shares, 2,318 shares, 32 shares and 17,756 shares held under
the Company's Employees' Profit-Sharing-Retirement Plan. Included in the
shares beneficially owned by Mr. Noonan are 3,744 shares held of record by
Mr. Noonan and his wife with shared voting and investment power.
ITEM 1
ELECTION OF DIRECTORS
NOMINEES AND CONTINUING DIRECTORS
The term of office of the Class II directors of the Company's classified
Board of Directors expires at the Annual Meeting. The Board of Directors has
nominated the individuals designated below for election as Class II directors at
the Annual Meeting, each to serve for a three-year term expiring at the 1998
Annual Meeting of Shareholders and until his successor has been duly elected and
qualified. Each nominee, other than Mr. Shepherd, presently serves as a Class II
director of the Company. Unless otherwise instructed, proxy holders will vote
the proxies received by them for the election of the Board's nominees. The
proxies may be voted for a substitute nominee or nominees in the event one or
more of the Board's nominees shall be unable to serve for any reason or be
withdrawn from nomination, a contingency not now anticipated.
Set forth below is certain information concerning each of the nominees, the
three Class III directors whose term of office expires at the 1996 Annual
Meeting of Shareholders and the three Class I directors whose term of office
expires at the 1997 Annual Meeting of Shareholders, including the number of
shares of Common Stock beneficially owned by each of them as of March 31, 1995.
The only directors who beneficially owned one percent or more of the outstanding
shares of Common Stock as of that date were Messrs. Churm (5.5%), Hagan (3.0%)
and Noonan (1.0%); for additional information concerning their beneficial
ownership, see "General Information." The shares beneficially owned by Messrs.
Bright, Chase, Cvengros and Threshie include 1,018 shares acquired by each of
them, in lieu of their annual cash Board retainer, under the Company's 1993 Non-
3
<PAGE> 6
Employee Directors' Stock Compensation Plan described below. Except as otherwise
indicated, beneficial ownership includes both voting and investment power.
<TABLE>
<CAPTION>
SHARES
DIRECTOR BENEFICIALLY
NAME POSITION SINCE AGE OWNED
------------------------------- --------------------- -------- --- ------------
<S> <C> <C> <C> <C>
NOMINEES:
Class II
Cochrane Chase** Director 1979 63 8,068
H. David Bright** Director 1982 60 1,768
William C. Shepherd Nominee -- 56 --
CONTINUING DIRECTORS:
Class III
J. Michael Hagan Chairman of the Board 1980 55 267,586
Peter Churm Chairman Emeritus 1963 69 486,183
William D. Cvengros* Director 1987 46 1,768
Class I
Director and
Terrence A. Noonan President 1991 57 91,567
R. David Threshie* Director 1990 63 6,018
Bruce E. Ranck* Director 1994 46 2,500
</TABLE>
- ---------------
* Member of Audit Committee
** Member of Compensation Committee
NOMINEES
Class II
COCHRANE CHASE currently is retired. Prior to his retirement in 1988, he
served for 21 years as Chairman of the Board of Cochrane Chase, Livingston &
Company, Inc., an advertising, marketing and public relations firm. The shares
of Common Stock beneficially owned by Mr. Chase are held of record by Mr. Chase
and his wife as Trustees of the Cochrane and Janis Chase Trust, with shared
voting and investment power.
H. DAVID BRIGHT currently is retired. Prior to his retirement in 1989, he
served as Chairman of the Board of National Education Corporation, a training
and educational publishing company, from 1988 to 1989, and as President and
Chief Executive Officer from 1981 through 1988. Mr. Bright is a member of the
Board of Trustees of Marquette University.
WILLIAM C. SHEPHERD is the President, Chief Executive Officer and a
director of Allergan, Inc., a global provider of specialty therapeutic products.
He joined Allergan in 1966, was named Vice President -- Manufacturing in 1973,
Vice President -- Operations in 1976, Senior Vice President -- U.S. Operations
in 1978, President -- Allergan U.S. in 1981, and President and Chief Operating
Officer in 1984, and was appointed to his current position in January 1992. Mr.
Shepherd also is a director of Ligand Pharmaceuticals Incorporated and the
Orange County Performing Arts Center.
CONTINUING DIRECTORS
Class III
J. MICHAEL HAGAN was elected Chairman of the Board of the Company in June
1991, having previously served as President from 1980 to June 1991 and as a Vice
President from 1975 to 1980. Mr. Hagan also is a director of Freedom
Communications, Inc. and Ameron, Inc.
PETER CHURM has rendered management consulting services to the Company
since his retirement on February 1, 1992. Mr. Churm was named Chairman Emeritus
of the Board of Directors
4
<PAGE> 7
in June 1991, having previously served as Chairman of the Board of the Company
from 1980 to June 1991 and as President from 1963 to 1980. Mr. Churm also is a
director of Carl Karcher Enterprises.
WILLIAM D. CVENGROS has served as President, Chief Executive Officer and a
director of PIMCO Advisors L.P., a publicly traded investment management firm,
since November 1994. Previously, he served since 1990 as the Vice Chairman and
Chief Investment Officer of Pacific Mutual Life Insurance Company, a life
insurance and investment company. He joined Pacific Mutual in 1972, and was
elected Vice President in 1982, Senior Vice President in 1985 and Executive Vice
President in 1986.
Class I
TERRENCE A. NOONAN was elected President of the Company in June 1991,
having previously served as an Executive Vice President from 1989 to June 1991
and as a Vice President from May 1987, when he joined the Company, to 1989.
Prior to joining the Company, he served as a Group General Manager of Eaton
Corporation, a diversified manufacturing company.
R. DAVID THRESHIE has served since 1979 as Publisher and Chief Executive
Officer of the Orange County Register, a division of Freedom Communications,
Inc., an integrated communications company. The shares of Common Stock
beneficially owned by Mr. Threshie include 5,000 shares held of record by Mr.
Threshie as Trustee of the Threshie Family Trust, Part A.
BRUCE E. RANCK has served as President and Chief Operating Officer of
Browning-Ferris Industries, Inc., a waste services provider ("BFI"), since
November 1991 and as a director of BFI since March 1990. He was BFI's Executive
Vice President (Solid Waste Operations -- North America) from October 1989 to
November 1991, having previously served as a Regional Vice President for more
than five years. Mr. Ranck also serves as a director of Junior Achievement of
Southeast Texas, Inc.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
During the fiscal year ended January 28, 1995, the Board of Directors met
seven times. Each director attended at least 75% of all meetings of the Board
and the committees on which the director served. The only standing committees of
the Board of Directors are described below.
The Board's Audit Committee, which currently is comprised of Messrs.
Cvengros (Chairman), Threshie and Ranck, held four meetings during the last
fiscal year. The Audit Committee reviews the Company's financial reporting and
internal operating controls, its Annual Report on Form 10-K and the selection of
the Company's independent auditors. It also reviews with the independent
auditors the scope and results of the annual audit and the Company's reporting
systems and practices and makes recommendations to the Board of Directors with
respect to the foregoing.
The Board's Compensation Committee, which currently is comprised of William
E. Eckhardt (Chairman), who is retiring as a director at the Annual Meeting, and
Messrs. Bright and Chase, held one meeting during the last fiscal year. The
Compensation Committee reviews and recommends to the Board of Directors the
remuneration (including salary, bonus, retirement and other benefits) to be paid
or made available to officers and key employees, reviews benefit programs
available to all employees and administers certain of the Company's employee
benefit plans.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company is paid $14,000 per
year, plus $1,000 for each Board meeting attended and $750 for each Committee
meeting attended. A Committee Chairman is paid an additional $2,600 per year.
5
<PAGE> 8
In November 1993, the Board adopted the 1993 Non-Employee Directors' Stock
Compensation Plan ("Plan"). The Plan provides non-employee directors with the
opportunity to acquire Common Stock of the Company in lieu of their annual cash
retainer. Eligible directors make an election to receive their annual retainer
payable for the one-year term commencing on the date of the next Annual
Shareholders Meeting in (i) cash, (ii) restricted shares of the Company's Common
Stock, or (iii) hypothetical stock "units" which are converted to shares of the
Company's Common Stock upon distribution from the Plan following the director's
termination as a member of the Board or the expiration of some other fixed
period specified by the director, whichever occurs sooner. The number of
restricted shares or stock units which an eligible director receives is
determined by dividing the director's annual retainer by the fair market value
of the Company's Common Stock on the date of the Annual Shareholders Meeting,
and by then multiplying that number by 1.1. In effect, this provides an
incentive for participating directors to increase their ownership of the
Company's Common Stock by enabling them to obtain shares at a discount of 9.09%.
The shares acquired under the Plan are nonforfeitable, but are subject to
significant restrictions on transferability for five years from the date of
award, unless the director ceases to be a member of the Board. The Plan provides
that upon the occurrence of certain "events" described below under "Executive
Compensation - Change in Control Agreements," the restrictions on
transferability applicable to shares issued under the Plan immediately lapse.
Peter Churm, the Chairman Emeritus of the Board, has provided management
consulting services to the Company since his retirement on February 1, 1992. Mr.
Churm will be paid $90,000 for those services during the current fiscal year and
received $120,000 last fiscal year. Mr. Churm also is reimbursed for business
related expenses incurred in the performance of those services. As part of this
arrangement, the Company provides general medical insurance coverage for Mr.
Churm and his wife at a cost of approximately $600 per month and reimburses them
for any uninsured out-of-pocket medical expenses (which totaled $4,300 during
the last fiscal year). This consulting arrangement is subject to the annual
review of the Compensation Committee and approval by the Board of Directors.
During the last fiscal year, the Company also reimbursed Mr. Churm $21,640 to
pay for certain personal tax consulting services.
6
<PAGE> 9
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors of
the Company is comprised of non-employee independent directors, none of whom has
any interlocking or other relationships with the Company that would call into
question their independence as Committee members. The Compensation Committee
reviews, administers and monitors the Company's executive compensation plans,
policies and programs.
Executive Compensation Philosophy and Principles
The executive compensation philosophy of the Company is to link
compensation with enhancement of shareholder value. To that end, at the
beginning of fiscal 1993 the Committee replaced the Company's former short-term
and long-term compensation plans with an Economic Value Added incentive
compensation plan (the "EVA Plan") which rewards continuous improvement in
Economic Value Added ("EVA"). According to empirical stock market research by
Stern Stewart & Co., the nationally recognized corporate financial advisory firm
that developed the measure ("Stern Stewart"), EVA(R) has a stronger correlation
with shareholder value than all other financial performance measures. As a
result, the Committee believes that the Company has aligned the financial
interests of the executive officers with those of the Company's shareholders.
The principles followed by the Committee to implement the executive
compensation philosophy are (i) to provide a cash compensation package
consisting of competitive base salary levels and incentive opportunities that
are linked to corresponding levels of performance as measured by EVA and (ii) to
grant stock option incentives which require increases in the Company's stock
price in order for executives to realize value and, thus, are tied to the
Company's long-term stock performance. The result is a total compensation
opportunity largely dependent upon the Company's performance. To measure the
effectiveness of the executive compensation program in achieving the foregoing
objectives, the Committee uses the services of Stern Stewart and Towers Perrin,
an internationally recognized compensation consulting firm (collectively, the
"Consultants"), which provide independent expertise and direction on these
matters.
As one of the factors in its consideration of compensation matters, the
Committee will continue to consider, to the extent determinable, the anticipated
tax consequences to the Company and its executive officers of the levels and
forms of executive compensation. The tax consequences of various levels and
forms of compensation, including tax deductibility to the Company, may depend
upon the timing of payment or vesting or exercise of previously granted rights.
In addition, interpretations of and changes in the tax laws and other factors
beyond the Committee's control also affect the tax consequences of executive
compensation. For these and other reasons, the Committee will not necessarily
and in all circumstances limit executive compensation to that level or those
forms which would be deductible to the Company for tax purposes. However, the
Committee will consider various alternatives for preserving the deductibility of
executive compensation to the extent reasonably practicable and consistent with
its other compensation objectives.
Executive Compensation Components
Company's executive compensation is based on three principal
components, each of which is intended to support the overall compensation
philosophy. As a result, substantially more than 50% of the executive officer's
total compensation opportunity is at risk and contingent upon the performance of
the Company. The three principal components are:
o BASE SALARY. Base salary ranges are reviewed and established at the
beginning of each fiscal year. The Company participates in a broad based
compensation study conducted annually by Towers Perrin to ensure that
base salary ranges reflect competitive job market conditions for similar
sized companies in terms of sales, employees and related factors. (The
7
<PAGE> 10
study covers several of the companies included in the Russell 2000 and
some of those in the Russell 2000: Producer Durables indices shown below
under "Performance Graph.") Adjustments to actual base salaries are made
subjectively pursuant to job performance and relationship to the midpoint
range (which is plus or minus 10% of the actual midpoint) of the salary
range for the salary grade corresponding to the position and level of
responsibilities. The Company's philosophy generally is to provide a base
salary that is within the midpoint range of the applicable salary grade.
o INCENTIVE COMPENSATION. The incentive compensation opportunity under the
EVA Plan contains short-term and long-term components that are determined
by the achievement of continuous improvement in EVA in relation to
predetermined criteria that were subjectively established by the
Committee for the first and second plan years, consistent with the
advice of the Consultants, and thereafter are self-adjusting. Economic
Value Added and the EVA Plan are discussed in more detail below.
o STOCK OPTIONS. Executive officers are eligible to receive annual grants
of stock options, which since fiscal 1988 have been granted as
nonqualified stock options. The Company's policy is not to grant
restricted stock awards to its executive officers. The stock option
awards are intended to retain and motivate executive officers to improve
long-term stock market performance. Awards are granted at the fair market
value of the Company's Common Stock at the date of grant. Stock options
generally vest in equal installments over a four-year period and have a
ten-year term. The Company's policy is not to adjust award levels
annually for fluctuations in the market price of the Company's Common
Stock. Rather, the number of shares subject to individual awards was
fixed for executive officers in fiscal 1992 at the midpoint of Towers
Perrin's 1990/1991 analysis of competitive compensation practices of
companies reflected in the salary survey referred to above. Adjustments
based on subjective criteria (other than market price) were permitted
for other than the Chief Executive Officer and the President until
fiscal 1995.
