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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended September 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
For the transition period from
___________ to __________
Commission file number 0-20686
UNIROYAL TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 65-0341868
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two North Tamiami Trail, Suite 900
Sarasota, Florida 34236-5568
(Address of principal executive offices) (Zip Code)
(941) 366-2100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (29,405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
As of November 29, 1996, the aggregate market value of the voting stock held by
non-affiliates of the registrant (assuming for this purpose that all directors
and officers of the registrant and all holders of 5% or more of the common stock
of the registrant are affiliates) was approximately $19,390,000 based on the
closing price for the stock on November 29, 1996. The foregoing aggregate market
value is based on issuance of only 98% of the shares authorized for initial
issuance; the registrant believes that the foregoing aggregate market value
would be approximately $20,062,000 if all 10,000,000 shares authorized for
initial issuance had been issued.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
As of November 29, 1996, 13,266,708 shares of the registrant's common stock were
outstanding.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No _____
DOCUMENTS INCORPORATED BY REFERENCE
Parts III - Portions of the registrant's definitive proxy statement to be issued
in connection with the registrant's annual meeting of stockholders to be held in
1997.
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ii
TABLE OF CONTENTS
PART I
ITEM 1 BUSINESS.................................................................
GENERAL....................................................................
CORPORATE DEVELOPMENTS...................................................
Ensolite Sale.........................................................
Acquisition of South Bend Facility....................................
Revolving Credit Agreement............................................
SAP Business Information System ......................................
Settlement of Uniroyal Retiree Benefits Litigation ...................
Introduction of New Coated Fabrics Product ...........................
Shareholders' Rights Plan.............................................
Redemption of Series B Preferred Stock................................
Disposition of Port Clinton, Ohio Automotive Operation................
BUSINESS SEGMENTS..........................................................
High Performance Plastics Segment.....................................
Coated Fabrics Segment................................................
Specialty Adhesives Segment..........................................
EMPLOYEES..................................................................
TRADEMARKS AND PATENTS.....................................................
RESEARCH AND DEVELOPMENT...................................................
BACKLOG....................................................................
WORKING CAPITAL ITEMS......................................................
ENVIRONMENTAL MATTERS......................................................
HISTORY OF THE COMPANY.....................................................
Predecessor Companies.................................................
Reorganization........................................................
ITEM 2 PROPERTIES...............................................................
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ITEM 3 LEGAL PROCEEDINGS......................................................
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....................
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS....................................................
ITEM 6 SELECTED FINANCIAL DATA................................................
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..................................
RESULTS OF OPERATIONS............................................
Comparison of Fiscal 1996 with Fiscal 1995 .................
Comparison of Fiscal 1995 with Fiscal 1994 .................
Liquidity and Capital Resources ............................
Effects of Inflation .......................................
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..............................
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE......................................
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT......................
ITEM 11 EXECUTIVE COMPENSATION..................................................
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT..............................................................
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..........................
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.........
SIGNATURES......................................................................
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE..................
EXHIBIT INDEX...................................................................
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Item 1. Business
General
Uniroyal Technology Corporation (the "Company") is a leader in
the development, manufacture and sale of a broad range of materials
employing plastics and specialty chemicals technologies used in the
production of a wide range of consumer, commercial and industrial
products. Its products, many of which are based on proprietary
technology, include thermoplastic sheet for use in the manufacture of
seating, interior paneling and other applications in the
transportation, recreational, agricultural and industrial vehicle and
computer manufacturing industries; acrylic sheet for use in the
manufacture of aircraft canopies, cabin windows and windshields, sun
tanning beds and bullet resistant enclosures; acrylic rods and tubes
used in the manufacture of orthopedic devices and hard contact lenses;
a wide selection of plastic vinyl coated fabrics for use in automobile
and furniture manufacturing; and liquid adhesives and sealants for use
in the commercial roofing industry and in the manufacture of furniture,
truck trailers and recreational vehicles. The Company's technologies
allow it to incorporate into its specialized materials, such as
thermoplastic and acrylic sheets, performance characteristics such as
fire retardancy, static dissipation, weatherability, optical clarity,
high strength to weight ratio, light filtration capability and others
required in the specialty markets on which it focuses. The Company is a
leading supplier in such markets due to its ability to provide
materials with such varying performance characteristics, to customize
such materials and to provide technical and customer support in
connection with the use of its products in manufacturing.
The manufacturing operations of the Company are conducted at
nine sites located in Indiana, Connecticut, New Jersey, California,
Georgia, Ohio and Wisconsin, through three business segments: High
Performance Plastics, Coated Fabrics and Specialty Adhesives. The High
Performance Plastics Segment of the Company's business is comprised of
two divisions: Royalite, which manufactures specialty and general
purpose thermoplastic sheet, injection molding resins, color
concentrates and extruded profiles, and Polycast Technology
("Polycast"), which manufactures acrylic sheet for the aerospace,
specialty and general purpose markets as well as acrylic rods and
tubes. The Coated Fabrics Segment manufactures the Company's line of
vinyl coated fabrics and vinyl laminated composites, and the Specialty
Adhesives Segment (formerly, the Specialty Foams and Adhesives
Segment), manufactures liquid adhesives and sealants.
The Company's Fiscal 1996 net sales were approximately $209.3
million. Approximate net sales for each of the Company's three business
segments during such period were as follows: High Performance Plastics
- $115.1 million, Coated Fabrics - $58.7 million, and Specialty
Adhesives - $35.5 million. For certain financial information with
respect to the Company's business segments, see "Note 16 to Financial
Statements." The Company is the successor to an affiliated group of
reorganized entities from which the Company acquired all of its
businesses in 1992 pursuant to a plan of reorganization adopted on
September 27, 1992. See "- History of the Company."
Corporate Developments
The following are certain corporate developments which
occurred in Fiscal 1996. The descriptions of such developments should
be read in conjunction with the other parts of this Form 10-K and with
the Financial Statements and Notes to Financial Statements and other
financial information which form a part hereof.
Ensolite Sale
On June 10, 1996, the Company sold substantially all of the
assets used in the Specialty Foams Division of its Specialty Adhesives
Segment to Rubatex Corporation ("Rubatex") for a purchase price of
$25.0 million. Pursuant to its agreement with Rubatex, the Company will
continue manufacturing specialty foam products for Rubatex until not
later than July 31, 1997. See "- Business Segments - Specialty
Adhesives" and "Note 3 to Financial Statements."
In connection with the Ensolite Sale, the Company has retained
certain liabilities related to its Specialty Foams Division, including
liabilities for employee severance, facility clean-up and environmental
remediation costs. See "- Acquisition of South Bend Facility," "-
Business Segments - Specialty Adhesives," "Environmental Matters" and
"Note 3 to Financial Statements."
Acquisition of South Bend Facility
The Company acquired on July 17, 1996 a manufacturing facility
in South Bend, Indiana consisting of approximately 240,000 square feet
for approximately $1.8 million. The manufacturing operations of the
Specialty Adhesives Segment, as well as certain other Company
operations, will relocate to the South Bend, Indiana facility during
the first half of Fiscal 1997. During Fiscal 1996 and Fiscal 1995, the
Company incurred approximately $900,000 and $1.3 million, respectively,
in excess facility costs associated with the operation of the
Mishawaka, Indiana facility, the current site of the manufacturing
operations of the Company's Specialty Adhesives Segment. See "-
Business Segments - Specialty Adhesives" and "- Environmental Matters."
The Company expects significant savings in facility expenditures in
future periods from the elimination of the excess facility costs
related to the operation of the Mishawaka, Indiana facility and reduced
operating expenses resulting from operating efficiencies of the new
plant, including reduced energy costs, property taxes and personnel
requirements. Approximately $1.0 million of the purchase price for the
South Bend, Indiana Facility has been placed in escrow and will be
drawn upon to pay for the costs of environmental remediation at such
facility. The Company expects to incur this approximately $1.0 million
in environmental remediation costs over a five to seven year period in
connection with such facility. The Company has reserved $4.3 million
for severance, environmental remediation and other relocation costs
associated with the closure of the Mishawaka, Indiana facility. See "-
Business Segments - Specialty Adhesives" and "- Environmental Matters."
Revolving Credit Agreement
On June 10, 1996, the Company entered into a new revolving
credit agreement with The CIT Group/Business Credit, Inc., pursuant to
which the Company may, subject to certain conditions, borrow up to
$25.0 million, but generally in no event more than an amount equal to
the lesser of 85 percent (85%) of its trade accounts receivable and
seventy-five percent (75%) of certain accounts of the Company,
including, but not limited to, its trade accounts receivable. Interest
under the agreement is payable, at the Company's election, either at
the rate of a specified prime rate plus a margin of one-half of one
percent (.5%) per annum, or the applicable London Interbank Offer Rate
plus a margin of two and three-quarters percent (2.75%). All of the
Company's trade accounts receivable are pledged to the lender as
collateral for this agreement. The Company believes that this agreement
provides it with borrowing conditions more beneficial to it than the
terms of the revolving credit agreement it previously had in place with
Heller Financial, Inc., as to aggregate borrowing availability,
interest rate and restrictions applicable to the Company's operations.
SAP Business Information System
In October 1996, the Company completed implementation of a new
business information system utilizing software developed by SAP
America, Inc. ("SAP"). The SAP system is expected to make the Company
more competitive and responsive to customer needs through the
integration of order entry, production, inventory control, shipping and
billing information and financial systems generally. The new system had
been under development at the Company since 1994 and has cost
approximately $4.7 million as of September 29, 1996.
Settlement of Uniroyal Retiree Benefits Litigation
The Company has reached an agreement in principle with
Uniroyal Retiree Benefits, Inc. ("URBI"), a non-profit corporation
unaffiliated with the Company which provides medical and life insurance
benefits to certain retired employees of the Predecessor Companies (as
hereinafter defined) and affiliates thereof and their dependents. See
"- History of the Company." Since 1994, URBI has contested the level of
funding to be provided to it by the Company under the terms of a
funding agreement that was part of the Plan of Reorganization of the
Predecessor Companies. See "Item 3. - Legal Proceedings." The proposed
settlement provides, among other things, for a compromise on the level
of funding to reflect URBI's current program needs. The Company
anticipates that the final documentation with respect to the settlement
should be completed in the near future, but no assurance can be given
to that effect.
Introduction of New Coated Fabrics Product
During Fiscal 1996, the Company commenced production of
significant amounts of a new line of coated fabric products, sales of
which had commenced in Fiscal 1995. Such products had been in
development since 1992. The material has been qualified for use in the
door panels for several General Motors Corporation ("GM") automobile
models. It accounted for approximately $6.0 million in sales in Fiscal
1996. In 1995, sales of this product were nominal. It has been the
Company's experience that product specifications developed for
particular automobile models are generally effective for a period of
three to four years. The Company thus has expectations that its new
product series will be usable in the door panels for the GM models in
which they are presently used for a like period, but no assurance
exists to such effect. Moreover, at the present time, the Company is
the only manufacturer that has satisfied the rigorous specifications
imposed by GM for materials for use in the manufacture of such door
panels. These product specifications require a material characterized
by light weight, deep grain patterns, softness, cohesion upon exposure
to heat and processability, among others. There can be no assurance,
however, that other suppliers will not in the future introduce products
which satisfy such requirements.
Redemption of Series B Preferred Stock
On December 16, 1996, the Company redeemed 15 shares of the
Company's Series B Preferred Stock held by the Pension Benefit Guaranty
Corporation for an aggregate redemption price of approximately $2.3
million.
Shareholder Rights Plan
On December 18, 1996, the Company's Board of Directors (the
"Board") declared a dividend distribution of one preferred shared
purchase right (a "Right") for each share of the Company's Common
Stock, par value $.01 per share ("Common Stock"), outstanding as of
December 30, 1996. Each Right entitles the holder to purchase from the
Company 1/100,000 of a share of participating preferred stock of the
Company for $17.00, subject to adjustment. Initially, the Rights are
attached to the Common Stock and are not represented by separate
certificates or exercisable until the earlier to occur of (i) ten days
after the public announcement (the date of such first public
announcement being the "Stock Acquisition Date") that a person or group
has acquired 15% or more of the Common Stock (other than the existing
15% owners who do not increase their ownership), or (ii) ten business
days (or such later date as may be determined by the Board) after the
commencement of a tender or exchange offer that would result in owning
an Acquiring Person 15% or more of the Common Stock, the earlier of
such dates being the "Distribution Date". If after the Distribution
Date a person shall become an Acquiring Person (other than pursuant to
certain offers approved by the Board) each holder of a Right (other
than the Acquiring Person and, in certain circumstances, his
transferees) will have the right to receive, upon exercise, Common
Stock (or, in certain circumstances, cash, property or other securities
of the Company) having a value equal to two times the purchase price of
the Right. In addition, if after a Stock Acquisition Date the Company
enters into certain business combinations, or 50% or more of the
Company's assets or earning power is sold or transferred, each holder
of a Right shall have the right to receive, upon exercise, Common Stock
of the acquiring company having a value equal to two times the purchase
price of the Right. The Board may, subject to certain limitations,
amend the Rights and may redeem all but not less than all of the Rights
for $0.001 per Right. The Rights have certain anti-take-over-effects.
The Rights will expire on December 18, 2006 unless earlier redeemed.
The Rights may cause substantial dilution to a person that
attempts to acquire the Company without the approval of the Board
unless the offer is conditioned on a substantial number of Rights being
acquired or on redemption of the Rights. The Rights, however, should
not affect offers for all outstanding shares of Common Stock at a fair
price and otherwise in the best interests of the Company and its
stockholders as determined by the Board.
Dispostion of Port Clinton, Ohio Automotive Operation
Due to the operating losses experienced by the Port Clinton,
Ohio operation of the Coated Fabrics Segment during the past three
fiscal years, management of the Company has proposed to sell or close
that operation during Fiscal 1997.
Business Segments
High Performance Plastics Segment
The High Performance Plastics Segment of the Company's
business accounted for approximately $115.1 million (approximately 55
percent (55%)) of the Company's net sales in Fiscal 1996. It consists
of two divisions: the Royalite Division, which manufactures
thermoplastics products, and the Polycast Division, which manufactures
acrylic products.
The Royalite Division - Thermoplastic Products
General
The Company's Royalite Division is a leading manufacturer of
thermoplastic products. Thermoplastics are polymers, such as
acrylonitrile butadiene styrene and polyvinylchloride, made from the
polymerization of monomers, which can be reshaped after they have been
formed by the application of heat and are used in the manufacture of a
wide assortment of commercial and consumer products. The Division's
products include thermoplastic sheet, injection molding resins, color
concentrates and extruded profiles.
Thermoplastic sheet is manufactured by the Company from a
variety of polymers and chemical additives and is constructed either of
solid plastic, a core of inexpensive plastic covered with a thin layer
of high-quality thermoplastic or a base or substrate of plastic foam
surrounded by solid thermoplastic. It is sold to equipment
manufacturers, who incorporate the sheet into their product, custom
fabricators, who cut and form the sheet for specific applications and
supply finished components to equipment manufacturers, and
distributors, who resell raw sheet to equipment manufacturers or custom
fabricators. The Company manufactures two types of this sheet,
specialized sheet, which is made by varying the polymer and chemical
components of the sheet in order to achieve particular performance
characteristics, and general purpose sheet, which is used by
manufacturers for a variety of products not requiring particular
performance characteristics.
Specialty thermoplastic sheet is sold by the Royalite Division
in a number of niche markets, depending upon the performance
characteristics of the sheet. The following is a chart setting forth
the application of specialized sheet with particular performance
characteristics:
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Performance Characteristics Principal Uses
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flame and smoke retardancy mass transportation vehicle
seating and interior panels,
aircraft interior trim and
computer and other electronic
equipment component housings
static dissipation and
conductivity computer chip and hard drive
carriers
weatherability/temperature
resistance recreational camper tops,
interior trim for agricultural
and other off road vehicles and
exterior boat trim
buoyant, hydrodynamic and/or
high strength-to-weight ratio canoes, kayaks, other watersport
craft and amusement park
vehicles
The Company believes it has a substantial share of the markets
for specialty thermoplastic sheet due to its ability to manufacture
sheet with the wide variety of performance characteristics set forth
above, and which are, in many cases, customized to meet its customers'
exact specifications. Net sales of specialty thermoplastic sheet
accounted for approximately 65 percent (65%) of total net sales of
thermoplastic sheet by the Royalite Division during Fiscal 1996.
The Company maintains a scientific and technical staff and the
necessary production capabilities to design specialty thermoplastic
sheet with performance characteristics to suit its customers'
specifications. See "- Research and Development." In addition, the
Company has advanced coloring technology, including a database of up to
2,500 color formulas developed by the Royalite Division, which enables
it to color its thermoplastic sheet to match customer specifications
precisely and consistently. The Company also has the ability to
texturize its sheet with what it believes to be one of the most
extensive selections of embossing grains available in the market.
By contrast to specialty thermoplastic sheet, general purpose
thermoplastic sheet is used in the manufacture of numerous consumer and
industrial products, such as luggage, musical instrument and equipment
cases, tote boxes and vehicle mudflaps, which do not require that the
thermoplastic material used in their manufacture possess any of the
performance characteristics which distinguish specialty sheet and which
are referred to above. The market for general purpose thermoplastic
sheet is significantly broader than the market for specialty
thermoplastic sheet due to the almost limitless uses to which such
sheet may be put in the manufacture of products. Such market is
generally characterized by intense competition, high volume and low
margins. The Company does not have a significant share of this market.
Sales of general purpose sheet during Fiscal 1996 accounted for
approximately 35 percent (35%) of total net sales of the Royalite
Division.
In Fiscal 1995, the Royalite Division introduced two new
product lines: injection molding resins, which are used in the
manufacture of thermoplastic products through injection molding, and
color concentrates, which are used to color thermoplastic sheet
materials and injection molding products during the manufacturing
process.
The Company introduced these product lines as part of its
"life cycle sourcing" strategy implemented in 1995, aimed at satisfying
a customer's needs for thermoplastic material with respect to a
particular product from the product's development stage through
maturity, including matching products to production methods used at
different production volume levels. When a customer is in the initial
stages of developing a product requiring a thermoplastic component, the
Company employs its technological capabilities and scientific expertise
to design and produce customized thermoplastic sheet, which the
customer then generally "thermoforms" through the application of heat
into particular applications to be incorporated into its final product.
Due to its low cost, "thermoforming" is used in connection with the
manufacture of thermoplastic components not required in large volume
manufacturing runs. When a customer's unit volume of a product attains
those levels at which it becomes economical for the customer to
manufacture the thermoplastic application by injection molding, a more
capital intensive but efficient process when compared to thermoforming,
the Company, which does not compete in the injection molding
manufacturing industry, can continue to supply the customer with the
polymer resins and color concentrates used in the injection molding
process, which will achieve the same properties and color as when the
application was produced through thermoforming. By using the Company's
injection molding resins and color concentrates, which have been
customized to meet the customer's particular specifications, the
customer avoids any disruption in its production that may result from
having to qualify a thermoplastic material from a new manufacturer.
Although injection molding resins and color concentrates
constitute less than five percent (5%) of net sales of the Royalite
Division for Fiscal 1996, the Company believes that significant
opportunities for growth exist in this market and that such product
lines will enhance the division's specialty sheet lines by assuring
customers that the Company will be able to meet their specialized
thermoplastics needs throughout every stage of a product's life cycle.
In Fiscal 1995, the Royalite Division combined its
technological capabilities with the Polycast Division's expertise in
extrusion production methods (see " - High Performance Plastics Segment
- Polycast Division") to commence manufacturing an extruded profile
line of products which are used for applications requiring flexibility
and resilience, such as dock/boat bumpers and gaskets which are sold to
the Polycast Division for use in the manufacture of acrylic sheet. This
product line was implemented primarily to make use of the Company's
available production capacity at the division's Warsaw, Indiana
facility. Even though sales of extruded profiles do not represent a
significant part of the Royalite Division's business, the Company
believes that significant opportunities for growth exist in this
market.
Competition
The market for thermoplastic sheet in the United States is
highly competitive, with companies competing primarily on the basis of
product specifications, price, customer service and technical support.
The Company competes in this market principally by maintaining or
increasing its market share in the specialty thermoplastic niche
markets described above. See "- Royalite Division - General." The
Company believes that it competes effectively with other producers in
such markets by providing strong customer service through technical
support, state-of-the-art color technology and new product development.
The Division maintains highly knowledgeable technical representatives
who work directly with customers to ensure that the Division's
materials used in the manufacture of a customer's product conform to
the customer's specifications and work efficiently with the customers'
manufacturing processes. In addition, the Company has polymer expertise
and custom compounding capabilities to customize the performance
characteristics and color of its thermoplastic products, whereas many
of its competitors do not have such capability. Its technological
capabilities have also permitted the Company to develop successful new
products which enhance its competitiveness in this segment. For
example, recently, the Royalite Division introduced graffiti-resistant
seating material, developed for the mass transportation market. The
addition of injection molding resins and color concentrates and
implementation of life cycle sourcing have enhanced the Royalite
Division's competitiveness by assuring customers that the Company will
be able to meet their thermoplastics needs throughout every stage of a
product's life.
The Company is also able to compete effectively with respect
to price due in part to its low production costs and savings resulting
from its use of recycled material in the manufacture of thermoplastic
sheet. See "Royalite Division - Raw Materials." The Company's ability
to internally produce and laminate a thin layer of high quality colored
thermoplastic film over a less costly substrate allows it to compete
favorably with most other specialty thermoplastic sheet manufacturers,
which use a single layer of relatively expensive colored plastic sheet
to produce the desired end product.
The Company's principal competitors in the flame and smoke
retardant thermoplastic product market are Kleerdex Company, GenCorp
Inc. and Spartech Corporation. Mitech Corp. is the Company's principal
competitor in the static control thermoplastic product market, and
Spartech Corporation and Primex Plastics Corp. are the Company's
principal competitors in the general purpose thermoplastic sheet
market. The Company's competitors have in the past increased their
market shares in the thermoplastic industry generally through
acquisitions.
Marketing
The Royalite Division's thermoplastic sheet products are
marketed under the ROYALITE(R) and SPECTRUM(R) brand names.
Thermoplastic sheet with specialized characteristics is also marketed
under individual brand names, such as ROYALSTAT(R) (thermoplastic sheet
designed to dissipate or conduct static electric charges), ROYALEX(R)
(multilayer thermoplastic sheet with a foam core and highly
weather-resistant layer on one or both sides, resulting in a high
strength-to-weight ratio, designed for recreational, marine and
sporting applications), ROYALTHOTIC(R) (thermoplastic sheet designed to
be thermoformed at low temperatures to permit orthopedic medical
practitioners to form individual patient orthopedic devices in their
offices).
The Royalite Division markets its thermoplastic products
primarily through a national sales force of approximately 14 sales
representatives, who are employees of the Company, and through
wholesale distributors to whom it supplies its products for resale to
fabricators and manufacturers. Representative customers of the Royalite
Division and representative end users of its products include: American
Seating Company, National Railroad Passenger Corp. (Amtrak),
Bombardier, Inc., Caterpillar, Inc., Curbell Plastics, a division of
Curbell, Inc., Commercial Plastics and Supplies Corp., General Motors
Corporation, Hewlett-Packard Company, Laird Plastics, Inc., McDonnell
Douglas Corporation, Sensormatic Electronics Corporation, Seagate
Technology, Inc. and the U.S. Navy. The Company has a broad customer
base for its thermoplastic products and it does not believe that it is
dependent upon any single customer or group of customers for sale of
its thermoplastic products. Pricing and terms offered to customers are
generally consistent with those found in the industry.
Manufacturing Facilities
The Company manufactures its thermoplastic products at three
wholly-owned facilities, the largest of which is located in Warsaw,
Indiana. The Company's other thermoplastic sheet manufacturing
facilities are located in Rome, Georgia and Redlands, California. See
"Item 2. Properties."
Raw Materials
The principal raw materials used by the Company in the
manufacture of thermoplastic sheet, injection molding resins, color
concentrates and extruded profiles are acrylonitrile butadiene styrene
("ABS") resins and polyethylene, polypropylene and polyvinylchloride
("PVC") resins and alloys of such resins. The Company has no long-term
purchasing agreements with any suppliers for such raw materials, other
than GE Plastics (a division of General Electric Company) from which
the Company acquires a substantial portion of its ABS resins. The
Company purchases PVC resins and other raw materials from a variety of
domestic and international suppliers. These products are all currently
readily available from a variety of suppliers.
The Company recycles scraps of thermoplastic material that
result from customers' forming sheet for their specific applications
for use in the manufacture of new sheet. Recycled material is generally
used by the Company to replace the raw materials that would otherwise
be required to manufacture specialized and general purpose
thermoplastic sheet. Recycled material is purchased from customers and
brokers and is significantly less expensive than new raw materials.
The Polycast Division - Acrylic Products
General
The Polycast Division manufactures high performance acrylic
sheet, rods and tubes which are sold principally to custom fabricators
and original equipment manufacturers, who heat and form the Polycast
product into shapes for specific applications, such as aircraft window
units, furniture components and orthopedic braces. The Division's
acrylic products have a unique combination of physical properties and
performance characteristics which are required by the manufacturers who
use them as a component of their products. For example, they weigh
considerably less than, but are superior in clarity and impact
resistance to, glass. They are thermoformable, remain stable under
sustained exposure to the elements and can be processed to transmit or
filter ultraviolet light, depending on customer requirements.
The Company manufactures acrylic sheet for three markets - the
aerospace market, which includes the commercial and military aerospace
industries, in which the Division's products are used for such
applications as aircraft cockpit canopies and cabin windows and
helicopter windshields; the specialty acrylic sheet market, which
includes a variety of niche markets in which the Division's products
are used in the manufacture of boat windshields, bullet-resistant
security enclosures for banks, convenience stores and other businesses,
basketball backboards, hockey rink protective barriers, furniture, sun
tanning beds, aquariums and atriums; and the general purpose market for
acrylic sheet, in which general purpose acrylic sheet is used for such
applications as store displays and signage, where specific performance
characteristics are not required. The Division's acrylic rods and tubes
are used for a variety of applications, including the manufacture of
lighting fixtures, furniture, medical instruments, orthopedic devices,
such as orthopedic braces, and lens materials used to replace defective
lenses of the eye in cataract surgery and certain types of hard contact
lenses.
The Polycast Division manufactures its acrylic products
through cell cast manufacturing, a process which enables it to
customize the performance characteristics of its acrylic aerospace
sheet, specialized sheet and rods and tubes, to meet the exact
specifications of its customers and to offer its products with a
broader range of physical characteristics than generally can be
achieved through other manufacturing processes, such as continuous
cast, extrusion and calender processes. For example, the Polycast
Division's scientific staff have used the cell cast process to develop
a specialized sheet which transmits rather than filters ultraviolet
rays for use in sun tanning beds and an aerospace sheet with
consistently high optical quality and exact color shading for use in
constructing aerospace transparencies such as aircraft and helicopter
window products. The Division can manufacture acrylic products in more
than 60 colors and acrylic sheet in widths ranging from 0.030 to 6.00
inches. Acrylic sheet manufactured by the cell cast process, which is
more labor intensive than continuous cast, extrusion or calender
processes, generally yields higher margins than acrylic sheet produced
by such other processes.
The Division markets its aerospace acrylic sheet in the
military and commercial aerospace industries, which require products
meeting precise specifications. The Division is one of a few acrylic
manufacturers in the United States qualified to produce acrylic sheet
meeting military manufacturing standards, specifications and
requirements ("MILSPEC"), a designation made by the U.S. Navy's Naval
Air Development Center which is a prerequisite for supplying the
military aerospace industry. The Division and the Predecessor Companies
have maintained this qualification since 1976. The Division's aerospace
acrylic sheet is also qualified by several commercial aerospace
manufacturers, including McDonnell-Douglas Corporation, Boeing Company,
Sikorsky Aircraft Corporation and Bell-Helicopter,Textron, Inc., which
include a supplier's products on their "qualified product lists" only
after such products have met MILSPEC requirements and passed the
manufacturer's additional and more stringent testing and approval
procedures. Any failure of the Division's aerospace acrylic products to
continue to meet required specifications under which they are provided
to an aerospace manufacturer could have a material adverse effect on
the Division.
The Division sells its specialty acrylic sheet in a wide
variety of niche markets, including to manufacturers of boat
windshields, bullet resistant enclosures and protective barriers for
athletic facilities, furniture and sun tanning beds and aquariums and
atriums. The Division markets its acrylic products to such industries
through customization of the performance and physical characteristics
of its specialty sheet to meet customer specifications.
Competition
The Division faces continuing competition from North American
producers and from certain foreign producers, particularly from Asian
and South American countries. Many of these competitors have greater
resources than the Company. These competitors primarily produce
standard sizes of general purpose acrylic sheet by continuous cast,
extrusion or calender processes. The Division concentrates on the
production of aerospace and specialty acrylic sheet, which in certain
cases has unique characteristics that cannot be obtained by such other
manufacturing processes. Net sales of aerospace and specialty acrylic
sheet accounted for approximately 63 percent (63%) of total net sales
by the Polycast Division.
The Company believes that the Division has a significant share
of the niche markets in which it sells its aerospace and specialty
acrylic sheet. See "- Polycast Division - General." The Division's
principal competitors in the specialty acrylic sheet market are ICI
Acrylics, Inc., a subsidiary of Imperial Chemicals Industries plc
("ICI"), AtoHaas Americas Inc. ("AtoHaas"), Cyro Industries, a division
of Cytec Industries, Inc. ("Cyro"), and Nordam, Inc. ("Nordam"). The
Division's principal competitors in the acrylic aerospace sheet market
are Swedlow, Inc., a subsidiary of Pilkington plc ("Pilkington"), Rohm
Darmstadt GmbH, and Cyro.
In order to compete with vertically integrated companies in
the aerospace acrylic sheet market, such as Pilkington and Nordam,
which manufacture such sheet as well as form it into finished aircraft
window products for sale to commercial aircraft manufacturers, the
Division entered into an agreement in 1995 with PPG Industries, Inc.
("PPG"), pursuant to which an affiliate of PPG in Italy uses acrylic
window blanks constructed of Polycast(R) aerospace acrylic sheet to
manufacture finished aircraft window systems for sale to the commercial
aerospace market. The Polycast(R) acrylic sheet is stretched to form
window blanks by Aerospace Composite Technologies Limited ("ACT") in
England pursuant to an agreement with the Company and then sold to PPG.
The purchase price paid by PPG for the acrylic blanks is based, in
part, on PPG's profits from sales of aircraft windows incorporating
such blanks. Both the agreement with PPG and the agreement with ACT
expire in 1998 but may be renewed for successive 12-month periods.
In the acrylic rod and tube market, the Division's competitors
are various small companies that typically produce only these products.
ICI, Cyro, and AtoHaas, which are North American producers of
acrylic sheet, also produce methyl methacrylate monomer ("MMA"), the
principal raw material used in the manufacture of acrylic sheet, rods
and tubes, or certain of the components thereof, making it possible for
them to absorb increases in the cost of MMA, and buy in large
quantities, thereby availing themselves of volume discounts not
available to the Division. Since the Company does not itself produce
MMA, the Polycast Division is unable to compete with the low prices
charged by these companies for general purpose acrylic sheet. See "-
Polycast Division - Raw Materials."
Marketing
The Polycast Division's acrylic products are marketed under
the POLYCAST(R) brand name. Acrylic products with special performance
characteristics are also marketed under individual brand names, such as
PILOTS' CHOICE(TM) (aerospace sheet with high optical quality) for
helicopter windshields, SOLACRYL(R) (specialty sheet which transmits
ultraviolet rays) for sun tanning beds and POLYDOR(R) (thermoformable
sheet) used for orthopedic products. The Company's acrylic rods and
tubes are also marketed under the GLASFLEX(TM) brand name.
The Division markets its acrylic sheets, rods and tubes
primarily through five sales representatives, who are employees of the
Division, and through wholesale distributors.
Representative domestic customers of the Polycast Division and
representative end users of its acrylic products include Beech Aircraft
Corp., Bell-Helicopter Textron, Inc., Boeing Company, Cadillac Plastic
& Chemical Co., The Cessna Aircraft Company, Chris-Craft Industries,
Inc., Llamas Plastics, Inc, Commercial Plastics and Supply Corp., Laird
Plastics, Inc., Sensormatic Electronics Corporation, Sierracin/Sylmar
Corporation, Sikorsky Aircraft Corporation, Texstar Inc., Thunderbird
Products Corp. and Wellcraft Marine. Representative foreign customers
and end users include Augusta Helicopters and Embraer. The Company is
not dependent upon a single customer or group of customers for sales of
its acrylic products.
Manufacturing Facilities
The Division manufactures acrylic sheet at its facility in
Stamford, Connecticut and finishes and further processes acrylic sheet
for certain applications at its facility in Hackensack, New Jersey,
which also serves as the principal warehouse for acrylic sheet
products. Acrylic sheet is also manufactured, along with acrylic rods
and tubes, at the Division's facility in Stirling, New Jersey. The
Company owns all three of these facilities. The Division leases office
space used for its division headquarters adjacent to its Stamford,
Connecticut manufacturing facility. See "Item 2. Properties."
Raw Materials
Since October 1, 1991, all of the Division's requirements of
MMA have been purchased from ICI or its predecessor owner of the
monomer business, E.I. duPont de Nemours & Co., pursuant to a supply
agreement which obligates the Division to purchase from ICI and ICI to
supply the Division with its requirements for MMA on a year-to-year
basis, subject to termination by either party upon one year's advance
notice. Under the supply agreement, the Division is entitled to
purchase MMA from other suppliers who offer the product at prices lower
than those ICI is willing to match. In addition, the supply agreement
requires that any party that acquires all or substantially all of ICI's
assets used to manufacture MMA assume the obligations of ICI under the
agreement and further requires that any party that acquires all or
substantially all of the Company's assets used to manufacture its
acrylic sheet, rods and tubes assume the obligations of the Division
under the agreement.