Economic Value Added and the EVA Plan
The primary financial objective of the Company is to increase shareholder
value. To support that effort the Company uses a financial performance
measurement system called Economic Value Added. EVA is the internal measure of
operating and financial performance that, in the opinion of Stern Stewart and
the Company, best reflects the change in shareholder value. EVA can be more
specifically defined as the economic profit generated by the business, less a
charge for the use of capital. Economic profit is an after-tax measure of
operating results which differs from normal accounting profit as the consequence
of certain adjustments for non-economic charges. The capital charge (or cost of
capital) is the weighted average cost of (i) equity capital based upon a 30-year
U.S. Treasury Bond yield plus the product of the average equity risk premium and
the business risk index for the Company, and (ii) debt capital equal to the
after-tax cost of long-term debt.
EVA provides a framework within which management can make decisions that
will build long-term value for the Company and its shareholders rather than
focus on short-term results. The Committee takes the view that the financial
marketplace is a competition for scarce capital. Management of the Company is
charged with the task of putting that scarce capital to work efficiently to earn
the best possible returns. As long as the Company is investing in projects that
earn a rate of return higher than its cost of capital, then in accordance with
Stern Stewart's view of the fundamental forces which drive the capital markets,
investors will earn a return in excess of their required reward and the
Company's capital or stock should command a premium in the marketplace.
8
<PAGE> 11
There are four key elements to the Company's incentive compensation
philosophy which are incorporated into the EVA Plan and are summarized below.
1. There is only one cash bonus plan, which uses the same measurement
system for both short-term and long-term bonuses to provide a more
substantial incentive for increasing shareholder value.
2. Long-range goals, resource allocation decisions, capital expenditures,
acquisitions and operating performance are all evaluated in terms of
EVA.
3. EVA targets are separated from the budgetary and strategic planning
processes and are set and revised according to a predetermined formula
which rewards long-term continuous improvement and penalizes negative
performance. Under the formula, the Company's target EVA performance for
a fiscal year will be 50% of the difference between the previous year's
target and actual EVA performance if the actual EVA performance equals
or exceeds the target or, if it does not, it will be the prior year's
target less an amount equal to 30% of the difference between that target
and the actual EVA performance.
4. The potential bonus has no ceiling on the upside and no floor on the
downside. Individual target incentive awards (also called "current
bonuses") under the EVA Plan range from 7.5% to 80% of the individual's
salary for the fiscal year. Bonuses earned in excess of target incentive
compensation are considered exceptional and are "banked forward" (i.e.,
deferred) with their full payout contingent upon continued successful
performance. No interest is earned on the deferred amount and the
participant has no vested right to receive it. Negative performance can
eliminate these contingent amounts and create a negative bank balance
which will be offset against any future bank payments.
The Company's incentive compensation has been determined using the concepts
of Economic Value Added since fiscal 1993. Following a review by the Consultants
of the EVA Plan's first year of operations, the Committee elected to make
certain modifications to the EVA Plan effective for fiscal 1994. Those
modifications increased the difficulty of receiving incentive compensation by
reducing the compensation paid for a given level of performance. In addition,
the current bonus portion payable in a fiscal year was reduced from 150% to 100%
of target incentive compensation, thereby increasing the long-term incentive
component.
The objectives underlying the EVA incentive compensation program are to
more closely link incentive awards to value added for shareholders, and to
provide a culture of performance and ownership among the Company's managers and
senior executives. This requires management to share some of the Company's
business risk with shareholders, provides the opportunity for the upside
potential that results from the creation of value and, as a result, helps
managers think like owners. Accordingly, the program rewards long-term
continuous improvements in shareholder value.
CEO Compensation
J. Michael Hagan, the Chief Executive Officer of the Company, received a
base salary of $360,000 in fiscal 1994. The Committee subjectively maintained
Mr. Hagan's base salary at $360,000 for fiscal 1995 since it was at the midpoint
of the annual market analysis of competitive compensation practices completed by
Towers Perrin.
For fiscal 1995, Mr. Hagan was paid a current bonus of $288,000 under the
EVA Plan for exceeding the target EVA performance by 27% and, since the
Company's actual EVA performance exceeded the target by 98%, an additional
$371,981 was banked forward. In addition, he received a long-term bonus of
$143,746 that was distributed out of his EVA bank pursuant to the terms of the
EVA Plan.
9
<PAGE> 12
Mr. Hagan was awarded 35,000 shares of nonqualified stock options during
fiscal 1995 at an exercise price of $16.25 per share, which was the price of the
Company's stock on the date of the grant. The options vest over four years and
have a term of ten years. This award is consistent with the Company's
fixed-share stock option policy discussed above.
William E. Eckhardt (Chairman)
H. David Bright
Cochrane Chase
SUMMARY COMPENSATION TABLE
The following table sets forth certain compensation paid or accrued for the
fiscal year ended January 28, 1995 and the two prior fiscal years to the
Company's executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------------------
AWARDS PAYOUTS
------------------------- -------
ANNUAL COMPENSATION SECURITIES
-------------------------------------- RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ LTIP
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS
POSITION YEAR (A) ($)(B) ($)(B) ($)(C) ($)(D) (#) ($)
- -------------------------- -------- -------- -------- ------------ ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Michael Hagan 1995 $360,000 $288,000 $ 4,361 $0 35,000 $143,746
Chairman of the Board 1994 $360,000 $288,000 $ 4,183 $0 35,000 $171,843
and Chief Executive
Officer 1993 $345,000 $414,000 $ 3,312 $0 35,000 $ 0
Terrence A. Noonan 1995 $291,000 $203,700 $ 68,942 $0 21,000 $ 92,500
President and Chief 1994 $280,000 $196,000 $ 68,209 $0 21,000 $108,958
Operating Officer 1993 $250,000 $262,500 $ 2,644 $0 21,000 $ 0
Monty A. Houdeshell 1995 $215,000 $129,000 $ 43,280 $0 9,000 $ 61,028
Vice President and 1994 $205,000 $123,000 $ 54,344 $0 12,000 $ 72,846
Chief Financial Officer 1993 $195,000 $175,500 $ 57,848 $0 12,000 $ 0
Larry K. Hanson 1995(F) $174,300 $ 49,650 $ 7,772 $0 5,000 $ 49,702
Former Executive Vice 1994 $198,600 $ 99,300 $ 6,217 $0 7,000 $ 59,460
President 1993 $191,000 $143,250 $ 1,731 $0 8,000 $ 0
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL COMPENSATION
POSITION ($)(E)
- -------------------------- ------------
<S> <C>
J. Michael Hagan $ 5,707
Chairman of the Board $ 6,190
and Chief Executive
Officer $ 6,599
Terrence A. Noonan $ 5,941
President and Chief $ 6,337
Operating Officer $107,656
Monty A. Houdeshell $ 6,423
Vice President and $ 6,093
Chief Financial Officer $ 5,655
Larry K. Hanson $ 6,191
Former Executive Vice $ 6,094
President $ 5,399
</TABLE>
- ---------------
(A) Fiscal year ended on or about January 31.
(B) Amounts shown include cash compensation earned and received by the executive
officers, as well as amounts earned but deferred at their election.
(C) The amounts shown in this column for Messrs. Hagan and Hanson represent tax
reimbursements. The amounts shown for Mr. Noonan represent tax
reimbursements in fiscal 1993 and, for fiscal 1994 and 1995, include the
estimated value ($48,223 and $45,038, respectively) of a relocation loan
made to him in July 1992 in addition to tax reimbursements of $1,854 and
$6,763, respectively. The amounts shown for Mr. Houdeshell consist of (i)
tax reimbursements ($6,723, $7,414, and $6,986 in fiscal 1993, 1994, and
1995, respectively), (ii) the estimated value of a relocation loan made to
him in June 1988 ($28,789 for fiscal 1993 and $22,389 for fiscal 1994) and
(iii) the value for federal income tax purposes of the personal use of his
Company automobile ($10,338 for fiscal 1995). Mr. Noonan's fiscal 1994 and
1995 amounts and all of Mr. Houdeshell's amounts also include the estimated
value of certain other personal benefits received during the respective
fiscal years that were generally available to executive officers, including
amounts allocated for the use of Company automobiles and reimbursements for
certain expenses under the Company's supplemental medical reimbursement
plan. No information is presented concerning the value of the personal
benefits provided to Mr. Noonan in fiscal 1993 or to the other executive
officers during any of the fiscal years presented, because such value does
not exceed the lesser of $50,000 or ten percent of the executive officer's
salary and bonus for the fiscal year.
(D) There are no outstanding grants of restricted stock to any of the named
executive officers.
10
<PAGE> 13
(E) The amounts shown in this column for Messrs. Hagan, Houdeshell, and Hanson
for all three fiscal years, and for Mr. Noonan for fiscal 1994 and 1995,
represent Company contributions to defined contribution plans. The amounts
shown for Mr. Noonan for fiscal 1993 consist of those contributions ($6,876)
and certain amounts paid or reimbursed in connection with his relocation
from Ohio to California ($100,780).
(F) Effective August 1, 1994, Mr. Hanson ceased to be an executive officer and
assumed a new role with the Company as a part-time internal consultant. Mr.
Hanson's compensation included in this table and elsewhere herein reflects
all compensation paid to him for the full fiscal year for all services
rendered to the Company in all capacities.
STOCK OPTIONS
The following tables set forth information in respect of the individuals
named in the Summary Compensation Table concerning stock option grants and
exercises during fiscal 1995 and unexercised options held as of the end of that
fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR (A)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------
% OF
TOTAL GRANT DATE
NUMBER OF OPTIONS VALUE
SECURITIES GRANTED -----------
UNDERLYING TO EXERCISE GRANT
OPTIONS EMPLOYEES OR BASE DATE
GRANTED IN FISCAL PRICE EXPIRATION PRESENT
NAME (#)(B) YEAR ($/SH)(C) DATE VALUE($)(D)
- ------------------------------------- ---------- --------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
J. Michael Hagan..................... 35,000 50.0 $ 16.25 3/23/2004 $ 232,050
Terrence A. Noonan................... 21,000 30.0 $ 16.25 3/23/2004 $ 139,230
Monty A. Houdeshell.................. 9,000 12.9 $ 16.25 3/23/2004 $ 59,670
Larry K. Hanson...................... 5,000 7.1 $ 16.25 3/23/2004 $ 33,150
</TABLE>
- ---------------
(A) No SARs were granted to any of the named executive officers during the last
fiscal year.
(B) The options are exercisable in incremental amounts equal to 25% of the
underlying shares of Common Stock on each anniversary of the grant date,
with full vesting occurring on the fourth anniversary date. The options were
granted for a term of 10 years, subject to earlier termination in certain
events related to termination of employment. Under the terms of the
Company's 1982 Stock Incentive Plan, the Compensation Committee retains
discretion, subject to plan limits, to modify the terms of outstanding
options and to reprice the options.
(C) Subject to certain conditions, the exercise price may be paid by delivery of
already owned shares and the tax withholding obligations related to exercise
may be paid by offset of the underlying shares.
(D) These values were calculated using the Black-Scholes option pricing model.
The Black-Scholes model is a complicated mathematical formula which is
widely used and accepted for valuing traded stock options. The model is
premised on immediate exercisability and transferability of the options,
which is not the case for the Company's options granted to executive
officers. Therefore, the values shown are theoretical and are not intended
to reflect the actual values the recipients may eventually realize. Any
ultimate value will depend on the market value of the Company's stock at a
future date. In addition to the stock price at time of grant and the
exercise price, which are identical, and the ten-year term of each option
(with exercise assumed to occur at the end of such term), the following
assumptions were used to calculate the values shown: (i) expected dividend
yield of 1.8%, which is the average yield of the Company's Common Stock for
the 36 months prior to the grant date; (ii) expected stock price volatility
of .315, which is the volatility for the total shareholder return of the
Company's
11
<PAGE> 14
Common Stock for that period; and (iii) risk-free rate of return of 5.4%,
which is equal to the average yield on a blend of long and intermediate term
U.S. Government bonds for the twelve-month period prior to the grant date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES (A)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE YEAR END(#) AT FISCAL YEAR END($)(C)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#)(B) ($)(C) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Michael Hagan..... 13,600 $109,933 177,348 84,000 $ 1,833,293 $ 525,875
Terrence A. Noonan... -- -- 61,875 49,500 $ 568,468 $ 307,875
Monty A. Houdeshell.. -- -- 58,625 26,250 $ 550,125 $ 166,875
Larry K. Hanson...... -- -- 74,225 16,000 $ 785,851 $ 104,625
</TABLE>
- ---------------
(A) No information is presented concerning SARs because none has been granted by
the Company.
(B) The options covering these shares were granted to Mr. Hagan in March 1984 at
a per share exercise price of $8.6667, representing the then fair market
value of the underlying Common Stock.
(C) Calculated based upon the market value of the underlying Common Stock at the
exercise date ($16.75 per share) or fiscal year end ($22.00 per share), as
the case may be, minus the exercise price.
LONG-TERM INCENTIVE COMPENSATION
Under the EVA Plan described above under "Compensation Committee Report on
Executive Compensation," executive officers and other key employees are eligible
to receive certain long-term incentive compensation based upon the Company's EVA
performance. There is no limitation on the total incentive compensation that a
participant may earn for a fiscal year under the EVA Plan. However, a
participant is only eligible to receive his or her target bonus for a given
fiscal year; any balance is deferred. The deferred amount is accrued by the
Company and banked forward in an EVA incentive compensation bank ("Bank")
maintained for the participant for a possible future payment by the Company. No
interest is earned on the deferred amount and the participant has no vested
right to receive the deferred amount. Rather, the distribution and unconditional
vesting of the Bank are subject to future positive EVA performance.