In the event that ICI elects to terminate the supply
agreement, the Company believes that the Division could obtain MMA from
one or more alternate sources. However, each of the two major alternate
domestic manufacturers and certain other major alternate foreign
manufacturers of MMA compete (as does ICI) with the Division in the
manufacture and sale of acrylic sheet. Thus, there can be no assurance
that the Division would be able to obtain MMA from these alternate
sources at satisfactory prices, on a reliable basis or on terms
otherwise satisfactory to the Division.
Coated Fabrics Segment
The Company's Coated Fabrics Segment, which accounted for
approximately $58.7 million (28 percent (28%)) of the Company's net
sales for Fiscal 1996, is a leading manufacturer of vinyl coated
fabrics and vinyl laminated composites. The segment's product lines
consist of products for the automobile manufacturing industry, which
accounted for 56 percent (56%) of total net sales for Fiscal 1996, and
the well known Naugahyde(R) brand name vinyl coated fabric products,
which accounted for 44 percent (44%) of total net sales for such fiscal
year.
General
The segment's automotive product line consists of plastic
vinyl coated fabrics and vinyl laminated composites used by
manufacturers and custom fabricators in the production of vehicle seat
coverings, door panels, arm rests, consoles and instrument panels. Its
coated fabrics are durable, stain resistant, cost-effective
alternatives to leather and cloth coverings. The segment's vinyl
laminated composites are durable, easily formed, economical
alternatives to fabric coverings used for applications such as
automobile instrument and door panels. The materials manufactured by
the segment can be hand or machine sewn or glued to an underlying
structure, such as a seat frame or automobile door panel, or
thermoformed to cover various underlying structures or into
freestanding shapes for a variety of applications, and come in a wide
range of colors and textures. The Company has determined to exit the
Port Clinton, Ohio operation of this Segment. The operation consists of
the vinyl laminated composite line. See "- Corporate Developments -
Disposition of Port Clinton, Ohio Automotive Operation" and "Note 15 to
Financial Statements."
The segment's Naugahyde(R) vinyl coated fabrics products have
varying performance characteristics and are sold in markets depending
upon the performance characteristics required by end users. For
example, for recreational products which are used outdoors, such as
boats, personal watercraft, golf carts and snowmobiles, the segment
sells a Naugahyde(R) product that is designed primarily for
weatherability. It also manufactures Naugahyde(R) products that can
withstand powerful cleaning agents, which are widely used in hospitals
and in other medical facilities. Flame and smoke retardant Naugahyde(R)
vinyl coated fabrics are used for a variety of commercial and
institutional furniture applications, including hospital furniture and
school bus seats. In Fiscal 1996, the segment employed a designer to
commence development of additional styles and patterns for its
Naugahyde(R) products in order to respond to changing needs of its
customers. See "Item 7. Management's Discussion and Analysis of
Financial Conditions and Results of Operations - Comparison of Fiscal
1996 with Fiscal 1995."
The segment is one of the few manufacturers that can produce
coated fabrics through composite, continuous cast and calender
manufacturing processes. These processes allow it to produce coated
fabrics and laminated composites with different characteristics:
composite manufacturing produces a material which is light in weight
with sharply defined borders; the continuous cast method produces a
material with a soft finish, deep grain pattern and a wide temperature
range and high malleability factors for thermoforming; and calender
manufacturing produces a material with less of a soft finish but which
can be manufactured economically in high volume.
The segment has three state-of-the-art production lines which
produce coated fabrics and laminated composites in more than 450 colors
and 25 textures and patterns. However, one of such lines was installed
to penetrate the market for the application of coatings for the
automobile air bag market, which the segment subsequently decided to
exit in Fiscal 1996. Such line continues idle at this time. Management
is currently evaluating alternate uses for such line.
The segment's automotive products are marketed to domestic
automobile manufacturers as well as to foreign automobile manufacturers
producing vehicles in the United States ("transplant manufacturers").
The coated fabrics and laminated composites which comprise this line
are designed to meet the performance specifications set by automobile
manufacturers such as crisp lines or soft finishes of interior
components or the ability to thermoform the products into specific
applications. In Fiscal 1995, the segment introduced a new series of
coated fabrics products in response to performance specifications of
General Motors Corporation ("GM") for a coated fabric with limited
propensity to lose cohesion upon exposure to heat and that would meet
processability requirements but would also be lighter in weight and
softer to the touch. Such products had been in development since 1992
and in Fiscal 1995 represented a nominal amount of the segment's sales.
In Fiscal 1996, sales of such products to GM accounted for
approximately $6.0 million in net sales. The products are currently
being provided to GM for use in several of its automobile models. See
"-Corporate Developments- Introduction of New Coated Fabrics Product."
In order to supply coated fabrics and laminated composites to
the domestic automotive market, a supplier must first satisfy extensive
product standards and specifications established by the manufacturer.
The segment and the Predecessor Companies have had products that
satisfied the standards of domestic automobile manufacturers for many
years. In fact, the Company and its predecessors have supplied coated
fabrics to GM for more than 30 years. As a result of the introduction
of its new series of coated fabrics products, sales to GM increased
substantially in Fiscal 1996. Although this segment has not had
significant sales to other domestic automobile manufacturers in Fiscal
1996, the Company believes that an opportunity for significant
expansion exists in the domestic automotive market for such product
line for use in seat upholstery trim, door panels and other interior
vinyl covered components for trucks and automobiles.
Similar to the domestic automotive market, a supplier must
first satisfy extensive quality and manufacturing specifications in
order to supply coated fabrics and laminated composites to transplant
manufacturers. The segment has satisfied these standards of Honda
America Manufacturing, Inc. ("Honda") with respect to seat covers and
laminated composite door and instrument panels and for Mazda Motor
Corporation with respect to seat covers and door panels. The Company
believes that transplant manufacturers represent a growing market for
its coated fabrics and laminated composites.
Pursuant to a technical collaboration agreement entered into
with Okamoto Industries, Inc. ("Okamoto"), a Japanese manufacturer of
coated fabrics products, the segment holds an exclusive license to use
Okamoto's advanced technology for the manufacture of certain coated
fabrics in the United States and Canada until 2003. This arrangement
has provided the segment with the capability to manufacture materials
using the composite production process, and has allowed it to supply
product to transplant manufacturers such as Honda. The Company is
required to pay Okamoto a royalty on net sales of products under the
agreement.
The coated fabrics and laminated composites market for the
automobile manufacturing industry is characterized by long lead times
for new products requiring significant working capital investment and
extensive testing, qualification and approval by automobile
manufacturers. The segment faces a significant risk that automobile
manufacturers might not select its new products after it has incurred
significant cost for, among other things, research and development,
manufacturing equipment, training and facility-related overhead
expenses to develop such products. Moreover, even if the segment's
products are eventually approved and purchased by automobile
manufacturers, its working capital investment might fail to generate
revenues for several years while the segment develops such products and
automobile manufacturers conduct their testing, qualification and
approval procedures for such products. For example, in 1992 the segment
incurred significant costs for research and development, equipment and
facility costs to develop a new series of coated fabric products but
sales of such products were nominal or nonexistent until Fiscal 1996
when GM began purchasing significant quantities of the product for use
in several automobile models, resulting in sales of approximately $6.0
million in such fiscal year. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations- Comparison
of Fiscal 1996 with Fiscal 1995."
Competition
The Coated Fabrics Segment competes in the domestic and
transplant automotive markets for coated fabrics and laminated
composites primarily on the basis of price. In the case of unique
product lines developed by the segment, such as the new product series
discussed above, the segment competes on the basis of the performance
characteristics of its products. In the domestic and transplant
automotive markets, the segment generally sells its coated fabrics and
laminated composites directly to automobile manufacturers and to custom
fabricators, who use the segment's coated fabrics and laminated
composites to make finished products, such as seats and door panels,
which are then sold to automobile manufacturers.
The segment competes with respect to its Naugahyde(R) products
primarily on the basis of style, color and quality, as well as price
and customer service through technical support and performance
characteristics which meet customer needs. In Fiscal 1996, it employed
a designer to commence development of additional styles and patterns in
order to respond to changing needs of end-users of Naugahyde(R)
products. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Comparison of Fiscal
1996 with Fiscal 1995."
The segment's principal competitors in the domestic automotive
markets are Canadian General Tower, Ltd. and Sandusky Vinyl Products
Corporation, and its principal competitors in the transplant automotive
markets are O'Sullivan Industries Corp. and foreign importers. Its
principal competitors with respect to its Naugahyde(R) products are
C.G. Spradling & Company, GenCorp Inc. and Morbern Inc.
Marketing
The segment's coated fabrics products were introduced by one
of its predecessors more than 45 years ago and today are marketed under
several nationally recognized brand names, including NAUGAHYDE(R),
NAUGAFORM(R) and DURAN(R). BEAUTYGARD(R) is the name under which the
segment markets its cleaning agent-resistant coated fabrics, and its
flame and smoke retardant coated fabrics are marketed under the brand
name FLAME BLOCKER(TM).
The segment markets and sells its coated fabrics and laminated
composites primarily through 12 national sales representatives, who are
employees of the Company, and independent sales representatives. In the
furniture manufacturing market, it generally sells its coated fabrics
through its sales representatives and to distributors who sell to
furniture manufacturers, upholsterers and fabric distributors, which
supply furniture manufacturers. Approximately 50 percent (50%) of the
segment's non-automotive market sales in Fiscal 1996 were to
distributors.
Representative customers and end users of the segment's coated
fabrics and laminated composites include Becker Group, Inc.,
Bombardier, Inc., Club Car, Inc., GM, Honda, Kawasaki Heavy Industries,
Inc., Harley-Davidson, Inc., Mazda Motors of America, Inc., Michigan
Seat Co., Okamoto USA, Inc., Polaris Industries, Inc., Shelby Williams
Industries, Inc., TS Trim, Inc. and United Technologies Automotive
Division.
Manufacturing Facilities
The segment manufactures its coated fabrics at facilities
located in Stoughton, Wisconsin and Port Clinton, Ohio. Both of these
facilities are owned by the Company. The segment also leases offices in
Troy, Michigan for its sales representatives serving the automotive
industry and in Sarasota, Florida for customer service representatives
of its Naugahyde(R) product line. See "Item 2. Properties."
Raw Materials
The principal raw materials for the segment's coated fabrics
are casting paper, knit fabric, polyolefin foam, PVC plastic resins and
plasticizers. The segment generally has multiple sources for casting
paper, knit fabric and plasticizers. Although it obtains PVC plastic
resins from several domestic and foreign suppliers, a substantial
portion of its requirements of PVC plastic resins are purchased from
The Goodyear Tire and Rubber Company ("Goodyear"). In 1996, Goodyear
announced that commencing in early 1997 it would cease the manufacture
and sale of PVC plastic resins. The segment has identified alternative
sources of such materials and incurred costs of approximately $300,000
in Fiscal 1996 in connection with the reformulation of its current
products to use such substitute resins in order to meet its customers'
specifications. Although several of the Coated Fabrics Segment's
customers have approved, for certain applications, such reformulation
of the PVC plastic resins which the segment uses to manufacture its
coated fabrics products, many of its customers, including GM, have not
approved such reformulation as to all applications. The Company does
not believe it will be adversely impacted in the future by Goodyear's
decision to cease selling PVC plastic resins, since it expects that all
PVC resin reformulations will be approved prior to such cessation or
shortly thereafter.
The segment purchases polyolefin foam from Toray Industries,
Inc. which currently is the only supplier of polyolefin foam approved
by end users of the segment's foam-based products. Although the Company
believes that polyolefin foam would be available from alternative
suppliers, if polyolefin foam from Toray Industries, Inc. were to
become unavailable, production of the segment's coated fabrics and
laminated composites could be affected, because the segment would have
to obtain approval from its customers of product using polyolefin foam
purchased from alternative suppliers. The segment is currently in the
process of seeking such approvals from its most significant customers
with respect to alternative suppliers of polyolefin foam. The Company
does not expect that the segment will have to incur significant costs
to obtain such approval.
Specialty Adhesives Segment
The Company's Specialty Adhesives Segment accounted for
approximately $35.5 million (17 percent (17%)) of the Company's total
net sales for Fiscal 1996. Approximately $17.2 million of this amount
was attributable to net sales of Ensolite products. See "Note 3 to
Financial Statements" and "Corporate Developments - Ensolite Sale."
General
The Specialty Adhesives Segment (formerly, the Specialty Foam
and Adhesives Segment) is composed of two general product lines:
roofing adhesives and sealants and industrial adhesives and sealants.
The segment is one of the leading manufacturers of liquid adhesives and
sealants for the commercial EPDM rubber roofing market. The segment's
adhesives for this market, known as "splice adhesives" and "bonding
adhesives," are used to splice rubber roofing sheets and to bond them
to the underlying structure. They have the ability to withstand the
stress of extensive thermal expansion and contraction. The Company
believes that its patented splice adhesive is the best selling splice
adhesive in the EPDM rubber roofing market. In Fiscal 1996, sales of
splice adhesives represented 27 percent (27%) of the total net sales of
the segment's adhesives and sealants. In addition, the segment
manufactures more than 200 industrial adhesives and sealants in brush,
roll and spray-on form which are used in a number of different
industries such as furniture manufacturing, truck trailer and
recreational vehicle manufacturing, and foam and plastic fabrication.
The Company's strategy for the development of this segment is
to add to its existing product lines of industrial adhesives and
sealants through acquisition and/or development of new products which
satisfy unfulfilled market needs. For example, in Fiscal 1996 the
segment commenced sales of water-based adhesives which it expects will
become an increasingly more significant part of its business as
environmental and worker health and safety requirements become more
stringent. See "- Research and Development."
The segment sells splice and bonding adhesives for the EPDM
rubber roofing market exclusively to Firestone Building Products
Company, a division of Bridgestone/Firestone, Inc. ("Firestone"),
pursuant to a five-year contract which was entered into in Fiscal 1995
and expires on February 20, 2000 (the "Firestone Agreement"). Under the
terms of the Firestone Agreement, Firestone is obligated to purchase
from the segment a minimum of 80 percent (80%) of its annual volume
requirements of the splice and bonding adhesives for the EPDM rubber
roofing market. In Fiscal 1996, 1995 and 1994, Firestone purchased 83
percent (83%), 69 percent (69%) and 63 percent (63%), respectively, of
the Company's total net sales of adhesives and sealants for such
periods. Sales to Firestone during the fiscal year ended September
29,1996 represented seven percent (7%) of the Company's net sales for
such fiscal year. The loss of Firestone as a customer would have an
adverse effect on the Company's Specialty Adhesives Segment. Firestone
will acquire the Company's patent for splice adhesive upon expiration
of the Firestone Agreement. See "-Trademarks and Patents."
This segment also manufactured and sold closed cell foam
products until June 10, 1996, when the Company sold substantially all
of the segment's assets relating to the manufacture of foam products to
Rubatex for $25.0 million (the "Ensolite Sale"). See "- Corporate
Developments - The Ensolite Sale." The segment's closed cell foam
products were marketed under the brand name ENSOLITE(R), a registered
trademark which was transferred to Rubatex.
Competition
Pursuant to the exclusivity terms of the Firestone Agreement,
the Company does not compete with respect to its roofing adhesives and
sealants. As to its industrial adhesives and sealants, the Company
competes principally on the basis of price and the performance
characteristics of its products.
The segment's principal competitors in the adhesives and
sealants market for EPDM rubber roofing applications are Ashland
Chemical Company, Adco Technologies, Inc. and TACC International Corp.
In addition, Carlisle Syntec Systems, supplies these adhesives
primarily for its own single-ply roofing system and consequently
competes indirectly with the segment. In the industrial adhesives and
sealants markets, the segment's primary competitors include Sika Corp.,
Imperial Adhesives, Inc. and Minnesota Mining and Manufacturing
Company.
Marketing
The segment's industrial adhesives and sealants are marketed
under the brand name SILAPRENE(R). Its water-based adhesives are also
marketed under the brand name Hydra Fast-En(TM). The segment's
SILAPRENE(R) products have established name recognition in, and hold a
significant share of the recreational vehicle and truck trailer
manufacturing markets. Hydra Fast-En(TM) adhesives, sales of which
commenced in Fiscal 1996, are beginning to establish market share in
the foam and plastic fabrication markets.
The segment's roofing adhesives and sealants are marketed
under Firestone's private brand names. The Company indirectly controls
a significant share of the splice adhesives and bond adhesives market
through Firestone, which continues to control significant market share
in the EPDM rubber roofing market.
The segment markets its industrial adhesives and sealants
primarily to manufacturers through a network of 50 authorized
distributors and ten sales representatives who are employees of the
segment, located throughout the United States and Canada. Pursuant to
its obligation under the Firestone Agreement, the segment does not
market its splice and bonding adhesives for the EPDM rubber roofing
market.
The segment's roofing adhesives business is seasonal,
increasing in the warmer months of the year due to an increase in
roofing and other construction activities in such months, and is
sensitive to adverse weather conditions. See Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of
Operations Comparison of Fiscal 1996 with Fiscal 1995."
Manufacturing Facilities
The segment manufactures specialty foam products and adhesives
and sealants at its manufacturing facility in Mishawaka, Indiana, which
is leased from Uniroyal Plastics Company, Inc., a company related to
the Predecessor Companies. See "- History of Company." The term of the
current lease expires on January 31, 1997 with options to extend the
lease for two six-month periods. See "Item 2. Properties" and "-
Business Corporate Developments - Acquisition of South Bend Facility."
On July 17, 1996, the Company acquired a manufacturing
facility in South Bend, Indiana, consisting of approximately 240,000
square feet for $1.8 million. The new facility will house the Company's
adhesives and sealants product lines as well as certain other Company
operations, including the headquarters of the Royalite segment. The
Company expects to move these operations to the South Bend, Indiana
facility from the existing leased facility in Mishawaka, Indiana during
the first six months of Fiscal 1997. See "- Corporate Developments -
Acquisition of South Bend Facility."
Raw Materials
The Division's adhesives and sealants use a variety of raw
materials such as rubber, resins and solvents, which are generally
available from multiple sources. The Division's principal suppliers of
such raw materials and containers include E.I. duPont de Nemours & Co.,
Unocal Chemicals, a division of Unocal Corp. and Cleveland Steel
Container Corp. The Company believes that adequate supplies of raw
materials for its adhesives and sealants will be available to the
Division from alternate suppliers. However, if the Division is required
to use alternate suppliers, production could be affected while the raw
materials produced by such alternate suppliers are qualified by the
Division to meet the product specifications of its customers.
Employees
The Company has approximately 1,285 employees, including
approximately 845 hourly wage employees and 440 salaried employees. The
Company believes that at the present time its workforce is adequate to
conduct its business and that its relations with employees are
generally satisfactory.
The Company is a party to a number of collective bargaining
agreements. Approximately 130 hourly wage employees of the Company's
acrylic sheet manufacturing facility located in Stamford, Connecticut
are covered by an agreement expiring on March 31, 2000 with Teamsters
Local 191, which is affiliated with the International Brotherhood of
Teamsters, Chauffeurs, Warehousemen and Helpers of America (the
"Teamsters"). Approximately 33 employees at the Company's Hackensack,
New Jersey acrylic sheet manufacturing and warehouse facility are
covered by an agreement expiring on February 3, 2002 with the
Amalgamated Clothing & Textile Workers Union of America (AFL-CIO). At
the Company's coated fabrics manufacturing facility located in
Stoughton, Wisconsin, another 160 hourly employees of the Company are
covered by an agreement expiring on September 17, 2001 with Local 1207
of the United Paperworkers International Union. Separate agreements
expiring on April 20, 1999 with the United Steel Workers of America,
United Rubber Workers Division (the "USWA") cover approximately 140
hourly wage employees at the Company's adhesives and sealants
manufacturing facility located in Mishawaka, Indiana, and approximately
120 employees at the coated fabrics and laminated composites
manufacturing facility located in Port Clinton, Ohio.
On July 20, 1995 the National Labor Relations Board certified
the United Paperworkers International Union as the exclusive collective
bargaining representative for the hourly wage employees at the
Company's thermoplastic products plant in Warsaw, Indiana. The Company
challenged the election which led to such certification and,
accordingly, did not recognize the union. On October 24, 1996, the
United States Court of Appeals for the Seventh Circuit denied the
Company's appeal. The Company has since recognized the union and
intends to negotiate a collective bargaining agreement with it.
Richard D. Kimbel, the former President of USWA Local 65
(Mishawaka), is a member of the Company's Board of Directors. See "Item
10. Directors and Executive Officers of the Registrant."
Trademarks and Patents
The Company owns and controls patents, trade secrets,
trademarks, trade names, copyrights and confidential information, which
in the aggregate are material to its business. The Company is not
materially dependent, however, upon any single patent or trademark. The
Company has several trademarks that have wide recognition and are
valuable to its business. Among the trademarks that are of material
importance to the Company are NAUGAHYDE(R), NAUGAFORM(R), DURAN(R),
ROYALITE(R), PILOTS' CHOICE(TM), POLYCAST(R) and SILAPRENE(R). The
Company's trademarks are registered in the United States and in a
number of foreign jurisdictions with terms of registration expiring
generally between 1996 and 2004. No trademark registration of material
importance to the Company expired during Fiscal 1996. The Company
intends to renew in a timely manner all those trademarks that are
required for the conduct of its business.
The Company also holds more than 40 patents and pending
patents worldwide. While in the past the Company considered the patent
on its splice adhesives technology to be the most important patent
owned by it, its value has since been determined by management to have
eroded significantly due to the relatively short remaining life of the
patent, the consolidation of the EPDM rubber roofing market and the
development of competitive products. Consequently, in 1995, the Company
entered into the Firestone Agreement pursuant to which the Company will
transfer ownership of this patent to Firestone on February 20, 2000.
The Company's splice adhesive patent expires on July 28, 2003. The loss
of such patent would not have a material adverse effect on the
Company's Adhesives Segment unless such loss were to affect the ability
of the Company to perform under the Firestone Agreement. See "-
Business Segments - Specialty Adhesives."
The Company uses the trade name and trademark "Uniroyal"
pursuant to a license from Uniroyal Goodrich Licensing Services, Inc.
Research and Development
The Company is actively engaged in research and development
programs designed to develop new products, manufacturing processes,
systems and technologies and to enhance its existing products and
processes. Research and development is conducted within each business
segment of the Company. Investment in research and development has been
an important factor in establishing and maintaining the Company's
competitive position in many of the specialized niche markets in which
its products are marketed. For example, the Company's research and
development efforts have led to the development of water-based
adhesives (see "-Business Segments - Specialty Adhesives"), bullet
resistant acrylic sheet, acrylic sheet for use in commercial aquariums
(see "- Business Segments - High Performance Plastics - Polycast
Division") and the new coated fabrics product line (see "Business
Segments - Coated Fabrics"). The Company spent approximately $4.9
million for research and development during Fiscal 1996 compared to
approximately $4.7 million during Fiscal 1995.
The Company currently employs a staff of approximately 30
individuals in connection with its research and development efforts.
The individuals include chemists, process development engineers and
laboratory technicians and are responsible for new product development
and improvement of production processes. The allocation of research and
development staff among the Company's business segments is as follows:
seven at High Performance Plastics, 14 at Coated Fabrics and nine at
Specialty Adhesives.
Backlog
At September 29, 1996, the Company had backlog orders
aggregating approximately $22.7 million, as compared to approximately
$25.6 million as of October 1, 1995. Management presently anticipates
that all backlog orders will be filled within the next 12 months.
Backlog orders for each of the Company's business segments were as
follows as of the indicated dates:
September 29, 1996 October 1, 1995
------------------ -----------------
(in thousands)
High Performance Plastics $ 13,727 $ 15,059
Coated Fabrics 4,784 4,360
Specialty Adhesives 4,222 6,144(1)
-------- ---------
Total $ 22,733 $ 25,563
======== =========
(1) This amount includes $2.8 million in backlog orders for Ensolite
products.
Working Capital Items
Many of the markets in which the Company competes, the
aerospace acrylic sheet market and the coated fabric and laminated
composite markets for the automobile manufacturing industry, are
characterized by long lead times for new products requiring significant
working capital investment by the Company and extensive testing,
qualification and approval by the Company's customers and end users of
its products. The Company faces a significant risk that customers and
end users in such markets may not select the Company's new products
after it has incurred significant costs for, among other things,
research and development, manufacturing equipment, training and
facility-related overhead expenses to develop such products.
Moreover, even if the Company's products are eventually
approved and purchased by customers and end users in such markets, the
working capital investment made by the Company could fail to generate
revenues for several years while the Company develops such products and
its customers and end users conduct their testing, qualification and
approval procedures for such products. For example, in 1992 through
Fiscal 1995 the Company's Coated Fabrics Segment incurred significant
costs for research and development, equipment and facility costs to
develop a new series of coated fabrics products in response to GM's
performance specifications for a coated fabrics product that would be
lighter in weight and with a softer finish but that would not be
affected by exposure to heat. See "- Business Segments - Coated
Fabrics." Sales of such products were nominal or nonexistent until
Fiscal 1996, when GM approved the products for use in several
automobile models, resulting in sales of approximately $6.0 million in
such fiscal year. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Comparison of Fiscal
1996 with Fiscal 1995." Although the Company believes that cash from
its operations and its ability to borrow under its revolving credit
agreement (see " - Corporate Developments - Revolving Credit Agreement"
and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources")
will provide it sufficient liquidity to finance its efforts to develop
new products, there can be no assurance that the Company's operations
together with amounts available under its revolving credit agreement
will be sufficient to finance such development efforts and to meet the
Company's other obligations.
Environmental Matters
The Company is subject to federal, state and local laws and
regulations designed to protect the environment and worker health and
safety. The Company's management emphasizes compliance with such laws
and regulations and has instituted programs throughout the Company to
provide education and training in compliance at and auditing of all
Company facilities. Whenever required under applicable law, the Company
has implemented product or process changes or invested in pollution
control systems to ensure compliance with such laws and regulations.
Such investments may in the future provide financial returns to the
Company as a result of increased efficiencies or product improvements.
In Fiscal 1996, 1995 and 1994, the amount of capital
expenditures related to environmental matters was immaterial and the
amount of such expenditures is expected to be immaterial in Fiscal
1997. In the future, as the requirements of applicable law impose more
stringent controls at Company facilities, expenditures related to
environmental and worker health and safety are expected to increase.
While the Company does not currently anticipate having to make any
material capital expenditures in order to comply with these laws and
regulations, if the Company is required to do so, such expenditures
could have a material impact on its earnings or competitive position in
the future.
In connection with its acquisition of a manufacturing facility in South
Bend, Indiana on July 17, 1996, the Company assumed the costs of
remediation of soil and groundwater contamination resulting from the
leaking of solvents used in the operation of the plant by its former
owner. The Company is conducting the remediation voluntarily pursuant
to an agreement with the Indiana Department of Environmental
Management. The Company estimates that such remediation will cost
approximately $1.0 million over a five-to-seven-year period. In
connection with its acquisition of the facility, the Company placed in
escrow in accordance with the terms of the purchase agreement $1.0
million of the $1.8 million purchase price to be applied to such
remediation costs. See "-Corporate Developments - Acquisition of South
Bend Facility."
The Company established a $610,000 reserve for environmental
remediation costs related to its Mishawaka, Indiana facility. The
Company intends to exit from the Mishawaka, Indiana facility to its
South Bend, Indiana facility during the first six months of Fiscal
1997. While the Company estimates the cost of such environmental
remediation will be approximately $610,000, the ultimate cost will
depend on the extent of contamination discovered following the
relocation process. The Company expects the environmental remediation
to be substantially completed within one year. The Indiana Department
of Environmental Management ("IDEM") has conducted tests of the soil
and water at the facility in response to requests from local government
officials. According to press accounts, IDEM has found low levels of
polychlorinated biphenyls (PCBs) in soil samples and ground water
contamination. The Company believes that further testing might be
necessary to determine the extent of contamination and that there might
then need to be an allocation of any liability between the Company and
UPC (see "- History of the Company ` Predecessor Companies"), since the
Company's operations at the Mishawaka, Indiana facility do not employ
PCBs.
Pursuant to a 1992 settlement agreement with the United States
Environmental Protection Agency (the "EPA"), the United States
Department of the Interior and the States of Wisconsin and Indiana (the
"EPA Settlement Agreement") entered into in connection with the Plan of
Reorganization of the Predecessor Companies (see "History of Company -
Predecessor Companies"), the Predecessor Companies compromised and
settled (in exchange for Common Stock of the Company) substantially all
of their prepetition liabilities relating to disposal activities under
Sections 106 and 107 of the Comprehensive Environmental Response,
Compensation & Liability Act ("CERCLA"), Section 3008 of the Resource
Conservation & Recovery Act ("RCRA") and similar state laws for the
cleanup of 20 designated sites not owned by any of the Predecessor
Companies (the "Known Sites") and for natural resource damages at 15 of
the 20 Known Sites. Pursuant to the EPA Settlement Agreement, the
United States and the States of Indiana and Wisconsin agreed not to sue
for response costs and, with the exception of five Known Sites, natural
resource damages at each of the Known Sites. In addition, pursuant to
Section 113(f)(2) of CERCLA, and as provided under the Settlement
Agreement, the Predecessor Companies and the Company will be protected
against contribution claims filed by private parties for any Known Site
for matters covered by the EPA Settlement Agreement. The EPA Settlement
Agreement established a mechanism for the Company to resolve its
liability for any other sites (the "Additional Sites"), except those
owned by the Company, arising from prepetition disposal activity. The
Company also agreed to share with such governmental parties the
proceeds of claims relating to the Known Sites made against certain
insurers of the Predecessor Companies and their affiliates.
In the event that the United States, Wisconsin or Indiana
asserts a claim against the Predecessor Companies or the Company for
response costs associated with prepetition disposal activities at any
Additional Site, the governmental party will be entitled to pursue its
claim in the ordinary course, and the Company and the Predecessor
Companies will be entitled to assert all of their defenses. However, if
and when the Company or any of the Predecessor Companies is held
liable, and if the liability is determined to arise from prepetition
disposal activities, the Company or such Predecessor Company may pay
the liability in discounted "plan dollars" (i.e., the value of the
consideration that the party asserting such claim would have received
if the liability were treated as a general unsecured claim under the
Plan of Reorganization). Such payment may be made in cash or in the
Company's stock, or a combination thereof, at the Company's or such
Predecessor Company's option. Claims arising from real property owned
by the Company are not affected by the EPA Settlement Agreement.
In October 1996, the EPA sent the Company a General Notice and
Special Notice of Liability concerning the Refuse Hideaway Landfill
Superfund Site at Middleton, Wisconsin. While a unit of Uniroyal, Inc.
is believed to have sent non-hazardous waste to the site between 1978
and 1984, the Company is not aware that the unit sent any hazardous
materials to the site. The Company does not presently anticipate any
material liability in connection with the site, and in any event, if
the Company is found to have liability in connection with the site,
such liability will be subject to the terms of the EPA Settlement
Agreement. See "- History of Company- Predecessor Companies."
Based upon information available as of September 29, 1996, the
Company believes that the costs of environmental remediation for which
it may be liable have either been adequately reserved for or are
otherwise unlikely to have a material adverse effect on the Company's
operations, cash flows or financial position.
History of Company
Predecessor Companies
The Company's businesses trace their origins to a number of
predecessor companies which eventually were reorganized pursuant to the
Third Amended Plan of Reorganization under the Bankruptcy Code for
Polycast Technology Corporation and Its Affiliated Debtors (as
subsequently modified, the "Plan of Reorganization"). See "- History of
the Company - Reorganization."
The Company's acrylic sheet business originated in the 1960's
in a company known as Polycast Technology Corporation ("Polycast
Technology"), which subsequently changed its name to The Jesup Group,
Inc. ("Jesup"). In 1984, Jesup acquired the business of Shenandoah
Plastics ("Shenandoah"), a company engaged since 1967 in the
manufacture of thermoplastic sheet, and Glasflex Corporation
("Glasflex"), a manufacturer since 1954 of acrylic sheet, rods and
tubes. These businesses eventually became part of what is known today
as the Company's High Performance Plastics Segment.
A substantial portion of the thermoplastic sheet business of
the High Performance Plastics Segment (other than that acquired from
Shenandoah ), as well as the businesses of the Coated Fabrics Segment
and the Specialty Adhesives Segment (formerly the Specialty Foams and
Adhesives Segment), originated in the chemical and plastics operations
of the U.S. Rubber Company (later known as Uniroyal, Inc.
("Uniroyal")), which date from the mid-1940's. These operations were
conducted by segments of Uniroyal until 1985, when Uniroyal Plastics
Company, Inc. ("UPC") was formed by Uniroyal as a wholly-owned
subsidiary to hold these operations. In October 1986, Jesup,
indirectly, through its wholly-owned subsidiary, Uniroyal Plastics
Acquisition Corp. ("UPAC"), acquired UPC from Uniroyal. Following its
acquisition of UPC, Jesup combined the thermoplastic sheet operations
acquired from UPC with its existing thermoplastic sheet and acrylic
sheet, rod and tube businesses in a subsidiary known as Polycast
Technology Corporation ("Old Polycast"). Jesup also transferred what is
now the Coated Fabrics Segment of the Company's business into Uniroyal
Engineered Products, Inc. ("Old UEP") and the adhesives and sealants
business of what is now its Specialty Adhesives Segment into Uniroyal
Adhesives and Sealants Company, Inc. ("Old UAS"). The assets of the
specialty foam business were transferred from UPC to Ensolite, Inc.
("Old Ensolite"). Old Polycast, Old UEP, Old Ensolite and Old UAS are
referred to herein as the "Predecessor Companies." UPC is currently in
bankruptcy liquidation and is an affiliate of the Predecessor
Companies. UPAC's plan of reorganization was substantially implemented
in November 1993.
In October and November 1991, the Predecessor Companies and
one other subsidiary of Jesup filed voluntary bankruptcy petitions with
the United States Bankruptcy Court for the Northern District of
Indiana, South Bend Division (the "Bankruptcy Court") for relief under
Chapter 11 of Title 11 of the United States Code, as amended (the
"Bankruptcy Code").
Reorganization
The Predecessor Companies sought protection under the
Bankruptcy Code primarily as a result of their inability to meet
significant obligations for retiree medical expenses, unfunded pension
obligations and interest on indebtedness incurred in connection with
the acquisition of UPC. Prior to the commencement of the Predecessor
Companies' bankruptcy proceedings (the "Bankruptcy Proceedings") in
Fiscal 1991, these non-operating expenses, combined with the loss of
sales in certain economically depressed markets (particularly the
automobile markets), caused a significant and increasing drain on the
Predecessor Companies' working capital and resulted in certain of the
Predecessor Companies' significantly reducing their operations
(including profitable, but working capital-intensive, operations such
as the Company's application of coatings to fabric for automotive
airbags) and certain capital expenditure programs. The segments most
adversely affected by the decreased working capital condition were the
Coated Fabrics and Specialty Adhesives Segments.
The plan of reorganization of the Predecessor Companieswas
substantially consummated on September 27, 1992. Pursuant to the Plan
of Reorganization, each of the Predecessor Companies transferred
substantially all of its assets to a newly organized subsidiary of the
Company with a name that was substantially identical to the name of its
corresponding Predecessor Company. In exchange, each of these new
subsidiaries, including Polycast Technology Corporation ("Polycast"),
Uniroyal Engineered Products, Inc. ("UEP"), Uniroyal Adhesives and
Sealants Company, Inc. ("UAS") and Ensolite, Inc. ("Ensolite"), agreed
to assume certain of the liabilities of its corresponding Predecessor
Company. In addition, the Company issued, or authorized for issuance,
9,575,000 shares of its Common Stock to holders of allowed unsecured
claims against the Predecessor Companies and 50 shares of Series A
Preferred Stock and 50 shares of Series B Preferred Stock to the
Pension Benefit Guaranty Corporation (the "PBGC"). (See "Item 13.
Certain Relationships and Related Transactions.") On June 7, 1993, in
conjunction with the public offering of the Company's 11.75% Senior
Secured Notes, the Company merged each of its operating subsidiaries
into the Company. In May 1993 the Company called and repurchased from
the PBGC all of the outstanding shares of Series A Preferred Stock and
15 shares of the outstanding shares of Series B Preferred stock. On
December 16, 1996, the Company repurchased an additional 15 shares of
such stock. See "Item 1. Business Corporate Developments - Redemption
of Series B Preferred Stock."
On November 8, 1993, the Plan of Liquidation of UPAC became
effective and was substantially consummated. Pursuant to the UPAC Plan
of Liquidation, the Company received a cash distribution of
approximately $6.8 million following the liquidation of the assets of
the UPAC estate and accordingly recorded income from the UPAC Plan of
Liquidation in the amount of approximately $6.8 million shown as
recovery of pension expense in the accompanying financial statements
for the fiscal year ended October 2, 1994.
In connection with matters relating to its acquisition of UPC,
on May 6, 1993 the Company entered into a settlement agreement (the
"Company Settlement") with Uniroyal, Inc., CDU Holding Liquidating
Trust, and Uniroyal Holding, Inc. (collectively, the "Uniroyal
Parties") pursuant to which the Company and the Uniroyal Parties
resolved certain existing and potential disputes arising from the
acquisition of UPC by UPAC from Uniroyal, Inc. Uniroyal, Inc. was
dissolved in December 1986. CDU Holding Liquidating Trust and Uniroyal
Holding, Inc. were affiliates of Uniroyal, Inc. In connection with the
resolution of the matters covered by the Company Settlement, the
Uniroyal Parties paid $2.25 million in cash to the Company. In
exchange, the Company agreed to certain matters involving the
prosecution and settlement of claims under insurance policies,
including certain claims of the Uniroyal Parties that covered
environmental liabilities at certain of the Known Sites. See "Item 1.
Business - Environmental Matters." As a result of this agreement and
related agreements reached with insurance companies during Fiscal 1994
as to amounts with respect to environmental claims, the Company
recorded as income in Fiscal 1994 approximately $1,176,000 and in
Fiscal 1995 approximately $70,000, net of certain professional fees and
other expenses.
The Company Settlement also provides that the Company will
indemnify and hold harmless the Uniroyal Parties with respect to: (i)
environmental liabilities associated with sites that were owned or
operated by the Company or the Predecessor Companies on or before May
6, 1993; and (ii) future environmental expenditures by the Uniroyal
Parties with respect to the businesses of UPC, net of recoveries from
third parties (including insurance proceeds), but only with respect to
the portion of such expenditures, if any, that exceeds $30 million and
is less than $45 million. See "Item 1. Business - Environmental
Matters."
Pursuant to the Company Settlement, the Company and the
Uniroyal Parties also agreed to share on a 35 percent (35%) - 65
percent (65%) basis, respectively, the costs of providing medical,
prescription drug and life insurance benefits to certain retired former
salaried employees of UPC or Uniroyal who are class members in a
federal class action lawsuit against certain of the Uniroyal Parties.
The Company's cost for providing such medical, prescription drug and
life insurance benefits in Fiscal 1996 was approximately $943,000. The
Company and the Uniroyal Parties also mutually released each other from
all claims and causes of action, if any, related to or arising in
connection with the acquisition of UPC from Uniroyal in 1986 and all of
the agreements entered into in connection therewith.
In a separate settlement agreement entered into on May 6, 1993
(the "UPAC Settlement"), UPAC and Jesup (each of which was an affiliate
of the Predecessor Companies) settled their claims against the Uniroyal
Parties and certain of their insiders and affiliates, The Uniroyal
Parties and such insiders and affiliates are collectively referred to
as the "Uniroyal Affiliated Parties". Pursuant to the UPAC Settlement,
the Uniroyal Affiliated Parties paid $16.0 million in cash to UPAC.
Such cash constituted the major portion of the bankruptcy estate of
UPAC.
Item 2. Properties
The following table sets forth the location, size, general
character and nature of the Company's facilities:
<TABLE>
<CAPTION>
SQUARE FEET GENERAL CHARACTER OWNED OR
LOCATION AND ENTITY OF FACILITY OF PROPERTY LEASED
<S> <C> <C> <C>
Sarasota, Florida 18,000 Corporate offices Leased
High Performance Plastics Segment
Mishawaka, Indiana(1) 12,000 Offices Leased
Stamford, Connecticut 5,500 Offices Leased
Stamford, Connecticut 81,000 Manufacture of cell cast Owned
acrylics
Hackensack, New Jersey 46,000 Manufacture of cell cast Owned
acrylics
Rome, Georgia 45,062 Manufacture of thermoplastic Owned
products
Redlands, California 60,000 Manufacture of thermoplastic Owned
products
Stirling, New Jersey 50,000 Manufacture of acrylic sheet Owned
rods and tubes
Warsaw, Indiana 225,000 Manufacture of thermoplastic Owned
products and warehouse
Coated Fabrics Segment
Sarasota, Florida 6,000 Offices Leased
Stoughton, Wisconsin 198,275 Manufacture of coated Owned
fabrics products
Port Clinton, Ohio 240,000 Manufacture of coated Owned
fabrics products
Troy, Michigan 2,200 Offices Leased
Specialty Adhesives
Segment
Mishawaka, Indiana (1) (2) 692,245 Manufacture of closed-cell Leased
foam products, adhesives and
sealants
South Bend, Indiana (2) 240,000 Offices Owned
Manufacture of adhesives and
sealants
All of the owned properties are subject to the liens of mortgages
securing the Company's 11.75% Senior Secured Notes Due 2003. (See Note
8 to the Financial Statements.)
<FN>
(1) Applicable fire and safety regulations and the configuration of the 704,245
square feet currently leased and used by the Company in the Mishawaka,
Indiana facility require the Company to heat and light at its own expense
an additional approximately 829,060 square feet of adjacent or nearby pre-
mises that currently are not used by the Company. Such expenses may be
credited against the rent expenses due under the Company's lease.
(2) On July 17, 1996, the Company acquired a manufacturing facility in South
Bend, Indiana. The new facility will house the Company's Specialty
Adhesives Segment, the headquarters of the Royalite Division and certain
other Company operations. The Company plans to move these operations from
the existing leased facility in Mishawaka, Indiana to the South Bend,
Indiana facility during the first six months of Fiscal 1997.
</FN>
</TABLE>
Item 3. Legal Proceedings
URBI, an organization unaffiliated with the Company,
administers medical, prescription drug and life insurance programs for
certain retired employees of the Predecessor Companies and certain of
their affiliates. The Company contributes funding for a portion of the
costs of the benefits programs administered by URBI in accordance with
the terms of an agreement entered into with URBI's predecessor in
connection with the Plan of Reorganization. See "Business - History of
Company." As a result of disputes between the Company and URBI
concerning the eligibility requirements applicable to URBI's medical
plan and the level of payments due from the Company, URBI filed a
complaint with the United States Bankruptcy Court for the Northern
District of Indiana, South Bend Division (the "Bankruptcy Court"),
claiming that the Company had breached its agreement to fund URBI's
operations. The Company filed counterclaims against URBI claiming
breach of contract, fraud, negligent misrepresentation, unjust
enrichment, declaratory judgment and clarification or reformation of
contract. On December 20, 1995, the Bankruptcy Court ruled in favor of
URBI with respect to certain matters and in favor of the Company with
respect to other matters resulting in a net judgment against the
Company of approximately $211,000. The Company filed an appeal of the
Bankruptcy Court's December 20, 1995 ruling with the United States
District Court for the Northern District of Indiana, South Bend
Division, which appeal is still pending. On November 28, 1995, URBI
filed an additional complaint with the Bankruptcy Court, concerning
funding payments due in Fiscal 1996. The Bankruptcy Court ordered the
Company to increase its monthly payments to URBI to approximately
$160,000 through September 1996. In December 1996 the Bankruptcy Court
ordered the Company to continue payments at such level through January
1997. The Company has agreed in principle with URBI to settle the
foregoing litigation The proposed settlement provides, among other
things, for a compromise on the level of funding to reflect URBI's
current program needs. A definitive settlement agreement between the
Company and URBI has not yet been executed.
Approximately 130 hourly employees at the Company's acrylic
sheet manufacturing facility in Stamford, Connecticut are represented
by Teamsters Local 191, which is affiliated with the Teamsters. The
Teamsters declared a strike on July 11, 1994 on the grounds that the
Company was allegedly bargaining in bad faith and called off the strike
on December 10, 1994. The Company and Teamsters settled their dispute
in June 1996. The Company agreed to settle the claim of the striking
employees for back pay following the release of claims of such
employees in exchange for a payment of approximately $808,000
(inclusive of employment taxes of approximately $58,000) in August
1996. The settlement amount paid by the Company in connection with such
matter was less than the accrued back pay at issue.
The Company is also involved in certain other proceedings in
the ordinary course of its business which, if determined adversely to
the Company would, in the opinion of management, not have a material
adverse effect on the Company or its operations.
In connection with its reorganization, the Company entered
into a number of settlement agreements, including certain agreements
relating to environmental matters. See "Item 1. Business - History of
the Company - Reorganization."
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fourth quarter of Fiscal
1996 to a vote of security holders, through the solicitation of proxies
or otherwise.
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Prior to the effective date of the Plan of Reorganization,
none of the Company's common stock, par value $.01 per share (the
"Common Stock"), was issued, and consequently there was no public
market for the Common Stock. The Common Stock was admitted to trading
on the Nasdaq National Market System ("Nasdaq") on September 28, 1992
and trades under the symbol "UTCI." At the close of trading on November
29, 1996, the price per share of Common Stock was $2.75. The Plan of
Reorganization provides for the issuance of a maximum of 10,000,000
shares of Common Stock in settlement of claims and other matters in
connection with the Bankruptcy Proceedings. As of November 29, 1996,
9,861,986 of such shares of Common Stock had been issued pursuant to
the Plan of Reorganization (including shares transferred to the
Company's treasury as a result of the election by certain claim
holders, as provided under the Plan of Reorganization, to receive cash
in lieu of Common Stock). The remaining shares are being held pending
resolution of certain retiree medical claims.
As of November 29, 1996, there were 966 holders of record of
shares of Common Stock.
The following table sets forth the high and low sales price
per share of the Company's Common Stock as reported by Nasdaq for the
indicated dates:
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended
September 29, 1996 October 1, 1995
--------------------------- -------------------------
<S> <C> <C> <C> <C>
Quarter High Low High Low
First $3.750 $3.125 $4.000 $2.750
Second $3.563 $3.125 $4.250 $3.000
Third $4.438 $3.313 $3.625 $3.063
Fourth $3.750 $3.000 $4.500 $3.125
</TABLE>
The holders of record of shares of Common Stock are entitled
to receive dividends when and as declared by the Board of Directors of
the Company, provided that the Company has funds legally available for
the payment of such dividends and is not otherwise contractually
restricted from making payment thereof. The Company has not paid any
cash dividends on the common stock in the last three fiscal years. The
Company's ability to pay cash dividends on Common Stock currently is
restricted by the indenture in connection with the Company's Senior
Secured Notes. See "Note 10 to Financial Statements."
<PAGE>
Item 6. Selected Financial Data
The following historical financial data as of and for the
fiscal years ended September 29, 1996, October 1, 1995, and October 2,
1994 have been derived from financial statements of the Company audited
by Deloitte & Touche LLP and contained elsewhere in this Form 10-K. The
selected historical financial data presented below as of September 26,
1993 and September 27, 1992 and for the fiscal year ended September 26,
1993 have been derived from audited financial statements of the
Company. The selected historical financial data presented below for the
fiscal year ended September 27, 1992 have been derived from audited
financial statements of the Predecessor Companies. All of the financial
data set forth below should be read in conjunction with the Financial
Statements and related notes and other financial information contained
in this Form 10-K.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
------------------ ---------------- --------------- ----------------- ----------------
September 29, October 1, October 2, September 26, September 27,
1996 1995 1994(1) 1993 1992
------------------ ---------------- --------------- ----------------- ----------------
(in thousands, except ratios, share and per share data)
Operating Data:
<S> <C> <C> <C> <C> <C>
Net sales.............................. $ 209,348 $ 214,951 $ 197,536 $ 173,361 $ 165,565
Depreciation and amortization (2)...... 9,848 9,521 8,356 8,872 7,358
(Loss) income before interest, reorgan-
ization items, income taxes and extra-
ordinary item........................ (12,749) 9,549 15,414 6,462 (15,148)
Interest expense(3).................... (9,773) (10,029) (10,109) (9,295) (4,974)
Reorganization items................... - - - - 52,520
Income tax benefit (expense)........... 8,121 189 (2,217) 853 (5,085)
(Loss) income before extraordinary
item ................................ (14,401) (291) 3,088 (1,980) 27,313
Extraordinary gain..................... - 363 727 - 127,842
Net (loss) income...................... (14,401) 72 3,815 (1,980) 155,155
(Loss) income per common share and common
stock equivalent:
Primary and fully diluted: (4)
(Loss) income before extraordinary item $ (1.09) $ (0.02) $ 0.22 $ (0.20)
Extraordinary gain..................... - 0.02 0.05 - N/A
----------- ------------ ----------- -----------
Net (loss) income per share............ $ (1.09) $ 0.00 $ 0.27 $ (0.20)
=========== ============ =========== ===========
Average number of shares used in
computation(5) ........................ 13,167,466 14,507,605 14,317,298 9,971,552 (4)
========== ========== ========== =========
Balance Sheet Data:
Cash and cash equivalents.............. $ 2,023 $ 291 $ 4,249 $ 3,683 $ 1,047
Working capital........................ 29,148 31,292 34,454 25,174 7,723
Total assets........................... 170,786 180,483 179,274 186,288 168,078
Long-term debt (including current
portion)............................... 72,775 76,763 79,371 89,953 69,904
Shareholders' equity................... 43,499 57,669 57,533 53,936 54,400
<FN>
(1) All fiscal years presented are 52-week periods except for the fiscal
year ended October 2, 1994 which was a 53-week fiscal year.
(2) Excludes amortization of reorganization value in excess of amounts
allocable to identifiable assets of $765,000, $769,000, $1,003,000 and
$714,000 for the fiscal years ended September 29, 1996, October 1,
1995, October 2, 1994 and September 26, 1993, respectively. There was
no corresponding charge for the fiscal year ended September 27, 1992.
(3) Does not include $3,927,000 of contractual interest on indebtedness of
one of the Predecessor Companies for the fiscal year ended September
27, 1992 for which the Company ceased accruing interest during the
Bankruptcy Proceedings.
(4) Net (loss) income per common share based on the capital structures of
the Predecessor Companies is not meaningful due to the debt discharge
and issuance of new common stock of the Company. See "Note 2 to Financial
Statements."
(5) See Note 2 to Financial Statements.
</FN>
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis by the Company's
management should be read in conjunction with Item 6. Selected
Financial Data and Item 8. The Financial Statements and Supplementary
Data appearing elsewhere in this Form 10-K.
Results Of Operations
Comparison of Fiscal 1996 with Fiscal 1995
Net Sales. The Company's net sales decreased in Fiscal 1996 by
approximately three percent (3%) to $209.3 million from $215.0 million
in Fiscal 1995. While overall net sales decreased during the period,
net sales in the Company's High Performance Plastics and Coated Fabrics
Segments increased in the aggregate approximately three percent (3%) to
$173.8 million in Fiscal 1996 from $168.3 million in Fiscal 1995. Such
increase was offset by decreased net sales in the Specialty Adhesives
Segment resulting principally from the Ensolite Sale, the prices
received by the Company for its roofing adhesives and sealants under
the Firestone Agreement, which are generally lower than those which the
Company had historically been able to obtain in the relevant market,
and the impact on the commercial roofing sector generally of severe
winter weather conditions in the Northeastern United States. See "Item
1. Business - Business Segments - Specialty Adhesives" and "Note 3 to
Financial Statements."
Net sales in the High Performance Plastics Segment increased
in Fiscal 1996 by approximately three percent (3%) to approximately
$115.1 million from $112.2 million in Fiscal 1995. This increase was
principally due to increased sales prices and unit volume of the
Royalite Division's specialty thermoplastic sheet. Decreases in the
unit volume of Royalite's general purpose thermoplastic sheet partially
offset such increase. Management believes that this shift in unit
volume resulted, in part, from its efforts to focus on the production
of specialty sheet for sale in niche markets rather than on the
production of general purpose sheet. See "Item 1. Business - Business
Segments - High Performance Plastics - Royalite Division." Increases in
unit volume sales of both specialty and general purpose acrylic sheet
by the Polycast Division also contributed to such increase in net
sales. These increases were partially offset by decreased sales prices
for aerospace specialty acrylic sheet in response to market conditions.
The Coated Fabrics Segment's net sales increased in Fiscal
1996 approximately five percent (5%) to $58.7 million from $56.1
million in Fiscal 1995. This increase resulted primarily from increased
sales prices for, and unit volume of, products sold to the automotive
industry. Increased sales to the automotive industry resulted
principally from the Company's introduction of a new product line (see
"Item 1. Business - Corporate Developments - Introduction of New Coated
Fabric Product" and "- Business Segments - Coated Fabrics") qualified
for use in the manufacture of several automobile models by General
Motors. This increase was partially offset by decreased net sales of
Naugahyde(R) coated vinyl products resulting primarily from a delay in
developing and marketing products in new styles and patterns which in
Fiscal 1996 were generally in greater demand than the styles and
patterns offered by the Company. In response to such market conditions,
the Company employed a designer in 1996 in order to design and commence
production of newer styles and patterns.
Net sales in the Specialty Adhesives Segment decreased in
Fiscal 1996 by approximately 24 percent (24%) to $35.5 million from
$46.7 million in Fiscal 1995. This decrease resulted principally from
the Ensolite Sale and the impact of severe winter weather conditions in
the Northeastern United States on the commercial roofing sector
generally. See "Item 1. Business - Business Segments - Specialty
Adhesives" and "Note 3 to Financial Statements." In Fiscal 1996, net
sales of Ensolite(R) products for the 8 month period preceding
consummation of the Ensolite Sale on June 10, 1996, were approximately
$17.2 million as compared to net sales of approximately $24.6 million
during Fiscal 1995. Net sales of liquid adhesives and sealants
decreased approximately 17 percent (17%) from Fiscal 1995 to Fiscal
1996.
(Loss) Income Before Interest, Reorganization Items, Income
Taxes and Extraordinary Item. In Fiscal 1996, the Company incurred a
loss before interest, reorganization items, income taxes and
extraordinary item of $12.7 million as compared to income before
interest, reorganization items, income taxes and extraordinary item of
$9.5 million for Fiscal 1995. This loss resulted from factors which
impacted all of the Company's segments. The performance of the High
Performance Plastics Segment was impacted principally by a back pay
labor settlement at the Polycast Division and costs of implementing
quality assurance programs and improved manufacturing efficiency at the
Royalite Division. In the Coated Fabrics Segment, the Company
established reserves totalling approximately $12.5 million related to
its decision to exit the Port Clinton, Ohio automotive operations. See
Item 1. Business - Corporate Developments - Disposition of Port
Clinton, Ohio Automotive Operation" and "Note 15 to Financial
Statements". In addition the Company suffered incremental losses
resulting primarily from production problems encountered as a result of
defective adhesion materials purchased from one of its suppliers. In
the Specialty Adhesives Segment, performance was adversely affected
principally by the Ensolite Sale and the impact of the Firestone
Agreement for all of Fiscal 1996. See "Item 1. Business - Business
Segments - Specialty Adhesives - General."
Income before interest, reorganization items, income taxes and
extraordinary item for the High Performance Plastics Segment decreased
in Fiscal 1996 to $7.0 million from $13.0 million approximately in
Fiscal 1995 primarily as a result of higher MMA costs on average and an
$808,000 charge incurred for estimated back pay and retraining costs in
connection with the settlement of a strike at the Polycast Division's
Stamford, Connecticut facility and a temporary decline in manufacturing
efficiency at such facility during Fiscal 1996 as a result of the
required retraining of employees returning from the strike. In
addition, the Royalite Division incurred approximately $560,000 in
consulting fees for production and reengineering studies relating to
its Warsaw, Indiana facility and certain additional costs in connection
with the implementation of improved quality standards, training and
support programs for employees and a more efficient manufacturing
process at such facility.
The Coated Fabrics Segment's loss before interest,
reorganization items, income taxes and extraordinary item increased in
Fiscal 1996 to approximately $19.0 million from a loss of approximately
$4.9 million in Fiscal 1995. In Fiscal 1996 the Company established
reserves totalling approximately $12.5 million related to its decision
to exit the Port Clinton, Ohio automotive operation. The automotive
products business incurred operating losses of approximately $7.6
million (before consideration of reserves totalling $12.5 million
described above) and $5.5 million in Fiscal 1996 and 1995,
respectively. In addition, the increased losss resulted from decreased
sales of instrument panels for a transplant automotive customer as a
result of defective adhesion materials provided by one of the Company's
suppliers and the continued incurrence of fixed costs associated with
the operation of such facility at less than 50 percent (50%) of its
capacity as a result of the decreased sales caused by such defective
adhesion. While the production problems caused by such defective
materials have been satisfactorily resolved, the Port Clinton, Ohio
facility has continued to operate at significantly reduced levels as
the Company sought to recover the segment's lost automotive sales and
to expand the segment's sales in the automotive sector generally.
Income before interest, reorganization items, income taxes and
extraordinary item for the Specialty Adhesives Segment decreased in
Fiscal 1996 to $70,000 from approximately $2.1 million in Fiscal 1995.
This decrease resulted from decreased sales resulting principally from
the effect of the Ensolite Sale, the impact of reduced sales prices for
roofing adhesives under the Firestone Agreement and the effect on the
EPDM roofing adhesives market of severe winter weather conditions in
the Northeastern United States which caused delays in the commercial
roofing industry and increased costs at the Company's Mishawaka,
Indiana manufacturing facility resulting from general energy price
increases. Energy prices represent a significant cost of operating the
Mishawaka, Indiana facility. Due to its configuration and applicable
fire and safety regulations, the entire facility must be heated and lit
even though the Company's operations occupy less than 50 percent (50%)
of the facility. The Specialty Adhesives Segment will relocate its
operations from the Mishawaka, Indiana facility to its facility in
South Bend, Indiana during the first six months of Fiscal 1997. See
"Item 2. Properties, Note 2" and "Item 1. Business - Business Segments
- Specialty Adhesives - Manufacturing Facilities." The effects of these
items were partially offset by reduced costs of raw materials and an
approximately $2.1 million gain from the Ensolite Sale. The gain from
the Ensolite Sale is net of an approximately $4.3 million reserve
established in Fiscal 1996 for fixed asset write-offs, severance and
incentive packages for Ensolite employees to be terminated and facility
clean-up costs. In prior years, the Company established a relocation
reserve for its planned restructuring and move of the Specialty
Adhesives Segment. Management believes that such reserves are adequate
to cover the costs to be incurred in connection with the relocation of
the Specialty Adhesives Segments to the new plant at South Bend,
Indiana. See "Item 1. Business - Business Segments - Specialty
Adhesives - General."
Amortization of reorganization value in excess of amounts
allocable to identifiable assets in Fiscal 1996 decreased to $765,000
from $769,000 in Fiscal 1995. This decrease results from the write-off
of the assets transferred in connection with the Ensolite Sale.
Approximately $73,000 of miscellaneous income in Fiscal 1995
was not allocated to any segment of the Company's business. There were
no such unallocated amounts in Fiscal 1996.
Interest Expense. Interest expense in Fiscal 1996 decreased to
approximately $9.8 million from $10.0 million in Fiscal 1995 due to
interest income earned by the Company on the $5.0 million, 11.75
percent (11.75%) note issued to the Company by RBX, Inc. as part of the
purchase price of the Ensolite Sale. See "Item 1. Business - Business
Segments - Specialty Adhesives - General" and "Note 3 to Financial
Statements."
Income Tax Benefit. Income tax benefit in Fiscal 1996 was
approximately $8.1 million as compared to $189,000 in Fiscal 1995. The
provisions for income tax benefit were calculated by the Company
through use of the estimated income tax rates based upon its projected
annualized income.
Extraordinary Gain on the Extinguishment of Debt.
Extraordinary gain on the extinguishment of debt for Fiscal 1995 was
$363,000. This amount represents a gain recognized by the Company as a
result of open market purchases of approximately $7.5 million of face
amount of its Senior Secured Notes (see "Note 8 to Financial
Statements") net of the write-off of applicable debt issuance costs and
unamortized debt discount associated therewith and approximately
$310,000 of income taxes.
Comparison of Fiscal 1995 With Fiscal 1994
Net Sales. The Company's net sales increased in Fiscal 1995 by
approximately nine percent (9%) to approximately $215.0 million from
approximately $197.5 million in Fiscal 1994, as a result of increased
net sales in each of the Company's three business segments. Fiscal 1995
contained 52 weeks of operations as compared to 53 weeks of operations
in Fiscal 1994.
Net sales by the High Performance Plastics Segment increased
in Fiscal 1995 by approximately six percent (6%) to approximately
$112.2 million from approximately $105.5 million in Fiscal 1994. This
increase was primarily due to increased sales prices for both
Royalite(R) thermoplastic products and Polycast(R) acrylic products.
These increases were partially offset by decreased unit volume of
thermoplastic products generally. Total unit volume for the Royalite
Division decreased ten percent (10%), principally as a result of Fiscal
1995 decreases in sales of general purpose thermoplastic sheet and, to
a lesser extent, of specialty thermoplastic sheet. Overall unit volume
of sales of acrylic products in Fiscal 1995 was comparable to Fiscal
1994.
The Coated Fabrics Segment's net sales increased in Fiscal
1995 approximately 14 percent (14%) to approximately $56.1 million from
approximately $49.2 million in Fiscal 1994, as a result of increased
sales prices for both Naugahyde(R) vinyl coated fabric products
generally and products sold to the automotive industry. This increase
was offset by decreased unit volume of Naugahyde(R) products generally.
Overall, the segment's unit volume in Fiscal 1995 increased six percent
(6%) compared to Fiscal 1994. Unit volume increased in products sold to
the automotive industry as a result of sales of laminated composite
products produced using new technology introduced at the Company's Port
Clinton, Ohio facility pursuant to the technical collaberation
agreement with Okamoto. See "Item 1. Business - Business Segment -
Coated Fabrics - General" For example, Honda commenced making purchase
of such laminated composites from the Company in 1995.
Net sales of the Specialty Adhesives Segment increased in
Fiscal 1995 by approximately nine percent (9%) to $46.7 million from
approximately $42.8 million in Fiscal 1994. This increase resulted
particularly from an increase in the segment's total unit volume. Such
increase in unit volume is attributable principally to a 27 percent
(27%) increase in unit volume of sales of liquid adhesives and sealants
for the EPDM roofing market as a result of sales to Firestone pursuant
to the Firestone Agreement. See "Item 1. Business - Business Segments
Specialty Adhesives." The increase in total unit volume was partially
offset by decreased sales prices of liquid adhesives and sealants under
the Firestone Agreement. Also contributing to the increase in net sales
were increases of unit volume and sales prices of Ensolite's foam
products. Ensolite unit volume increased four percent (4%) in Fiscal
1995.
(Loss) Income Before Interest, Reorganization Items, Income
Taxes and Extraordinary Item. Income before interest, reorganization
items, income taxes and extraordinary item for Fiscal 1995 was
approximately $9.5 million compared to approximately $15.4 million for
Fiscal 1994. This decrease was primarily due to gains recorded in
Fiscal 1994 of approximately $6.8 million and $1.2 million from the
recovery of pension expenses incurred in previous years pursuant to the
UPAC Settlement and from insurance settlements, respectively. See "Item
3. Litigation." In addition, after refining its estimate of the
restructuring reserve required in connection with the relocation of
certain manufacturing operations within its Mishawaka, Indiana
facility, the Company, in Fiscal 1994, reduced the reserve recorded in
a prior period by approximately $1.8 million to reflect the anticipated
reduced costs of such relocation. The original relocation plan assumed
these operations would be moved to a new facility. In Fiscal 1994,
management developed a plan to reconfigure the existing facility to
improve efficiencies, and, therefore, reduced the reserve to reflect
the revised plan. Excluding these nonrecurring gains in Fiscal 1994 and
a $70,000 nonrecurring gain in Fiscal 1995, operating income would have
increased $3.8 million. This increase is primarily due to increased
sales and improved margins which were partially offset by an increase
in excess facility expenses at the Company's facility in Mishawaka,
Indiana. As a result of the present configuration of such plant, the
Company incurs the cost of heating and lighting the entire facility
even though the Company occupies less than 50 percent (50%) of the
facility.
The High Performance Plastics Segment's income before
interest, reorganization items, income taxes and extraordinary item for
Fiscal 1995 increased to approximately $13.0 million from $9.2 million
in Fiscal 1994. This increase was principally due to an increase in net
sales of and improved margins on, Royalite products and Polycast
products. During the third quarter of Fiscal 1994, the Teamsters, which
represent the hourly wage workers at the Acrylic Products Division's
Stamford, Connecticut facility, went on strike. As a result,
productivity at such facility decreased, causing reduced margins on
acrylic products produced at such manufacturing facility. During Fiscal
1995, the division made significant improvements in productivity and
produced acrylic sheet at pre-strike productivity levels. The strike
was settled during Fiscal 1996. See "Item 3. Litigation."
The Coated Fabrics Segment's loss before interest,
reorganization items, income taxes and extraordinary item marginally
increased in Fiscal 1995 to approximately $4.9 million from $4.8
million in Fiscal 1994. Although such segment's net sales increased,
such increase was offset by decreased margins caused by increased
production costs resulting from increased raw material costs and
production problems encountered in the manufacturing of certain coated
fabrics for an automotive customer stemming from certain equipment
failure at the Company's Port Clinton, Ohio facility which has been
remedied.
The Specialty Adhesives Segment's income before interest,
reorganization items, income taxes and extraordinary item decreased in
Fiscal 1995 to approximately $2.1 million from $4.1 million in Fiscal
1994. The effect of the increase in net sales was offset by margin
decreases caused by reduced sales prices for product under the
Firestone Agreement. See "Item 1. Business - Business Segments -
Specialty Adhesives - Marketing and Competition." Also contributing to
the decrease was an increase in certain excess facility expenses
associated with the operation of the Company's Mishawaka, Indiana
leased facility. See "Item 2. Properties" and "Item 1. Business -
Business Segments - Specialty Adhesives - Manufacturing Facilities." In
previous years, the excess facility costs were charged to reserves
established in connection with the Plan of Reorganization. See "Item 1.
Business - History of the Company." In addition, during Fiscal 1994 the
restructuring reserve recorded in prior periods was reduced by
approximately $1.8 million as the Company refined its estimate of the
costs associated with relocating the segment's manufacturing
operations.
Amortization of reorganization value in excess of amounts
allocable to identifiable assets in Fiscal 1995 decreased to $769,000
from approximately $1.0 million in Fiscal 1994. The decrease is due to
adjustments made to reorganization value in excess of amounts allocable
to identifiable assets in Fiscal 1994.
Not allocated to any of the Company's business segments in
Fiscal 1995 was approximately $70,000 of miscellaneous income. Also,
the gains of approximately $70,000 and approximately $1.2 million
resulting from the settlement of certain environmental claims with
insurance companies recorded during Fiscal 1995 and Fiscal 1994,
respectively, and the gain of approximately $6.8 million from the UPAC
Settlement recorded during Fiscal 1994 were unallocated to any segment.