At the end of each fiscal year for which performance is being measured
under the EVA Plan, a participant is eligible to receive a payment from the Bank
equal to one-third of (i) the participant's beginning Bank balance for the
fiscal year less (ii) any reductions to the Bank resulting from negative EVA
performance for the fiscal year. Negative Bank balances are carried forward to
be offset by any future additions to the Bank.
The amounts of contingent incentive compensation awarded to the individuals
named in the Summary Compensation Table for fiscal 1995 that were banked forward
and accrued by the
12
<PAGE> 15
Company, their "LTIP Payouts" from the Bank which also are shown in the Summary
Compensation Table and their current Bank balances, are as follows:
EVA PLAN BANK
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 28, 1995
------------------------------------------------
BEGINNING LTIP AMOUNTS ENDING
NAME BALANCE PAYOUTS BANKED BALANCE
------------------------------------ --------- -------- -------- --------
<S> <C> <C> <C> <C>
J. Michael Hagan.................... $ 431,238 $143,746 $371,981 $659,473
Terrence A. Noonan.................. 277,501 92,500 263,099 448,100
Monty A. Houdeshell................. 183,085 61,028 166,616 288,673
Larry K. Hanson..................... 149,107 49,702 64,128 163,533
</TABLE>
RETIREMENT PLAN
The following table shows the estimated annual benefit payable (before
giving effect to the benefit reductions described below) upon retirement to
participants in the Company's Supplemental Executive Retirement Plan at the
specified compensation and years-of-service classifications.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------
3-YEAR AVERAGE 15 OR
REMUNERATION* 5 10 MORE
---------------------------------------- -------- -------- --------
<S> <C> <C> <C>
$300,000.............................. $ 49,950 $ 99,900 $150,000
350,000.............................. 58,275 116,550 175,000
400,000.............................. 66,600 133,200 200,000
450,000.............................. 74,925 149,850 225,000
500,000.............................. 83,250 166,500 250,000
550,000.............................. 91,575 183,150 275,000
600,000.............................. 99,900 199,800 300,000
650,000.............................. 108,225 216,450 325,000
700,000.............................. 116,550 233,100 350,000
750,000.............................. 124,875 249,750 375,000
800,000.............................. 133,200 266,400 400,000
</TABLE>
- ---------------
* Represents the average annual compensation paid for the three highest
compensation years during the five calendar years preceding retirement.
The compensation covered by the plan (which generally will not be the same
as the fiscal year compensation reported in the Summary Compensation Table) is
the aggregate calendar year earnings included in the participant's income for
federal tax purposes plus any compensation deferred by the participant, but
excluding any amounts associated with nonrecurring payments such as moving
expenses, long-term incentive plan payouts and stock option exercises. The
three-year average remuneration under the plan as of the end of the last
calendar year for J. Michael Hagan, Terrence A. Noonan, and Monty A. Houdeshell
was $679,045, $460,133 and $347,697, respectively. At the time Mr. Hanson ceased
to be an executive officer of the Company, the plan was amended to provide that
this three-year average would be calculated for him for the six-year period
ended December 31, 1994. This results in a fixed amount equal to $301,110.
The benefit is reduced by the Company-provided portion of the benefit
payable from the Company's Employees' Profit-Sharing-Retirement Plan, the
benefit payable from Social Security and any other benefit payable to the
participant from any tax-qualified retirement plan. Benefits become payable at
age 65 and are paid in an annuity over the life of the participant. If the
participant dies after retirement and leaves a surviving spouse, the surviving
spouse receives an annuity of 50% of the amount the participant was receiving.
If the participant dies before retirement and leaves a surviving spouse, the
surviving spouse receives as a death benefit an annuity of 50% of the annual
13
<PAGE> 16
earnings of the participant immediately before death. A participant is not
vested in his or her benefit for the first five years of service, but then
becomes vested gradually between the sixth and fifteenth years of service, with
full vesting after fifteen years of service. The years of credited service
through January 28, 1995 for Messrs. Hagan, Noonan, Houdeshell, and Hanson are
27, 21, 7 and 24 years, respectively.
PERFORMANCE GRAPH
The following graph compares the five-year cumulative total return on the
Company's Common Stock to the total returns on the Russell 2000 and the Russell
2000: Producer Durables. This comparison assumes in each case that $100 was
invested on January 31, 1990 and all dividends were reinvested. The Company's
fiscal year ends on or about January 31.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Russell 2000:
Measurement Period Furon Producer
(Fiscal Year Covered) Company Russell 2000 Durables
<S> <C> <C> <C>
1990 100 100 100
1991 99.72 96.14 96.23
1992 116.46 139.26 123.15
1993 132.64 157.68 121.00
1994 146.79 187.04 140.56
1995 199.71 175.00 130.66
</TABLE>
CHANGE IN CONTROL AGREEMENTS
Each executive officer has a change in control agreement with the Company
that will remain in effect until the first anniversary date of the agreement
which is two and one-half years after the date that notice of termination is
given by either party. The agreements provide for the payments described below
if the executive officer's employment is terminated within six months before or
within two years following certain "events." The amounts are not payable,
however, if the termination of employment was due to retirement at or after age
65, death or disability, by the Company for cause, or by the executive officer
without good reason.
The "events" that trigger payments under the change in control agreements
include (1) approval by the shareholders of (a) the dissolution or liquidation
of the Company, (b) certain mergers, consolidations or reorganizations of the
Company or (c) certain sales or transfers of substantially all of the Company's
business or assets, and (2) a "change in control," which is
14
<PAGE> 17
deemed to include (a) the acquisition of 20% or 30% of the outstanding voting
securities of the Company by certain persons (other than the executive officer
acting individually or as part of a group or any employee benefit or stock plan
of the Company) and (b) certain changes in the membership of the Board of
Directors of the Company.
The payments under the change in control agreements are (1) a pro rata
share (based upon the portion of the fiscal year preceding the termination of
employment) of the average annual amount awarded to the executive officer under
the Company's incentive compensation plan over the preceding three years, plus
(2) two times the sum of (a) the executive officer's highest annual base salary
within the two years prior to termination of employment, and (b) the average
annual amount awarded under the Company's incentive compensation plan over the
preceding three years. In addition, an executive officer who is eligible for the
above cash payments is entitled to continued participation in the Company's
life, health, accident and disability insurance plans for up to two years
following termination of employment. Furthermore, in the event of termination
following an "event" for any reason other than by the Company for cause, the
executive officer is entitled to purchase his Company car at its then wholesale
value and to retain any existing club memberships upon reimbursement of the
membership costs to the Company, and no loan to such executive officer under the
Company's Employee Relocation Assistance Plan will be accelerated. Payments to
an executive officer under the change in control agreement will be limited so
that certain excise taxes specified in the Internal Revenue Code will not be
payable.
In the event of the occurrence of an "event" triggering cash payments under
the change in control agreements and assuming termination of employment on
January 28, 1995, the aggregate estimated cash payments to J. Michael Hagan,
Terrence A. Noonan, Monty A. Houdeshell, and Larry K. Hanson would be
$1,710,000, $1,244,200, $857,500 and $689,400, respectively.
ACCELERATION OF BENEFITS
The Company's Supplemental Executive Retirement Plan, 1982 Stock Incentive
Plan and Economic Value Added (EVA) Incentive Compensation Plan all provide for
the vesting of certain benefits upon the happening of any of the "events"
described above under "Change in Control Agreements." If an "event" occurs, then
(1) all outstanding stock options, restricted stock and other awards under the
1982 Stock Incentive Plan become immediately vested, (2) all benefits under the
Supplemental Executive Retirement Plan are paid immediately in a cash lump sum,
with such benefits to be determined based upon the greater of the employee's
actual years of service (up to 15 years) or 10 years of service and (3) the Bank
balance under the Economic Value Added (EVA) Incentive Compensation Plan is
immediately payable.
RELOCATION ARRANGEMENTS
The Company has outstanding loans to two of its executive officers which
were made to enable them to purchase their current residences in connection with
their relocations to the Company's headquarters in California. The Company
loaned Monty A. Houdeshell $325,000 in June 1988 and Terrence A. Noonan
approximately $700,000 in July 1992. Each of the loans is non-interest bearing
for the first six years of its twelve-year term and is secured by a second trust
deed on the residence. Mr. Houdeshell's loan now bears annual interest until
maturity at the same rate as is charged from time to time under the first trust
deed on the residence, which resulted in approximately $13,000 of accrued
interest for the fiscal year ended January 28, 1995. Mr. Noonan's loan will bear
interest for the final six years of its term at a rate based on the appreciation
rate of the property, with principal and interest due at maturity.
15
<PAGE> 18
ITEM 2
APPROVAL OF THE 1995 STOCK INCENTIVE PLAN
PROPOSED ACTION REGARDING 1995 STOCK INCENTIVE PLAN
The Board of Directors believes that stock compensation plays a vital role
in (i) aligning the economic interests of management with those of the
shareholders, (ii) strongly motivating management to maximize the Company's
shareholder value and (iii) encouraging management to remain with the Company.
As discussed previously in the Compensation Committee Report, the use of stock
incentives is one of the key components which supports the overall compensation
philosophy of the Company. Shares authorized under the Company's 1982 Stock
Incentive Plan have been nearly exhausted (less than 50,000 shares remaining).
Therefore, shareholders are being asked to approve the 1995 Stock Incentive Plan
(the "Plan") which has been unanimously approved by the Board of Directors.
Under the Plan, 1.8% of shares outstanding are reserved each fiscal year,
commencing with the fiscal year beginning February 4, 1996. The Board of
Directors believes that the Plan will enable the Company to achieve its
compensation objectives of aligning management and shareholder interests,
motivating superior management performance, and retaining management at a
reasonable cost to shareholders. In addition, the Plan will allow the Company to
achieve its growth objectives and maintain competitive stock incentive awards.
Based upon a market analysis conducted by Stern Stewart, the annual share
reserve provided under the Plan represents the median reserve of companies
(adjusted for size) that provide for an annual percentage reserve in their stock
plans.
The Plan prohibits the "repricing" and "cancellation and regrant" of
options or stock appreciation rights and does not provide for "tax offset
bonuses" or "stock depreciation rights," all of which were components of the
1982 plan. The Plan also specifically limits the utilization of restricted stock
and performance share awards to 60% of the annual reserve. Historically, the
Company has never issued performance share awards, has limited the award of
restricted stock to employees who are not executive officers and has adjusted
the size of any restricted stock awards (relative to target award levels) to
reflect EVA performance.
The Plan permits the grant of options, stock appreciation rights,
restricted stock awards and performance share awards (collectively or
individually also referred to as "Awards") to selected officers and key
employees of the Company and its Subsidiaries. The following discussion
summarizes the material features of the Plan; however, it is qualified in its
entirety by reference to the full text of the Plan, which is attached to this
Proxy Statement as Exhibit A. Capitalized terms not otherwise defined herein
have the meanings set forth in the Plan.
SUMMARY DESCRIPTION OF 1995 STOCK INCENTIVE PLAN
Administration. The Plan will be administered by the Compensation
Committee (the "Committee") currently consisting of three or more members, each
of whom is "disinterested" as such term is defined for purposes of Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
"outside" as such term is defined under Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"). The Committee will have the authority to
determine the employees to be granted Awards under the Plan and to determine the
specific terms and conditions of such Awards, including, without limitation, the
number of shares subject to each Award, the price to be paid for the shares and,
subject to the requirements of applicable law, any performance or other vesting
criteria. The Committee will make all other determinations necessary or
advisable for the administration of the Plan.
Eligibility. Any officer (whether or not a director) or key employee of
the Company or its Subsidiaries, as determined in the sole discretion of the
Committee, will be eligible to be granted Awards under the Plan. The Company
estimates that all officers of the Company will be among
16
<PAGE> 19
those eligible to receive Awards, subject to the discretion of the Committee to
determine the particular individuals who, from time to time, will be selected to
receive Awards. The specific number of key employees of the Company and its
Subsidiaries who will be eligible to receive Awards has not been determined at
this time. In addition, neither the individuals who will receive Awards, the
number of Awards that will be granted to any individual or group of individuals,
nor the amounts which will be payable with respect to Awards, have been
determined at this time.
Shares Available for Awards. The Plan imposes various limits on the number
of shares of the Company's Common Stock which will be available for Awards. The
Plan provides that for each fiscal year of the Company occurring during the term
of the Plan, commencing with the fiscal year which begins on February 4, 1996,
the maximum aggregate number of shares of Common Stock that may be covered by
Awards granted during such fiscal year will be 1.8% of the Company's issued and
outstanding shares as of the last day of the preceding fiscal year; provided,
however, that the number of shares available for granting Awards during any such
fiscal year will be increased by a number of shares which were available for
Awards in previous years but were not covered by Awards granted in such years.
As described below (see "Termination of or Changes to the Plan"), the Plan has
an indefinite term, but is subject to termination by the Board at any time.
Accordingly, the total number of shares which may be delivered pursuant to
Awards granted under the Plan during its entire term is not determinable.
The Plan also provides that the maximum number of shares of Common Stock
which may be covered by incentive stock options (within the meaning of Section
422 of the Code) may not exceed 1,000,000 shares. In addition, the maximum
number of shares of Common Stock subject to options and stock appreciation
rights which may be granted during any calendar year to any participant may not
exceed 175,000 shares. Furthermore, the Plan provides that the maximum number of
shares of Common Stock that may be covered by restricted stock awards and
performance share awards granted during each fiscal year of the Company,
commencing with the fiscal year beginning February 4, 1996, shall be 1.08% of
the issued and outstanding shares of Common Stock as of the last day of the
preceding fiscal year; provided, however, that the number of shares available
for granting such Awards in any such fiscal year will be increased by the number
of shares so available for such Awards in prior fiscal years but not covered by
Awards in such fiscal years.
Under the Plan, each of the limits described above as well as the kind of
shares available are subject to adjustment in the event of (i) certain
reorganizations, mergers, combinations, recapitalizations, stock splits, stock
dividends, or other similar events which change the number or kind of shares
outstanding; or (ii) extraordinary dividends or distributions of property to the
shareholders. Shares relating to options or stock appreciation rights which are
not exercised, restricted stock awards which do not vest, and performance share
awards which are not issued and any Award which is not exercised or which
expires will again become available for regrant and Award purposes under the
Plan to the extent permitted thereby.
Vesting and Award Periods. Except as may be provided in an applicable
Award Agreement, no Award made under the Plan may be exercisable or may vest
until at least six months after the initial Award Date, and once exercisable an
Award will remain exercisable until the expiration or earlier termination of the
Award. Each Award will expire on such date as is determined by the Committee,
but in the case of options, not later than ten years after the Award Date.
Loans to Finance Exercise of Awards. The Company may, with the Committee's
approval, loan to a participant sufficient funds to exercise or pay for any
Award made under the Plan. Each such loan will be evidenced by a promissory note
bearing interest at a rate determined by the Committee. The note will provide
for full recourse against the participant and will be repaid over a period of
time not to exceed five years, including extensions. If the employment or
service of the participant terminates, the unpaid principal balance of the note
will become due and payable on the 10th business day after such termination;
provided, however, that if a sale of such shares would cause such participant to
incur liability under Section 16(b) of the Exchange Act, the unpaid balance will
17
<PAGE> 20
become due and payable on the 10th business day after the first day on which a
sale of such shares could have been made without incurring such liability. The
principal of the note will not exceed the amount required to be paid to the
Company upon the exercise or receipt of one or more Awards under the Plan. In
addition, the Company may loan the participant funds sufficient to pay the tax
liability, if any, resulting from the exercise, payment or vesting of the Award;
the terms of such a loan need not conform to the foregoing provisions.
Transferability. The Plan provides, with limited exceptions, that rights
or benefits under any Award are not assignable or transferable except by will or
the laws of descent and distribution, and that only the participant, subject to
such exceptions (consistent with applicable legal considerations), may exercise
the Award during the participant's lifetime.
AWARDS THAT MAY BE GRANTED UNDER THE PLAN
Options. An option is the right to purchase shares of Common Stock at a
future date at a specified price ("Option Price"). The Option Price is generally
the closing price for a share of Common Stock reported on the New York Stock
Exchange ("Fair Market Value") on the date of grant. On April 17, 1995, the
closing price for a share of Common Stock reported on the New York Stock
Exchange was $19 1/8.
An option granted to an employee may either be an incentive stock option,
as defined in the Code, or a nonqualified stock option. An incentive stock
option may not be granted to a person who owns more than 10% of the total
combined voting power of all classes of stock of the Company and its
Subsidiaries unless the Option Price is at least 110% of the fair market value
of shares of Common Stock subject to the option and such option by its terms is
not exercisable after expiration of five years from the date such option is
granted. The aggregate fair market value of shares of Common Stock (determined
at the time the option is granted) for which incentive stock options may be
first exercisable by an option holder during any calendar year under the Plan or
any other plan of the Company or its Subsidiaries may not exceed $100,000.
Full payment for shares purchased on the exercise of any option must be
made at the time of such exercise in (i) cash or by electronic funds transfer,
(ii) by check payable to the Company, (iii) if authorized by the Committee or
specified in the applicable Award Agreement, in exchange for a promissory note
by the option holder in favor of the Company, (iv) subject to the Committee's
approval, in shares of Common Stock having a fair market value equal to the
Option Price, or (v) by notice and third party payment in such manner as may be
authorized by the Committee; or any combination thereof. In addition, option
holders may be permitted to offset or deliver already owned stock in
satisfaction of applicable tax withholding requirements.
Stock Appreciation Rights. A stock appreciation right is the right to
receive payment based on the appreciation in the fair market value of the Common
Stock from the date of grant to the date of exercise. In its discretion, the
Committee may grant a stock appreciation right concurrently with the grant of an
option for all or any portion of the shares covered by the option. A stock
appreciation right is exercisable at such time, and to the extent, that the
related option is exercisable.
Upon exercise of a stock appreciation right, the holder receives for each
share an amount equal to the difference between the exercise price of a related
option and the fair market value of the Common Stock on the date of exercise. As
determined by the Committee, such amount may be paid in cash, in shares of
Common Stock or a combination thereof.
Restricted Stock Awards. A restricted stock award is an Award of a fixed
number of shares of Common Stock subject to vesting requirements and other
restrictions. The Committee specifies the price, if any, the participant must
pay for such shares and the restrictions imposed on such shares which shall not
terminate earlier than six months after the Award Date, except to the extent the
Committee provides otherwise. Restricted stock awarded to a participant may not
be voluntarily or involuntarily sold, assigned, transferred, pledged or
encumbered during the restricted period. Stock
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<PAGE> 21
certificates evidencing shares of restricted stock will bear a legend
referencing any applicable restrictions. Unless otherwise provided in the
applicable Award Agreement, the recipient of a restricted stock award will be
entitled to receive any dividends and exercise voting rights pertaining to such
shares prior to the time they have vested. The Committee will specify in each
Award Agreement the extent to which cash paid or received in connection with a
restricted stock award must be returned in the event that any of the restricted
shares subject to the Award cease to be eligible for vesting.
Performance Share Awards. The Committee may, in its discretion, grant one
or more performance share awards to any participant based upon such factors
(including the contributions, responsibilities and other compensation of the
person or an increase in Economic Value Added ("EVA") or other performance
measure) as the Committee shall deem relevant in light of the specific type and
terms of the Award. The amount of cash or shares or other property that may be
deliverable pursuant to such an Award is based upon the degree of attainment
over a specified period of such measure(s) of performance of the Company (or any
part thereof) or the participant as may be established by the Committee. An
Award Agreement shall specify the maximum number of shares (if any) subject to
the performance share award, the consideration (but not less than the minimum
lawful consideration) to be paid for any such shares as may be issuable to the
participant, the duration of the Award and the conditions upon which delivery of
any shares or cash to the participant will be based.
Termination of Employment. Absent provisions to the contrary in the Award
Agreement or Committee action, in the case of stock options and stock
appreciation rights, if a participant terminates from employment for any reason
other than Retirement, death, Total Disability or for cause, the participant
will have three months after such termination to exercise his or her Award to
the extent it was exercisable as of the date of termination. If a participant's
termination is due to a Total Disability, the exercise period will generally be
extended for 12 months after such event. If the participant's employment
terminates as a result of Retirement, the participant's options and stock
appreciation rights will become fully exercisable and the exercise period will
be extended for 36 months after such event. Furthermore, if the participant dies
while employed by the Company, the participant's options and stock appreciation
rights will become fully exercisable and the participant's beneficiary will have
12 months from the date of death to exercise such Awards. In no case, however,
will the exercise period extend beyond the original expiration date of the
option or stock appreciation right.
With respect to restricted stock awards and performance share awards, the
Plan provides that in the event of a participant's termination from employment
for any reason, shares of Common Stock subject to such Awards, will be forfeited
in accordance with the provisions of the related Awards.
Possible Early Termination of Awards. Upon the dissolution or liquidation
of the Company, or upon the occurrence of a reorganization or similar event in
which the Company is not the surviving entity, the Plan provides that
outstanding Awards will terminate. Notwithstanding the preceding sentence, the
Committee may provide for any or all of the following alternatives as a result
of or in contemplation of such an event: (i) for the assumption and conversion
of outstanding Awards by the successor entity, with appropriate adjustments as
to the number and kind of shares and exercise prices; (ii) for the continuance
of the Plan and individual Awards thereunder; or (iii) for the payment in cash
or shares of Common Stock in lieu of and in complete satisfaction of outstanding
Awards.
Acceleration of Awards. Except as otherwise provided in an applicable
Award Agreement, upon the approval by the shareholders of a dissolution or
liquidation of the Company, certain agreements to merge or consolidate, the sale
of substantially all of the Company's assets or certain other "Events" as
defined in the Plan, each option and related stock appreciation right will
become
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<PAGE> 22
immediately exercisable, each restricted stock award will immediately vest and
each performance share award will immediately become payable provided that
Awards will in no event be accelerated to a date less than six months after the
Award Date.
Termination of or Changes to the Plan. The Plan has an indefinite term.
However, the Board may, at any time, terminate the Plan. Such termination
typically will not affect rights of participants which accrued prior to such
termination. The Board may, without shareholder approval, suspend or amend the
Plan at any time. The Committee may, with the consent of a holder, extend the
term of an Award (subject to maximum term limits), accelerate exercisability or
vesting or preserve benefits of the Award. Without shareholder approval, the
Board may not increase the maximum number of shares which may be delivered
pursuant to Awards granted under the Plan, materially increase the benefits
accruing to participants under the Plan or materially change the requirements as
to the eligibility to participate in the Plan. In addition, without shareholder
approval, the Committee may not authorize the amendment of outstanding options
and stock appreciation rights to reduce their exercise price, or cancel and
replace such Awards with Awards having a lower exercise price.
FEDERAL INCOME TAX CONSEQUENCES OF AWARDS UNDER THE PLAN
The federal income tax consequences of the Plan under current federal law,
which is subject to change, are summarized in the following discussion which
deals with the general tax principles applicable to the Plan. State and local
tax consequences are beyond the scope of this summary.
Nonqualified Stock Options. No taxable income will be realized by an
option holder upon the grant of a nonqualified stock option under the Plan. When
the holder exercises the nonqualified stock option, however, he or she will
generally recognize ordinary income equal to the difference between the option
price and the fair market value of the shares at the time of exercise. The
Company is generally entitled to a corresponding deduction at the same time and
in the same amounts as the income recognized by the option holder. Upon a
subsequent disposition of the Common Stock, the holder will realize short-term
or long-term capital gain or loss, depending on how long the Common Stock is
held. The Company will not be entitled to any further deduction at that time.
Incentive Stock Options. An employee who is granted an incentive stock
option under the Plan does not recognize taxable income either on the date of
its grant or on the date of its exercise, provided that, in general, the
exercise occurs during employment or within three months after termination of
employment. However, any appreciation in value of the Common Stock after the
date of the grant will be includable in the participant's federal alternative
minimum taxable income at the time of exercise in determining liability for the
alternative minimum tax. If Common Stock acquired pursuant to an incentive stock
option is not sold or otherwise disposed of within two years from the date of
grant of the option nor within one year after the date of exercise, any gain or
loss resulting from disposition of the Common Stock will be treated as long-term
capital gain or loss. If stock acquired upon the exercise of an incentive stock
option is disposed of prior to the expiration of such holding periods (a
"Disqualifying Disposition"), he or she will generally recognize ordinary income
at the time of such Disqualifying Disposition equal to the difference between
the exercise price and the fair market value of the Common Stock on the date the
incentive stock option is exercised or, if less, the excess of the amount
realized on the Disqualifying Disposition over the exercise price. Any remaining
gain or net loss is treated as a short-term or long-term capital gain or loss,
depending upon how long the Common Stock is held. Unlike the case in which a
nonqualified stock option is exercised, the Company is not entitled to a tax
deduction upon either the grant or exercise of an incentive stock option or upon
disposition of the Common Stock acquired pursuant to such exercise, except to
the extent that the employee recognizes ordinary income in a Disqualifying
Disposition.
Stock Appreciation Rights. The recipient of a stock appreciation right is
not taxed upon the grant of the stock appreciation right. Likewise, the Company
will not be entitled to a deduction for
20
<PAGE> 23
the stock appreciation right. Upon the exercise of a stock appreciation right,
the recipient generally will be taxed at ordinary income tax rates on the amount
of cash received and the fair market value of any Common Stock received. The
amount of ordinary income recognized by the recipient is deductible by the
Company in the year that the income is recognized. The recipient's basis in any
shares acquired is equal to the amount of ordinary income recognized with
respect to such shares, and, upon subsequent disposition, any further gain or
loss is taxable either as short-term capital gain or loss, depending on how long
the shares are held. The holding period for such shares commences as of the date
ordinary income is recognized.
Restricted Stock Awards. In general, no income is recognized by the
recipient upon the grant of a restricted stock award. Unless the recipient makes
an election described below, the recipient will recognize ordinary income when
the restrictions lapse equal to the excess of the fair market value of the
restricted stock at the time the restrictions lapse over the amount which the
recipient paid for the restricted stock, if any. The Company may deduct an
amount equal to the income recognized by the recipient at the time the recipient
recognizes the income.
The recipient may elect, within 30 days after the date of receipt of the
Award, to recognize ordinary income arising from the Award as of the Award Date.
If such election is made, the recipient will recognize ordinary income in an
amount equal to the excess of the fair market value of the stock over the amount
paid, if any, at the time of receipt.
The tax treatment of restricted stock which is disposed of will depend upon
whether the recipient made an election to include the value of the stock in
income when awarded. If the recipient made such an election, any disposition
after the restrictions lapse will result in a long-term or short-term capital
gain or loss depending upon the period the restricted stock is held. If,
however, such election is made and for any reason the restrictions imposed on
the Restricted Stock fail to lapse, the individual will not be entitled to a
deduction. If an election is not made, disposition after the lapse of
restrictions will result in short-term or long-term capital gain or loss
(depending on the period of time the stock is held after the restriction lapse)
equal to the difference between the amount received on disposition and the
greater of the amount paid for the stock by the recipient or its fair market
value at the date the restrictions lapsed.
Performance Share Awards. A participant who has been granted a performance
share award will generally not realize taxable income at the time of grant, and
the Company will not be entitled to a deduction at that time. When an Award is
paid, whether in cash or shares, the participant will have ordinary income, and
the Company will have a corresponding deduction. The measure of such income and
deduction will be the amount of cash and the fair market value of the shares at
the time the Award is paid.