Interest Expense. Interest expense in Fiscal 1995 marginally
decreased to $10.0 million from $10.1 million in Fiscal 1994. This
decrease resulted primarily from reduced total interest expense on the
Company's Senior Secured Notes as a result of the Company's open market
purchases of $7.5 million of face amount of Senior Secured Notes during
Fiscal 1995. See "Note 8 to Financial Statements." This decrease was
partially offset by increased interest expense on capitalized lease
obligations incurred in the last two quarters of Fiscal 1994 and during
Fiscal 1995 and increased borrowings by the Company under its revolving
line of credit agreement during the last two quarters of Fiscal 1995.
See "Note 8 to Financial Statements."
Income Tax Benefit (Expense). Income tax benefit in Fiscal
1995 was $189,000 as compared to an income tax expense of approximately
$2.2 million in Fiscal 1994. The provisions for income tax benefit
(expense) were calculated through the use of estimated income tax rates
based on annualized income.
Extraordinary Gain on the Extinguishment of Debt.
Extraordinary gain on the extinguishment of debt in Fiscal 1995 was
$363,000. This amount represents the gain recognized as a result of the
Company's acquisition of approximately $7.5 million of face amount of
its Senior Secured Notes net of the write-off of applicable debt
issuance costs and unamortized debt discount and approximately $310,000
of income taxes. Extraordinary gain on the extinguishment of debt for
Fiscal 1994 was $727,000. This amount represents a gain in the amount
of $2.2 million on the early retirement of a $10 million note issued by
the Company pursuant to the Reorganization Plan and payable to the
PBGC, less applicable professional fees, expenses and income taxes. See
"Note 8 to Financial Statements."
Liquidity and Capital Resources
For Fiscal 1996, the Company's operations used approximately
$3.8 million of cash as compared to approximately $6.4 million provided
during Fiscal 1995. This increase in cash used in operations for Fiscal
1996 resulted primarily from increased net losses, trade accounts
receivable and inventories and was partially offset by the timing of
payments of trade accounts payable and increases in other liabilities
resulting from the establishment of reserves in connection with the
Ensolite Sale.
Net cash provided by investing activities of the Company in
Fiscal 1996 was approximately $10.5 million as compared to
approximately $7.4 million used during Fiscal 1995. Approximately $19.6
million of such cash was provided from the Ensolite Sale. The primary
use of cash during Fiscal 1996 and Fiscal 1995 was to purchase
property, plant and equipment. The Company used approximately $1.8
million to purchase the facility located in South Bend, Indiana. See
"Item 1. Business - Corporate Developments." The Company does not have
any significant specific commitments for the purchase of property,
plant and equipment.
Net cash used in financing activities was $4.9 million during
Fiscal 1996 as compared to approximately $3.0 million used during
Fiscal 1995. Cash was used during Fiscal 1996 to repay the Company's
obligation under its revolving credit agreement. See "Note 8 to
Financial Statements." At September 29, 1996 the Company did not have
any borrowings outstanding under this agreement. The principal use of
cash during Fiscal 1995 was to purchase on the open market
approximately $7.5 million of face value of the Company's Senior
Secured Notes. See "Note 8 to Financial Statements."
The Company on September 29, 1996, had approximately $2.0
million in cash and cash equivalents as compared to approximately
$291,000 at October 1, 1995. Working capital at September 29, 1996 was
approximately $29.1 million compared to approximately $31.3 million at
October 1, 1995. The Company had short-term borrowings of approximately
$3.8 million under a $15 million revolving credit agreement at October
1, 1995. The Company had no outstanding borrowings under its $25
million revolving credit agreement at September 29, 1996. See "Note 8
to Financial Statements."
The Company believes that cash from its operations and its
ability to borrow under the revolving credit facility mentioned above
provide it sufficient liquidity to finance its existing level of
operations and meet its debt service obligations. However, there can be
no assurance that the Company's operations together with amounts
available under the revolving credit facility will continue to be
sufficient to finance its existing level of operations and meet its
debt service obligations. The Company's ability to meet its debt
service and other obligations depends on its future performance, which
in turn, is subject to general economic conditions and to financial,
business and other factors, including factors beyond the Company's
control. If the Company is unable to generate sufficient cash flow from
operations, it may be required to refinance all or a portion of its
existing debt or obtain additional financing. There can be no assurance
that the Company will be able to obtain such refinancing or additional
financing.
Effects of Inflation
The markets in which the Company sells products are
competitive. In particular, the Company has encountered in connection
with its sales of coated fabrics to the automotive industry and its
sales of acrylics to the aerospace industry, effective resistance to
price increases generally. Thus, in an inflationary environment the
Company may not in all instances be able to pass through to consumers
general price increases in which event the Company's operations may be
materially impacted if such conditions were to occur. The Company has
not in the past been adversely impacted by general price inflation.
Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements on Page F-1.
Item 9. Changes in and Disagreements wit Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to the directors and executive officers of the
Company is incorporated herein by reference to the Company's definitive
proxy statement pursuant to Regulation 14A, which statement will be
filed not later than 120 days after the end of the fiscal year covered
by this Report.
Item 11. Executive Compensation
Information with respect to the directors and executive officers of the
Company is incorporated herein by reference to the Company's definitive
proxy statement pursuant to Regulation 14A, which statement will be
filed not later than 120 days after the end of the fiscal year covered
by this Report.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information with respect to the directors and executive officers of the
Company is incorporated herein by reference to the Company's definitive
proxy statement pursuant to Regulation 14A, which statement will be
filed not later than 120 days after the end of the fiscal year covered
by this Report.
Item 13. Certain Relationships and Related Transactions
Information with respect to the directors and executive officers of the
Company is incorporated herein by reference to the Company's definitive
proxy statement pursuant to Regulation 14A, which statement will be
filed not later than 120 days after the end of the fiscal year covered
by this Report.
Part IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
<TABLE>
<CAPTION>
<S> <C> <C>
(a) Financial Statements as of September 29, 1996, and October 1,
1995 and for the Years Ended September 29, 1996, October 1, 1995
and October 2, 1994:
Independent Auditors' Report F-2
Balance Sheets as of September 29, 1996 and October 1, 1995 F-3
Statements of Operations for the Years Ended September 29,
1996, October 1, 1995 and October 2, 1994 F-5
Statements of Changes in Stockholders' Equity for the Years
Ended September 29, 1996, October 1, 1995 and October 2, 1994 F-6
Statements of Cash Flows for the Years Ended September 29, 1996,
October 1, 1995 and October 2, 1994 F-7
Notes to Financial Statements F-9
(b) Financial Statement Schedule:
Independent Auditors' Report S-1
Schedule VIII - Valuation and Qualifying Accounts S-2
</TABLE>
<TABLE>
<S> <C>
(c) Exhibits:
2.1 Certificate of Ownership and Merger, dated June 7, 1993, of Polycast Technology Corporation, Uniroyal
Engineered Products, Inc., Uniroyal Adhesives and Sealants, Inc. and Ensolite, Inc. with the Company.
(8)
3.1 Amended and Restated Certificate of Incorporation of the Company as corrected by a Certificate of
Correction of the Amended and Restated Certificate of Incorporation of the Company. (1)
3.2 By-Laws of the Company, as amended to November 14, 1996.
4.1 Indenture, dated as of June 1, 1993, between the Company and The Bank of New York, as trustee. (8)
4.2 Warrant Agreement, dated as of June 1, 1993, between the Company and The Bank of New York, as warrant
agent. (8)
10.1 Asset Acquisition Agreement, dated as of September 27, 1992, among Old Polycast, Polycast and the
Company. (2)
10.2 Asset Acquisition Agreement, dated as of September 27, 1992, among Old UEP, UEP and the Company. (2)
10.3 Asset Acquisition Agreement, dated as of September 27, 1992, among Old Ensolite, Ensolite and the
Company. (2)
10.4 Asset Acquisition Agreement, dated as of September 27, 1992, among Old UAS, UAS and the Company. (2)
10.5 Asset Acquisition Agreement, dated as of September 27, 1992, between Plastics Support Corp. ("PSC")
and the Company. (2)
10.6 Asset Acquisition Agreement, dated as of September 27, 1992, among U.E. Systems, Inc., Ensolite and
the Company. (2)
10.7 Amended and Restated Employment Agreement, dated as of April 25, 1995, between Howard R. Curd and the
Company. (9)
10.8 Amended and Restated Employment Agreement, dated as of April 25, 1995, between Oliver J. Janney and
the Company. (9)
10.9 Amended and Restated Employment Agreement, dated as of April 25, 1995, between Robert L. Soran and the
Company. (9)
10.10 Amended and Restated Employment Agreement, dated as of April 25, 1995, between George J. Zulanas, Jr.
and the Company. (9)
10.11 Joint Stipulation Between the Debtors and the United States of America on Behalf of Its Agency, The
Internal Revenue Service, Regarding Treatment of Tax Claims. (3)
10.14 Supply Agreement, dated as of February 17, 1992, between Old Polycast and E.I. duPont de Nemours &
Company, Inc. assumed by ICI Acrylics Inc. (3)
10.15 Uniroyal Technology Corporation Employee Stock Ownership Plan. (4)
10.16 Amended and Restated Uniroyal Technology Corporation 1992 Stock Option Plan.
10.19 Registration Rights Agreement, dated September 27, 1992, between the PBGC and the Company. (2)
10.21 Settlement Agreement among Old Polycast, Old UAS, Old UEP, Old Ensolite and the Official
Retirees' Committee. (3)
10.22 Settlement Agreement and Stipulated Order among Old Polycast, Old UAS, Old UEP, Old Ensolite,
the United States of America, the State of Indiana and the State of Wisconsin. (3)
10.23 Plan Disbursing Agent Agreement, dated September 27,1992, among Old Polycast, Old UAS, Old UEP, Old
Ensolite and the Company. (2)
10.24 Technical Collaboration Agreement, dated June 20, 1988, between UPC and Okamoto Industries, Inc. (3)
10.25 Assignment of Technical Collaboration Agreement, among UPC, Old UEP, The Jesup Group, Inc. and Okamoto
Industries, Inc. (3)
10.26 Letter Amendment to Technical Collaboration Agreement, dated January 21, 1991, between Old UEP and
Okamoto Industries, Inc. (3)
10.27 Amendment No. 2 to Technical Collaboration Agreement, dated as of July 31, 1992, between Old UEP and
Okamoto Industries, Inc. (3)
10.28 Amended and Restated Uniroyal Technology Corporation 1992 Non-Qualified Stock Option Plan.
10.29 Agreement dated August 20, 1993 among the Company, UPAC, and the Official Committee of Unsecured
Creditors of UPAC.(7)
10.30 Settlement Agreement dated December 6, 1993 among the Company, UPAC, Jesup and the PBGC.(7)
10.34 Uniroyal Technology Corporation Deferred Compensation Plan Effective as of August 1, 1995. (10)
10.35 Split-Dollar Insurance Agreement dated as of August 15, 1995 by and between Uniroyal Technology
Corporation and Howard R. Curd. (11)
10.39 Financing Agreement dated as of June 5, 1996 by and between The CIT Group/Business Credit, Inc. and
Uniroyal Technology Corporation. (12)
10.40 Amended and Restated Uniroyal Technology Corporation 1994 Stock Option Plan.
10.41 Amended and Restated Uniroyal Technology Corporation 1995 Non-Qualified Stock Option Plan.
10.42 Asset Purchase Agreement between Rubatex Corporation and Uniroyal Technology Corporation, dated June
5, 1996. (13)
10.43 Amendment No. 3 to Technical Collaboration Agreement, dated March 1, 1996, between Uniroyal Technology
Corporation and Okamoto Industries, Inc.
10.44 Shareholder Rights Agreement, dated as of December 18, 1996, between Uniroyal Technology Corporation and
The Bank of New York, as rights agent. (14)
23.1 Independent Auditors' Consent
<FN>
(1) Incorporated by reference to Amendment No. 2 to the Company's Registration Statement on Form 10, dated
September 25, 1992.
(2) Incorporated by reference to Amendment No. 4 to the Company's Registration Statement on Form 10, dated
October 1, 1992.
(3) Incorporated by reference to the Company's Amendment No. 1 to the Company's Registration Statement on
Form 10, dated September 17, 1992.
(4) Incorporated by reference to the Company's Form 10-K, dated December 24, 1992.
(5) Incorporated by reference to the Company's Registration Statement on Form 10, dated July 28, 1992.
(6) Incorporated by reference to the Company's Form 10-K/A, dated May 26, 1993.
(7) Incorporated by reference to the Company's Form 10-K, dated December 17, 1993.
(8) Incorporated by reference to the Company's Form 8-K, dated June 9, 1993.
(9) Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended April 2, 1995.
(10) Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended July 2, 1995.
(11) Incorporated by reference to the Company's Form 10-Q dated August 14, 1995. Virtually identical
agreements were entered into between the Company and each of Robert L. Soran, George J. Zulanas, Jr.,
Oliver J. Janney and Martin J. Gutfreund.
(12) Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1996
filed August 13, 1996.
(13) Incorporated by reference to the Company's Form 8-K, dated June 10, 1996.
(14) Incorporated by reference to the Company's Registration Statement on Form 8-A,
dated December 20, 1996.
</FN>
(d) Reports on Form 8-K:
No reports on Form 8-K were filed during the last quarter of
Fiscal 1996.
</TABLE>
<PAGE>
Item 8. Financial Statements and Supplementary Data.
<TABLE>
<CAPTION>
Index to Financial Statements
Financial Statements as of September 29, 1996 and October 1, 1995 and
for the Years Ended September 29, 1996, October 1, 1995 and October 2, 1994:
<S> <C>
Independent Auditors' Report F-2
Balance Sheets as of September 29, 1996 and October 1, 1995 F-3
Statements of Operations for the Years Ended September 29, 1996,
October 1, 1995 and October 2, F-5
Statements of Changes in Stockholders' Equity for the Years
Ended September 29, 1996, October 1, 1995 and October 2, 1994 F-6
Statements of Cash Flows for the Years Ended September 29, 1996,
October 1, 1995 and October 2, 1994 F-7
Notes to Financial Statements F-9
Financial Statement Schedule:
Independent Auditors' Report S-1
Schedule VIII - Valuation and Qualifying Accounts S-2
Schedules Omitted - Certain other schedules have been omitted
because they are not required or because the information
required therein has been included in Notes to the Financial
Statements.
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Uniroyal Technology Corporation
Sarasota, Florida
We have audited the accompanying balance sheets of Uniroyal Technology
Corporation (the "Company") as of September 29, 1996 and October 1, 1995, and
the related statements of operations, changes in stockholders' equity and cash
flows for each of the three years in the period ended September 29, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of September 29,
1996 and October 1, 1995 and the results of its operations and its cash flows
for each of the three years in the period ended September 29, 1996, in
conformity with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, the Company adopted
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
during the year ended September 29, 1996.
/S/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
Tampa, Florida
December 20, 1996
<PAGE>
<TABLE>
<CAPTION>
UNIROYAL TECHNOLOGY CORPORATION
BALANCE SHEETS
(In thousands)
ASSETS
September 29, October 1,
1996 1995
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (including restricted cash
and cash equivalent of $764 at September 29, 1996) (Note 2) $ 2,023 $ 291
Trade accounts receivable (less estimated reserve for
doubtful accounts of $369 and $437, respectively) (Notes 2 and 8) 25,094 27,042
Inventories (Notes 2, 4 and 8) 33,170 32,632
Prepaid expenses and other current assets 1,507 1,903
Deferred income taxes (Notes 2 and 9) 7,408 6,541
---------- ----------
Total current assets 69,202 68,409
Property, plant and equipment - net (Notes 2, 5 and 8) 63,312 90,728
Property, plant and equipment held for sale (Notes 2 and 15) 11,504 -
Note receivable (Note 3) 5,000 -
Reorganization value in excess of amounts allocable to identifiable
assets - net (Note 2) 8,288 9,228
Deferred income taxes (Notes 2 and 9) 1,485 -
Other assets (Notes 6 and 8) 11,995 12,118
---------- ----------
TOTAL ASSETS $ 170,786 $ 180,483
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNIROYAL TECHNOLOGY CORPORATION
BALANCE SHEETS
(In thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 29, October 1,
1996 1995
------------- ------------
<S> <C> <C>
Current liabilities:
Current portion of long-term debt (Note 8) $ 659 $ 4,290
Trade accounts payable 16,549 16,686
Accrued expenses:
Compensation and benefits 10,166 8,145
Interest 2,861 2,930
Taxes, other than income 1,939 2,061
State income taxes 259 253
Other 7,621 2,752
----------- -----------
Total current liabilities 40,054 37,117
Long-term debt (Note 8) 72,116 72,473
Other liabilities (Note 7) 15,117 6,804
Deferred income taxes (Notes 2 and 9) - 6,420
----------- -----------
Total liabilities 127,287 122,814
----------- -----------
Commitments and contingencies (Note 12)
Stockholders' equity (Notes 8 and 10):
Preferred stock - par value $0.01; 1,000 shares authorized;
Series B - 35 shares issued and outstanding (redemption value
of $150,000 per share) 5,250 5,250
Common stock - par value $0.01; 35,000,000 shares authorized;
13,233,912 and 13,103,113 shares issued or to be issued,
respectively 133 131
Additional paid-in capital 52,517 52,331
Deficit (14,401) -
----------- -----------
43,499 57,712
Less treasury stock at cost - 50,843 and 52,369 shares, respectively - (43)
----------- -----------
Total stockholders' equity 43,499 57,669
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 170,786 $ 180,483
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
UNIROYAL TECHNOLOGY CORPORATION
STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
Fiscal Years Ended
-------------------------------------------------
September 29, October 1, October 2,
1996 1995 1994
------------ ------------ -----------
<S> <C> <C> <C>
Net sales $ 209,348 $ 214,951 $ 197,536
Costs, expenses and (other income):
Costs of goods sold 170,088 166,384 154,710
Selling and administrative 28,626 26,783 26,770
Amortization of reorganization value in excess of amounts
allocable to identifiable assets 765 769 1,003
Depreciation and other amortization 9,848 9,521 8,356
Excess facility expense 924 1,307 409
Reorganization professional fees subsequent to effective date 640 708 599
Gain on sale of division (Note 3) (2,102) - -
Loss on assets to be disposed of (Note 15) 12,500 - -
Strike settlement and training expense 808 - -
Recovery from insurance settlement (Note 13) - (70) (1,176)
Recovery of pension expense (Note 11) - - (6,761)
Reduction of restructuring reserve (Note 5) - - (1,788)
---------- ---------- ----------
(Loss) income before interest, income taxes
and extraordinary item (12,749) 9,549 15,414
Interest expense - net (9,773) (10,029) (10,109)
---------- ---------- ----------
(Loss) income before income taxes and extraordinary item (22,522) (480) 5,305
Income tax benefit (expense) (Notes 2 and 9) 8,121 189 (2,217)
---------- ---------- ----------
(Loss) income before extraordinary item (14,401) (291) 3,088
Extraordinary gain on the extinguishment of
debt - net (Note 8) - 363 727
---------- ---------- ----------
Net (loss) income $ (14,401) $ 72 $ 3,815
========== ========== ==========
(Loss) income per common share and common stock equivalent
(Notes 2 and 10)
Primary and fully diluted:
(Loss) income before extraordinary item $ (1.09) $ (0.02) $ 0.22
Extraordinary gain - 0.02 0.05
---------- ---------- ----------
Net (loss) income $ (1.09) $ 0.00 $ 0.27
========== ========== ==========
Average number of shares used in computation 13,167,466 14,507,605 14,317,298
========== ========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
UNIROYAL TECHNOLOGY CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
Preferred Stock Additional
-------------------- Common Paid-In Treasury Stockholders'
Series A Series B Stock Capital Deficit Stock Equity
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 26, 1993 $ 7,500 $ 7,500 $ 100 $ 40,845 $ (1,980) $ (29) $ 53,936
Common stock issued in
conjunction with Private
Placement - - 25 10,500 - - 10,525
Stock issuance costs - - - (775) - - (775)
Preferred stock repurchase
in conjunction with Private
Placement (7,500) (2,250) - (322) - - (10,072)
Common stock issued under
stock option plan - - - 7 - - 7
Amounts received pursuant
to Directors' stock option
plan - - - 111 - - 111
Purchase of treasury stock - - - - - (14) (14)
Stock dividends paid (Note 10) - - 5 1,830 (1,835) - -
Net income - - - - 3,815 - 3,815
-------- -------- -------- -------- -------- -------- --------
Balance at October 2, 1994 - 5,250 130 52,196 - (43) 57,533
Common stock issued under
stock option plans - - - 8 - - 8
Amounts received pursuant
to Directors' stock option plan - - - 56 - - 56
Stock dividends paid (Note 10) - - 1 71 (72) - -
Net income - - - - 72 - 72
-------- -------- -------- -------- -------- -------- --------
Balance at October 1, 1995 - 5,250 131 52,331 - (43) 57,669
Common stock issued under
stock option plans - - 1 20 - - 21
Common stock issued to
employee benefit plan - - 1 166 - 43 210
Stock dividends paid (Note 10) - - - - - - -
Net loss - - - - (14,401) - (14,401)
-------- -------- -------- -------- -------- -------- --------
Balance at September 29, 1996 $ - $ 5,250 $ 133 $ 52,517 $(14,401) $ - $ 43,499
======== ======== ======== ======== ======== ======== ========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNIROYAL TECHNOLOGY CORPORATION
STATEMENTS OF CASH FLOWS
(In thousands)
Fiscal Years Ended
-------------------------------------------------------
September 29, October 1, October 2,
1996 1995 1994
------------- ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $(14,401) $ 72 $ 3,815
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation and other amortization 9,848 9,521 8,356
Deferred tax (benefit) expense (8,904) (431) 2,053
(Recovery of) provision for doubtful accounts (6) (217) 38
Amortization of reorganization value in excess of
amounts allocable to identifiable assets 765 769 1,003
Amortization of Senior Secured Notes discount 100 92 85
Amortization of debt issuance costs 457 466 436
Reduction of restructuring reserve - - (1,788)
Gain on sale of division (2,102) - -
Loss on assets to be disposed of 12,500 - -
Extraordinary gain - (363) (727)
Other 106 299 370
Changes in assets and liabilities:
Increase in trade accounts receivable (1,858) (5,837) (2,175)
Increase in inventories (2,456) (2,995) (1,924)
(Increase) decrease in prepaid expenses and
other assets (359) 1,532 (2,167)
Increase in trade accounts payable 757 3,363 2,457
Increase (decrease) in accrued expenses 1,130 (773) (1,300)
Increase (decrease) in other liabilities 609 920 (1,503)
--------- ---------- ---------
Net cash (used in) provided by operating activities (3,814) 6,418 7,029
--------- ---------- ---------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (9,181) (7,422) (6,042)
Proceeds from sale of division 19,641 - -
Proceeds from sale of U.S. Treasury Notes - restricted - - 10,094
--------- --------- ---------
Net cash provided by (used in) investing activities 10,460 (7,422) 4,052
--------- --------- ---------
FINANCING ACTIVITIES:
Note retirement costs - - (823)
Repurchase of Senior Secured Notes - (6,223) -
Other(decrease) increase in debt, net (4,934) 3,261 (9,363)
Preferred stock redeemed - - (10,072)
Common stock issued - - 10,525
Stock options exercised 20 8 7
Purchases of treasury stock - - (14)
Common stock issuance costs - - (775)
--------- --------- ---------
Net cash used in financing activities (4,914) (2,954) (10,515)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 1,732 (3,958) 566
Cash and cash equivalents at beginning of year 291 4,249 3,683
--------- --------- ---------
Cash and cash equivalents at end of year $ 2,023 $ 291 $ 4,249
========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNIROYAL TECHNOLOGY CORPORATION
STATEMENTS OF CASH FLOWS
(Continued)
Supplemental Disclosures:
Payments for income taxes and interest expense were (in thousands):
Fiscal Years Ended
--------------------------------------------------------------
September 29, October 1, October 2,
1996 1995 1994
------------------- ----------------- ----------------
<S> <C> <C> <C>
Income tax payments $ 570 $ 155 $ 172
Interest payments 9,549 9,784 9,626
</TABLE>
The amounts shown as payment of debt is the net activity for the Company's
revolving loan and term loan facilities which includes draws and payments on the
revolving loan facilities during the periods shown. The following summarizes the
activity of these facilities (in thousands):
<TABLE>
<CAPTION>
Fiscal Years Ended
--------------------------------------------------------------
September 29, October 1, October 2,
1996 1995 1994
------------------- ----------------- ----------------
<S> <C> <C> <C>
Term loan payments $ - $ (500) $ (9,363)
(Decrease) increase in revolver loan balances (4,934) 3,761 -
--------- ------- --------
Other (decrease) increase in debt, net $ (4,934) $ 3,261 $ (9,363)
========= ======= ========
</TABLE>
The purchases of property, plant and equipment and the other increase (decrease)
in debt, net for the fiscal years ended September 29, 1996, October 1, 1995 and
October 2, 1994 do not include $846,000, $1,404,000 and $696,000, respectively,
related to property held under capitalized leases (Note 12).
Net cash used in financing activities for the fiscal years ended September 29,
1996, October 1, 1995 and October 2, 1994 do not include the dividends declared
on the Series A Preferred Stock or the Series B Preferred Stock since they were
paid with the issuance of 115,657, 125,588 and 495,403 shares, respectively, of
the Company's common stock (Note 10). Net cash used in financing activities for
the fiscal years ended October 1, 1995 and October 2, 1994 do not include 36,409
and 48,999 options purchased pursuant to the 1992 Non-Qualified Stock Option
Plan. No such options were purchased during the fiscal year ended September 29,
1996.
See notes to financial statements.
<PAGE>
UNIROYAL TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the Fiscal Years Ended September 29, 1996,
October 1, 1995 and October 2, 1994
1. THE COMPANY
Uniroyal Technology Corporation, a Delaware corporation, through its
operating divisions, Royalite Thermoplastics ("Royalite"), Polycast
Technology ("Polycast"), Uniroyal Engineered Products ("UEP"), and
Uniroyal Adhesives and Sealants ("UAS") (collectively, the "Company")
is engaged in the manufacture and sale of high performance plastics,
coated fabrics and specialty adhesives. During Fiscal 1996 the Company
sold substantially all the assets, net of certain liabilities, of its
Ensolite closed cell foam division (Note 3).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year End
The Company's fiscal year ends on the Sunday following the last Friday
in September. The dates on which the fiscal year ended for the past
three fiscal years were September 29, 1996, October 1, 1995 and October
2, 1994. Fiscal 1996 and Fiscal 1995 were 52-week periods and Fiscal
1994 was a 53-week period.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents includes all highly liquid investments
purchased with an original maturity of three months or less. Restricted
cash and cash equivalents are the net proceeds from the sale of the
Ensolite division placed in escrow in accordance with the terms of the
indenture agreement for the Company's Senior Secured Notes (Notes 3 and
8).
Fair Value of Financial Instruments
The estimated fair value of amounts reported in the financial
statements have been determined using available market information and
valuation methodologies, as applicable. The carrying value of all
current assets and liabilities approximates the fair value because of
their short term nature.
Trade Accounts Receivable
The Company grants credit to its customers generally in the form of
short-term trade accounts receivable. The creditworthiness of customers
is evaluated prior to the sale of inventory. There are no significant
concentrations of credit risk to the Company.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using a monthly average basis for raw materials and supplies
and the first-in, first-out ("FIFO") basis of accounting or standard
costs (which approximates actual costs) for work in process and
finished goods.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. The cost of property,
plant and equipment held under capital leases is equal to the lower of
the net present value of the minimum lease payments or the fair value
of the leased asset at the inception of the lease. Depreciation is
computed principally under the straight-line method based on the cost
and estimated useful lives of the related assets including assets held
under capital leases.
During March 1995 the Financial Accounting Standards Board adopted
Statement of Financial Accounting Standards No. 121 ("SFAS No.121"),
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of. SFAS No. 121 establishes accounting standards
for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used
for long-lived assets and certain identifiable intangibles to be
disposed of. In accordance with SFAS No. 121, during the fiscal year
ended September 29, 1996 the Company established reserves totalling
approximately $12,500,000 related to its decision to exit the Port
Clinton, Ohio automotive operation of the Coated Fabrics Segment. See
Note 15. Other than the establishment of these reserves the adoption of
SFAS No. 121 did not have a significant effect on the Company's
financial statements.
Property, Plant and Equipment Held for Sale
Property, plant and equipment held for sale is stated at the lower of
cost or market.
Amortization
Debt discount and debt issuance costs are amortized using the interest
method over the life of the related debt. Patents and trademarks are
being amortized using the straight-line method over periods ranging
from 7 to 20 years. Reorganization value in excess of amounts allocable
to identifiable assets is amortized on a straight-line basis over 15
years. Reorganization value in excess of amounts allocable to
identifiable assets is reported net of accumulated amortization of
$3,251,000 and $2,486,000 at September 29, 1996 and October 1, 1995,
respectively.
Research and Development Expenses
Research and development expenditures are expensed as incurred.
Research and development expenditures were $4,918,000, $4,689,000 and
$4,021,000 for the fiscal years ended September 29, 1996, October 1,
1995 and October 2, 1994, respectively.
Employee Compensation
The cost of post-retirement benefits other than pensions are recognized
in the financial statements over an employee's term of service with the
Company.
Income Taxes
The Company utilizes the asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred income
taxes are recognized for the tax consequences of "temporary
differences" by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying
amounts and the tax basis of existing assets and liabilities. The
effect on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment date.
The Company has recorded a net deferred tax asset of approximately
$8,893,000. Realization is dependent on generating sufficient taxable
income prior to expiration of the loss carryforwards. Although
realization is not assured, management believes it is more likely than
not that all of the deferred tax asset will be realized. The amount of
the deferred tax asset considered realizable, however, could be reduced
in the near term if estimates of future taxable income during the
carryforward period are reduced.
Net (Loss) Income Per Common Share
Primary and fully diluted loss per common share for the fiscal year
ended September 29, 1996 do not include the assumed conversion of the
Series B Preferred Stock nor the exercise of the warrants and the
employee stock options since their inclusion would have been
anti-dilutive. The computations of primary and fully diluted income per
common share for the fiscal years ended October 1, 1995 and October 2,
1994 are based on the weighted average number of common shares issued
and outstanding (or to be issued pursuant to the Plan, as defined in
Note 12) less the average number of shares held in treasury for the
period and also include the assumed conversion of the Series B
Preferred Stock and the exercise of all stock options and warrants
having exercise prices less than the average market price of the common
stock using the treasury stock method. The convertible preferred stock
issued to the Pension Benefit Guaranty Corporation ("PBGC"), the
warrants and stock options are considered to be common stock
equivalents.
Reclassifications
Certain prior years' amounts have been reclassified to conform with the
current year's presentation.
3. SALE OF ENSOLITE DIVISION
Pursuant to an asset purchase agreement, the Company sold on June 10,
1996 substantially all the assets net of certain liabilities of its
Ensolite closed-cell foam division to Rubatex Corporation ("Rubatex")
for $25,000,000 consisting of cash in the amount of $20,000,000 and a
promissory note of the parent of Rubatex in the amount of $5,000,000
(the "Ensolite Sale"). Interest on the promissory note is payable
semi-annually at 11.75% per annum. The promissory note matures on May
1, 2006. Cash proceeds from the sale were used to pay off the Company's
borrowings under its revolving credit agreement. The remaining cash
proceeds, net of amounts placed in escrow in accordance with the
Company's indenture agreement for the Senior Secured Notes, were
invested in short-term highly liquid investments. The Company
recognized a pre-tax gain on the sale of approximately $2,102,000 net
of transaction costs, the write-down of certain fixed assets not
acquired by Rubatex and after consideration of reserves for severance
and incentive packages for Ensolite employees, facility clean-up costs
and the recognition of Ensolite's pro rata share of the Company's
transition obligation, net of a curtailment gain of $664,000 in
accordance with Statement of Financial Accounts Standards No. 106,
Employer's Accounting for Postretirement Benefits Other Than Pensions
("SFAS No. 106"). In connection with the Ensolite Sale Rubatex received
an option to purchase certain additional equipment housed at the
Company's Mishawaka, Indiana manufacturing facility for $250,000 which
it exercised in November 1996. The purchase price was adjusted for
changes in working capital, as defined in the asset purchase agreement,
between October 1, 1995 and June 10, 1996. The change in working
capital resulted in additional proceeds and select assets paid to the
Company by Rubatex of approximately $700,000. Such amount has been
included in the pre-tax gain on sale. The Company and Rubatex also
entered into an earn-out agreement whereby the Company could earn
between $.15 and $.20 per board foot of Ensolite products produced by
Rubatex in excess of the base volume as defined in such agreement
during each of the four year periods following the closing of the
Ensolite Sale. In no event will the total amount earned by the Company
under the earn-out agreement during the forty-eight month period
following the closing of the sale exceed $3,000,000.
In conjunction with the Ensolite Sale, the Company entered into a toll
manufacturing agreement with Rubatex. The Company is producing Ensolite
products for the benefit of Rubatex at its leased Mishawaka, Indiana
manufacturing facility for an initial period of approximately twelve
months, and in no event beyond July 31, 1997. The Company is being
reimbursed by Rubatex for the variable costs incurred in the production
of Ensolite products and is being paid a fixed amount for manufacturing
period costs based on actual costs incurred by the Company during
Fiscal 1995 and adjusted for inflation. In addition the Company
provides certain support services to Rubatex and is reimbursed by
Rubatex for the costs of such services.
4. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 29, October 1,
1996 1995
------------------ -----------------
<S> <C> <C>
Raw materials and supplies $ 17,058 $ 14,926
Work in process 4,400 5,253
Finished goods 11,712 12,453
--------- ---------
Total $ 33,170 $ 32,632
========= =========
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in
thousands):
<TABLE>
<CAPTION>
Estimated
Useful September 29, October 1,
Lives 1996 1995
---------------- ------------------ ----------------
<S> <C> <C> <C>
Land and improvements - $ 5,014 $ 5,358
Buildings and improvements 3-40 years 16,083 19,025
Machinery, equipment and office
furnishings 3-15 years 57,170 85,097
Construction in progress - 7,412 5,959
--------- --------
85,679 115,439
Accumulated depreciation (22,367) (24,711)
--------- --------
Total $ 63,312 $ 90,728
========= ========
</TABLE>
On July 17, 1996 the Company acquired a manufacturing facility in South
Bend, Indiana for a purchase price of approximately $1,800,000 in cash.
This facility will house the Company's UAS division and the Royalite
division's headquarters as well as certain other Company operations.
The Company plans to move all these operations from their existing
leased facility in Mishawaka, Indiana during the first six months of
Fiscal 1997.
In prior years the Company had established reserves for the estimated
costs for asset write-offs, property clean-up costs and relocation
costs associated with the Company's move of its UAS division. The
reserves totaled $1,658,000 as of September 29, 1996. Such amounts are
classified as current and are included in other accrued expenses in the
accompanying financial statements.
<PAGE>
6. OTHER ASSETS
Other assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 29, October 1,
1996 1995
----------------- ----------------
<S> <C> <C>
Patents and trademarks $ 5,322 $ 6,457
Debt issuance costs 4,110 4,425
Other 2,563 1,236
-------- ---------
Total $ 11,995 $ 12,118
======== =========
</TABLE>
Patents and trademarks are reported net of accumulated amortization of
$2,142,000 and $1,776,000 at September 29, 1996 and October 1, 1995,
respectively. During the fiscal year ended October 1, 1995 the Company
wrote off $466,000 of debt issuance costs in connection with the
acquisition of $7,497,000 of face value of the Company's Senior Secured
Notes (Note 8). During the fiscal year ended October 2, 1994 the
Company wrote off $228,000 of debt issuance costs related to the PBGC
debt retirement (Note 8). Debt issuance costs are shown net of
accumulated amortization of $1,502,000 and $1,045,000 at September 29,
1996 and October 1, 1995, respectively.
7. OTHER LIABILITIES
Other liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 29, October 1,
1996 1995
------------------ ----------------
<S> <C> <C>
Accrued retirement benefits $ 13,639 $ 5,058
Taxes, other than income 1,478 1,746
-------- --------
Total $ 15,117 $ 6,804
======== ========
</TABLE>
8. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 29, October 1,
1996 1995
----------------- ----------------
<S> <C> <C>
11.75% Senior Secured Notes, principal due June 1, 2003,
interest due semi-annually on December 1 and June 1 $ 72,503 $ 72,503
Revolving credit agreement - 3,761
Unamortized debt discount (1,130) (1,230)
--------- ---------
71,373 75,034
Other obligations 1,402 1,729
--------- ---------
72,775 76,763
Less current portion (659) (4,290)
--------- ---------
Long-term debt $ 72,116 $ 72,473
========= =========
</TABLE>
Debt amounts become due during subsequent fiscal years ending in
September as follows (in thousands):
<TABLE>
<S> <C>
1997 $ 659
1998 450
1999 161
2000 118
2001 14
Subsequent years 72,503
Less unamortized debt discount (1,130)
--------
72,775
Less current portion (659)
--------
Total $ 72,116
========
</TABLE>
<PAGE>
Prior to Fiscal 1994, the Company consummated a public offering of
80,000 units, consisting of $80,000,000 aggregate principal amount of
its 11.75% Senior Secured Notes Due 2003 ("Senior Secured Notes") and
warrants to purchase an aggregate of 800,000 shares of its common
stock. The warrants issued with the Senior Secured Notes are detachable
and therefore were allocated a portion of the proceeds in the amount of
approximately $1,566,000 which was an estimate of their market value at
the time they were issued. The proceeds allocated to the notes were
approximately $78,434,000 resulting in a note discount of $1,566,000,
which is being amortized using the interest method. The effective
interest rate of the notes based on the allocated proceeds was
calculated to be approximately 12.09%. The notes will mature on June 1,
2003. Interest is payable on June 1 and December 1 of each year at the
rate of 11.75% per annum. The notes are collateralized by a lien on
substantially all of the non-cash assets of the Company (other than
trade accounts receivable) and net cash proceeds of the sale of
collateral. The notes are redeemable at the option of the Company, in
whole or in part, on or after June 1, 1998, at 104.41% of the principal
amount, declining to par on and after June 1, 2001. The indenture
contains certain covenants which limit, among other things, the
Company's ability to incur additional debt, pay cash dividends, make
certain other payments, sell its assets, and redeem its capital stock.
The Company was in compliance with these covenants at September 29,
1996 and October 1, 1995.
During the fiscal year ended October 1, 1995 the Company acquired
$7,497,000 of face value of the Senior Secured Notes through open
market purchases. These purchases resulted in an extraordinary gain
(net of the write-off of applicable debt issuance costs, unamortized
debt discount and other transaction costs totaling $601,000, and net of
applicable income taxes of $310,000) of approximately $363,000. The
Company did not acquire any such notes during the fiscal years ended
September 29, 1996 and October 2, 1994.
On June 5, 1996, the Company entered into a revolving credit agreement
with The CIT Group/Business Credit Inc., pursuant to which, subject to
the satisfaction of certain borrowing conditions, the Company may
borrow the lesser of $25,000,000 or 85% of eligible accounts receivable
but in no event at any time more than 75% of the Company's Accounts, as
defined in the agreement, determined in accordance with generally
accepted accounting principles. Interest is payable monthly at prime
plus .5% per annum or at the LIBOR rate plus 2.75% if the Company
elects to borrow funds under a LIBOR Loan as defined in the agreement.
The loan matures on June 5, 2001. All of the Company's trade accounts
receivable are pledged as collateral for this loan. The agreement
restricts the creation of certain additional indebtedness. The Company
was in compliance with the covenants under this agreement at September
29, 1996. The Company repaid in full its obligations to Heller
Financial, Inc. with borrowings under this agreement. At September 29,
1996 the Company had approximately $19,727,000 available under the
revolving credit agreement. The Company had no outstanding borrowings
under this agreement at September 29, 1996.
On December 7, 1993, the Company repaid at a discount its remaining
obligation to the PBGC in the amount of $10,000,000 plus accrued
interest of $243,000 with a payment of $8,000,000. Concurrent with the
payment, the PBGC released its lien on the Company's $10,000,000
investment in U.S. Treasury Notes, which were sold and the proceeds
therefrom were used, in part, to make the repayment. A gain of $727,000
resulting from this transaction, net of applicable income tax of
$465,000 and certain expenses, including the write-off of loan costs of
$228,000, is shown in the accompanying financial statements as an
extraordinary item for the fiscal year ended October 2, 1994. In
addition to the forgiveness of debt, the PBGC also agreed to make
certain payments to the Company as a result of any recoveries the PBGC
receives on account of its claims against the estate of Uniroyal
Plastics Company, Inc. ("UPC") which is currently in liquidation
proceedings under Chapter 7 of the U.S. Bankruptcy Code and is an
affiliate of the Predecessor Companies, which are the predecessors of
the Company's current operating divisions. The Company acquired the
businesses of the Predecessor Companies in connection with the
consummation of their plan of reorganization (the "Plan") on September
27, 1992. The amount and timing of the recovery of additional amounts,
if any, cannot be estimated and are not included in the accompanying
financial statements.
The Company leases certain machinery and equipment under non-cancelable
capital leases which extend for varying periods up to 5 years. Other
obligations include remaining capitalized lease obligations of
$1,402,000 and $1,729,000 as of September 29, 1996 and October 1, 1995,
respectively (Note 12).
<PAGE>
9. INCOME TAXES
The effective tax rate differs from the statutory federal income tax
rate for the following reasons (in thousands):
<TABLE>
<CAPTION>
Fiscal Years Ended
---------------------------------------------------------
September 29, October 1, October 2,
1996 1995 1994
------------------ ---------------- ---------------
<S> <C> <C> <C>
Income tax calculated at the statutory
rate applied to income before income
tax $ (7,657) $ (163) $ 1,804
Increase (decrease) resulting from:
Exclusion of extraordinary gain
on the extinguishment of debt - 310 465
Amortization of reorganization value
in excess of amounts allocable to
identifiable assets 145 145 204
State income taxes (593) - -
Other (16) (171) 209
---------- ---------- ----------
Income tax (benefit) expense $ (8,121) $ 121 $ 2,682
========== ========== ==========
</TABLE>
Income tax (benefit) expense consisted of the following components (in
thousands):
<TABLE>
<CAPTION>
Fiscal Years Ended
---------------------------------------------------------
September 29, October 1, October 2,
1996 1995 1994
------------------ ----------------- --------------
<S> <C> <C> <C>
Current
Federal $ 118 $ - $ -
State 533 242 164
---------- ---------- ----------
Total $ 651 $ 242 $ 164
========== ========== ==========
Net deferred tax
(benefit) expense
Federal $ (7,647) $ (106) $ 2,195
State (1,125) (15) 323
---------- ---------- ----------
Total $ (8,772) $ (121) $ 2,518
========== ========== ==========
Total
Federal $ (7,529) $ (106) $ 2,195
State (592) 227 487
---------- ---------- ----------
Total $ (8,121) $ 121 $ 2,682
========== ========== ==========
</TABLE>
The total income tax expense of $121,000 and $2,682,000 for the fiscal
years ended October 1, 1995 and October 1, 1994, respectively, includes
an expense in the amount of $310,000 and $465,000, respectively,
applicable to the extraordinary item (Note 8).
<PAGE>
The components of the deferred tax assets and liabilities consisted of
the following (in thousands):
<TABLE>
<CAPTION>
September 29, 1996
-----------------------------------------------------------
Assets Liabilities Total
---------------- ------------------ -----------------
<S> <C> <C> <C>
Current
Accrued expenses deductible in future
period $ 7,408 $ - $ 7,408
========== ========== ==========
Non-Current
Acquired tax loss carryforward benefits $ 7,872 $ - $ 7,872
Net operating loss carryforward 4,906 - 4,906
Book basis in excess of tax basis of
assets - (7,931) (7,931)
Long-term accrual of expenses deductible
in future periods 4,510 - 4,510
Valuation allowance (7,872) - (7,872)
---------- ---------- ----------
Total $ 9,416 $ (7,931) $ 1,485
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
October 1, 1995
-----------------------------------------------------------
Assets Liabilities Total
---------------- ------------------ -----------------
<S> <C> <C> <C>
Current
Accrued expenses deductible in future
period $ 6,541 $ - $ 6,541
========== ========== ==========
Non-Current
Acquired tax loss carryforward benefits
$ 7,872 $ - $ 7,872
Net operating loss carryforward 6,395 - 6,395
Book basis in excess of tax basis of
assets - (12,815) (12,815)
Valuation allowance (7,872) - (7,872)
---------- ---------- ----------
Total $ 6,395 $ (12,815) $ (6,420)
========== ========== ==========
</TABLE>
The ultimate realization of the acquired tax loss carryforward benefits
is uncertain and subject to interpretation of the tax law as it applies
to the Company's bankruptcy reorganization.
The net operating and acquired tax loss carryforward benefits expire in
various years ending in 2010. The acquired tax loss carryforward
benefits consist of tax net operating loss carryforwards and pension
contribution deductions. The acquired net operating loss carryforwards
are subject to an annual limitation arising from the Company's
September 27, 1992 bankruptcy reorganization. The annual limitation on
utilization of the acquired benefits for tax purposes is approximately
$700,000 per year. Utilization of the acquired tax loss carryforward
benefits in future periods will be applied to reduce reorganization
value in excess of amounts allocable to identifiable assets.
10. STOCKHOLDERS' EQUITY
The Company's certificate of incorporation provides that the authorized
capital stock of the Company consists of 35,000,000 shares of common
stock and 1,000 shares of preferred stock, each having a par value of
$0.01 per share. At September 29, 1996, 13,002,595 shares of common
stock had been issued. Approximately 230,000 shares of common stock are
reserved for issuance pending resolution of disputed claims in the
bankruptcy proceedings (Note 12).
The holder of the Series B Preferred Stock is entitled to vote as a
separate class of shareholders for the purpose of electing one director
to the Board of Directors of the Company. A holder of Series B
Preferred Stock has no preemptive or preferential rights to purchase or
subscribe to any additional shares of capital stock except for the
conversion rights described below.
The Company has the right to redeem all or any portion of the Series B
Preferred Stock at any time following 30 days' notice to the holder of
such Preferred Stock by (a) paying $150,000 per share for each share of
Series B Preferred Stock that the Company, in its sole discretion,
elects to redeem; and (b) issuing all common stock dividends then
accrued but unpaid on the Preferred Stock to be redeemed. The Company
has the right, but no obligation, to redeem, at its option, any or all
whole or fractional shares of Preferred Stock. In the event of a
liquidation of the Company, the holder of the Preferred Stock will be
entitled to receive, following all distributions to creditors of the
Company required under Delaware law, a liquidation payment of $150,000
per share plus all accrued but unpaid dividends prior to any
distributions to common stockholders.
The holder of Series B Preferred Stock may require that the Company
convert all of its Series B Preferred Stock into common stock (a)
during a period commencing on November 1 and ending on the last
business day prior to November 30 of each year for so long as the
Series B Preferred Stock is outstanding (the "Series B Conversion
Period") or (b) during a 30-day period following notice by the Company
of its intention to exercise its redemption option with respect to the
Series B Preferred Stock (the "Series B Redemption Conversion Period").
Pursuant to the certificate of incorporation, the number of common
shares into which each share of Series B Preferred Stock is convertible
has been fixed at approximately 38,071 shares for the remaining
outstanding shares of Series B Preferred Stock.
On May 31, 1994, the Company issued 2,476,586 shares of the Company's
common stock (the "Private Placement") at a price of $4.25 per share
for aggregate proceeds of approximately $10,525,000. The net proceeds
after certain expenses totalling approximately $775,000 were
approximately $9,750,000 or $3.94 per share. The Company used these net
proceeds together with approximately $322,000 of the Company's cash on
hand to repurchase all of the outstanding shares (50 shares) of the
Company's Series A Preferred Stock and 15 of the 50 outstanding shares
of Series B Preferred Stock (aggregate redemption value of $9,750,000)
for an aggregate of approximately $10,072,000 representing a price of
$4.07 for the Underlying Common Stock. The excess redemption price of
$322,000 has been charged to additional paid-in capital. On December
16, 1996, the Company redeemed 15 shares of Series B Preferred Stock.
The holders of record of shares of common stock are entitled to receive
dividends when and as declared by the Board of Directors of the
Company, provided that the Company has funds legally available for the
payment of dividends and is not otherwise contractually restricted from
the payment of dividends. The Company's ability to pay cash dividends
on common stock currently is restricted by the indenture in connection
with the Senior Secured Notes.
Since September 1, 1992, the holder of shares of Series A Preferred
Stock and Series B Preferred Stock has been entitled to receive an
annual dividend equal to 8% of the redemption price for outstanding
shares of Series A Preferred Stock and Series B Preferred Stock, as
applicable, payable only in shares of common stock which number of
shares is based on the average of the last reported bid prices for the
30 calendar days preceding the declaration date. The Company has
declared such dividends, on a quarterly basis, since January 1, 1994,
and pays such dividends within 30 days after each such declaration. To
the extent that outstanding shares of Series A Preferred Stock and
Series B Preferred Stock were repurchased in connection with the
Private Placement, the PBGC agreed that no dividends of common stock
would accrue on such repurchased shares of preferred stock subsequent
to March 31, 1994. In connection with such repurchase the Company
agreed to issue to the PBGC shares of the Company's common stock in an
amount equal to the dividends that would have accrued on the shares
repurchased for a period of 30 days subsequent to March 31, 1994.
During the fiscal years ended September 29, 1996, October 1, 1995, and
October 2, 1994, the Company declared stock dividends of $420,000,
$420,000 and $2,069,000, respectively, resulting in the issuance of
115,657, 125,588 and 495,403 shares of common stock, respectively, at
an average price per common share of $3.63, $3.34 and $4.18,
respectively. The $420,000 of dividends declared during the fiscal year
ended September 29, 1996 were charged to additional paid-in capital. Of
the $420,000 of dividends declared during the fiscal year ended October
1, 1995, $72,000 were charged to retained earnings and the remaining
$348,000 was charged to additional paid-in capital. Of the $2,069,000
of dividends declared during the fiscal year ended October 2, 1994,
$1,835,000 were charged to retained earnings and the remaining $234,000
were charged to additional paid-in capital.
The dividend for the period July 1, 1996 through September 29, 1996 as
declared on October 1, 1996 was approximately $105,000, which resulted
in the issuance in October 1996 of 32,796 shares of common stock based
on a share price of $3.20.
On December 18, 1996, The Board designated a new series of preferred
stock of the Company termed Series C Participating Preferred Stock $.01
par value ("Series C Preferred") and reserved 500 shares of Series C
Preferred for issuance. At the same time, the Board declared a dividend
of a right to acquire 1/100,000 of a share of Series C Preferred to the
holder of each share of Common Stock (the "Rights") under the
Shareholders Rights Plan adopted on the same date. The Rights will
trade with the common stock and be detachable from the common stock and
exercisable only in the event of an acquistion of 15% or more of the
common stock by one party or a common group or a tender offer to
acquire 15% or more of the Common Stock.
<PAGE>
Warrants
The Company has 800,000 warrants outstanding to purchase an aggregate
of 800,000 shares of its Common Stock at a price equal to $4.375 per
share subject to adjustments under certain circumstances. All
outstanding warrants are exercisable at any time on or prior to June 1,
2003, at which time they will terminate and become void. The warrants
are detachable from the Senior Secured Notes and, therefore, were
allocated a portion of the proceeds of the sale of the Senior Secured
Notes and warrants in the amount of approximately $1,566,000, which was
their market value at the time they were issued. This amount was added
to additional paid-in capital. As of September 29, 1996 no warrants had
been exercised.
Stock Options
The Company has reserved 1,363,636 shares of common stock to be issued
and sold pursuant to the 1992 Stock Option Plan that was adopted by the
Company effective September 27, 1992. Generally, of the options under
this plan granted, 60% vested on May 1, 1994 and the remainder vested
on November 1, 1995. Vesting provisions for any additional options will
be determined by the Board of Directors of the Company at the time of
the grant of such options. The stock options are exercisable over a
period determined by the Board of Directors or its Option Committee,
but not longer than ten years after the date granted.
During the fiscal year ended September 26, 1993, the Company adopted
the 1992 Non-Qualified Stock Option Plan for non-officer directors.
This plan provides that directors who are not officers of the Company
are entitled to forego up to 100% of their annual retainer in exchange
for options to purchase the Company's common stock at an option price
of 50% of the market price of the underlying common stock at the date
of grant. The options are exercisable for a period of 10 years starting
with the date of the grant of each option. The plan provides for the
granting of stock options to purchase up to 150,000 shares of common
stock.
During the fiscal year ended October 2, 1994, the Company adopted the
1994 Stock Option Plan available for certain key employees of the
Company. The Company has reserved 800,000 shares of common stock to be
issued under this plan, provided that the aggregate number of options
that may be granted under the 1994 Stock Option Plan and all other
stock option plans of the Company for employees may not at any time
exceed in the aggregate 15% of the then currently authorized common
stock outstanding, on a fully diluted basis. Stock options granted
under this plan are exercisable until not later than January 1, 2004.
During the fiscal year ended September 29, 1996, the Company adopted
the 1995 Non-Qualified Stock Option Plan available for directors. Each
director is granted an option to purchase 10,000 shares of the
Company's common stock in the case of the initial grant and 5,000
shares for any subsequent grant. The initial grant occurred upon the
adoption of this plan. Options granted under this plan have a term of
three years and may be exercised nine months after the date of the
grant. This plan terminates on February 14, 2006.
Transactions in stock options under these plans are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Years Ended
-------------------------------------------------------------
September 29, October 1, October 2,
1996 1995 1994
---------------- ----------------- -----------------
<S> <C> <C> <C>
Options outstanding at beginning
of year 1,734 1,409 788
Options granted 96 421 641
Options exercised 7 3 2
Options canceled 29 93 18
----------- ---------- ----------
Options outstanding at end of year 1,794 1,734 1,409
=========== ========== ==========
Options exercisable at end of year 1,778 840 851
=========== ========== ==========
Option prices per share:
Granted $3.375 $1.69-$4.25 $1.75-$4.13
Exercised $2.75-$3.44 $2.75 $2.75-$3.44
Canceled $2.75-$4.13 $2.75-$4.13 $2.75-$4.13
</TABLE>
Approximately 570,000 options are available for grant under the
Company's stock option plans as of September 29, 1996.
In October 1995 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation ("SFAS No. 123"). SFAS No. 123 establishes a
fair value based method of accounting for stock-based compensation
plans, including stock option and stock purchase plans. It encourages
entities to adopt that method in place of the provisions of Accounting
Practice Bulletin No. 25, Accounting for Stock Issued to Employees, for
all arrangements under which employees receive shares of stock or other
equity instruments of the employer or the employer incurs liabilities
to employees in amounts based on the price of its stock. SFAS No. 123
also establishes fair value as the measurement basis for transactions
in which an entity acquires goods or services from nonemployees in
exchange for equity instruments. SFAS No. 123 is effective for fiscal
years beginning after December 15, 1995 and will become effective for
the Company beginning in Fiscal 1997. The adoption of SFAS No. 123 is
not expected to have a significant effect on the Company's results of
operations, cash flows or financial condition.
Employee Stock Ownership Plan
The Company has established the Uniroyal Technology Corporation
Employee Stock Ownership Plan (the "ESOP") effective September 27,
1992. The ESOP is a stock bonus plan intended to encourage eligible
employees to save for their retirement and to increase their
proprietary interest in the Company by accumulating the Company's
common stock. Eligible employees generally are all employees employed
by the Company on or after January 1, 1993, excluding executive
officers of the Company.
The Company made an initial contribution to the ESOP of 425,000 shares
of common stock. Future contributions by the Company are discretionary.
The initial contribution has been allocated to eligible employees of
the Company ratably based upon the respective compensation levels of
the eligible employees. Shares allocated to each participant account
under the ESOP become vested upon the participant's completion of three
years of cumulative service with the Company. The Company did not make
any contributions to the ESOP during the fiscal years ended September
29, 1996, October 1, 1995 and October 2, 1994. The Company did not have
any ESOP expense during the fiscal years ended September 29, 1996,
October 1, 1995 and October 2, 1994.
11. EMPLOYEE COMPENSATION
Retirement Plan
All salaried and non-union hourly employees and certain union employees
of the Predecessor Companies were covered by a retirement plan prior to
September 27, 1992. The PBGC approved the termination of the retirement
plan effective February 20, 1992. During the fiscal year ended October
2, 1994, the Company received approximately $6,761,000, net of certain
expenses, from the Uniroyal Plastics Acquisition Corp. ("UPAC") estate
related to a claim filed by the Company with the Bankruptcy Court
against the UPAC estate. The claim was filed to recover amounts paid by
the Company to the PBGC on behalf of UPAC. UPAC was an affiliate of the
Predecessor Companies. Such amount is shown as a recovery of pension
expense in the accompanying financial statements.
Post-retirement Health Care and Life Insurance Benefits
Certain retired employees are currently provided with specified health
care and life insurance benefits. Generally, the plan provides for
reimbursement of approved medical and prescription drug costs not fully
covered by Medicare. The plan also provides for certain deductibles and
co-payments. The life insurance benefits provide for amounts based upon
the retirees' compensation at the time of their retirement. Eligibility
requirements for such benefits vary by division, but generally provide
that benefits are available to employees who retire after a certain age
with specified years of service or a combined total of age and years of
service. The Company has the right to modify or terminate certain of
these benefits. The Company's policy is to pay the actual expenses
incurred by the retirees; the Company does not intend to fund any
amounts in excess of those obligations. The Company is also obligated
to provide benefits to certain salaried retirees of UPC or Uniroyal,
Inc. ("Uniroyal") (not affiliated with the Company) who are class
members under a federal district court order. In the Company Settlement
(Note 13), the Company and the Uniroyal Parties (Note 13), agreed to
share on a 35%-65% basis, respectively, the costs of providing medical,
prescription drug and life insurance benefits to these retirees. The
Company is further obligated to make payments to an administrative
corporation established to provide benefits to certain retirees of the
Predecessor Companies and UPC.
The Company adopted SFAS No. 106 as of September 27, 1992, which
requires that the cost of the foregoing benefits be recognized in the
Company's financial statements over an employee's service period with
the Company. The Company determined that the accumulated
post-retirement benefit obligation ("Transition Obligation") of these
plans upon adoption of SFAS No. 106 was $28,085,000. The Company
elected to defer the recognition of the Transition Obligation and
amortize it over the greater of the average remaining service period or
life expectancy period of the participants, which is expected to be
approximately 16 years. In connection with the Ensolite Sale (Note 3),
the Company recognized approximately $4,500,000 of the Transition
Obligation relating to this employee group as reduction to the gain on
the sale.
The following table summarizes the accumulated post-retirement and
benefit obligation included in the Company's balance sheets (in
thousands):
<TABLE>
<CAPTION>
September 29, October 1, 1995
1996
------------------ ----------------
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees $ 25,919 $ 26,731
Fully eligible active plan participants 4,836 4,554
Other active plan participants 2,904 4,302
Plan assets at fair value - -
Unrecognized prior service cost (290) (322)
Unamortized transition obligation (16,613) (22,819)
Unrecognized net loss (6,279) (8,123)
------------ ------------
Accrued post-retirement benefit obligation $ 10,477 $ 4,323
============ ============
</TABLE>
Not reflected in the above table is approximately $3,600,000 of the
Transition Obligation the Company recognized as of September 29, 1996
in connection with its decision to exit the Port Clinton, Ohio
automotive operation (Note 15).
The net periodic post-retirement benefit cost contains the following
components (in thousands):
<TABLE>
<CAPTION>
Fiscal Years Ended
-------------------------------------------------------
September 29, October 1, October 2,
1996 1995 1994
---------------- -------------- ----------------
<S> <C> <C> <C>
Service cost $ 205 $ 196 $ 196
Interest cost on projected benefit 2,366 2,202 2,202
obligation
Amortization of unrecognized transition
obligation 1,651 1,755 1,755
Amortization of net loss 362 140 140
---------- ---------- ---------
Net periodic post-retirement benefit cost $ 4,584 $ 4,293 $ 4,293
========== ========== =========
</TABLE>
All post-retirement benefits are based on actual costs incurred except
for a certain group of retirees which is covered under an agreement
providing payments based on the number of beneficiaries. For
measurement purposes, an approximately 7.6% annual rate of increase in
the cost of covered health care benefits was assumed for years one
through four, approximately 6.5% for years five through seven, and
approximately 5.5% thereafter. The health care cost trend rate
assumption has a significant effect on the amounts reported. For
example, increasing the health care trend rate by one percentage point
in each year would increase the accumulated post-retirement benefit
obligation as of September 29, 1996 by $3,265,000 and the net periodic
post-retirement benefit cost by $283,000.
The weighted average discount rate used in determining the accumulated
post-retirement benefit obligation and net periodic post-retirement
benefit cost was 7.75% for the fiscal year ended September 29, 1996 and
7.00% for the fiscal years ended October 1, 1995 and October 2, 1994.
Other Benefit Plans
The Royalite, UEP and UAS divisions provide additional retirement
benefits to substantially all of their employees and the Polycast
division provides such benefits to certain of its employees through two
defined contribution savings plans. The plans provide for employee
contributions and employer contributions to employee savings. Employer
contributions are generally either 2% of salaried and certain non-union
hourly participants' gross earnings or rates per hour ranging generally
from $.05 to $.51 based on years of service. The expenses pertaining to
these plans amounted to approximately $699,000, $670,000 and $608,000,
for the fiscal years ended in 1996, 1995 and 1994, respectively.
In addition, the Company provides a savings plan under Section 401(k)
of the Internal Revenue Code. The savings plan covers all eligible
salaried and non-union wage employees of the Company. The savings plan
allows all eligible employees to defer up to 15% of their income on a
pretax basis through contributions to the savings plan. For every
dollar an employee contributes the Company may contribute an amount
equal to 25% of each participant's before-tax obligation up to 6% of
the participant's compensation. Such employer contribution may be made
in cash or in Company common stock. The expenses pertaining to this
savings plan were approximately $228,000 and $174,000 for the fiscal
years ended 1996 and 1995. No expenses were incurred by the Company for
the fiscal year ended 1994. During Fiscal 1996 the Company contributed
60,648 shares of its common stock with a market value of approximately
$212,000 to the savings plan. The Company did not make any such
contributions during the fiscal years ended in 1995 and 1994.
12. COMMITMENTS AND CONTINGENCIES
Bankruptcy Proceedings
Notwithstanding the confirmation and effectiveness of the Plan, the
United States Bankruptcy Court for the Northern District of Indiana,
South Bend Division (the "Bankruptcy Court") continues to have
jurisdiction to, among other things, resolve disputed prepetition
claims and to resolve other matters that may arise in connection with
or relate to the Predecessor Companies' Plan. The Company has resolved,
through negotiation or through dismissal by the Bankruptcy Court,
approximately $38,000,000 in disputed claims. During Fiscal 1996,
pursuant to the Predecessor Companies' Plan, the Company distributed
1,061,998 shares of common stock reserved for the satisfaction of
disputed claims; a total of 9,768,683 such shares have been issued to
the holders of unsecured claims against the Predecessor Companies in
settlement of the allowed unsecured claims against the estates of the
Predecessor Companies and to the Company's ESOP. The Company retained
50,843 shares of common stock which are included in treasury stock. The
remaining shares are being held pending resolution of certain retiree
medical claims.
Litigation
Uniroyal Retiree Benefits, Inc. ("URBI"), an organization that is
unaffiliated with the Company, administers a medical, prescription drug
and life insurance program for certain retired employees of the
Predecessor Companies and certain affiliates of the Predecessor
Companies. This program is partially funded by the Company in
accordance with terms of an agreement entered into by and between the
predecessors of URBI and the Company in connection with the Predecessor
Companies' Plan. The Company has had disputes with URBI concerning the
eligibility of certain participants in URBI's medical plan and the
level of payments due. URBI had filed a complaint with the Bankruptcy
Court claiming the Company had breached its agreement relating to
funding URBl's operations. The Company filed counterclaims against URBI
claiming breach of contract, fraud, negligent misrepresentation, unjust
enrichment, declaratory judgment and clarification or reformation of
contract. The Bankruptcy Court ruled in favor of URBI with respect to
certain matters and in favor of the Company with respect to other
matters. The effect to the Company was a net judgment against the
Company of approximately $211,000. URBI filed an additional complaint
with the Bankruptcy Court concerning payments due in Fiscal 1996. The
Bankruptcy Court then ordered the Company to increase its monthly
payments to URBI to approximately $160,000 through September 1996 and
later ordered the Company to continue payments at that level through
January 1997. The Company filed an appeal of Bankruptcy Court's
December 20, 1995 ruling with the United States District Court for the
Northern District of Indiana, South Bend Division which is still
pending. The Company has agreed in principle with URBI to settle the
foregoing litigation on a level of funding to reflect URBI's current
program needs.
Approximately 130 hourly employees at the Company's acrylic sheet
manufacturing facility in Stamford, Connecticut are represented by
Teamsters Local 191, which is affiliated with the International
Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of
America (the "Teamsters"). The Teamsters declared a strike on July 11,
1994 and called off the strike December 10, 1994. The Company and
Teamsters settled their dispute in June 1996. The Company agreed to
settle the claim of the striking employees for back pay following the
receipt of release of claims from such employees. The Company settled
its obligation to the employees in August 1996 with a payment of
approximately $808,000, inclusive of employment taxes of $58,000.
The Company is also engaged in litigation arising in the ordinary
course of business. Management believes the ultimate outcome of such
litigation will not have a material adverse effect upon the Company's
results of operations, cash flows or financial position.
Environmental Factors
The Company is subject to a wide range of federal, state and local laws
and regulations designed to protect the environment and worker health
and safety. The Company's management emphasizes compliance with these
laws and regulations. The Company has instituted programs to provide
guidance and training and to audit compliance with environmental laws
and regulations at Company owned or leased facilities. The Company's
policy is to accrue environmental and cleanup-related costs of a
non-capital nature when it is probable both that a liability has been
incurred and that the amount can be reasonably estimated.
The Company may become subject to claims relating to certain
environmental matters. The operations of the Predecessor Companies and
certain of their affiliates produced waste materials that, prior to
1980, were disposed of at some 36 known unregulated sites throughout
the United States. After 1980, waste disposal was limited to sites
permitted under federal and state environmental laws and regulations.
If any of the disposal sites (unregulated or regulated) are found to be
releasing hazardous substances into the environment, under current
federal and state environmental laws, the companies that sent hazardous
waste materials to such sites could be subject to liability for cleanup
and containment costs.
Prior to the effective date of the Predecessor Companies' Plan several
sites were identified where there were potential liabilities for the
cost of environmental cleanup. In most instances, this potential
liability resulted from the alleged arrangement for the off-site
disposal of hazardous substances by Uniroyal, Inc.