Special Rules Governing Persons Subject to Section 16(b). Under the
federal tax law, special rules may apply to participants in the Plan who are
subject to the restrictions on resale of the Company's Common Stock under
Section 16(b) of the Exchange Act. These rules, which effectively take into
account the Section 16(b) restrictions, apply in limited circumstances and may
impact the timing and/or amount of income recognized by these persons with
respect to certain stock-based Awards under the Plan.
Accelerated Payments. If, as a result of certain changes in control of the
Company, a participant's options or stock appreciation rights become immediately
exercisable, or if restrictions immediately lapse on restricted stock, or if
shares covered by a performance share award are immediately issued or a cash
payment under an Award is accelerated, the additional economic value, if any,
attributable to the acceleration may be deemed a "parachute payment." The
additional value will generally be deemed a parachute payment if such value,
when combined with the value of other payments which are deemed to result from
the change in control, equals or exceeds a threshold amount equal to 300% of the
participant's average annual taxable compensation over the five calendar years
preceding the year in which the change in control occurs. In such case, the
excess of the total parachute payments over such participant's average annual
taxable compensa-
21
<PAGE> 24
tion will be subject to a 20% non-deductible excise tax in addition to any
income tax payable. The Company will not be entitled to a deduction for that
portion of any parachute payment which is subject to the excise tax.
Section 162(m) Limits. Notwithstanding the foregoing discussion of the
deductibility of compensation paid under the Plan by the Company, Section 162(m)
of the Code would render non-deductible to the Company certain compensation to
certain employees required to be named in the Summary Compensation Table
("Executive Officers") in excess of $1,000,000 in any year unless such excess
compensation is "performance-based" (as defined in the Code) or is otherwise
exempt from these new limits on deductibility. Stock options and stock
appreciation rights which are granted at fair market value to Executive Officers
as contemplated by the Plan are intended to qualify for the exemption for
performance-based compensation under Section 162(m). However, restricted stock
awards and performance share awards granted under the Plan do not satisfy the
exemption for performance-based compensation under Code Section 162(m).
Historically, the Company has never issued performance share awards and has
limited the award of restricted stock to employees who are not Executive
Officers.
VOTE REQUIRED FOR APPROVAL OF THE PLAN
Approval of the Plan requires the affirmative vote of the holders of a
majority of the Common Stock present, or represented, and entitled to vote at
the Annual Meeting assuming the presence of a quorum. Each share of Common Stock
is entitled to one vote.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND RECOMMENDS A VOTE FOR
THE APPROVAL OF THE 1995 STOCK INCENTIVE PLAN AS DESCRIBED ABOVE AND AS SET
FORTH IN EXHIBIT A HERETO. PROXIES RECEIVED WILL BE SO VOTED UNLESS SHAREHOLDERS
SPECIFY OTHERWISE IN THE PROXY.
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<PAGE> 25
ITEM 3
APPOINTMENT OF INDEPENDENT AUDITORS
In recognition of the important role of independent auditors, the Board of
Directors has determined that its selection of the independent auditors for the
Company should be submitted to the Company's shareholders for ratification. The
Board of Directors has appointed Ernst & Young LLP to serve as the Company's
independent auditors for the fiscal year ending February 3, 1996, subject to
ratification by the holders of a majority of the shares represented either in
person or by proxy at the Annual Meeting. In the event that the shareholders do
not approve Ernst & Young LLP as the independent auditors, the selection of
another independent auditor will be considered by the Board of Directors.
Ernst & Young LLP has served as the Company's independent auditors since
1973. A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting and will have the opportunity to respond to appropriate questions
and to make a statement if he or she desires.
ADDITIONAL INFORMATION
PROPOSALS OF SHAREHOLDERS
All proposals of shareholders intended to be presented at the Company's
1996 Annual Meeting of Shareholders must be received by the Secretary of the
Company at the address set forth under "General Information -- Proxy" on or
before January 1, 1996, if they are to be considered for possible inclusion in
the Company's proxy statement and form of proxy relating to the meeting.
OTHER BUSINESS
The Board of Directors is unaware of any other business to be presented for
consideration at the Annual Meeting. If, however, other business should properly
come before the Annual Meeting, the proxies will be voted in accordance with the
best judgment of the proxy holders.
The Company's Annual Report for the fiscal year ended January 28, 1995,
which includes financial statements for the year, is enclosed.
By Order of the Board of Directors
FURON COMPANY
/s/ Donald D. Bradley
--------------------------------
Donald D. Bradley
General Counsel and
Secretary
May 1, 1995
Laguna Niguel, California
23
<PAGE> 26
EXHIBIT A
FURON COMPANY
1995 STOCK INCENTIVE PLAN
<PAGE> 27
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. THE PLAN.......................................................................... A-1
1.1 Purpose..................................................................... A-1
1.2 Administration and Authorization; Power and Procedure....................... A-1
1.3 Participation............................................................... A-2
1.4 Shares Available for Awards; Share Limits................................... A-2
1.5 Grant of Awards............................................................. A-3
1.6 Award Period................................................................ A-3
1.7 Limitations on Exercise and Vesting of Awards............................... A-3
1.8 Acceptance of Notes to Finance Exercise..................................... A-4
1.9 No Transferability.......................................................... A-4
2. OPTIONS........................................................................... A-5
2.1 Grants...................................................................... A-5
2.2 Option Price................................................................ A-5
2.3 Limitations on Grant and Terms of Incentive Stock Options................... A-6
2.4 Limits on 10% Holders....................................................... A-6
3. STOCK APPRECIATION RIGHTS......................................................... A-6
3.1 Grants...................................................................... A-6
3.2 Exercise of Stock Appreciation Rights....................................... A-7
3.3 Payment..................................................................... A-7
4. RESTRICTED STOCK AWARDS........................................................... A-7
4.1 Grants...................................................................... A-7
4.2 Restrictions................................................................ A-8
5. PERFORMANCE SHARE AWARDS.......................................................... A-8
6. OTHER PROVISIONS.................................................................. A-8
6.1 Rights of Eligible Employees, Participants and Beneficiaries................ A-8
6.2 Adjustments; Possible Early Termination of Awards; Acceleration............. A-9
6.3 Effect of Termination of Employment......................................... A-10
6.4 Compliance with Laws........................................................ A-11
6.5 Tax Withholding............................................................. A-11
6.6 Plan Amendment, Termination and Suspension.................................. A-12
6.7 Privileges of Stock Ownership............................................... A-12
6.8 Effective Date of the Plan.................................................. A-12
6.9 Governing Law/Construction/Severability..................................... A-13
6.10 Captions.................................................................... A-13
6.11 Non-Exclusivity of Plan..................................................... A-13
7. DEFINITIONS....................................................................... A-14
7.1 Definitions................................................................. A-14
</TABLE>
i
<PAGE> 28
FURON COMPANY
1995 STOCK INCENTIVE PLAN
1. THE PLAN.
1.1 Purpose.
The purpose of this Plan is to promote the success of the Company by
providing an additional means to attract, motivate, retain and reward key
employees, including officers, whether or not directors, of the Company through
the grant of Awards that provide added long-term incentives for high levels of
individual performance and for significant efforts to improve the financial
performance of the Company. "Corporation" means Furon Company and "Company"
means the Corporation and its Subsidiaries, collectively. These terms and other
capitalized terms are defined in Article 7.
1.2 Administration and Authorization; Power and Procedure.
(a) Committee. This Plan shall be administered by and all Awards to
Eligible Employees shall be authorized by the Committee. Action of the Committee
with respect to the administration of this Plan shall be taken pursuant to a
majority vote or by written consent of its members.
(b) Plan Awards; Interpretation; Powers of Committee. Subject to the
express provisions of this Plan, the Committee shall have the authority:
(i) to determine from among the class of Eligible Employees those
persons who will receive any Awards;
(ii) to grant Awards to Eligible Employees, determine the price at
which securities will be offered or awarded and the amount of securities
to be offered or awarded to any of such persons, and determine the other
specific terms and conditions of such Awards consistent with the express
limits of this Plan, and establish the installments (if any) in which
such Awards shall become exercisable or shall vest, or determine that no
delayed exercisability or vesting is required, and establish the events
of termination or reversion of such Awards;
(iii) to approve the forms of Award Agreements (which need not be
identical either as to type of award or among Participants);
(iv) to construe and interpret this Plan and any agreements
defining the rights and obligations of the Company and Participants
under this Plan, further define the terms used in this Plan, and
prescribe, amend and rescind rules and regulations relating to the
administration of this Plan;
(v) to cancel, modify, or waive the Corporation's rights with
respect to, or modify, discontinue, suspend, or terminate any or all
outstanding Awards held by Eligible Employees, subject to any required
consent under Section 6.6;
(vi) to accelerate or extend the exercisability or extend the term
of any or all such outstanding Awards within the maximum ten-year term
of Awards under Section 1.6; and
(vii) to make all other determinations and take such other action
as contemplated by this Plan or as may be necessary or advisable for the
administration of this Plan and the effectuation of its purposes.
(c) Binding Determinations. Any action taken by, or inaction of, the
Corporation, any Subsidiary, the Board or the Committee relating or pursuant 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
Committee, or officer of the Corporation or any 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
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<PAGE> 29
and Committee may act in their absolute discretion in matters within their
authority related to this Plan.
(d) Reliance on Experts. In making any determination or in taking or not
taking any action under this Plan, the Committee or the Board, as the case may
be, may obtain and may rely upon the advice of experts, including professional
advisors to the Corporation. No director, officer or agent of the Company shall
be liable for any such action or determination taken or made or omitted in good
faith.
(e) Delegation. The Committee may delegate ministerial, non-discretionary
functions to individuals who are officers or employees of the Company.
1.3 Participation.
Awards may be granted by the Committee only to those persons that the
Committee determines to be 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. Non-Employee Directors shall not be eligible to
receive any Awards.
1.4 Shares Available for Awards; Share Limits.
(a) Shares Available. Subject to the provisions of Section 6.2, the
capital stock that may be delivered under this Plan shall be shares of the
Corporation's authorized but unissued Common Stock. The shares may be
delivered for any lawful consideration.
(b) Share Limits. For each Fiscal Year occurring during the term of this
Plan from and including the Fiscal Year beginning February 4, 1996, the
aggregate maximum number of shares of Common Stock that may be covered by Awards
granted to Eligible Employees under this Plan during such year shall be 1.8% of
the issued and outstanding shares of the Corporation's Common Stock as of the
last day of the preceding Fiscal Year; provided, however, that the number of
shares available for granting Awards in any such Fiscal Year shall be increased
in any such Fiscal Year by the number of shares so available for Awards under
this Plan in previous Fiscal Years but not covered by Awards granted under this
Plan in such Fiscal Years (the limitation described in this sentence shall
hereinafter be referred to as the "Share Limit"). The maximum number of shares
of Common Stock that may be delivered pursuant to options qualified as Incentive
Stock Options granted under this Plan is 1,000,000 shares. The maximum number of
shares subject to Options and Stock Appreciation Rights that are granted during
any calendar year to any individual shall be limited to 175,000 shares. The
maximum number of shares of Common Stock that may be covered by Restricted Stock
Awards and Performance Share Awards granted during each Fiscal Year, commencing
with the Fiscal Year beginning February 4, 1996, under this Plan shall be 1.08%
of the issued and outstanding shares of the Corporation's Common Stock as of the
last day of the preceding Fiscal Year; provided, however, that the number of
shares available for granting Restricted Stock Awards and Performance Share
Awards in any such Fiscal Year shall be increased in any such Fiscal Year by the
number of shares so available for such Awards in previous Fiscal Years but not
covered by Awards in such Fiscal Years. Each of the four foregoing numerical
limits shall be subject to adjustment as contemplated by this Section 1.4 and
Section 6.2.
(c) Calculation of Available Shares and Replenishment. Shares subject to
outstanding Awards of derivative securities (as defined in Rule 16a-1(c) under
the Exchange Act) shall be reserved for issuance. If any Option or other right
to acquire shares of Common Stock under an Award shall expire or be cancelled or
terminated without having been exercised in full, or any Common Stock subject to
a Restricted Stock Award or other Award shall not vest or be delivered, the
unpurchased, unvested or undelivered shares subject thereto shall again be
available for the purposes of the Plan, subject to any applicable limitations
under Rule 16b-3. If a Stock Appreciation Right or similar right is exercised or
a Performance Share Award based on the increased market value of a specified
number of shares of Common Stock is paid, the number of shares of Common Stock
to which such
A-2
<PAGE> 30
exercise or payment relates under the applicable Award shall be charged against
the maximum amount of Common Stock that may be delivered pursuant to Awards
under this Plan and, if applicable, such Award. If the Corporation withholds
shares of Common Stock pursuant to Section 6.5, the number of shares that would
have been deliverable with respect to an Award but that are withheld pursuant to
the provisions of Section 6.5 may in effect not be issued, but the aggregate
number of shares issuable with respect to the applicable Award and under the
Plan shall be reduced by the number of shares withheld and such shares shall not
be available for additional Awards under this Plan. To the extent a Performance
Share Award or dividend equivalent constitutes an equity security (as this
phrase is defined in Rule 16a-1 under the Exchange Act) issued by the
Corporation and is paid in shares of Common Stock, the number of shares of
Common Stock (if any) subject to such Performance Share Award or dividend
equivalent shall be charged (but in the case of tandem or substituted Awards or
dividend equivalents, without duplication) against the maximum number of shares
of Common Stock that may be delivered pursuant to Awards under this Plan.
Notwithstanding the foregoing provisions, but subject to Section 1.4(d), 3.2(b)
and 6.9(c), Awards payable solely in cash shall not reduce the number of shares
available for Awards under this Plan and any imputed charges to the maximum
number of shares deliverable under this Plan pursuant to Awards payable in
shares or cash shall be reversed to the extent the Awards are actually paid in
cash. To the extent any shares were previously reserved in respect of such
Awards payable in cash or shares, the number of shares not issued shall (except
as above expressly provided with respect to withholding under Section 6.5) again
be available for purposes of this Plan.
(d) Cash Only Award Limit. Awards payable solely in cash under the Plan
that would constitute derivative securities but for the exclusion in Rule
16a-1(c)(3)(i) under the Exchange Act shall constitute and be referred to as
"Cash Only Awards". The number of Cash Only Awards shall be determined by
reference to the number of shares or share equivalents referenced in or
otherwise linked to such Awards for purposes of determining the amount, value or
price of the Cash Only Awards. The maximum number of Cash Only Awards shall not,
together with the aggregate number of shares previously issued and subject to
then outstanding Awards payable (or deemed payable) in Common Shares under this
Plan, exceed the Share Limit, plus the number of reacquired shares available for
reissue consistent with the provisions of subsection (c) above, in each case,
subject to adjustments under Section 6.2.
1.5 Grant of Awards.
Subject to the express provisions of this Plan, the Committee shall
determine the number of shares of Common Stock subject to each Award, the price
(if any) to be paid for the shares or the Award and, in the case of Performance
Share Awards, the specific objectives, goals and performance criteria (such as
an increase in EVA, sales, market value, earnings or book value over a base
period, the years of service before vesting, the relevant job classification or
level of responsibility or other factors) that further define the terms of the
Performance Share Award. Each Award shall be evidenced by an Award Agreement
signed by the Corporation and, if required by the Committee, by the Participant.
1.6 Award Period.
Each Award and all executory rights or obligations under the related Award
Agreement shall expire on such date (if any) as shall be determined by the
Committee, but in the case of Options or other rights to acquire Common Stock
not later than ten (10) years after the Award Date.
1.7 Limitations on Exercise and Vesting of Awards.
(a) Provisions for Exercise. Unless the Committee otherwise expressly
provides, no Award shall be exercisable or shall vest until at least six months
after the initial Award Date, and once
A-3
<PAGE> 31
exercisable an Award shall remain exercisable until the expiration or earlier
termination of the Award.
(b) Procedure. Any exercisable Award shall be deemed to be exercised when
the Secretary of the Corporation receives written notice of such exercise from
the Participant, together with any required payment made in accordance with
Section 2.2(b).
(c) Fractional Shares/Minimum Issue. Fractional share interests shall be
disregarded. The Committee, however, may determine that cash, other securities,
or other property will be paid or transferred in lieu of any fractional share
interests. No fewer than 100 shares may be purchased on exercise of any Award at
one time unless the number purchased is the total number at the time available
for purchase under the Award.
1.8 Acceptance of Notes to Finance Exercise.
The Corporation may, with the Committee's approval, accept one or more
notes from any Participant in connection with the exercise or receipt of any
outstanding Award; provided that any such note shall be subject to the following
terms and conditions:
(a) The principal of the note shall not exceed the amount required to
be paid to the Corporation upon the exercise or receipt of one or more
Awards under the Plan and the note shall be delivered directly to the
Corporation in consideration of such exercise or receipt.
(b) The initial term of the note shall be determined by the Committee;
provided that the term of the note, including extensions, shall not exceed
a period of five years.
(c) The note shall provide for full recourse against the Participant
and shall bear interest at a rate determined by the Committee.
(d) If the employment of the Participant terminates, the unpaid
principal balance of the note shall become due and payable on the 10th
business day after such termination; provided, however, that if a sale of
such shares would cause such Participant to incur liability under Section
16(b) of the Exchange Act, the unpaid balance shall become due and payable
on the 10th business day after the first day on which a sale of such shares
could have been made without incurring such liability assuming for these
purposes that there are no other transactions by the Participant subsequent
to such termination.
(e) If required by the Committee or by applicable law, the note shall
be secured by a pledge of any shares or rights financed thereby in
compliance with applicable law.
(f) The terms, repayment provisions, and collateral release provisions
of the note and the pledge securing the note shall conform with applicable
rules and regulations of the Federal Reserve Board as then in effect.
1.9 No Transferability.
(a) Limit On Exercise. Prior to the expiration of any applicable
transition period in respect of Rule 16b-3 described in Section 6.9(d), and
thereafter, unless otherwise expressly permitted by the Committee and by
applicable law (including (if applicable) Rule 16b-3) and the express terms of
an Award Agreement, Awards may be exercised only by, and amounts payable or
shares issuable pursuant to an Award shall be paid only to (or for the account
of), the Participant or, if the Participant has died, the Participant's
Beneficiary or, if the Participant has suffered a Total Disability, the
Participant's Personal Representative, if any, or if there is none,
the Participant. The Committee may permit Awards to be exercised by and paid
to certain persons or entities related to the Participant who are transferees
of the Participant without consideration pursuant to such conditions and
procedures as the Committee may establish and (for Awards intended to satisfy
the conditions of Rule 16b-3) as may be permitted under Rule 16b-3.
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(b) Limit On Transfer. No right or similar benefit or derivative security
granted under this Plan or any Award, including, without limitation, any Option,
undistributed Performance Share Award, or share of Restricted Stock that has not
vested, shall be transferrable by the Participant or shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge (other than to the Corporation), except (i) by will or the
laws of descent and distribution, (ii) pursuant to a QDRO, or pursuant to any
other exception to transfer restrictions expressly permitted by the Committee
and set forth in the Award Agreement (or an amendment thereto) and, in the case
of Awards intended to satisfy the conditions of Rule 16b-3, to the extent
permitted by Rule 16b-3 (or, in the case of Awards not intended to satisfy Rule
16b-3, as may not be inconsistent with the issue of Awards under this Plan that
do satisfy the Rule), or (iii) in the case of Awards comprising Incentive Stock
Options, as permitted by the Code. Any attempted transfer in violation of these
provisions shall be void and the Corporation shall disregard any attempt at
transfer, assignment or other alienation prohibited hereby. During the
transition period described in Section 6.9(d), any derivative securities granted
under this Plan whose grant is intended to be exempt from Rule 16b-3 shall be
not transferable other than as permitted by former Rule 16b-3(d)(1)(ii).
(c) Designation of Beneficiary. The designation of a Beneficiary hereunder
shall not constitute a transfer prohibited by the foregoing provisions.
(d) Exceptions. The restrictions on exercise and transfer above shall not
be deemed to prohibit the authorization by the Committee of "cashless exercise"
procedures with unaffiliated third parties who provide financing for the purpose
of (or who otherwise facilitate) the exercise of Awards consistent with
applicable legal restrictions and Rule 16b-3, nor, to the extent permitted by
the Committee, transfers for estate and financial planning purposes,
notwithstanding that the inclusion of such features may render the particular
Awards ineligible for the benefits of Rule 16b-3, nor, in the case of
Participants who are not Section 16 persons, transfers to such other persons or
in such other circumstances as the Committee may in the Award Agreement or other
writing expressly permit.
2. OPTIONS.
2.1 Grants.
One or more Options may be granted under this Article to any Eligible
Employee. Each Option granted may be either an Option intended to be an
Incentive Stock Option, or not so intended, and such intent shall be indicated
in the applicable Award Agreement. Notwithstanding any other provision of the
Plan to the contrary, it is intended that Options which are granted with a
purchase price per share that is not less than 100% of the Fair Market Value of
the Common Stock on the date of grant shall satisfy the requirement for
"performance-based compensation" under Section 162(m) of the Code. In addition,
notwithstanding anything else contained herein to the contrary, no Incentive
Stock Options shall be granted more than ten years after the effective date of
this Plan set forth in Section 6.8.
2.2 Option Price.
(a) Pricing Limits. The purchase price per share of the Common Stock
covered by each Option shall be determined by the Committee at the time of the
Award, but in the case of Incentive Stock Options shall not be less than 100%
(110% in the case of a Participant who owns or is deemed to own under Section
424(d) of the Code more than 10% of the total combined voting power of all
classes of stock of the Corporation) of the Fair Market Value of the Common
Stock on the date of grant.
(b) Payment Provisions. The purchase price of any shares purchased on
exercise of an Option granted under this Article 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 electronic funds transfer; (ii) by check payable to the order of the
Corporation; (iii) if authorized by the Committee or specified in the
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applicable Award Agreement, by a promissory note of the Participant consistent
with the requirements of Section 1.8; (iv) by notice and third party payment in
such manner as may be authorized by the Committee; or (v) by the delivery of
shares of Common Stock of the Corporation already owned by the Participant,
provided, however, that any shares delivered must have been owned by the
Participant at least six months as of the date of delivery and the Committee may
in its absolute discretion limit the Participant's ability to exercise an Award
by delivering such shares. 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.
2.3 Limitations on Grant and Terms of Incentive Stock Options.
(a) $100,000 Limit. To the extent that the aggregate "fair market value"
of stock with respect to which incentive stock options first become exercisable
by a Participant in any calendar year exceeds $100,000, taking into account both
Common Stock subject to Incentive Stock Options under this Plan and stock
subject to incentive stock options under all other plans of the Company, such
options shall be treated as nonqualified stock options. For this purpose, the
"fair market value" of the stock subject to options shall be determined as of
the date the options were awarded. In reducing the number of options treated as
incentive stock options to meet the $100,000 limit, the most recently granted
options shall be reduced first. To the extent a reduction of simultaneously
granted options is necessary to meet the $100,000 limit, the Committee may, in
the manner and to the extent permitted by law, designate which shares of Common
Stock are to be treated as shares acquired pursuant to the exercise of an
Incentive Stock Option.
(b) Option Period. Each Option and all rights thereunder shall expire no
later than ten years after the Award Date.
(c) Other Code Limits. There shall be imposed in any Award Agreement
relating to Incentive Stock Options such terms and conditions as from time to
time are required in order that the Option be an "incentive stock option" as
that term is defined in Section 422 of the Code.
2.4 Limits on 10% Holders.
No Incentive Stock Option may be granted to any person who, at the time the
Option is granted, owns (or is deemed to own under Section 424(d) of the Code)
shares of outstanding Common Stock possessing more than 10% of the total
combined voting power of all classes of stock of the Corporation, 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. STOCK APPRECIATION RIGHTS.
3.1 Grants.
In its discretion, the Committee may grant to any Eligible Employee Stock
Appreciation Rights concurrently with the grant of another Award. 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
422 of the Code and the regulations promulgated thereunder, unless the holder
otherwise agrees. Notwithstanding any other provision of the Plan to the
contrary, it is intended that Stock Appreciation Rights with a base price per
share of Common Stock not less than Fair Market Value on the date of grant shall
satisfy the requirements for "performance-based compensation" under Section
162(m) of the Code.
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3.2 Exercise of Stock Appreciation Rights.
(a) Exercisability. Unless the Award Agreement or the Committee otherwise
provides, a Stock Appreciation Right related to another Award shall be
exercisable at such time or times, and to the extent, that the related Award
shall be exercisable.
(b) Effect on Available Shares. To the extent that a Stock Appreciation
Right is exercised, the number of underlying shares of Common Stock theretofore
subject to a related Award shall be charged against the maximum amount of Common
Stock that may be delivered pursuant to Awards under this Plan. The number of
shares subject to the Stock Appreciation Right and the related Award of the
Participant shall be reduced by the number of underlying shares as to which the
exercise related, unless the Award Agreement otherwise provides.
3.3 Payment.
(a) Amount. Unless the Committee otherwise provides, upon exercise of a
Stock Appreciation Right and the attendant surrender of an exercisable portion
of any related Award, 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 Award 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) Form of Payment. The Committee, in its sole discretion, shall
determine the form in which payment shall be made of the amount determined under
paragraph (a) above, either 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. If the Committee permits the Participant to elect to receive
cash or shares (or a combination thereof) on such exercise, any such election
shall be subject to such conditions as the Committee may impose and, in the case
of any Section 16 Person, any election to receive cash shall be subject to any
applicable limitations under Rule 16b-3 unless the Committee otherwise provides.
4. RESTRICTED STOCK AWARDS.
4.1 Grants.
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 consideration for such shares (but not less than
the minimum lawful consideration under applicable state law) by the Participant,
the extent to which the Participant shall be entitled to dividends, voting and
other rights in respect of the shares and the restrictions imposed on such
shares and the conditions of release or lapse of such restrictions. Such
restrictions shall not lapse earlier than six months after the Award Date,
except to the extent the Committee may otherwise provide. Stock certificates
evidencing shares of Restricted Stock pending the lapse of the restrictions
("restricted shares") shall bear a legend making appropriate reference to the
restrictions imposed hereunder and shall be held by the Corporation or by a
third party designated by the Committee until the restrictions on such shares
shall have lapsed and the shares shall have vested in accordance with the
provisions of the Award and Section 1.7. Upon issuance of the Restricted Stock
Award, the Participant may be required to provide such further assurance and
documents as the Committee may require to enforce the restrictions.
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4.2 Restrictions.
(a) Pre-Vesting Restraints. Except as provided in Section 1.9, restricted
shares comprising any Restricted Stock Award may not be sold, assigned,
transferred, pledged or otherwise disposed of or encumbered, either voluntarily
or involuntarily, until the restrictions have lapsed.
(b) Dividend and Voting Rights. Unless otherwise provided in the
applicable Award Agreement, a Participant receiving a Restricted Stock Award
shall be entitled to cash dividend and voting rights for all shares issued even
though they are not vested, provided that such rights shall terminate
immediately as to any restricted shares which are forfeited.
(c) Cash Payments. If the Participant shall have paid or received cash
(including any dividends) in connection with the Restricted Stock Award, the
Award Agreement shall specify whether and to what extent such cash shall be
returned (with or without an earnings factor) as to any restricted shares which
cease to be eligible for vesting.