Pursuant to a settlement agreement with the United States Environmental
Protection Agency ("EPA"), the United States Department of the Interior
and the States of Wisconsin and Indiana (the "EPA Settlement
Agreement"), entered into in connection with the Plan, the Predecessor
Companies compromised and settled (in exchange for common stock of the
Company) substantially all of the prepetition liabilities of the
Predecessor Companies and the Company relating to disposal activities
under Sections 106 and 107 of the Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA"), Section 3008 of the Resource
Conservation and Recovery Act ("RCRA") and similar state laws for
cleanup of the remaining unsettled 20 designated sites not owned by any
of the Predecessor Companies (the "Known Sites") and for natural
resource damages at 15 of the 20 Known Sites. Pursuant to the EPA
Settlement Agreement, the Predecessor Companies and the Company
received from the United States and the States of Indiana and Wisconsin
a covenant not to sue for response costs and, with the exception of
five Known Sites, natural resource damages at each of the Known Sites.
In addition, pursuant to Section 113(f)(2) of CERCLA, and as provided
under the EPA Settlement Agreement, the Predecessor Companies and the
Company will be protected against contribution claims filed by private
parties for any Known Site for matters covered by the EPA Settlement
Agreement. The EPA Settlement Agreement established a mechanism for the
Company to resolve its liability for any other sites, except those
owned by the Company (the "Additional Sites"), arising from prepetition
disposal activity. The Company also agreed to share with such
governmental parties the proceeds of claims relating to the Known Sites
made against certain insurers of the Predecessor Companies and their
affiliates.
In the event that the United States, or the State of Wisconsin or the
State of Indiana asserts a claim against any of the Predecessor
Companies or the Company for response costs associated with prepetition
disposal activities at any Additional Site, the governmental party will
be entitled to pursue its claim in the ordinary course, and the Company
and the Predecessor Companies will be entitled to assert all of their
defenses. However, if and when the Company or any of the Predecessor
Companies is held liable, and if the liability is determined to arise
from prepetition disposal activities, the Company or such Predecessor
Company may pay the claims in discounted "plan dollars" (the value of
the consideration that the party asserting such claim would have
received if the liability were treated as a general unsecured claim
under the Plan). Such payment may be made in cash or securities, or a
combination thereof, at the Company's or such Predecessor Company's
option. The Company is not aware of any material claims related to
Additional Sites.
Claims arising from real property owned by the Company are not affected
by the EPA Settlement Agreement. In connection with the acquisition of
a manufacturing facility in South Bend, Indiana, the Company assumed
costs of remediation of soil and ground water contamination which the
Company estimates will cost not more than $1,000,000 over a
five-to-seven-year period. The Company has placed $1,000,000 in an
escrow account to be used for such clean-up in accordance with the
terms of the purchase agreement.
The Company has established a reserve for cleanup costs, including
environmental remediation costs, related to the Ensolite Sale and the
Company's planned exit from its Mishawaka, Indiana leased manufacturing
facility. The Company estimates the cost for all such cleanup costs to
be approximately $610,000; however, the ultimate cost will depend on
the extent of contamination found as the project progresses. The
Company expects the clean-up to be substantially completed within one
year.
Based on information available as of September 29, 1996, the Company
believes that the costs of known environmental matters either have been
adequately provided for or are unlikely to have a material adverse
effect on the Company's operations, cash flows or financial position.
Leases
The Company is a party to non-cancelable lease agreements involving
equipment. The leases extend for varying periods up to 5 years and
generally provide for the payment of taxes, insurance and maintenance
by the lessee. Generally these leases have options to purchase at
varying dates.
The Company's property held under capitalized leases, included in
property, plant and equipment (Note 5) consists of the following (in
thousands):
<PAGE>
<TABLE>
<CAPTION>
September 29, October 1,
1996 1995
---------------- --------------
<S> <C> <C>
Machinery, equipment and office furnishing $ 1,445 $ 1,199
Construction in progress 969 969
Less accumulated amortization (308) (146)
------------- -----------
$ 2,106 $ 2,022
============= ===========
</TABLE>
The approximate minimum future lease obligations on long-term
non-cancelable capital lease obligations included in long-term debt
(Note 8) during subsequent fiscal years ending in September are as
follows (in thousands):
<TABLE>
<S> <C>
Fiscal Year
1997 $ 761
1998 500
1999 182
2000 125
2001 14
-------------
1,582
Less imputed interest 180
-------------
Total $ 1,402
=============
</TABLE>
Interest is imputed using the rate that would equate the present value
of the minimum lease payments to the fair value of the leased
equipment.
The Company leases equipment, vehicles and warehouse and office space
under various lease agreements, certain of which are subject to
escalations based upon increases in specified operating expenses or
increases in the Consumer Price Index. The approximate future minimum
rentals under non-cancelable operating leases during subsequent fiscal
years ending in September are as follows (in thousands):
<TABLE>
<S> <C>
Fiscal Year
1997 $ 1,021
1998 650
1999 505
2000 497
2001 47
-------------
Total $ 2,720
=============
</TABLE>
Rent expense was approximately $1,592,000, $1,643,000 and $2,056,000
for the years ended September 29, 1996, October 1, 1995 and October 2,
1994, respectively.
Officers' Compensation
On August 1, 1995 the Company implemented a Deferred Compensation Plan
providing certain key employees the opportunity to participate in an
unfunded deferred compensation program. Under the program, participants
may defer a portion of their base compensation and bonuses earned each
year. Amounts deferred will earn interest at 12% per annum. The program
is not qualified under Section 401 of the Internal Revenue Code. At
September 29, 1996 and October 1, 1995 participant deferrals which are
included in accrued liabilities were $173,000 and $17,000,
respectively. The expense during the fiscal year ended September 29,
1996 and October 1, 1995 was $156,000 and $17,000, respectively.
Also during the fiscal year ended October 1, 1995, split dollar life
insurance contracts were purchased on the lives of the five executive
officers. Insurance premiums of $186,000 were paid during each of the
fiscal years ended September 29, 1996 and October 1, 1995. As of
September 29, 1996 and October 1, 1995, $356,000 and $178,000,
respectively, had been capitalized to reflect the cash surrender value
of these contracts net of loan balances.
As of September 29, 1996, the Company had employment contracts with
four officers of the Company, providing for total annual payments of
approximately $1,339,000 plus bonuses through September 1997.
13. RECOVERY FROM INSURANCE SETTLEMENT
As a result of the EPA Settlement Agreement (Note 12), the Company
filed claims to recover amounts payable under various insurance
policies issued in the name of Uniroyal. To consolidate the processing
of claims of the Company and Uniroyal and to establish their respective
entitlement to proceeds, if any, of the claims submitted, on May 6,
1993, the Company entered into a settlement agreement (the "Company
Settlement") with Uniroyal, CDU Holding Liquidating Trust ("CDU") and
Uniroyal Holding, Inc. ("UHI") (collectively the "Uniroyal Parties")
pursuant to which the Company and the Uniroyal Parties resolved certain
existing and potential disputes arising from the acquisition by UPAC of
UPC from Uniroyal. Uniroyal was dissolved in December 1986 and CDU and
UHI were affiliates of Uniroyal. In connection with the resolution of
the matters covered by the Company Settlement, the Uniroyal Parties
paid $2,250,000 in cash to the Company upon execution of the Company
Settlement. In exchange, the Company agreed to certain matters
involving the prosecution and settlement of claims under insurance
policies of the Uniroyal Parties that covered environmental liabilities
at certain of the Known Sites (the "Class A Sites").
The Company Settlement also provides that the Company will indemnify
and hold harmless the Uniroyal Parties with respect to: (a)
environmental liabilities associated with sites that were owned or
operated by the Company or the Predecessor Companies on or prior to the
date of the Company Settlement; and (b) future environmental
expenditures by the Uniroyal Parties with respect to the businesses of
UPC net of recoveries from third parties (including insurance), but
only with respect to the portion of such expenditures, if any, that
exceeds $30,000,000 and is less than $45,000,000.
During the fiscal years ended October 1, 1995 and October 2, 1994, the
Company reached agreements with several insurance companies to recover
amounts with respect to environmental claims. As a result of these
agreements, the Company recorded as income approximately $1,176,000 net
of certain professional fees and other expenses in the fiscal year
ended October 2, 1994 and approximately $70,000 in the fiscal year
ended October 1, 1995.
14. RELATED PARTY TRANSACTIONS
In connection with the Ensolite Sale, the Company utilized the services
of an investment banking firm that employs a relative of one of the
Company's executive officers. This firm also provides certain other
services to the Company on a periodic basis. The Company incurred
expenses related to services provided by this firm of approximately
$258,000 during the fiscal year ended September 29, 1996.
15. SUBSEQUENT EVENT
On December 11, 1996 the Company determined to exit the Port Clinton,
Ohio automotive operation of the Coated Fabrics Segment. The automotive
operation incurred operating losses of approximately $7,640,000 (before
consideration of the estimated loss reserves totalling $12,500,000),
$5,540,000 and $3,696,000 during the fiscal years ended September 29,
1996, October 1, 1995 and October 2, 1994, respectively. In accordance
with SFAS No. 121 the Company established reserves totalling
approximately $12,500,000 during the fiscal year ended September 29,
1996. The carrying value of the long-lived assets to be disposed of was
$11,504,000 as of September 29, 1996.
<PAGE>
16. SEGMENT INFORMATION
Identifiable assets by segment are those assets that are used solely in
the Company's operations in each segment. The Company did not derive
10% or more of its sales from any single customer during the fiscal
years ended September 29, 1996, October 1, 1995 and October 2, 1994 .
Segment data for the fiscal years ended September 29, 1996, October 1,
1995 and October 2, 1994 are as follows (in millions):
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------------------------------------------------
September 29, October 1, October 2,
1996 1995 1994
----------------- --------------- --------------
<S> <C> <C> <C>
Net sales:
High performance plastics $ 115.1 $ 112.2 $ 105.5
Coated fabrics 58.7 56.1 49.2
Specialty adhesives 35.5 46.7 42.8
------------ ------------ ------------
Total $ 209.3 $ 215.0 $ 197.5
============ ============ ============
Operating (loss) income:
High performance plastics $ 7.0 $ 13.0 $ 9.2
Coated fabrics (19.0) (4.9) (4.8)
Specialty adhesives 0.1 2.1 4.1
Unallocated (0.8) (0.7) 6.9
------------ ------------ ------------
Total $ (12.7) $ 9.5 $ 15.4
============ ============ ============
Identifiable assets:
High performance plastics $ 81.7 $ 80.1 $ 74.0
Coated fabrics 45.9 51.0 51.3
Specialty adhesives 9.3 24.9 24.9
Corporate 33.9 24.5 29.1
------------ ------------ ------------
Total $ 170.8 $ 180.5 $ 179.3
============ ============ ============
Depreciation and amortization:
High performance plastics $ 4.4 $ 4.0 $ 3.5
Coated fabrics 3.7 3.6 3.1
Specialty adhesives 1.6 1.9 1.8
Unallocated 0.9 0.8 1.0
------------ ------------ ------------
Total $ 10.6 $ 10.3 $ 9.4
============ ============ ============
Capital expenditures:
High performance plastics $ 3.9 $ 4.5 $ 4.1
Coated fabrics 2.4 1.3 1.1
Specialty adhesives 1.8 0.8 1.1
Corporate 2.0 2.2 0.4
------------ ------------ ------------
Total $ 10.1 $ 8.8 $ 6.7
============ ============ ============
</TABLE>
The amount shown as unallocated operating (loss) income for the fiscal
year ended October 2, 1994 includes (i) amortization of reorganization
value in excess of amounts allocable to identifiable assets of
$1,003,000; (ii) recovery from insurance settlement of $1,176,000; and
(iii) recovery of pension expense of $6,761,000.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Uniroyal Technology Corporation
Sarasota, Florida
We have audited the balance sheets of Uniroyal Technology Corporation (the
"Company") as of September 29, 1996 and October 1, 1995, and the related
statements of operations, changes in stockholders' equity and cash flows for
each of the three years in the period ended September 29, 1996 and have issued
our report thereon dated December 20, 1996 (included in this Form 10-K). Our
audits also included the accompanying financial statement schedule listed in
Item 14 of this Form 10-K. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/S/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
Tampa, Florida
December 20, 1996
S-1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII
UNIROYAL TECHNOLOGY CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
BALANCE AT CHARGED (CREDITED) CHARGED
BEGINNING OF TO COSTS AND TO OTHER BALANCE AT
PERIOD EXPENSES ACCTS. DEDUCTION END OF PERIOD
DESCRIPTION
(a) (b)
<S> <C> <C> <C> <C> <C>
Year ended September 29, 1996 $ 437 $ (6) $ 27 $ (89) $ 369
Estimated reserve for
doubtful accounts
Year ended October 1, 1995 $ 629 $ (217) $ 114 $ (89) $ 437
Estimated reserve for
doubtful accounts
<FN>
(a) Amount represents recovery of amounts previously written-off.
(b) Amount includes write-off of uncollectible accounts.
</FN>
</TABLE>
S-2
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
UNIROYAL TECHNOLOGY CORPORATION
Date: December 20, 1996 By: /s/ Howard R.Curd
---------------------
Howard R. Curd, Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ Howard R. Curd /s/ Curtis L.Mack
- ---------------------- ------------------------
Howard R. Curd, Chairman of Curtis L. Mack, Director
the Board and Chief Executive Officer Date: December 20, 1996
Date: December 20, 1996
/s/ Robert L. Soran /s/ Roland H. Meyer
- -------------------------- ------------------------
Robert L. Soran, Director, President Roland H. Meyer, Director
and Chief Operating Officer Date: December 20, 1996
Date: December 20, 1996
/s/ George J. Zulanas Jr. /s/ John A. Porter
- -------------------------- ------------------------
George J. Zulanas Jr.Executive Vice John A. Porter, Director
President and Chief Financial Officer Date: December 20, 1996
Date: December 20, 1996
/s/ Peter C. B. Bynoe /s/ Thomas J. Russell
- -------------------------- ------------------------
Peter C. B. Bynoe, Director Thomas J. Russell, Director
Date: December 20, 1996 Date: December 20, 1996
/s/ Richard D.Kimbel
- --------------------------
Richard D. Kimbel, Director
Date: December 20, 1996
<PAGE>
POWER OF ATTORNEY
Each person whose signature to this report appears below hereby appoints Howard
R. Curd, Robert L. Soran and Oliver J. Janney, and each individually, any one of
whom may act without the joinder of the others, as his agent and
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments to this report, which amendments make such
changes and additions to this report as such agent and attorney-in-fact may deem
necessary and appropriate.
/s/ Howard R. Curd /s/ Peter C. B. Bynoe
- ---------------------- ------------------------
Howard R. Curd, Chairman of Peter C. B. Bynoe, Director
the Board and Chief Executive Officer Date: December 20, 1996
Date: December 20, 1996
/s/ Robert L. Soran /s/ Richard D. Kimbel
- -------------------------- ------------------------
Robert L. Soran, Director, President Richard D.Kimbel, Director
and Chief Operating Officer Date: December 20, 1996
Date: December 20, 1996
/s/ Curtis L. Mack
--------------------------
Curtis L. Mack, Director
Date: December 20, 1996
/s/ Roland H. Meyer
--------------------------
Roland H. Meyer, Director
Date: December 20, 1996
/s/ John A. Porter
--------------------------
John A. Porter, Director
Date: December 20, 1996
/s/ Thomas J. Russell
-------------------------
Thomas J. Russell, Director
Date: December 20, 1996
BY-LAWS
OF
UNIROYAL TECHNOLOGY CORPORATION
(a Delaware corporation)
AS AMENDED TO NOVEMBER 14, 1996
ARTICLE I.
Stockholders
SECTION 1. Annual Meetings. The annual meeting of stockholders
for the election of directors and for the transaction of such other business as
may properly come before the meeting shall be held each year at such date and
time, within or without the State of Delaware, as the Board of Directors shall
determine.
SECTION 2. Special Meetings. Special meetings of stockholders
for the transaction of such business as may properly come before the meeting may
be called by order of a simple majority of the Board of Directors or the
Chairman of the Board of Directors acting on his own initiative, and shall be
held at such date and time, within or without the State of Delaware, as may be
specified by such order.
SECTION 3. Notice of Meetings. Written notice of all meetings
of the stockholders, stating the place, date and hour of the meeting and the
place within the city or other municipality or community at which the list of
stockholders may be examined, shall be mailed or delivered to each stockholder
not less than 10 nor more than 60 days prior to the meeting. Notice of any
special meeting shall state in general terms the purpose or purposes for which
the meeting is to be held.
SECTION 4. Adjournments. Any meeting of stockholders, annual
or special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days or if after the adjournment a new date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 5. Stockholder Lists. The officer who has charge of
the stock ledger of the Corporation shall prepare and make, at least 10 days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
SECTION 6. Quorum. Except as otherwise provided by law or the
Corporation's Certificate of Incorporation, a quorum for the transaction of
business at any meeting of stockholders shall consist of the holders of record
of a majority of the issued and outstanding shares of the capital stock of the
Corporation entitled to vote at the meeting, present in person or by proxy. At
all meetings of the stockholders at which a quorum is present, all matters,
except as otherwise provided by law or the Certificate of Incorporation, shall
be decided by the vote of the holders of a majority of the shares entitled to
vote thereat present in person or by proxy. If there be no such quorum, the
holders of a majority of such shares so present or represented may adjourn the
meeting from time to time, without further notice, until a quorum shall have
been obtained. When a quorum is once present it is not broken by the subsequent
withdrawal of any stockholder. Solely for purposes of the Corporation's annual
meeting of stockholders to be held in 1994, a quorum for the transaction of
business at such meeting shall consist of the holders of record of forty percent
(40%) of the issued and outstanding shares of the capital stock of the
Corporation entitled to vote at the meeting, present in person or by proxy.
SECTION 7. Organization. Meetings of stockholders shall be
presided over by the Chairman, if any, or if none or in the Chairman's absence
the Vice Chairman, if any, or if none or in the Vice Chairman's absence the
President, if any, or if none or in the President's absence a Vice President,
or, if none of the foregoing is present, by a chairman to be chosen by the
stockholders entitled to vote who are present in person or by proxy at the
meeting. The Secretary of the Corporation, or in the Secretary's absence an
Assistant Secretary, shall act as secretary of every meeting, but if neither the
Secretary nor an Assistant Secretary is present, the presiding officer of the
meeting shall appoint any person present to act as secretary of the meeting.
SECTION 8. Voting; Proxies; Required Vote. (a) At each meeting
of stockholders, every stockholder shall be entitled to vote in person or by
proxy appointed by instrument in writing, subscribed by such stockholder or by
such stockholder's duly authorized attorney-in-fact (but no such proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period), and, unless the Certificate of Incorporation provides
otherwise, shall have one vote for each share of stock entitled to vote
registered in the name of such stockholder on the books of the Corporation on
the applicable record date fixed pursuant to these By-Laws. At all elections of
directors the voting may but need not be by ballot and a plurality of the votes
cast there shall elect. Except as otherwise required by law or the Certificate
of Incorporation, any other action shall be authorized by a majority of the
votes cast.
(b) Any action required or permitted to be taken by the
stockholders of the corporation must be effected at a duly called annual or
special meeting of such holders and may not be effected by any consent in
writing by such holders.
(c) Where a separate vote by a class or classes, present in
person or represented by proxy, shall constitute a quorum entitled to vote on
that matter, the affirmative vote of the majority of shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class, unless otherwise provided in the Corporation's Certificate of
Incorporation.
SECTION 9. Notifications of Nominations and Proposed Business.
Any stockholder may nominate one or more persons for election as directors at a
meeting or propose business to be brought before a meeting, or both, only if
such stockholder has given timely notice in proper written form of his intent to
make such nomination or nominations or to propose such business. To be timely, a
stockholder's notice must be delivered or mailed and received by the Secretary
of the Corporation not later than sixty (60) days prior to such meeting. To be
in proper written form, a stockholder's notice to the Secretary shall set forth:
(i)the name and address of the stockholder who intends to make
the nominations or propose the business and, as the case may be, of the person
or persons to be nominated or of the business to be proposed;
(ii) a representation that the stockholder is a holder of
record of stock of the corporation entitled to vote at such meeting and, if
applicable, intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice;
(iii) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder;
(iv) such other information regarding each nominee or each
matter of business to be proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or intended
to be nominated, or the matter been proposed, or intended to be proposed by the
Board of Directors; and
(v) if applicable, the consent of each nominee to serve as
director of the corporation if so elected.
The chairman of the meeting may refuse to acknowledge the
nomination of any person or the proposal of any business not made in compliance
with the foregoing procedure.
SECTION 10. Inspectors. The Board of Directors, in advance of
any meeting, may, but need not, appoint one or more inspectors of election to
act at the meeting or any adjournment thereof. If an inspector or inspectors are
not so appointed, the person presiding at the meeting may, but need not, appoint
one or more inspectors. In case any person who may be appointed as an inspector
fails to appear or act, the vacancy may be filled by appointment made by the
directors in advance of the meeting or at the meeting by the person presiding
thereat. Each inspector, if any, before entering upon the discharge of his or
her duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability. The inspectors, if any, shall determine the number of shares of
stock outstanding and the voting power of each, the shares of stock represented
at the meeting, the existence of a quorum, and the validity and effect of
proxies, and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determine the result, and do such acts
as are proper to conduct the election or vote with fairness to all stockholders.
On request of the person presiding at the meeting, the inspector or inspectors,
if any, shall make a report in writing of any challenge, question or matter
determined by such inspector or inspectors and execute a certificate of any fact
found by such inspector or inspectors.
ARTICLE II.
Board of Directors
SECTION 1. General Powers. The business, property and affairs
of the Corporation shall be managed by, or under the direction of, the Board of
Directors.
SECTION 2. Qualification; Number; Term; Remuneration.(a) Each
director shall be at least 18 years of age. A director need not be a
stockholder, a citizen of the United States, or a resident of the State of
Delaware. The number of directors initially constituting the entire Board shall
be one. Following the initial appointment of six additional directors by such
sole director, the number of directors constituting the entire Board shall be
seven or such larger number as may be fixed from time to time by action of the
stockholders or Board of Directors, one of whom may be selected by the Board of
Directors to be its Chairman. The use of the phrase "entire Board" herein refers
to the total number of directors which the Corporation would have if there were
no vacancies.
(b) Unless otherwise provided in the Corporation's Certificate
of Incorporation, Directors who are elected at an annual meeting of stockholders
shall hold office until the next annual meeting of stockholders and until their
successors are elected and qualified or until their earlier resignation,
disqualification, removal or death. Directors who are elected in the interim to
fill vacancies and newly created directorships shall hold office until the next
election of the class for which such directors shall have been chosen and until
their successors are elected and qualified or until their earlier resignation,
disqualification, removal or death.
(c) Directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
(d) One of the directors of the Corporation may serve as an
"active" director of the Corporation and may spend as much as twenty-five
percent (25%) of his available time working with the officers of the Corporation
on business strategy and such other areas of concern as the Board of Directors,
in its discretion, may designate.
SECTION 3. Quorum and Manner of Voting. Except as otherwise
provided by law, a majority of the entire Board shall constitute a quorum. A
majority of the directors present, whether or not a quorum is present, may
adjourn a meeting from time to time to another time and place without notice.
Except as otherwise provided in the Certificate of Incorporation or these
By-Laws, the vote of the majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors, but in a case of
an equality of votes, the Chairman of the Board shall have a second or deciding
vote.
SECTION 4. Places of Meetings. Meetings of the Board of
Directors may be held at any place within or without the State of Delaware, as
may from time to time be fixed by resolution of the Board of Directors, or as
may be specified in the notice of meeting.
SECTION 5. Annual Meeting. Following the annual meeting of
stockholders, the newly elected Board of Directors shall meet for the purpose of
the election of officers and the transaction of such other business as may
properly come before the meeting. Such meeting may be held without notice
immediately after the annual meeting of stockholders at the same place at which
such stockholders' meeting is held.
SECTION 6. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as the Board of Directors shall
from time to time by resolution determine, provided that meetings of the Board
of Directors shall be held not fewer than six (6) times during any fiscal year
and provided further that during the Corporation's 1993 fiscal year, the Board
of Directors shall meet a minimum of ten (10) times, with not more than one
hundred twenty (120) days between any two consecutive meetings. Notice need not
be given of regular meetings of the Board of Directors held at times and places
fixed by resolution of the Board of Directors.
SECTION 7. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board, if any, by
the Vice Chairman of the Board, if any, by the President or by any three
directors then in office.
SECTION 8. Telephone Meetings Permitted. Unless otherwise
restricted by the Certificate of Incorporation or by these By-Laws, members of
the Board of Directors, or any committee designated by the Board, may
participate in a meeting of the Board or of such committee, as the case may be,
by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this by-law shall constitute presence in
person at such meeting.
SECTION 9. Notice of Meetings. A notice of the place, date and
time and the purpose or purposes of each meeting of the Board of Directors shall
be given to each director by mailing the same at least three days before the
special meeting, or by telegraphing or telephoning the same or by delivering the
same personally not later than twenty-four hours before the time set for the
meeting.
SECTION 10. Organization. At all meetings of the Board of
Directors, the Chairman, if any, or if none or in the Chairman's absence or
inability to act, the Vice Chairman, if any, or, in the Vice Chairman's absence
or inability to act a chairman chosen by the directors, shall preside. The
Secretary of the Corporation shall act as secretary at all meetings of the Board
of Directors when present, and, in the Secretary's absence, the presiding
officer may appoint any person to act as secretary.
SECTION 11. Interested Directors; Quorum. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because such
person's or persons' votes are counted for such purpose, if: the material facts
as to the person's relationship or interest and as to the contract or
transaction are disclosed or are known to the Board or the committee, and the
Board or committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or the material facts as to the
person's relationship or interest as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or the contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified by the Board, a committee
thereof or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board or of a committee
which authorizes the contract or transaction.
SECTION 12. Resignation. Unless otherwise provided in these
By-Laws or the Corporation's Certificate of Incorporation, any director may
resign at any time upon written notice to the Corporation and such resignation
shall take effect upon receipt thereof by the President or Secretary, unless
otherwise specified in the resignation. At or prior to the annual meeting of
stockholders held in fiscal year 1994, any or all of the directors may be
removed at any time, but only for cause and only by the affirmative vote of a
majority of the Board of Directors or by holders of at least two-thirds of the
outstanding shares of stock entitled to vote for the election of directors cast
at a meeting of the stockholders called for that purpose. Subsequent to the
annual meeting of stockholders held during fiscal year 1994, any or all of the
directors may be removed at any time, with or without cause, by a vote of the
stockholders entitled to elect such director or directors. Except as may
otherwise be provided by law, cause for removal shall be construed to exist only
if:
(x) the Director whose removal is proposed
(1) has been convicted of a felony by a court of competent
jurisdiction and such conviction is no longer subject to direct appeal,
(2) hasengaged in fraudulent or dishonest conduct, or gross
abuse of authority or discretion, with respect to the Corporation, and
(3) has been declared of unsound mind by order of a court of
competent jurisdiction, and such declaration is no longer subject to
direct appeal, or has committed an action which constitutes intentional
misconduct or knowing violation of law if such action in either event
results both in an improper substantial personal benefit and a material
injury to the Corporation.
and (y) removal would be in the best interests of the Corporation.
SECTION 13. Vacancies. Unless otherwise provided in the
Certificate of Incorporation or these By-Laws (and with respect to the addition
of two additional directors to be elected by the holders of the Series A
Preferred Stock and Series B Preferred Stock as provided in the Certificate of
Incorporation), vacancies on the Board of Directors, whether caused by
resignation, death, disqualification, removal, an increase in the authorized
number of directors or otherwise, may be filled by the affirmative vote of a
majority of the remaining directors, although less than a quorum, or by a sole
remaining director, or at a special meeting of the stockholders called for such
purpose.
SECTION 14. Action by Unanimous Written Consent. Any action
required or permitted to be taken at any meeting of the Board of Directors may
be taken without a meeting if all the directors consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors.
SECTION 15. Compensation of Directors. The Board of Directors
or any committee it may designate shall have the authority to fix the
compensation, if any, of directors.
<PAGE>
ARTICLE III.
Committees
SECTION 1. Appointment. From time to time the Board of
Directors by a resolution adopted by a majority of the entire Board may appoint
any committee or committees for any purpose or purposes, to the extent lawful,
which shall have powers as shall be determined and specified by the Board of
Directors in the resolution of appointment; provided, however, that the Board of
Directors shall appoint an executive committee, an audit committee and a
compensation committee and shall delegate such powers and authority to such
committees as the Board of Directors deems necessary and proper and as is
customary in similar publicly held corporations.
SECTION 2. Procedures, Quorum and Manner of Acting. Each
committee shall fix its own rules of procedure, and shall meet where and as
provided by such rules or by resolution of the Board of Directors. Except as
otherwise provided by law, the presence of a majority of the then appointed
members of a committee shall constitute a quorum for the transaction of business
by that committee, and in every case where a quorum is present the affirmative
vote of a majority of the members of the committee present shall be the act of
the committee. Each committee shall keep minutes of its proceedings, and actions
taken by a committee shall be reported to the Board of Directors.
SECTION 3. Action by Unanimous Written Consent. Any action
required or permitted to be taken at any meeting of any committee of the Board
of Directors may be taken without a meeting if all the members of the committee
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the committee.
SECTION 4. Term; Termination. In the event any person shall
cease to be a director of the Corporation, such person shall simultaneously
therewith cease to be a member of any committee appointed by the Board of
Directors.
ARTICLE IV.
Officers
SECTION 1. Election and Qualifications. The Board of Directors
shall elect the officers of the Corporation, which shall include a Chairman of
the Board, a Chief Executive Officer, a President and a Secretary, and may
include, by election or appointment, one or more Vice Presidents (any one or
more of whom may be given an additional designation of rank or function), a
Treasurer and such Assistant Secretaries, such Assistant Treasurers and such
other officers as the Board may from time to time deem proper; provided,
however, that Howard R. Curd shall be elected to serve as the Corporation's
Chief Executive Officer. Each officer shall have such powers and duties as may
be prescribed by these By-Laws and as may be assigned by the Board of Directors
or the President. Any two or more offices may be held by the same person except
the offices of President and Secretary.
SECTION 2. Term of Office and Remuneration. The term of office
of all officers shall be until the next annual meeting of the Board of Directors
and until their respective successors have been elected and qualified, but any
officer may be removed from office, either with or without cause, at any time by
the vote of a majority of the entire Board of Directors. Any vacancy in any
office may be filled for the unexpired portion of the term by the Board of
Directors. The remuneration of all officers of the Corporation may be fixed by
the Board of Directors or in such manner as the Board of Directors shall
provide.
SECTION 3. Resignation; Removal. Any officer may resign at any
time upon written notice to the Corporation and such resignation shall take
effect upon receipt thereof by the President or Secretary, unless otherwise
specified in the resignation.
SECTION 4. Chairman of the Board. The Chairman of the Board of
Directors, if there be one, shall preside at all meetings of the Board of
Directors and shall have such other powers and duties as may from time to time
be assigned by the Board of Directors.
SECTION 5. Chief Executive Officer. The Chief Executive
Officer of the Corporation shall have such duties as customarily pertain to that
office. The Chief Executive Officer shall have general management and
supervision of the property, business and affairs of the Corporation and over
its other officers; may appoint and remove assistant officers and other agents
and employees, other than officers referred to in Section 1 of this Article IV;
and may execute and deliver in the name of the Corporation powers of attorney,
contracts, bonds and other obligations and instruments.
SECTION 6. President. The President of the Corporation may
execute and deliver in the name of the Corporation contracts and other
obligations and instruments pertaining to the regular course of the duties of
said office, and shall have such other authority and duties as from time to time
may be assigned by the Board of Directors or the Chief Executive Officer.
SECTION 7. Vice President. A Vice President may execute and
deliver in the name of the Corporation contracts and other obligations and
instruments pertaining to the regular course of the duties of said office, and
shall have such other authority and duties as from time to time may be assigned
by the Board of Directors, the Chief Executive Officer or the President.
SECTION 8. Treasurer. he Treasurer shall in general have all
duties incident to the position of Treasurer and such other duties as may be
assigned by the Board of Directors, the Chief Executive Officer or the
President.
SECTION 9. Secretary. The Secretary shall in general have all
the duties incident to the office of Secretary and such other duties as may be
assigned by the Board of Directors, the Chief Executive Officer or the
President.
SECTION 10. Assistant Officers. Any assistant officer shall
have such powers and duties of the officer such assistant officer assists as
such officer, the Chief Executive Officer, the President or the Board of
Directors shall from time to time prescribe.
SECTION 11. Other Officers. The other officers, if any, of the
Corporation shall have such powers and duties in the management of the
Corporation as shall be stated in a resolution of the Board of Directors which
is not inconsistent with these by-laws and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board. The Board may require any officer, agent or employee to give security for
the faithful performance of the duties of such person.
SECTION 12. Indemnification of Directors, Officers and
Employees. (a) A director of the Corporation shall not be personally liable
either to the Corporation or any stockholder for monetary damages for breach of
fiduciary duty as a director, except (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, or (ii) for acts or omissions
not in good faith or which involve intentional misconduct or knowing violation
of the law, or (iii) for any matter in respect of which such director shall be
liable under Section 174 of Title 8 of the General Corporation Law of the State
of Delaware or any amendment thereto or successor provision thereto, or (iv) for
any transaction from which the director shall have derived an improper personal
benefit. Neither amendment nor repeal of this paragraph (a) nor the adoption of
any provision of the Certificate of Incorporation inconsistent with this
paragraph (a) shall eliminate or reduce the effect of this paragraph (a) in
respect of any matter occurring, or any cause of action, suit or claim that, but
for this paragraph (a) of this Article, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
(b) The Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to, or testifies in, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative in nature, by reason of the fact that such
person is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding to the full extent permitted by law, and the Corporation may
adopt By-Laws or enter into agreements with any such person for the purpose of
providing for such indemnification.