5. PERFORMANCE SHARE AWARDS.
The Committee may, in its discretion, grant Performance Share Awards to
Eligible Employees based upon such factors, which in the case of any Award to a
Section 16 Person shall include but not be limited to the contributions,
responsibilities and other compensation of the person as the Committee shall
deem relevant in light of the specific type and terms of the award. An Award
Agreement shall specify the maximum number of shares of Common Stock (if any)
subject to the Performance Share Award, the consideration (but not less than the
minimum lawful consideration) to be paid for any such shares as may be issuable
to the Participant, the duration of the Award and the conditions upon which
delivery of any shares or cash to the Participant shall be based. The amount of
cash or shares or other property that may be deliverable pursuant to such Award
shall be based upon the degree of attainment over a specified period (a
"performance cycle") as may be established by the Committee of such measure(s)
of the performance of the Company (or any part thereof) or the Participant as
may be established by the Committee. The Committee may provide for full or
partial credit, prior to completion of such performance cycle or the attainment
of the performance achievement specified in the Award, in the event of the
Participant's death, Retirement, or Total Disability, an Event or in such other
circumstances as the Committee may determine.
6. OTHER PROVISIONS.
6.1 Rights of Eligible Employees, Participants and Beneficiaries.
(a) Employment Status. 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.
(b) No Employment Contract. Nothing contained in this Plan (or in any
other documents related to this Plan or to any Award) shall confer upon any
Eligible Employee or other Participant any right to continue in the employ or
other service of the Company or constitute any contract or agreement of
employment or other service, nor shall interfere in any way with the right of
the Company to change such person's compensation or other benefits or to
terminate the employment of such person, with or without cause, but nothing
contained in this Plan or any document related hereto shall adversely affect any
independent contractual right of such person without his or her consent thereto.
(c) Plan Not Funded. Awards payable under this Plan shall be payable in
shares of Common Stock or from the general assets of the Corporation, and
(except as provided in Section 1.4(c)) no special or separate reserve, fund or
deposit shall be made to assure payment of such Awards. 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, except as expressly
otherwise provided) of the
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Company by reason of any Award hereunder. Neither the provisions of this Plan
(or of any related documents), 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 payment
pursuant to any Award hereunder, such right shall be no greater than the right
of any unsecured general creditor of the Company.
6.2 Adjustments; Possible Early Termination of Awards; Acceleration.
(a) Adjustments. If there shall occur any extraordinary dividend or other
extraordinary distribution in respect of the Common Stock (whether in the form
of cash, Common Stock, other securities, or other property), or any
recapitalization, stock split (including a stock split in the form of a stock
dividend), reverse stock split, reorganization, merger, combination,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Common Stock or other securities of the Corporation, or there shall occur any
other like corporate transaction or event in respect of the Common Stock, or a
sale of substantially all the assets of the Corporation as an entirety, then the
Committee shall, in such manner and to such extent (if any) as it deems
appropriate and equitable (but subject to the requirements of Section 6.2(c))
(1) proportionately adjust any or all of (a) the number and type of shares of
Common Stock (or other securities) which thereafter may be made the subject of
Awards (including the specific numbers of shares set forth elsewhere in this
Plan), (b) the number, amount and type of shares of Common Stock (or other
securities or property) subject to any or all outstanding Awards, (c) the grant,
purchase, or exercise price of any or all outstanding Awards, (d) the
securities, cash or other property deliverable upon exercise of any outstanding
Awards, or (e) the performance standards appropriate to any outstanding Awards,
or (2) in the case of an extraordinary dividend or other distribution, merger,
reorganization, consolidation, combination, sale of assets, split up, exchange,
or spin off, make provision for a cash payment or for the substitution or
exchange of any or all outstanding Awards or the cash, securities or property
deliverable to the holder of any or all outstanding Awards based upon the
distribution or consideration payable to holders of the Common Stock of the
Corporation upon or in respect of such event; provided, however, in each case,
that with respect to Awards of Incentive Stock Options, no such adjustment shall
be made which would cause the Plan to violate Section 424(a) of the Code or any
successor provisions thereto without the written consent of holders materially
adversely affected thereby. In any of such events, the Committee may take such
action sufficiently prior to such event if necessary to permit the Participant
to realize the benefits intended to be conveyed with respect to the underlying
shares in the same manner as is available to shareholders generally.
(b) Possible Early Termination of Awards. Subject to the requirements of
Section 6.2(c), 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 Committee 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 6.2(c) to acceleration of
Awards under certain circumstances shall not in any way be modified, amended,
altered or impaired by virtue of this Section 6.2(b).
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(c) Acceleration of Awards. Except as otherwise explicitly provided in an
Award Agreement, upon the occurrence of an Event (i) each Option and 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 and the compensation payable
under a cash-based Performance Share Award shall be paid to the Participant;
provided, however, that in no event shall any Award be accelerated as to any
Section 16 Person to a date less than six months after the Award Date of such
Award. Any acceleration of Awards shall comply with applicable regulatory
requirements, including without limitation Section 422 of the Code.
Notwithstanding the foregoing, this Section 6.2(c) 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 7.1(p)(4)(A) which causes the occurrence of
the Event.
6.3 Effect of Termination of Employment.
(a) Unless the Committee provides otherwise in an applicable Award
Agreement or by resolution, if a 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 1.6, 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) Unless the Committee provides otherwise in an applicable Award
Agreement or by resolution, if a 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 1.6, 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 1.6, 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.
(c) Unless the Committee provides otherwise in an applicable Award
Agreement or by resolution, if the Participant's employment by the Company
terminates as a result of death while the Participant is employed by the
Company, the Participant's Option shall be exercisable by the Participant
Beneficiary, subject to earlier termination pursuant to or as contemplated by
Section 1.6, 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.
If the Participant's death occurs during either the twelve (12) or thirty-six
(36) month period referred to in Section 6.3(b) above, the Committee may provide
by resolution to extend such period for exercise by up to an additional twelve
(12) months.
(d) Each Stock Appreciation Right shall have the same termination
provisions and exercisability periods as the Option to which it relates.
(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
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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 6.3 to be a termination of employment of each employee
of that entity.
(h) Upon forfeiture of a Restricted Stock Award pursuant to this Section
6.3, 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 deem necessary or
advisable in connection with such transfer.
6.4 Compliance with Laws.
This Plan, the granting and vesting of Awards under this Plan and the
issuance and delivery of shares of Common Stock and/or the payment of money
under this Plan or under Awards granted hereunder are subject to compliance with
all required federal and state laws, rules and regulations (including but not
limited to state and federal securities law and federal margin requirements) and
to such approvals by any listing, regulatory or governmental authority as may,
in the opinion of counsel for the Corporation, be necessary or advisable in
connection therewith. Any securities delivered under this Plan shall be subject
to such restrictions, and the person acquiring such securities shall, if
requested by the Corporation, provide such assurances and representations to the
Corporation as the Corporation may deem necessary or desirable to assure
compliance with all applicable legal requirements.
6.5 Tax Withholding.
(a) Cash or Shares. Upon any exercise, vesting, or payment of any Award
or, if required under the Code, upon the disposition 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 422 of the Code, the
Company shall have the right at its option to (i) require the Participant (or
Personal Representative or Beneficiary, as the case may be) to pay or provide
for payment of the amount of any taxes which the Company may be required to
withhold with respect to such Award event or payment or (ii) deduct from any
amount payable in cash the amount of any taxes which the Company may be required
to withhold with respect to such cash payment. In any case where a tax is
required to be withheld in connection with the delivery of shares of Common
Stock under this Plan, the Committee may in its sole discretion grant (either at
the time of the Award or thereafter) to the Participant the right to elect,
pursuant to such rules and subject to such conditions as the Committee may
establish, to have the Corporation reduce the number of shares to be delivered
by (or otherwise reacquire) the appropriate number of shares valued at their
then Fair Market Value, to satisfy such withholding obligation.
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(b) Tax Loans. The Company may, in its discretion, authorize a loan to an
Eligible Employee in the amount of any taxes which the Company may be required
to withhold with respect to shares of Common Stock received (or disposed of, as
the case may be) pursuant to a transaction described in subsection (a) above.
Such a loan shall be for a term, at a rate of interest and pursuant to such
other terms and conditions as the Company, under applicable law may establish
and such loan need not comply with the provisions of Section 1.8.
6.6 Plan Amendment, Termination and Suspension.
(a) Board Authorization. The Board may, at any time, terminate or, from
time to time, amend, modify or suspend this Plan, in whole or in part. No Awards
may be granted during any suspension of this Plan or after termination of this
Plan, but the Committee shall retain jurisdiction as to Awards then outstanding
in accordance with the terms of this Plan.
(b) Shareholder Approval. If any amendment would (i) materially increase
the benefits accruing to Participants under this Plan, (ii) increase the
aggregate number of securities that may be issued under this Plan, or (iii)
materially modify the requirements as to eligibility for participation in this
Plan, then to the extent then required by Rule 16b-3 to secure benefits
thereunder or to avoid liability under Section 16 of the Exchange Act (and Rules
thereunder) or required under Section 425 of the Code or any other applicable
law, or deemed necessary or advisable by the Board, such amendment shall be
subject to shareholder approval.
(c) Amendments to Awards. Without limiting any other express authority of
the Committee under but subject to the express limits of this Plan, the
Committee by agreement or resolution may waive conditions of or limitations on
Awards to Eligible Employees that the Committee in the prior exercise of its
discretion has imposed, without the consent of a Participant, and may make other
changes to the terms and conditions of Awards that do not affect in any manner
materially adverse to the Participant, his or her rights and benefits under an
Award. Notwithstanding anything else contained herein to the contrary, the
Committee shall not, without prior shareholder approval, (i) authorize the
amendment of outstanding Options or Stock Appreciation Rights to reduce the
exercise or base price, as applicable, except as contemplated by Section 6.2(a),
or (ii) cancel and replace outstanding Options or Stock Appreciation Rights with
similar Awards having an exercise or base price which is lower, except as
contemplated by Section 6.2(a).
(d) Limitations on Amendments to Plan and Awards. No amendment, suspension
or termination of the Plan or change of or affecting any outstanding Award
shall, without written consent of the Participant, affect in any manner
materially adverse to the Participant any rights or benefits of the Participant
or obligations of the Corporation under any Award granted under this Plan prior
to the effective date of such change. Changes contemplated by Section 6.2 shall
not be deemed to constitute changes or amendments for purposes of this Section
6.6.
6.7 Privileges of Stock Ownership.
Except as otherwise expressly authorized by the Committee or this Plan, a
Participant shall not be entitled to any privilege of stock ownership as to any
shares of Common Stock not actually delivered to and held of record by him or
her. No adjustment will be made for dividends or other rights as a shareholder
for which a record date is prior to such date of delivery.
6.8 Effective Date of the Plan.
This Plan shall be effective as of April 12, 1995, the date of Board
approval, subject to shareholder approval within 12 months thereafter.
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<PAGE> 40
6.9 Governing Law/Construction/Severability.
(a) Choice of Law. This Plan, the Awards, all documents evidencing Awards
and all other related documents shall be governed by, and construed in
accordance with the laws of the State of California.
(b) Severability. 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 in effect.
(c) Plan Construction.
(1) Rule 16b-3. It is the intent of the Corporation that this Plan
and Awards hereunder satisfy and be interpreted in a manner that in the
case of Participants who are or may be subject to Section 16 of the
Exchange Act satisfies the applicable requirements of Rule 16b-3 so that
such persons (unless they otherwise agree) will be entitled to the benefits
of Rule 16b-3 or other exemptive rules under Section 16 of the Exchange Act
and will not be subjected to avoidable liability thereunder. If any
provision of this Plan or of any Award would otherwise frustrate or
conflict with the intent expressed above, that provision to the extent
possible shall be interpreted and deemed amended so as to avoid such
conflict, but to the extent of any remaining irreconcilable conflict with
such intent as to such persons in the circumstances, such provision shall
be disregarded.
(2) Section 162(m). It is the further intent of the Company that
Options or Stock Appreciation Rights with an exercise or base price not
less than Fair Market Value on the date of grant shall qualify as
performance-based compensation under Section 162(m) of the Code, and this
Plan shall be interpreted consistent with such intent.
(d) Limitations Prior to Expiration of Rule 16b-3 Transition
Period. Notwithstanding any other provision of this Plan, any Award granted to
a Section 16 Person prior to September 1, 1995 (or any other date at which the
transition period for purposes of new Rule 16b-3, as to this Plan, expires) is
subject to the following additional limitations:
(1) the Award may provide for the issuance of shares of Common Stock
as a stock bonus for no consideration other than services rendered; and
(2) in the event of an Award under which shares of Common Stock are or
in the future may be issued for any other type of consideration, the amount
of such consideration either (a) shall be equal to the minimum amount (such
as the par value of such shares) required to be received by the Corporation
to comply with applicable state law, or (b) shall be equal to or greater
than 50% of the Fair Market Value of the shares of Common Stock on the date
of the Award; provided that in the case of Restricted Stock Awards, the
amount shall equal the minimum lawful amount (but not more than 10% of the
market value of the stock subject to the Award on the Award Date) and any
right to purchase the Restricted Stock must be exercised within 60 days of
the Award Date.
6.10 Captions.
Captions and headings are given to the sections and subsections of this
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
6.11 Non-Exclusivity of Plan.
Nothing in this Plan shall limit or be deemed to limit the authority of the
Board or the Committee to grant awards or authorize any other compensation, with
or without reference to the Common Stock, under any other plan or authority.
A-13
<PAGE> 41
7. DEFINITIONS.
7.1 Definitions.
(a) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock Award, or Performance Share Award under this Plan.
(b) "Award Agreement" shall mean any writing setting forth the terms of an
Award that has been authorized by the Committee.
(c) "Award Date" shall mean the date upon which the Committee took the
action granting an Award or such later date as the Committee designates as the
Award Date at the time of the Award.
(d) "Beneficiary" shall mean the person, persons, trust or trusts
designated by a Participant or, in the absence of a designation, entitled by
will or the laws of descent and distribution, to receive the benefits specified
in the Award Agreement and under this Plan in the event of a Participant's
death, and shall mean the Participant's executor or administrator if no other
Beneficiary is designated and able to act under the circumstances.
(e) "Board" shall mean the Board of Directors of the Corporation.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(g) "Commission" shall mean the Securities and Exchange Commission.