(c) To the extent that a director or officer of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraph (b) of this Article, or in
defense of any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
(d) Expenses incurred by an officer, director, employee or
agent in defending or testifying in a civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such director or officer is not
entitled to be indemnified by the Corporation against such expenses as
authorized by this Article, and the Corporation may adopt By-Laws or enter into
agreements with such persons for the purpose of providing for such advances.
(e) The indemnification permitted by this Article shall not
be deemed exclusive of any other rights to which any person may be entitled
under any agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding an office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such person.
(f) The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, employee benefit plan trust or other enterprise against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify such person against such liability
under the provisions of this Article or otherwise.
(g) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to, or testifies in, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative in nature, by reason of the fact that such
person is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding to
the full extent permitted by law, and the Corporation may adopt By-Laws or enter
into agreements with any such person for the purpose of providing for such
indemnification.
ARTICLE V.
Books and Records
SECTION 1. Location. The books and records of the Corporation
may be kept at such place or places within or outside the State of Delaware as
the Board of Directors or the respective officers in charge thereof may from
time to time determine. The record books containing the names and addresses of
all stockholders, the number and class of shares of stock held by each and the
dates when they respectively became the owners of record thereof shall be kept
by the Secretary as prescribed in the By-Laws and by such officer or agent as
shall be designated by the Board of Directors.
SECTION 2. Addresses of Stockholders. Notices of meetings and
all other corporate notices may be delivered personally or mailed to each
stockholder at the stockholder's address as it appears on the records of the
Corporation.
SECTION 3. Fixing Date for Determination of Stockholders of
Record. (a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors and which record date shall not be more
than 60 nor less than 10 days before the date of such meeting. If no record date
is fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted and which record date shall be not more than 60 days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
ARTICLE VI.
Certificates Representing Stock
SECTION 1. Certificates; Signatures. The shares of the
Corporation shall be represented by certificates, provided that the Board of
Directors of the Corporation may provide by resolution or resolutions that some
or all of any or all classes or series of its stock shall be uncertificated
shares. Any such resolution shall not apply to shares represented by a
certificate until such certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock represented by certificates and upon request every holder
of uncertificated shares shall be entitled to have a certificate, signed by or
in the name of the Corporation by the Chairman or Vice Chairman of the Board of
Directors, or the President or Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation, representing the number of shares registered in certificate form.
Any and all signatures on any such certificate may be facsimiles. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue. The name of the holder of record of the
shares represented thereby, with the number of such shares and the date of
issue, shall be entered on the books of the Corporation.
SECTION 2. Transfers of Stock. Upon compliance with provisions
restricting the transfer or registration of transfer of shares of stock, if any,
shares of capital stock shall be transferable on the books of the Corporation
only by the holder of record thereof in person, or by duly authorized attorney,
upon surrender and cancellation of certificates for a like number of shares,
properly endorsed, and the payment of all taxes due thereon.
SECTION 3. Fractional Shares. The Corporation may, but shall
not be required to, issue certificates for fractions of a share where necessary
to effect authorized transactions, or the Corporation may pay in cash the fair
value of fractions of a share as of the time when those entitled to receive such
fractions are determined, or it may issue scrip in registered or bearer form
over the manual or facsimile signature of an officer of the Corporation or of
its agent, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a stockholder except as therein
provided.
The Board of Directors shall have power and authority to make
all such rules and regulations as it may deem expedient concerning the issue,
transfer and registration of certificates representing shares of the
Corporation.
SECTION 4. Lost, Stolen or Destroyed Certificates. The
Corporation may issue a new certificate of stock in place of any certificate,
theretofore issued by it, alleged to have been lost, stolen or destroyed, and
the Board of Directors may require the owner of any lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond
sufficient to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of any such new certificate.
ARTICLE VII.
Dividends
Subject always to the provisions of law and the Certificate of
Incorporation, the Board of Directors shall have full power to determine whether
any, and, if any, what part of any, funds legally available for the payment of
dividends shall be declared as dividends and paid to stockholders; the division
of the whole or any part of such funds of the Corporation shall rest wholly
within the lawful discretion of the Board of Directors, and it shall not be
required at any time, against such discretion, to divide or pay any part of such
funds among or to the stockholders as dividends or otherwise; and before payment
of any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, thinks proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the Board of Directors
shall think conducive to the interest of the Corporation, and the Board of
Directors may modify or abolish any such reserve in the manner in which it was
created.
ARTICLE VIII.
Ratification
Any transaction, questioned in any law suit on the ground of
lack of authority, defective or irregular execution, adverse interest of
director, officer or stockholder, non-disclosure, miscomputation, or the
application of improper principles or practices of accounting, may be ratified
before or after judgment, by the Board of Directors or by the stockholders, and
if so ratified shall have the same force and effect as if the questioned
transaction had been originally duly authorized. Such ratification shall be
binding upon the Corporation and its stockholders and shall constitute a bar to
any claim or execution of any judgment in respect of such questioned
transaction.
ARTICLE IX.
Corporate Seal
The corporate seal shall have inscribed thereon the name of
the Corporation and the year of its incorporation, and shall be in such form and
contain such other words and/or figures as the Board of Directors shall
determine. The corporate seal may be used by printing, engraving, lithographing,
stamping or otherwise making, placing or affixing, or causing to be printed,
engraved, lithographed, stamped or otherwise made, placed or affixed, upon any
paper or document, by any process whatsoever, an impression, facsimile or other
reproduction of said corporate seal.
ARTICLE X.
Fiscal Year
The fiscal year of the Corporation shall be fixed, and shall
be subject to change, by the Board of Directors. Unless otherwise fixed by the
Board of Directors, the fiscal year of the Corporation shall be the twelve month
period ending on the Sunday following the last Friday in August of each year.
<PAGE>
ARTICLE XI.
Waiver of Notice
Whenever notice is required to be given by these By-Laws or by
the Certificate of Incorporation or by law, a written waiver thereof, signed by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice.
ARTICLE XII.
Bank Accounts, Drafts, Contracts, Etc.
SECTION 1. Bank Accounts and Drafts. In addition to such bank
accounts as may be authorized by the Board of Directors, the primary financial
officer or any person designated by said primary financial officer, whether or
not an employee of the Corporation, may authorize such bank accounts to be
opened or maintained in the name and on behalf of the Corporation as he may deem
necessary or appropriate, payments from such bank accounts to be made upon and
according to the check of the Corporation in accordance with the written
instructions of said primary financial officer, or other person so designated by
the Treasurer.
SECTION 2. Contracts. Except as otherwise restricted by the
Certificate of Incorporation, the Board of Directors may authorize any person or
persons, in the name and on behalf of the Corporation, to enter into or execute
and deliver any and all deeds, bonds, mortgages, contracts and other obligations
or instruments, and such authority may be general or confined to specific
instances.
SECTION 3. Proxies; Powers of Attorney; Other Instruments. The
Chairman, the Chief Executive Officer, the President or any other person
designated by either of them shall have the power and authority to execute and
deliver proxies, powers of attorney and other instruments on behalf of the
Corporation in connection with the rights and powers incident to the ownership
of stock by the Corporation. The Chairman, the Chief Executive Officer, the
President or any other person authorized by proxy or power of attorney executed
and delivered by either of them on behalf of the Corporation may attend and vote
at any meeting of stockholders of any company in which the Corporation may hold
stock, and may exercise on behalf of the Corporation any and all of the rights
and powers incident to the ownership of such stock at any such meeting, or
otherwise as specified in the proxy or power of attorney so authorizing any such
person. The Board of Directors, from time to time, may confer like powers upon
any other person.
SECTION 4. Financial Reports. The Board of Directors may
appoint the primary financial officer or other fiscal officer and/or the
Secretary to cause to be prepared and furnished to stockholders entitled thereto
any special financial notice and/or financial statement, as the case may be,
which may be required by any provision of law.
ARTICLE XIII.
Amendments
Except as provided in the Certificate of Incorporation, the
Board of Directors shall have power to adopt, amend or repeal By-Laws. By-Laws
adopted by the Board of Directors may be repealed or changed, and new By-Laws
made, by the stockholders, and the stockholders may prescribe that any By-Law
made by them shall not be altered, amended or repealed by the Board of
Directors.
UNIROYAL TECHNOLOGY CORPORATION
1992 STOCK OPTION PLAN
AS AMENDED
TO NOVEMBER 14, 1996,
AND RESTATED
<PAGE>
TABLE OF CONTENTS
I. PURPOSE 1
II. AMOUNT OF STOCK SUBJECT TO THE PLAN 1
III. ADMINISTRATION 3
IV. ELIGIBILITY 5
V. OPTION PRICE AND PAYMENT 6
VI. TERM OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE 8
VII. TERMINATION OF EMPLOYMENT 10
VIII. EXERCISE OF OPTIONS 12
IX. USE OF PROCEEDS 12
X. NONTRANSFERABILITY OF OPTIONS 12
XI. ADJUSTMENT OF SHARES; EFFECT OF CERTAIN TRANSACTIONS 13
XII. RIGHT TO TERMINATE EMPLOYMENT 14
XIII. PURCHASE FOR INVESTMENT 14
XIV. ISSUANCE OF STOCK CERTIFICATES; LEGENDS, PAYMENT OF EXPENSES 15
XV. WITHHOLDING TAXES 16
XVI. LISTING OF SHARES AND RELATED MATTERS 18
XVII. AMENDMENT OF THE PLAN 18
XVIII. TERMINATION OR SUSPENSION OF THE PLAN 18
XIX. SAVINGS PROVISION 19
XX. GOVERNING LAW 19
XXI. PARTIAL INVALIDITY 19
XXII. EFFECTIVE DATE 19
<PAGE>
UNIROYAL TECHNOLOGY CORPORATION
1992 STOCK OPTION PLAN
I. PURPOSE
Uniroyal Technology Corporation, a Delaware corporation (the
"Company"), desires to afford certain of its key employees and certain key
employees of any subsidiary corporation or parent corporation of the Company now
existing or hereafter formed or acquired who are responsible for the continued
growth of the Company an opportunity to acquire a proprietary interest in the
Company, and thus to create in such key employees an increased interest in and a
greater concern for the welfare of the Company and its subsidiaries.
The stock options ("Options") offered pursuant to this 1992
Stock Option Plan (the "Plan") are a matter of separate inducement and are not
in lieu of any salary or other compensation for the services of any key
employee.
The Company, by means of the Plan, seeks to retain the
services of persons now holding key positions and to secure and retain the
services of persons capable of filling such positions.
The Options granted under the Plan are intended to be either
incentive stock options ("Incentive Options") within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), or options that
do not meet the requirements for Incentive Options ("Non-Qualified Options"),
but the Company makes no warranty as to the qualification of any Option as an
Incentive Option.
II. AMOUNT OF STOCK SUBJECT TO THE PLAN
The total number of Common Shares of the Company which may be
purchased pursuant to the exercise of Options granted under the Plan shall not
exceed, in the aggregate, 1,363,636 of the currently authorized Common Shares,
$.01 par value per share, of the Company (the "Shares"), such number to be
subject to adjustment in accordance with Article XI of the Plan.
Shares which may be acquired under the Plan may be either
authorized but unissued Shares, Shares of issued stock held in the Company's
treasury, or both, at the discretion of the Company. If and to the extent that
Options granted under the Plan expire or terminate without having been
exercised, the Shares covered by such expired or terminated Options may again be
subject to an Option under the Plan.
Except as provided in Article XXII hereof, the Company shall,
subject to the terms hereinafter set forth, grant:
(a) on September 27, 1992 (the "Effective Date"), Options to
purchase 340,909 Shares to, and in the amounts set forth opposite the
names of, the key employees of the Company listed in Subsection A of
Annex A attached hereto, provided, however, that, with respect to each
individual listed in Subsection A of Annex A hereto, such individual
must be employed by the Company on the Effective Date and, (x) if so
employed, the Company shall grant the Options to such individual in
accordance with this subparagraph (a) and (y) if not so employed, any
Option that otherwise would be granted to such individual shall be
granted to the new key employee of the Company who subsequently fills
the position formerly occupied by the key employee listed in Subsection
A of Annex A, as of the date such new key employee occupies the
position of the individual listed on Subsection A of Annex A,
(b) on the fifteenth (15) day after the earlier of the date
(x) on which the Company releases statements showing the financial
condition and results of operations for the first full fiscal quarter
of the Company following the Effective Date, or (y) which is forty-five
(45) days after the end of the first full fiscal quarter of the Company
following the Effective Date, Options to purchase up to 454,545 Shares
in the aggregate to, and in the amounts set forth opposite the names
of, the key employees of the Company listed in Subsection B of Annex A
hereto; provided, however, that, with respect to each individual listed
in Subsection B of Annex A hereto, such individual must be employed by
the Company on the date of grant and, (x) if so employed, the Company
shall grant the Options to such individual in accordance with this
subparagraph (b) and (y) if not so employed, any Option that otherwise
would be granted to such individual may be granted to key employees of
the Company as determined by the Committee, in its discretion, and
(c) on or after the first anniversary of the Effective Date,
Options to purchase up to 568,182 Shares in the aggregate to key
employees of the Company as determined by the Committee, in its
discretion.
Subject to the preceding paragraph, and except as provided in
Articles XVIII and XXII hereof, the Company may, from time to time during the
period beginning on the Effective Date and ending on September 27, 2002 (the
"Termination Date"), grant to certain key employees of the Company, or certain
key employees of any subsidiary corporation or parent corporation of the Company
now existing or hereafter formed or acquired, Incentive Options and/or
Non-Qualified Options under the terms hereinafter set forth.
As used in the Plan, the term "parent corporation" and
"subsidiary corporation" shall mean a corporation coming within the definition
of such terms contained in Sections 424(e) and 424(f) of the Code, respectively.
III. ADMINISTRATION
The board of directors of the Company (the "Board of
Directors") shall designate from among its members an option committee (the
"Committee") to administer the Plan. The Committee shall consist of no fewer
than three members of the Board of Directors, each of whom shall be a
"disinterested person" within the meaning of Rule 16b-3 (or any successor rule
or regulation) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). A majority of the members of the Committee shall
constitute a quorum, and the act of a majority of the members of the Committee
shall be the act of the Committee. Any member of the Committee may be removed at
any time either with or without cause by resolution adopted by the Board of
Directors, and any vacancy on the Committee at any time may be filled by
resolution adopted by the Board of Directors.
Any or all powers and functions of the Committee may be
exercised at any time and from time to time by the Board of Directors or an
executive committee of the Board of Directors (the "Executive Committee";
references below to the Committee shall be deemed to include references to the
Board of Directors and the Executive Committee, except as the context otherwise
requires); provided, however, that all of the members of the Board of Directors
or the Executive Committee, as the case may be, which exercise any power or
authority under the Plan, are "disinterested persons" within the meaning of Rule
16b-3 (or any successor rule or regulation) promulgated under the Exchange Act.
Subject to the express provisions of the Plan, the Committee shall have
authority, in its discretion, to determine the persons to whom Options shall be
granted, the time when such persons shall be granted Options, the number of
Shares which shall be subject to each Option, the purchase price of each Share
which shall be subject to each Option, the period(s) during which such Options
shall be exercisable (whether in whole or part), and the other terms and
provisions thereof (which need not be identical). In determining the persons to
whom Options shall be granted and the number of Shares for which Options are to
be granted to each person, the Committee shall give consideration to the length
of service, the amount of earnings and the responsibilities and duties of such
person.
Subject to the express provisions of the Plan, the Committee
also shall have authority to construe the Plan and the Options granted
thereunder, to amend the Plan and the Options granted thereunder, to prescribe,
amend and rescind rules and regulations relating to the Plan, to determine the
terms and provisions of the Options (which need not be identical) and to make
all other determinations necessary or advisable for administering the Plan. The
Committee also shall have the authority to require, in its discretion, as a
condition of the granting of any such Option, that the employee agree (a) not to
sell or otherwise dispose of Shares acquired pursuant to the exercise of such
Option for a period of six (6) months following the date of the acquisition of
such Option and (b) that in the event of termination of employment of such
employee, other than as a result of dismissal without cause, such employee will
not, for a period to be fixed at the time of the grant of the Option, enter into
any other employment or participate directly or indirectly in any other business
or enterprise which is competitive with the business of the Company or any
subsidiary corporation or parent corporation of the Company, or enter into any
employment in which such employee will be called upon to utilize special
knowledge obtained through employment with the Company or any subsidiary
corporation or parent corporation thereof. In no event will an employee who is
subject to the reporting requirements of Section 16(a) of the Exchange Act be
entitled to sell or otherwise dispose of any Shares acquired pursuant to
exercise of any such Options for a period of six (6) months from the date of the
acquisition of such Options.
The determination of the Committee on matters referred to in
this Article III shall be conclusive.
The Committee may employ such legal or other counsel,
consultants and agents as it may deem desirable for the administration of the
Plan and may rely upon any opinion or computation received from any such
counsel, consultant or agent. Expenses incurred by the Committee in the
engagement of such counsel, consultant or agent shall be paid by the Company. No
member or former member of the Board of Directors, the Executive Committee or
the Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any award of Options granted hereunder.
In order to give management of the Company flexibility in hiring new
key employees and retaining key employees, the Vice President, Human Resources
and Administration of the Company is authorized to grant options to purchase
common stock of the Company under the Plan, provided that (1) no such grant
shall be made to an executive officer of the Company, (2) no such grant to any
individual shall exceed 25,000 shares of common stock of the Company, (3) each
grant shall be approved in writing by the Chief Executive Office and Chief
Operating Officer of the Company and (4) the Vice President, Human Resources and
Administration or the Secretary of the Company shall notify the Committee in
writing of all such grants not later than the meeting of the Committee following
such grants.
IV. ELIGIBILITY
Options may be granted only to salaried key employees of the
Company or any subsidiary corporation or parent corporation of the Company now
existing or hereafter formed or acquired, except as hereinafter provided. Any
person who shall have retired from the active employment by the Company or any
subsidiary corporation or parent corporation of the Company, although such
person shall have entered into a consulting contract with the Company or a
subsidiary corporation or parent corporation of the Company, shall not be
eligible to receive an Option.
The Plan does not create a right in any person to participate
in the Plan, nor does it create a right in any person to have any Options
granted to him or her.
V. OPTION PRICE AND PAYMENT
The price for each Share purchasable under any Option shall be
equal to (i) in the case of an Option granted on the Effective Date to a key
employee of the Company listed on Annex A hereto, (x) if the Shares are publicly
traded within one (1) year after the Effective Date, the average fair market
value per Share during the period commencing on the day that public trading
commences and ending on the twentieth (20) day thereafter, or (y) if the Shares
are not publicly traded, the fair market value per Share at the Effective Date
as determined by Hauser, Richards & Company, as set forth in the Third Amended
Disclosure Statement pursuant to Section 1125 of the Bankruptcy Code With
Respect to Third Amended Plan of Reorganization Under Chapter 11 of the United
States Bankruptcy Code For Polycast Technology Corporation and its Affiliated
Debtors dated May 11, 1992, and in the case of any other Option granted
hereunder, such amount as the Committee shall, in its best judgment, determine
to be one hundred percent (100%) of the fair market value per Share at the date
the Option is granted; provided, however, that in the case of an Incentive
Option granted to a person who, at the time such Option is granted, owns shares
of the Company or any subsidiary corporation or parent corporation of the
Company possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of any subsidiary corporation or
parent corporation of the Company, the purchase price for each Share shall be
such amount as the Committee, in its best judgment, shall determine to be not
less than one hundred ten percent (110%) of the fair market value per Share at
the date the Option is granted. In determining the stock ownership of an
employee for any purpose under the Plan, the rules of Section 424(d) of the Code
shall be applied, and the Committee may rely on representations of fact made to
it by the employee and believed by it to be true.
If the Shares are listed on a national securities exchange in
the United States on any date on which the fair market value per Share is to be
determined, the fair market value per Share shall be deemed to be the closing
quotation at which such Shares are sold on such national securities exchange on
the date such Option is granted. In the event that the Shares are listed on a
national securities exchange in the United States on such date but the Shares
are not traded on such date, or such national securities exchange is not open
for business on such date, the fair market value per Share shall be determined
as of the closest preceding date on which such exchange shall have been open for
business and the Shares were traded. If the Shares are listed on more than one
national securities exchange in the United States on the date any such Option is
granted, the Committee shall determine which national securities exchange shall
be used for the purpose of determining the fair market value per Share.
If on the date any Option is granted a public market exists
for the Shares but such Shares are not listed on a national securities exchange
in the United States, the fair market value per Share shall be deemed to be the
average of the closing bid and asked quotations in the over-the-counter market
for such Shares in the United States on the date such Option is granted. In the
event that there are no bid and asked quotations in the over-the-counter market
in the United States for such Shares on the date such Option is granted, the
fair market value per Share shall be deemed to be the average of the closing bid
and asked quotations in the over-the-counter market in the United States for
such shares on the closest date preceding the date such Option is granted for
which such quotations are available.
For purposes of this Plan, the determination by the Committee
of the fair market value of a Share shall be conclusive.
Upon the exercise of an Option granted hereunder, the Company
shall cause the purchased Shares to be issued only when it shall have received
the full purchase price for the Shares in cash; provided, however, that in lieu
of cash, the holder of an Option may, to the extent permitted by applicable law,
exercise an Option (a) in whole or in part, by delivering to the Company Common
Shares of the Company (in proper form for transfer and accompanied by all
requisite stock transfer tax stamps or cash in lieu thereof) owned by such
holder having a fair market value equal to the cash exercise price applicable to
that portion of the Option being exercised by the delivery of such shares, the
fair market value of Common Shares so delivered to be determined as of the date
immediately preceding the date on which the Option is exercised, or as may be
required in order to comply with or to conform to the requirements of any
applicable laws or regulations, (b) in whole or in part, by delivering to the
Company authorization for the immediate sale of the Common Shares of the Company
that will be purchased by exercise of the Option and retention by Company of
such sale or liquidation proceeds (accompanied by all requisite authorizations
as legal counsel for the Company deem necessary) with respect to such numbers of
shares having a fair market value equal to the cash exercise price applicable to
that portion of the Option being exercised by holder, the fair market value of
Common Shares to be so purchased and sold to be determined as of the date
immediately preceding the date on which the Option is exercised, or as may be
required in order to comply with or to conform to the requirements of any
applicable laws or regulations, or (c) in part, by delivering to the Company an
executed promissory note on such terms and conditions as the Committee shall
determine, at the time of grant, in its discretion; provided, however, that (i)
the principal amount of such note shall not exceed ninety percent (90%) (or such
lesser percentage as would be permitted by applicable margin regulations) of the
aggregate purchase price of the Shares then being purchase pursuant to the
exercise of such Option and (ii) payment for shares with a promissory note is
permissible under applicable law.
VI. TERM OF OPTIONS AND LIMITATIONS ON THE
RIGHT OF EXERCISE
Any Option granted hereunder shall be exercisable at such
times, in such amounts and during such period or periods as the Committee shall
determine at the date of the grant of such Option; provided, however, that an
Incentive Option shall not be exercisable after the expiration of ten (10) years
from the date such Option is granted; provided, further, that in the case of an
Incentive Option granted to a person who, at the time such Incentive Option is
granted, owns stock of the Company or any subsidiary corporation or parent
corporation of the Company possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any
subsidiary corporation or parent corporation of the Company, such Incentive
Option shall not be exercisable after the expiration of five (5) years from the
date such Incentive Option is granted.
Notwithstanding anything contained herein to the contrary, the
Committee shall, in the case of Options granted on the dates set forth in
Article II to the key employees of the Company listed in Subsections A and B of
Annex A hereto, cause each such Option (x) to become exercisable on the first
day of the month which is eighteen (18) months after the first full month
following the Effective Date, to the extent of sixty percent (60%) of the total
number of Shares covered thereby, and (y) to become exercisable on the first day
of the month which is thirty-six (36) months after the first full month
following the Effective Date, to the extent of the remaining Shares covered
thereby.
The Committee shall have the right to accelerate, in whole or
in part, from time to time, conditionally or unconditionally, rights to exercise
any Option granted hereunder.
To the extent that an Option is not exercised within the
period of exercisability specified therein, it shall expire as to the then
unexercised part.
Except to the extent otherwise provided under the Code, to the
extent that the aggregate fair market value of stock for which Incentive Options
(under all stock option plans of the Company and of any parent corporation or
subsidiary corporation of the Company) are exercisable for the first time by an
employee during any calendar year exceeds $100,000, such Options shall be
treated as Non-Qualified Options. For purposes of this limitation, (a) the fair
market value of stock is determined as of the time the Option is granted, and
(b) the limitation will be applied by taking into account Options in the order
in which they were granted.
In no event shall an Option granted hereunder be exercised for
a fraction of a Share.
A person entitled to receive Shares upon the exercise of an
Option shall not have the rights of a stockholder with respect to such Shares
until the date of issuance of a stock certificate to such person for such
Shares; provided, however, that until such stock certificate is issued, any
holder of an Option using previously acquired Shares in payment of an option
exercise price shall continue to have the rights of a stockholder with respect
to such previously acquired Shares.
VII. TERMINATION OF EMPLOYMENT
Upon termination of employment of any employee of the Company
and all subsidiary corporations and parent corporations of the Company, any
Option previously granted to the employee, unless otherwise specified by the
Committee in the Option, shall, to the extent not theretofore exercised,
terminate and become null and void; provided, however, that:
(a) if the employee shall die while in the employ of such
corporation or during either the three (3) month or one (1) year
period, whichever is applicable, specified in clause (b) below and at a
time when such employee was entitled to exercise an Option as herein
provided, the legal representative of such employee, or such person who
acquired such Option by bequest or inheritance or by reason of the
death of the employee, may, not later than one (1) year from the date
of death, exercise such Option, to the extent not theretofore
exercised, in respect of any or all of such number of Shares as
specified by the Committee in such Option; and
(b) if the employment of any employee to whom such Option
shall have been granted shall terminate by reason of the employee's
retirement (at such age or upon such conditions as shall be specified
by the Committee), disability (as described in Section 22(e)(3) of the
Code) or dismissal by the employer other than for cause (as defined
below), and while such employee is entitled to exercise such Option as
herein provided, such employee shall have the right to exercise such
Option so granted in respect of any or all of such number of Shares as
specified by the Committee in such Option, at any time up to and
including (i) three (3) months after the date of such termination of
employment in the case of termination by reason of retirement or
dismissal other than for cause, and (ii) one (1) year after the date of
termination of employment in the case of termination by reason of
disability.
In no event, however, shall any person be entitled to exercise
any Option after the expiration of the period of exercisability of such Option,
as specified therein.
If an employee voluntarily terminates his or her employment,
or is discharged for cause, any Option granted hereunder shall, unless otherwise
specified by the Option Committee in the Option, forthwith terminate with
respect to any unexercised portion thereof.
If an Option granted hereunder shall be exercised by the legal
representative of a deceased grantee or by a person who acquired an Option
granted hereunder by bequest or inheritance or by reason of the death of any
employee or former employee, written notice of such exercise shall be
accompanied by a certified copy of letters testamentary or equivalent proof of
the right of such legal representative or other person to exercise such Option.
For the purposes of the Plan, the term "for cause" shall mean
(a) with respect to an employee who is a party to a written employment agreement
with, or, alternatively, participates in a compensation or benefit plan of the
Company or a subsidiary corporation or parent corporation of the Company, which
agreement or plan contains a definition of "for cause" or "cause" (or words of
like import) for purposes of termination of employment thereunder by the Company
or such subsidiary corporation or parent corporation of the Company, "for cause"
or "cause" as defined therein; or (b) in all other cases, (i) the willful
commission by an employee of an act that causes or may cause substantial damage
to the Company or a subsidiary corporation or parent corporation of the Company;
(ii) the commission by an employee of an act of fraud in the performance of such
employee's duties on behalf of the Company or a subsidiary corporation or parent
corporation of the Company; (iii) conviction of the employee for commission of a
felony in connection with the performance of his duties on behalf of the Company
or a subsidiary corporation or parent corporation of the Company, or (iv) the
continuing failure of an employee to perform the duties of such employee to the
Company or a subsidiary corporation or parent corporation of the Company after
written notice thereof and a reasonable opportunity to be heard and cure such
failure are given to the employee by the Committee.
For the purposes of the Plan, an employment relationship shall
be deemed to exist between an individual and a corporation if, at the time of
the determination, the individual was an "employee" of such corporation for
purposes of Section 422 of the Code. If an individual is on leave of absence
taken with the consent of the corporation by which such individual was employed,
or is on active military service, and is determined to be an "employee" for
purposes of the exercise of an Option, such individual shall not be entitled to
exercise such Option during such period and while the employment is treated as
continuing intact unless such individual shall have obtained the prior written
consent of such corporation, which consent shall be signed by the chairman of
the board of directors, the president, a vice-president or other duly authorized
officer of such corporation.
A termination of employment shall not be deemed to occur by
reason of (i) the transfer of an employee from employment by the Company to
employment by a subsidiary corporation or a parent corporation of the Company or
(ii) the transfer of an employee from employment by a subsidiary corporation or
a parent corporation of the Company to employment by the Company or by another
subsidiary corporation or parent corporation of the Company.
VIII. EXERCISE OF OPTIONS
Options granted under the Plan shall be exercised by the
optionee as to all or part of the Shares covered thereby by the giving of
written notice of the exercise thereof to the Corporate Secretary of the Company
at the principal business office of the Company, specifying the number of Shares
to be purchased and accompanied by payment of the purchase price. Subject to the
terms of Articles XIII, XIV and XVI hereof, the Company shall cause certificates
for the Shares so purchased to be delivered at the principal business office of
the Company, against payment of the full purchase price, on the date specified
in the notice of exercise.
IX. USE OF PROCEEDS
The cash proceeds of the sale of Shares subject to the Options
granted hereunder are to be added to the general funds of the Company and used
for its general corporate purposes as the Board of Directors shall determine.
X. NONTRANSFERABILITY OF OPTIONS
No Option granted hereunder shall be transferable, whether by
operation of law or otherwise, other than by will or the laws of descent and
distribution, and any Option granted hereunder shall be exercisable, during the
lifetime of the holder, only by such holder. Except to the extent provided
above, Options may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process.
XI. ADJUSTMENT OF SHARES; EFFECT OF
CERTAIN TRANSACTIONS
Notwithstanding any other provision contained herein, in the
event of any change in the Shares subject to the Plan or to any Option granted
under the Plan (through merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares, or other like change in capital structure of the
Company), an adjustment shall be made to each outstanding Option such that each
such Option shall thereafter be exercisable for such securities, cash and/or
other property as would have been received in respect of the Shares subject to
such Option had such Option been exercised in full immediately prior to such
change, and such an adjustment shall be made successively each time any such
change shall occur. The term "Shares" after any such change shall refer to the
securities, cash and/or property then receivable upon exercise of an Option. In
addition, in the event of any such change, the Committee shall make any further
adjustment to the maximum number of Shares which may be acquired under the Plan
pursuant to the exercise of Options, the maximum number of shares for which
Options may be granted to any one employee of the Company, and the number of
Shares and price per Share subject to outstanding Options as shall be equitable
to prevent dilution or enlargement of rights under such Options, and the
determination of the Committee as to these matters shall be conclusive;
provided, however, that (a) each such adjustment with respect to an Incentive
Option shall comply with the rules of Section 424(a) of the Code (or any
successor provision), and (b) in no event shall any adjustment be made which
would render any Incentive Option granted hereunder other than an "incentive
stock option" as defined in Section 422 of the Code.
In the event of a "change in control" of the Company, all then
outstanding Options shall immediately become exercisable. For purposes of the
Plan, a "change in control" of the Company occurs if (a) more than fifty percent
(50%) of the total combined voting power of all classes of stock of the Company
normally entitled to vote for the election of directors of the Company is
acquired by another person, firm or corporation or by a cooperating group of
such individuals or entities, (b) the Board of Directors approves the sale of
all or substantially all of the property or assets of the Company, or (c) the
Board of Directors approves a consolidation or merger of the Company with
another corporation, the consummation of which would result in the occurrence of
an event described in clause (a) above.
Notwithstanding anything contained herein to the contrary, the
Committee, in its discretion, may determine that, upon the occurrence of a
transaction described in the preceding paragraph, each Option outstanding
hereunder shall terminate within a specified number of days after notice to the
holder, and such holder shall receive, with respect to each Share subject to
such Option, an amount equal to the excess of the fair market value of such
Shares immediately prior to the occurrence of such transaction over the exercise
price per Share of such Option; such amount shall be payable in cash, in one or
more of the kinds of property payable in such transaction, or in a combination
thereof, as the Committee in its discretion shall determine. The provisions
contained in the preceding sentence shall be inapplicable to an Option granted
within six (6) months before the occurrence of a transaction described above if
the holder of such Option is subject to the reporting requirements of Section
16(a) of the Exchange Act.
XII. RIGHT TO TERMINATE EMPLOYMENT
The Plan shall not impose any obligation on the Company or on
any subsidiary corporation or parent corporation thereof to continue the
employment of any holder of an Option and it shall not impose any obligation on
the part of any holder of an Option to remain in the employ of the Company or of
any subsidiary corporation or parent corporation thereof.
XIII. PURCHASE FOR INVESTMENT
Except as hereinafter provided, the Committee may require the
holder of an Option granted hereunder, as a condition of exercise of such
Option, to execute and deliver to the Company a written statement, in form
satisfactory to the Committee, in which such holder represents and warrants that
such holder is purchasing or acquiring the Shares acquired thereunder for such
holder's own account, for investment only and not with a view to the resale or
distribution thereof, and agrees that any subsequent resale or distribution of
any of such Shares shall be made only pursuant to either (i) a Registration
Statement on an appropriate form under the Securities Act of 1933, as amended
(the "Securities Act"), which Registration Statement has become effective and is
current with regard to the Shares being sold, or (ii) a specific exemption from
the registration requirements of the Securities Act, but in claiming such
exemption the holder shall, prior to any offer of sale or sale of such Shares,
obtain a prior favorable written opinion of counsel, in form and substance
satisfactory to counsel for the Company, as to the application of such exemption
thereto. The foregoing restriction shall not apply to (x) issuances by the
Company so long as the Shares being issued are registered under the Securities
Act and a prospectus in respect thereof is current or (y) reofferings of Shares
by affiliates of the Company (as defined in Rule 405 or any successor rule or
regulation promulgated under the Securities Act) if the Shares being reoffered
are registered under the Securities Act and a prospectus in respect thereof is
current.