(h) "Committee" shall mean a committee appointed by the Board to administer
this Plan, which committee shall be comprised only of three (or, effective
September 1, 1995, or any other date at which the transition period for purposes
of new Rule 16b-3, as to this Plan, expires, two) or more directors or such
greater number of directors as may be required under applicable law, each of
whom, during such time as one or more Participants may be subject to Section 16
of the Exchange Act and/or Section 162(m) of the Code, shall be Disinterested
and/or an "outside director" (as such term is defined under Section 162(m) of
the Code and regulations issued thereunder).
(i) "Common Stock" shall mean the Common Stock of the Corporation and such
other securities or property as may become the subject of Awards, or become
subject to Awards, pursuant to an adjustment made under Section 6.2 of this
Plan.
(j) "Company" shall mean, collectively, the Corporation and its
Subsidiaries.
(k) "Corporation" shall mean Furon Company, a California corporation, and
its successors.
(l) "Disinterested" shall mean disinterested within the meaning of any
applicable regulatory requirements, including Rule 16b-3.
(m) "Eligible Employee" shall mean an officer (whether or not a director)
or key employee of the Company.
(n) "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
(o) "EVA" shall have the meaning set forth in the Corporation's Economic
Value Added (EVA) Incentive Compensation Plan.
(p) "Event" shall mean any of the following:
(1) Approval by the shareholders of the Corporation of the dissolution
or liquidation of the Corporation;
(2) Approval by the shareholders of the Corporation of an agreement to
merge or consolidate, or otherwise reorganize, with or into one or more
entities that 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;
A-14
<PAGE> 42
(3) 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
(4) 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 (i) an "Acquiring Person" as
defined in the Corporation's Rights Agreement dated as of March 21,
1989, as amended, or (ii) 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 Exchange Act 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 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) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(r) "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 price for the stock
on such date, as furnished by the NASD or a similar organization; or (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 value
as established by the Committee at such time for purposes of this Plan.
(s) "Fiscal Year" shall mean the fiscal year of the Corporation.
(t) "Incentive Stock Option" shall mean an Option which is designated as an
incentive stock option within the meaning of Section 422 of the Code, the award
of which contains such provisions (including but not limited to the receipt of
shareholder approval of this Plan, if the award is made prior to such approval)
and is made under such circumstances and to such persons as may be necessary to
comply with that section.
(u) "Non-Employee Director" shall mean a member of the Board of Directors
of the Corporation who is not an officer or employee of the Company.
(v) "Nonqualified Stock Option" shall mean an Option that is designated as
a Nonqualified Stock Option and shall include any Option intended as an
Incentive Stock Option that fails to meet the applicable legal requirements
thereof. Any Option granted hereunder that is not designated as
A-15
<PAGE> 43
an incentive stock option shall be deemed to be designated a nonqualified stock
option under this Plan and not an incentive stock option under the Code.
(w) "Option" shall mean an option to purchase Common Stock granted under
this Plan. The Committee shall designate any Option granted to an Eligible
Employee as a Nonqualified Stock Option or an Incentive Stock Option.
(x) "Participant" shall mean an Eligible Employee who has been granted an
Award under this Plan.
(y) "Performance Share Award" shall mean an award of shares of Common Stock
made in accordance with Section 5.
(aa) "Personal Representative" shall mean the person or persons who, upon
the Total 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 or receive benefits under this Plan and who shall have
become the legal representative of the Participant.
(bb) "Plan" shall mean this 1995 Stock Incentive Plan.
(cc) "QDRO" shall mean a qualified domestic relations order as defined in
Section 414(p) of the Code or Title I, Section 206(d)(3) of ERISA (to the same
extent as if this Plan were subject thereto), or the applicable rules
thereunder.
(dd) "Restricted Stock" shall mean shares of Common Stock awarded to a
Participant under this Plan, subject to payment of such consideration, if any,
and such conditions on vesting and such transfer and other restrictions as are
established in or pursuant to this Plan, for so long as such shares remain
unvested under the terms of the applicable Award Agreement.
(ee) "Restricted Stock Award" shall mean an award of Restricted Stock made
pursuant to Section 4.
(ff) "Retirement" shall mean termination of a Participant's employment with
the Company by reason of retirement on or following the Participant's 60th
birthday and such other terminations of employment as the Committee by rule may
include.
(gg) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the Commission
pursuant to the Exchange Act, as amended from time to time, but subject to any
applicable transition rules.
(hh) "Section 16 Person" shall mean a person subject to Section 16(a) of
the Exchange Act.
(ii) "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, the aggregate amount or value of which is determined by reference to a
change in the Fair Market Value of the Common Stock that is authorized under
this Plan.
(jj) "Subsidiary" shall mean any corporation or other entity a majority of
whose outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Corporation.
(kk) "Total Disability" shall mean, in the case of Incentive Stock Options,
a "permanent and total disability" within the meaning of Section 22(e)(3) of the
Code and, in the case of all other Awards, such other disabilities, infirmities,
afflictions or conditions as the Committee by rule may include.
A-16
<PAGE> 44
- -------------------------------------------------------------------------------
[ ]
1. ELECTION OF DIRECTORS *FOR all nominees
listed below /x/
WITHHOLD AUTHORITY to vote *EXCEPTIONS
for all nominees listed below /x/ /x/
Nominees Class II: Cochrane Chase, H. David Bright and William C. Shepherd
*(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "For" and "Exceptions" boxes and write that nominee's name in the
space provided below.)
Exceptions _______________________________________________________________
2. Proposal for approval of the Furon Company 1995 Stock Incentive Plan.
FOR /x/ AGAINST /x/ ABSTAIN /x/
3. Proposal for ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending February 3, 1996.
FOR /x/ AGAINST /x/ ABSTAIN /x/
4. In accordance with the discretion of the proxy holders, to act upon such
other matters as may properly come before the meeting and at any adjournment
thereof.
Please check box /x/ if you plan to attend the Annual Meeting.
Address Change and/or Comments /x/
Dated __________________________________, 1995
______________________________________________
______________________________________________
Signature or Signatures of Shareholders
(Your signature should conform to your name
as printed hereon. Co-owners should all sign.)
Votes must be indicated (x) in Black or Blue Ink. /x/
Please Sign, Date and Return This Card Promptly Using the Enclosed Envelope.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FURON COMPANY
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints J. Michael Hagan and Donald D. Bradley, and each
of them, proxies with full power of substitution, to vote all shares of Common
Stock of Furon Company (the "Company") held of record by the undersigned as of
April 17, 1995, the record date with respect to this solicitation, at the
Annual Meeting of Shareholders of the Company to be held at The Center Club,
650 Town Center Drive, Costa Mesa, California on Tuesday, June 6, 1995, at
10:30 a.m., local time, and at any adjournment thereof, upon the matters set
forth on the reverse side hereof, as more fully described in the accompanying
proxy statement.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSALS (1), (2) AND (3) ON THE REVERSE SIDE HEREOF.
(Continued and to be signed on reverse side)
FURON COMPANY
P.O. BOX 11987
NEW YORK, N.Y. 10203-0987
- -------------------------------------------------------------------------------
<PAGE> 45
- -------------------------------------------------------------------------------
[ ]
1. ELECTION OF DIRECTORS *FOR all nominees
listed below /x/
WITHHOLD AUTHORITY to vote *EXCEPTIONS
for all nominees listed below /x/ /x/
Nominees Class II: Cochrane Chase, H. David Bright and William C. Shepherd
*(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "For" and "Exceptions" boxes and write that nominee's name in the
space provided below.)
Exceptions _______________________________________________________________
2. Proposal for approval of the Furon Company 1995 Stock Incentive Plan.
FOR /x/ AGAINST /x/ ABSTAIN /x/
3. Proposal for ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending February 3, 1996.
FOR /x/ AGAINST /x/ ABSTAIN /x/
Address Change and/or Comments /x/
Dated __________________________________, 1995
______________________________________________
Signature
Votes must be indicated (x) in Black or Blue Ink. /x/
Please Sign, Date and Return This Card Promptly Using the Enclosed Envelope.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CONFIDENTIAL VOTING INSTRUCTIONS
TO: SOCIETY NATIONAL BANK, TRUSTEE ("TRUSTEE") UNDER THE
EMPLOYEE STOCK OWNERSHIP PLAN ("PLAN") OF FURON COMPANY ("COMPANY")
The undersigned, as a Participant in the Plan, is entitled to direct the
Trustee as to the voting of all shares of the Company's Common Stock allocated
to my account under the Plan as of April 17, 1995, the record date for the
Company's Annual Meeting of Shareholders to be held on June 6, 1995 ("Annual
Meeting"), as well as the portion of the unallocated shares of the Company's
Common Stock under the Plan, and the shares allocated to Participants for which
the Trustee does not receive timely and proper directions, as to which I am
entitled under the Plan to direct the Trustee as to the voting thereof
(collectively, the "Shares"). The undersigned hereby directs the Trustee to
vote (in person or by proxy) the Shares at the Annual Meeting and any
adjournment thereof as indicated on the reverse side hereof.
PLEASE SIGN AND DATE THIS INSTRUCTION CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE. THE PROPERLY EXECUTED INSTRUCTION CARD MUST BE DELIVERED TO
THE ADDRESS SPECIFIED BELOW BY THE CLOSE OF BUSINESS ON JUNE 2, 1995 TO ENABLE
THE TRUSTEE TO VOTE THE SHARES IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
PARTICIPANT. IF THIS INSTRUCTION CARD IS PROPERLY EXECUTED AND TIMELY DELIVERED
BUT NO DIRECTION IS GIVEN, THE SHARES WILL BE VOTED FOR PROPOSALS (1), (2) AND
(3) ON THE REVERSE SIDE HEREOF.
(Continued and to be signed on reverse side)
FURON COMPANY
P.O. BOX 11987
NEW YORK, N.Y. 10203-0987
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<PAGE> 46
- -------------------------------------------------------------------------------
[ ]
1. ELECTION OF DIRECTORS *FOR all nominees
listed below /x/
WITHHOLD AUTHORITY to vote *EXCEPTIONS
for all nominees listed below /x/ /x/
Nominees Class II: Cochrane Chase, H. David Bright and William C. Shepherd
*(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "For" and "Exceptions" boxes and write that nominee's name in the
space provided below.)
Exceptions _______________________________________________________________
2. Proposal for approval of the Furon Company 1995 Stock Incentive Plan.
FOR /x/ AGAINST /x/ ABSTAIN /x/
3. Proposal for ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending February 3, 1996.
FOR /x/ AGAINST /x/ ABSTAIN /x/
4. In accordance with the discretion of the proxy holders, to act upon such
other matters as may properly come before the meeting and at any adjournment
thereof.
Address Change and/or Comments /x/
Dated __________________________________, 1995
______________________________________________
Signature
Votes must be indicated (x) in Black or Blue Ink. /x/
Please Sign, Date and Return This Card Promptly Using the Enclosed Envelope.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CONFIDENTIAL VOTING INSTRUCTIONS
TO: FIDELITY MANAGEMENT TRUST COMPANY, AS TRUSTEE UNDER THE
FURON COMPANY EMPLOYEES' PROFIT-SHARING-RETIREMENT PLAN
Under the provisions of the trust relating to the Furon Company Employees'
Profit-Sharing-Retirement Plan, Fidelity Management Trust Company (FMT Co.) as
Trustee, is required to request your confidential instructions as to how your
proportionate interest in the shares of Furon Company Common Stock held under
the Plan is to be voted at the Annual Meeting of Shareholders to be held on
Tuesday, June 6, 1995, and at any adjournment thereof. Your instructions to FMT
Co. will not be divulged or revealed to anyone at Furon Company. You may
indicate your instructions to FMT Co. by completing the reverse side hereof,
which is a reprint of the proxy card sent to all shareholders.
THIS CARD WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS CARD WILL BE VOTED
FOR PROPOSALS (1), (2) AND (3) ON THE REVERSE SIDE HEREOF.
(Continued and to be signed on reverse side)
FURON COMPANY
P.O. BOX 11987
NEW YORK, N.Y. 10203-0987
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<PAGE> 47
[LOGO]
May 1, 1995
Re: Voting Cards for Annual
Meeting of Shareholders
-----------------------
Dear Plan Participant:
Enclosed are Furon Company's proxy solicitation materials for this
year's Annual Meeting of Shareholders. Since you fall within two or more of
the categories listed below, we need to request a separate voting card for each
category that applies to you. In an effort to minimize costs and avoid
duplication in connection with the Annual Meeting, we have enclosed separate
voting cards for each of your categories rather than send you multiple sets of
materials. (For example, if you fall within category nos. 1 and 3, two cards
will be enclosed--a white proxy card and a buff confidential voting
instructions card. If categories 2 and 3 apply to you, two confidential voting
instructions cards will be enclosed--one light yellow and one buff. And so
on.)
The possible categories and related voting cards are as follows:
<TABLE>
<CAPTION>
Voting Card
------------------------
Category Type Color
-------- ---- ------
<S> <C> <C> <C>
1. Record Holder of Furon Proxy White
Common Stock as of
April 17, 1995.
2. Participant in the Furon Confidential Light
Company Employees' Voting Yellow
Profit-Sharing-Retirement Instructions
Plan (401(k) Plan) with
All or a Portion
of Your Account Invested
in Furon Common Stock
as of April 17, 1995.
3. Participant in the Furon Confidential Buff
Company Employee Stock Voting
Ownership Plan (ESOP) as of Instructions
April 17, 1995.
</TABLE>
In order to assure that all of the shares which you are entitled to
vote or direct the vote as of April 17, 1995 (the record date for the Annual
Meeting) are voted at the meeting, please complete, sign and date EACH CARD
enclosed in accordance with the instructions printed thereon, and promptly
return ALL OF THE CARDS in the enclosed envelope to The Bank of New York, who
will tabulate the votes on a confidential basis.
Sincerely,
/s/ DONALD D. BRADLEY
---------------------
Donald D. Bradley
General Counsel
and Secretary