Nothing herein shall be construed as requiring the Company to
register Shares subject to any Option under the Securities Act. In addition, if
at any time the Committee shall determine that the listing or qualification of
the Shares subject to such Option on any securities exchange or under any
applicable law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection with, the granting
of an Option, or the issuance of Shares thereunder, such Option may not be
exercised in whole or in part unless such listing, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
XIV. ISSUANCE OF STOCK CERTIFICATES; LEGENDS,
PAYMENT OF EXPENSES
Upon any exercise of an Option which may be granted hereunder
and payment of the purchase price in respect thereof, a certificate or
certificates for the Shares shall be issued by the Company in the name of the
person exercising the Option and shall be delivered to or upon the order of such
person.
The Company may endorse such legend or legends upon the
certificates for Shares issued pursuant to the Plan and may issue such "stop
transfer" instructions to its transfer agent in respect of such Shares as the
Committee, in its discretion, determines to be necessary or appropriate to (a)
prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act, (b) implement the provisions of the Plan and
any agreement between the Company and the optionee or grantee with respect to
such Shares, or (c) permit the Company to determine the occurrence of a
disqualifying disposition, as described in Section 421(b) of the Code, of Shares
transferred upon exercise of an Incentive Option granted under the Plan.
The Company shall pay all issue or transfer taxes with respect
to the issuance or transfer of Shares, as well as all fees and expenses
necessarily incurred by the Company in connection with such issuance or
transfer, except fees and expenses which may be necessitated by the filing or
amending of a Registration Statement under the Securities Act, which fees and
expenses shall be borne by the recipient of the Shares unless such Registration
Statement has been filed by the Company for its own corporate purposes (and the
Company so states) in which event the recipient of the Shares shall bear only
such fees and expenses as are attributable to the inclusion of the Shares he or
she receives in the Registration Statement.
All Shares issued as provided herein shall be fully paid and
nonassessable to the extent permitted by law.
XV. WITHHOLDING TAXES
The Company may require an employee exercising a Non-Qualified
Option granted hereunder, or disposing of Shares acquired pursuant to the
exercise of an Incentive Option in a disqualifying disposition (within the
meaning of Section 421(b) of the Code), to reimburse the corporation that
employs such employee for any taxes required by any government to be withheld or
otherwise deducted and paid by such corporation in respect of the issuance or
disposition of such Shares. In lieu thereof, the corporation that employs such
employee shall have the right to withhold the amount of such taxes from any
other sums due or to become due from such corporation to the employee upon such
terms and conditions as the Committee shall prescribe. The corporation that
employs such employee may, in its discretion, hold the stock certificate to
which such employee is entitled upon the exercise of an Option as security for
the payment of such withholding tax liability, until cash sufficient to pay that
liability has been accumulated. In addition, at any time that the Company
becomes subject to a withholding obligation under applicable law with respect to
the exercise of a Non-Qualified Option (the "Tax Date"), except as set forth
below, a holder of a Non-Qualified Option may elect to satisfy, in whole or in
part, the holder's related personal tax liabilities (an "Election") by (a)
directing the Company to withhold from Shares issuable in the related exercise
either a specified number of Shares or Shares having a specified value (in each
case not in excess of the related personal tax liabilities), (b) tendering
Shares previously issued pursuant to the exercise of an Option or other shares
of the Company's common stock owned by the holder or (c) combining any or all of
the foregoing options in any fashion. An Election shall be irrevocable. The
withheld Shares and other Shares tendered in payment shall be valued at their
fair market value (determined in accordance with the principles set forth in
Article V hereof) on the Tax Date. The Committee may disapprove of any Election,
suspend or terminate the right to make Elections or provide that the right to
make Elections shall not apply to particular Shares or exercises. The Committee
may impose any additional conditions or restrictions on the right to make an
Election as it shall deem appropriate. In addition, the Company shall be
authorized to effect any such withholding upon exercise of a Non-Qualified
Option by retention of shares issuable upon such exercise having a fair market
value at the date of exercise (as determined under Article V) which is equal to
the amount to be withheld; provided, however, that the Company shall not be
authorized to effect such withholding without the prior written consent of the
employee if such withholding would subject such employee to liability under
Section 16(b) of the Exchange Act. The Committee may prescribe such rules as it
determines with respect to employees subject to the reporting requirements of
Section 16(a) of the Exchange Act to effect such tax withholding in compliance
with the Rules established by the Securities and Exchange Commission (the
"Commission") under Section 16 of the Exchange Act and the positions of the
staff of the Commission thereunder expressed in no-action letters exempting such
tax withholding from liability under Section 16(b) of the Exchange Act.
XVI. LISTING OF SHARES AND RELATED MATTERS
The Board of Directors may delay any issuance or delivery of
Shares if it determines that listing, registration or qualification of Shares
covered by the Plan upon any national securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the sale or
purchase of Shares under the Plan, until such listing, registration,
qualification, consent or approval shall have been effected or obtained, or
otherwise provided for, free of any conditions not acceptable to the Board of
Directors.
XVII. AMENDMENT OF THE PLAN
The Board of Directors may, from time to time, amend the Plan,
provided that no amendment shall be made, without the approval of the
stockholders of the Company, that will (a) increase the total number of Shares
reserved for Options under the Plan (other than an increase resulting from an
adjustment provided for in Article XI hereof), (b) reduce the exercise price of
any Incentive Option granted hereunder, (c) modify the provisions of the Plan
relating to eligibility, or (d) materially increase the benefits accruing to
participants under the Plan. The Committee shall be authorized to amend the Plan
and the Options granted thereunder to permit the Incentive Options granted
thereunder to qualify as incentive stock options within the meaning of Section
422 of the Code and the Treasury regulations promulgated thereunder. The rights
and obligations under any Option granted before amendment of the Plan or any
unexercised portion of such Option shall not be adversely affected by amendment
of the Plan or the Option without the consent of the holder of such Option.
XVIII. TERMINATION OR SUSPENSION OF THE PLAN
The Board of Directors may at any time suspend or terminate
the Plan; provided, however, that the Board of Directors shall not suspend or
terminate the Plan prior to granting the Options on the dates set forth in
Article II to the key employees of the Company listed on Subsections A and B of
Annex A hereto. The Plan shall terminate at the close of business on the
Termination Date. Options may not be granted while the Plan is suspended or
after it is terminated. Rights and obligations under any Option granted while
the Plan is in effect shall not be altered or impaired by suspension or
termination of the Plan, except upon the consent of the person to whom the
Option was granted. The power of the Committee to construe and administer any
Options granted prior to the termination or suspension of the Plan under Article
III nevertheless shall continue after such termination or during such
suspension.
XIX. SAVINGS PROVISION
With respect to persons subject to Section 16 of the Exchange
Act, transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision of the Plan or action by the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
XX. GOVERNING LAW
The Plan and such Options as may be granted hereunder and all
related matters shall be governed by, and construed and enforced in accordance
with, the laws of the State of Florida from time to time obtaining.
XXI. PARTIAL INVALIDITY
The invalidity or illegality of any provision herein shall not
be deemed to affect the validity of any other provision.
XXII. EFFECTIVE DATE
The Plan shall become effective at 9:00 A.M., Sarasota,
Florida time, on the Effective Date; provided, however, that if the Plan is not
approved by a vote of the stockholders of the Company at an annual meeting or
any special meeting or by unanimous written consent within twelve (12) months
after the Effective Date, any Options granted hereunder shall be Non-Qualified
Options whether or not initially designated as such by the Committee.
<PAGE>
Stock Option Distributions
I. First Allotment: Options to purchase 340,909 shares are to
be distributed to the following key employees and Secondary Management (as
defined herein) in the respective number of shares:
(1) Curd 73,864
(2) Soran 62,500
(3) Zulanas 34,091
(4) Janney 28,409
(5) Lynn 17,045
(6) Foster 17,045
(7) Lauer 17,045
(8) Matrange 17,045
(9) President of UEP 17,045
(10) Secondary Management 56,820
(As determined by the Committee)
"Secondary Management" shall mean the following individuals or their
successors for each the following companies:
1. Acrylic Division of Polycast Technology Corporation
a. McCormick (Operations)
b. J. Lee (R & D)
c. DuPont (Sales/Mkt)
d. Pungello (Finance)
1. Royalite Division of Polycast Technology Corporation
a. Dobersch (Operations)
b. V. Lee (R & D)
c. Munday (Sales/Mkt)
d. Ketcham (Finance)
1. Uniroyal Engineered Products, Inc. ("UEP")
a. Schrader (Operations)
b. [Open] (R & D)
c. Schaltz (Sales/Mkt)
d. Steele (Sales/Mkt)
e. [Open] (Finance)
Uniroyal Adhesives and Sealants Company, Inc./Ensolite, Inc.
a. Chiantello (Operations)
b. [Open] (R & D)
c. [Open] (Sales/Mkt)
d. Lauer (Finance)
e. Miller (Finance)
1. Uniroyal Technology Corporation
a. Wagner (Finance)
b. [Open]
<PAGE>
A. Second Allotment: Options to purchase up to 454,545 shares
are to be distributed to the following key employees and
Secondary Management in the respective number of shares:
(1) Curd 97,727
(2) Soran 82,955
(3) Zulanas 45,455
(4) Janney 37,500
(5) Lynn 22,727
(6) Foster 22,727
(7) Lauer 22,727
(8) Matrange 22,727
(9) President of UEP 22,727
(10) Secondary Management 77,273
(As determined by the Committee)
A. Third Allotment: It is contemplated that options to
purchase up to 568,182 shares will be distributed to the following key employees
and Secondary Management in the respective number of shares, or to such key
employees of the company or Secondary Management and in such number of shares as
determined by the Committee, in its discretion:
(1) Curd 123,864
(2) Soran 104,545
(3) Zulanas 56,818
(4) Janney 47,727
(5) Lynn 28,409
(6) Foster 28,409
(7) Lauer 28,409
(8) Matrange 28,409
(9) President of UEP 28,409
(10) Secondary Management 93,183
(As determined by the Committee)
Exhibit 10.28
UNIROYAL TECHNOLOGY CORPORATION
1992 NON-QUALIFIED STOCK OPTION PLAN
AS AMENDED, EFFECTIVE DECEMBER 11, 1996
1. Purpose of the Plan.
This Uniroyal Technology Corporation 1992 Non-Qualified Stock Option
Plan (the "Plan") is intended as an incentive to retain as independent directors
on the Board of Directors (the "Board") of Uniroyal Technology Corporation (the
"Company") persons of training, experience and ability, to encourage the sense
of proprietorship of such persons and to stimulate the active interests of such
persons in the development and financial success of the Company. It is further
intended that options issued pursuant to this Plan (the "Options") shall not be
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
2. Shares and Options.
Subject to adjustments provided in Paragraph 8 hereof, a total number
of up to the number of shares (the "Shares") of Common Stock, $.01 par value
("Stock"), of the Company calculated by multiplying the number of Directors (as
hereinafter defined) participating in the Plan by the number calculated pursuant
to the formula set forth in Paragraph 3(b) hereof shall be subject to the Plan;
during the term of the Plan such number shall be recalculated at the beginning
of each fiscal year of the Company and at the time of any changes in the number
of Directors participating in the Plan to include the number of shares added to
the Plan in such fiscal year. The Shares subject to the Plan shall consist of
authorized and unissued shares or previously issued shares reacquired and held
by the Company, or any corporation or entity of which the Company directly or
indirectly controls 50% or more of the total combined voting power of all
classes of its stock having voting power (any such corporation or entity being
hereinafter referred to as a "Subsidiary"), and such number of Shares pursuant
to the preceding sentence shall be and hereby is reserved for sale for such
purpose. Any of such Shares that may remain unsold and that are not subject to
outstanding Options at the termination of the Plan shall cease to be reserved
for the purpose of the Plan, but until termination of the Plan the Company shall
at all times reserve a sufficient number of Shares to meet the requirements of
the Plan. Should any Option expire or be canceled prior to its exercise in full,
the Shares theretofore subject to such Option may not again be subjected to an
Option under the Plan.
3. Formula for Automatic Grant of Options.
(a) Options shall be granted to those persons who, as of the
dates set forth in Section 3(b) below, are (i) directors of the Company, (ii)
are not officers of the Company or a Subsidiary, and (iii) elect to receive
Options in lieu of retainer as provided below (any person satisfying all three
requirements referred to herein as a "Director"). Each Director to whom an
Option is granted under this Plan, or any successor to the rights of such
Director under this Plan by reason of the death of the Director, hereafter shall
be referred to as an "Optionee." Each Option shall be evidenced by an option
agreement, in a form specified by the Board, containing terms and conditions
that are not inconsistent with this Plan or applicable laws ("Option
Agreement"). The Options granted to Directors under this Plan shall be in lieu
of the regular Director's annual retainer with respect to any Director's
position with the Company. The date of grant of an Option shall be stated in the
Option Agreement evidencing such Option (such date of grant being referred to
herein as the "Grant Date"). Neither the Plan nor any Option granted under the
Plan shall confer upon any person any right to continue to serve as a Director.
(b) Within 30 days after the later to occur of adoption of the
Plan or an individual's initially satisfying conditions (i) and (ii) of
paragraph (a) of this Section 3 above, such individual shall have the
opportunity to make an irrevocable election in writing, signed by such
individual and filed with the Company, to receive Options in lieu of all or any
portion of the Board and committee retainers that will become payable to such
individual in respect of his or her service after such election is received by
the Company; provided, however, that any individual who satisfies conditions (i)
and (ii) of paragraph (a) of this Section 3 above may, after expiration of the
aforementioned 30-day period in which he or she did not elect to defer his or
her retainer, irrevocably elect, in a signed writing filed with the Company, to
receive Options in lieu of all or any portion of the Board and committee
retainers that would otherwise become payable to such individual in respect of
his or her service beginning in the calendar year immediately following the
calendar year in which such election is received by the Company. Such election
shall continue in effect and apply to Board and committee retainers otherwise
payable to such Director in respect of his or her service in any period
following the calendar year of such election until such election is revoked, in
writing, signed by the applicable Director and filed with the Company, such
revocation to become effective with respect to Board and committee retainers
payable to such Director in respect of his or her service beginning in the
calendar year immediately following the calendar year in which such revocation
is received by the Company. If so elected, the number of Shares subject to the
Option shall be determined in accordance with the following formula:
dollar amount of cash retainer to be deferred
______________________________________________ = number of Shares
50% of the Fair Market Value per Share
For purposes of the foregoing formula, the Fair Market Value per Share shall be
determined as of the Grant Date (as hereinafter defined) of an Option.
No Director may receive Options to purchase more than 10,000 Shares on any Grant
Date. To the extent the Director would receive Options in lieu of retainer in
excess of the number of Options which may be granted pursuant to this Section
3(b), the Director shall receive such related retainer fees in cash under the
normal payment schedule.
(c) Notwithstanding any provision herein to the contrary, no
Director shall be granted any Option in any annual period which, if considered
together with all other outstanding and unexercised options granted by the
Company hereunder or pursuant to any other Company plan during such annual
period ("Outstanding Options"), would entitle such Director to purchase more
than the lesser of (i) the number of shares purchasable with the maximum
retainer earned or to be earned by such Director in the calendar year in which a
Grant Date occurs and (ii) 10,000 shares of Stock ("Option Maximum"). If any
grant of Options pursuant to Section 3(b) above would exceed the Option Maximum
for a Director, the number of Shares in respect of which Options shall be
granted hereunder shall be reduced (or eliminated) so that the number of Shares
covered by Outstanding Options granted to such Director shall not exceed the
Option Maximum. To the extent so reduced, the Director will receive retainer
fees in cash under the normal payment schedule. In the event that any such
Director subsequently exercises any of his or her Outstanding Options to
purchase shares of Stock, Options covering the Shares purchased thereby shall no
longer be considered to be Outstanding Options for purposes of the Option
Maximum.
4. Option Price.
(a) Each Option shall have an exercise price for the related
Shares that is equal to fifty percent (50%) of the Fair Market Value of such
Shares (determined as set forth in Section 4(b) below) on the date the Option is
granted.
(b) The fair market value of a Share on a particular date
("Fair Market Value") shall be (i) the highest closing price of the Stock on any
established national exchange or exchanges or the Nasdaq National Market (or its
successor quotation system), whichever is applicable, on such date or, if no
sale of Stock is made on such date, the next preceding date on which there was a
sale of such Stock, or (ii) if the Stock is not listed on an established stock
exchange or the Nasdaq National Market, the closing price of the Stock in the
New York over-the-counter market as reported by National Association of
Securities Dealers, Inc. for such date or, if no sale of Stock is reported for
such date, the next preceding date on which there was a reported sale of Stock.
5. Option Period.
The Options granted under this Plan shall be for a term of ten
(10) years from the date of granting of each Option (the "Option Period").
6. Exercise of Options: Certain Conditions to Grant.
(a) An Option may be exercised in whole or in part at any time
beginning nine (9) months after the Grant Date.
(b) Subject to applicable exercise restrictions set forth
herein, Options may be exercised, in whole or in part, by giving written notice
of exercise to the Company specifying the number of Shares to be purchased. The
notice shall be accompanied by payment in full of the purchase price (including
applicable withholding taxes, if any) in cash, by certified or cashier's check,
by money order or by personal check (if approved by the Board) of an amount
equal to the aggregate purchase price of the Shares to which such exercise
relates. No person will have the rights of a shareholder with respect to Shares
subject to an Option granted under this Plan until a certificate or certificates
for the Shares have been delivered to him or her.
(c) Notwithstanding the foregoing payment provisions, the
Board may refuse to recognize the method of exercise set forth in Section 6(b),
if, in the opinion of counsel to the Company, (i) the Optionee is, or within the
six (6) months preceding such exercise was, subject to reporting under Section
16(a) of the Exchange Act of 1934, as amended (the "Exchange Act"), and (ii)
there is a substantial likelihood that the method of exercise selected by the
Optionee would subject the Optionee to substantial risk of liability under
Section 16 of the Exchange Act.
(d) Notwithstanding any provision herein to the contrary, in
the event a Director is removed as a director of the Company as a result of his
or her permanent and total disability (as defined in Section 22(e)(3) of the
Code), he or she may, but only within the period of time one (1) year from the
date of such removal (but not later than the expiration of the Option Period),
exercise his or her Option to the extent he or she was entitled to exercise it
at the date of such removal. To the extent the Optionee was not entitled to
exercise the Option at the date of such removal, or if he or she does not
exercise such Option (which he or she was entitled to exercise) within the time
specified herein, the Option shall terminate.
(e) In the event of the death of an Optionee during his or her
term of service as a Director of the Company, to the extent the Optionee was
entitled to exercise the Option at the time of his or her death, the Option may
be exercised within a one-year period following the date of death (but not later
than the expiration of the term of the Option) by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance.
To the extent the Optionee was not entitled to exercise the Option at the date
of his or her death, the Option shall terminate.
(f) Termination of Services: If a Director ceases continuous
service as a Director for any reason other than death or disability (such
disability being determined by the Board in its sole discretion provided, that
no Director shall participate in any such determination relating to himself or
herself), all Options held by the Director shall lapse on the earlier of the end
of the Option Period or ninety (90) days following the effective date of the
termination of the Director's services to the Company. Any Option shall lapse at
the earlier of the end of the Option Period or the end of the period established
by the Optionee's termination of services to the Company. The Option may be
exercised only for the number of Shares for which it could have been exercised
on such termination date, subject to any adjustment under Section 8.
7. Non-Transferability of Options.
Except as hereinafter provided, no Option and no rights or
interest therein shall be assignable or transferable by an Optionee and may not
be sold, pledged, encumbered or otherwise alienated or hypothecated, otherwise
than by will or the laws of descent and distribution, and during the lifetime of
an Optionee, Options are exercisable only by the Optionee or his or her legal
representative. The Board may, in its discretion, authorize all or a portion of
any Option granted to an Optionee to be on terms which permit transfer by such
Option to (i) the Optionee's spouse, former spouse, children, grandchildren or
any other member of the Optionee's immediate family (collectively, "Immediate
Family Members"); (ii) a trust or trusts for the exclusive benefit of any
Immediate Family Members; (iii) one or more family partnerships, family limited
partnerships, family limited liability companies or similar entities of which or
in which any Immediate Family Members and/or the Optionee are the only partners,
members, shareholders or other owners; or (iv) such other persons or entities
permitted by the Board in its discretion; provided that (x) the Option Agreement
pursuant to which such Option is granted must expressly provide for
transferability in a manner consistent with this Section 7; (y) any transfer of
an Option shall be in accordance with any other terms, conditions, rules and
limitations prescribed by the Board; and (z) subsequent transfers of previously
transferred Options shall be prohibited, otherwise than by will or the laws of
descent and distribution. Following the valid transfer of any Option, the
transferred Option shall continue to be subject to the same terms and conditions
as were applicable immediately prior to such transfer, provided that the
applicable transferee of such Option shall be treated under the Plan and the
applicable Option Agreement as the Optionee, except that the terms of paragraph
(d), (e) and (f) of Section 6 hereof, dealing with exercise of an Option
following termination of a Director's service with the Company (and any similar
terms and conditions of the applicable Option Agreement), shall continue to be
applied with respect to the original Optionee, so that following any such
termination, any transferee of the original Optionee's Option may only exercise
such Option for the period specified in such paragraph (and any similar terms
and conditions of the applicable Option Agreement).
8. Adjustments.
(a) The existence of the Plan and the Options granted hereunder shall
not affect or restrict in any way the right or power of the Board or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of bonds, debentures, preferred or prior preference stocks ahead of or affecting
the Stock or the rights thereof, the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding.
(b) In the event of any change in capitalization affecting the Stock,
such as a stock dividend, stock split, extraordinary dividend payable in cash or
other property, recapitalization, merger, consolidation, split-up, combination,
exchange of shares, other form of reorganization, or any other change affecting
the Stock, the Board, in its discretion, may make proportionate adjustments it
deems appropriate to reflect such change with respect to (i) the maximum number
of shares of Stock which may be sold or awarded to any Optionee, (ii) the number
of shares of Stock covered by each outstanding Option, and (iii) the price per
share in respect of the outstanding Options. Notwithstanding the foregoing, the
Board may increase the aggregate number of shares of Stock for which Options may
be granted under the Plan solely to reflect the change, if any, of the
capitalization of the Company.
9. Securities Laws Restrictions.
The Company shall have no obligation to register Shares covered by the
Plan under the Securities Act of 1933, as amended (the "Securities Act").
Whether or not the Options and Shares covered by the Plan have been registered
under the Securities Act, each person exercising an Option under the Plan may be
required by the Company to give a representation in writing that he or she is
acquiring Shares for his or her own account for investment and not with a view
to, or for sale in connection with, the distribution of any part thereof. As a
condition of any transfer of the certificate evidencing Shares, the Company may
require such other agreements or undertakings, if any, that it may deem
necessary or appropriate to ensure compliance with any provisions of the Plan or
any law or regulation. Certificates for Shares delivered under the Plan may be
subject to such stock-transfer orders and other restrictions as counsel for the
Company may deem advisable under the rules, regulations, and other requirements
of the Securities and Exchange Commission, any stock exchange or other market
upon which the Stock is then listed, and any applicable federal or state
securities law. The Company may cause a legend or legends to be placed on any
such certificates to refer to such restrictions.
10. Amendment, Modification, Suspension or Discontinuance of this Plan.
(a) Except as set forth in Sections 10(b), 10(c) and 10(d)
below, without shareholder approval, the Board may at any time amend, modify,
suspend, discontinue or terminate the Plan, including, without limitation, for
the purpose of meeting or addressing any changes in legal requirements or for
any other purpose permitted by law.
(b) Except as set forth in Section 10(c) below, to comply with
the restrictions set forth in Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act, or any successor rule ("Rule 16b-3")
and to comply with the Code and accompanying regulations, but subject to changes
in law or other legal requirements (including any change in the provisions of
Rule 16b-3 and the Code and accompanying regulations that would permit
otherwise), the Board must obtain approval of the stockholders of the Company to
make any amendment that would (i) increase the aggregate number of shares of
Stock that may be issued under the Plan pursuant to Sections 2 and 3 of the Plan
(except for adjustments pursuant to Section 8 of the Plan), (ii) modify
materially the requirements as to eligibility for participation in the Plan, or
(iii) increase materially the benefits accruing to the Optionees under the Plan,
including, but not limited to, an increase in the number of Shares subject to an
Option, a reduction in the Option exercise price described in Section 4(a)
hereof, an extension of the period during which Options may be granted or
exercised under the Plan or a change in the vesting period or timing of Option
grants.
(c) Notwithstanding Sections 10(a) and 10(b), under no
circumstances may the Board amend, alter, discontinue or terminate the Plan so
as to impair the vested rights of Optionees under any Option theretofore granted
under the Plan without their written consent.
11. Government Regulations.
The Plan, and the granting and exercise of Options thereunder, and the
obligation of the Company to sell and deliver Shares under such Options, shall
be subject to all applicable laws, rules and regulations, and to such approvals
by any governmental agencies or national securities exchanges or other markets
as may be required.
12. Costs of Plan; Plan Unfunded.
The costs and expenses of administering the Plan shall be borne by the
Company. The Plan shall be unfunded. Neither the Company nor the Board shall be
required to establish any special or separate fund or to make any other
segregation of assets to assure the issuance of Shares upon exercise of any
Option under the Plan and issuance of Shares upon exercise of Options shall be
subordinate to the claims of the Company's general creditors. Proceeds from the
sale of Shares pursuant to Options shall constitute general funds of the
Company. None of the Company, any subsidiary of the Company or the Board shall
be deemed to be a trustee of any amounts to be paid under the Plan.
13. Governing Law.
The Plan and all actions taken thereunder shall be governed by and
construed in accordance with the laws of the State of Florida.
14. Effective Date.
The Plan shall be effective if and when approved by a majority of the
Company's stockholders at the 1994 annual meeting of stockholders or any
adjournment thereof.
15. Interpretation.
(a) If any provision of the Plan is held invalid for any reason, such
holding shall not affect the remaining provisions hereof, but instead the Plan
shall be construed and enforced as if such provision had never been included in
the Plan.
(b) Headings contained in this Agreement are for convenience only and
shall in no manner be construed as part of this Plan.
(c) Any reference to the masculine, feminine, or neuter gender shall be
a reference to such other gender as is appropriate.
16. Duration of Plan.
Options may be granted under this Plan only during the ten (10) years
immediately following the effective date of this Plan, unless the Plan is
terminated earlier pursuant to Section 10 hereof.
17. Taxes; Compliance with Law; Approval of Regulatory Bodies.
(a) The Company, if necessary or desirable, may pay or withhold the
amount of any tax attributable to any Shares deliverable or amounts payable
under this Plan, and the Company may defer making any such delivery or payment
until it is indemnified to its satisfaction or paid for that tax in accordance
with such procedures as may be adopted by the Board.
(b) Options are exercisable, and Shares can be delivered under this
Plan, only in compliance with all applicable federal and state laws and
regulations, including, without limitation, state and federal securities laws,
and the rules of all stock exchanges or other markets on which the Company's
stock is listed at any time. An Option is exercisable only if either (a) a
registration statement pertaining to the Shares to be issued upon exercise of
the Option has been filed with the Securities and Exchange Commission and has
become effective and remains effective on the date of exercise, or (b) an
exemption from the registration requirements of applicable securities laws is
available. This Plan does not require the Company, however, to file such a
registration statement or to assure the availability of such exemptions. Any
certificate issued to evidence Shares issued under the Plan may bear such
legends and statements, and shall be subject to such transfer restrictions, as
the Board deems advisable to assure compliance with federal and state laws and
regulations and with the requirements of this Section. Each Option may not be
exercised, and Shares may not be issued under this Plan, until the Company has
obtained the consent or approval of every regulatory body, federal or state,
having jurisdiction over such matters as the Board deems advisable.
(c) Each person who acquires the rights to exercise an Option by
bequest or inheritance may be required by the Board to furnish reasonable
evidence of ownership of the Option as a condition to his exercise of the
Option. In addition, the Board may require such consents and releases to taxing
authorities as the Board deems advisable.
18. Miscellaneous.
(a) By accepting any benefit under the Plan, each Optionee and each
person claiming under or through such Optionee shall be conclusively deemed to
have indicated his or her acceptance and ratification of, and consent to, all of
the terms and conditions of the Plan and any action taken under the Plan by the
Company, the Board or their delegees.
(b) No person shall have any rights or claims under the Plan except in
accordance with the provisions of the Plan and any Option Agreement. Except as
expressly provided for in the Plan, no Director or other person shall have any
claim or right to be granted an Option under the Plan.
UNIROYAL TECHNOLOGY CORPORATION
1994 STOCK OPTION PLAN, AS AMENDED
TO NOVEMBER 14, 1996 AND RESTATED
I. PURPOSE
Uniroyal Technology Corporation, a Delaware corporation (the
"Company"), desires to afford certain of its key employees and certain key
employees of any subsidiary corporation or parent corporation of the Company now
existing or hereafter formed or acquired who are responsible for the continued
growth of the Company an opportunity to acquire a proprietary interest in the
Company, and thus to create in such key employees an increased interest in and a
greater concern for the welfare of the Company and its subsidiaries.
The stock options ("Options") offered pursuant to this 1994
Stock Option Plan (the "Plan") are a matter of separate inducement and are not
in lieu of any salary or other compensation for the services of any key
employee.
The Company, by means of the Plan, seeks to retain the
services of persons now holding key positions and to secure and retain the
services of persons capable of filling such positions.
The Options granted under the Plan are intended to be either
incentive stock options ("Incentive Options") within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), or options that
do not meet the requirements for Incentive Options ("Non-Qualified Options"),
but the Company makes no warranty as to the qualification of any Option as an
Incentive Option.
II. AMOUNT OF STOCK SUBJECT TO THE PLAN
Up to 811,991 shares of Common Stock $.01 per value per share
("Shares"), may be granted and outstanding under the Plan, provided that the
total number of Shares of the Company which may be purchased pursuant to the
exercise of Options granted under the Plan and all other stock option plans of
the Company for employees shall not at any time exceed, in the aggregate,
fifteen percent (15%) of the then currently authorized Shares outstanding, on a
fully diluted basis, such number to be subject to adjustment in accordance with
Article XI of the Plan.
Shares which may be acquired under the Plan may be either
authorized but unissued Shares, Shares of issued stock held in the Company's
treasury, or both, at the discretion of the Company. If and to the extent that
Options granted under the Plan expire o terminate without having been exercised
the Shares covered by such expired or terminated Options may again be subject to
an Option under the Plan.
Except as provided in Articles XVIII and XXII hereof, the Company may,
from time to time during the period beginning on the Effective Date and ending
on January 1, 2004 (the "Termination Date"), grant to certain key employees of
the Company, or certain key employees of any subsidiary corporation or parent
corporation of the Company now existing or hereafter formed or acquired,
Incentive Options and/or Non-Qualified Options under the terms hereinafter set
forth.
As used in the Plan, the term "parent corporation" and
"subsidiary corporation" shall mean a corporation coming within the definition
of such terms contained in Sections 424(e) and 424(f) of the Code, respectively.
III. ADMINISTRATION
The board of directors of the Company (the "Board of
Directors") shall designate from among its members an option committee (the
"Committee") to administer the Plan. The Committee shall consist of no fewer
than three members of the Board of Directors, each of whom shall be a
"disinterested person" within the meaning of Rule 16b-3 (or any successor rule
or regulation) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). A majority of the members of the Committee shall
constitute a quorum, and the act of a majority of the members of the Committee
shall be the act of the Committee. Any member of the Committee may be removed at
any time either with or without cause by resolution adopted by the Board of
Directors, and any vacancy on the Committee at any time may be filled by
resolution adopted by the Board of Directors.
Any or all powers and functions of the Committee may be
exercised at any time and from time to time by the Board of Directors or an
executive committee of the Board of Directors (the "Executive Committee";
references below to the Committee shall be deemed to include references to the
Board of Directors and the Executive Committee, except as the context otherwise
requires); provided, however, that all of the members of the Board of Directors
or the Executive Committee, as the case may be, which exercise any power or
authority under the Plan, are "disinterested persons" within the meaning of Rule
16b-3 (or any successor rule or regulation) promulgated under the Exchange Act.
Subject to the express provisions of the Plan, the Committee shall have
authority, in its discretion, to determine the persons to whom Options shall be
granted, the time when such persons shall be granted Options, the number of
Shares which shall be subject to each Option, the purchase price of each Share
which shall be subject to each Option, the period(s) during which such Options
shall be exercisable (whether in whole or part), and the other terms and
provisions thereof (which need not be identical). In determining the persons to
whom Options shall be granted and the number of Shares for which Options are to
be granted to each person, the Committee shall give consideration to the length
of service, the amount of earnings and the responsibilities and duties of such
person. Options need not be uniform as to all grants and recipients thereof.
Subject to the express provisions of the Plan, the Committee
also shall have authority to construe the Plan and the Options granted
thereunder, to amend the Plan and the Options granted thereunder, to construe
any ambiguous provision of the Plan and/or any Option award agreement, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the Options (which need not be identical);
to determine eligibility for participation in the Plan; to determine whether an
Option will be a qualified Incentive Stock Option or a non-qualified option; to
grant waivers of Plan terms, conditions, restrictions and limitations or
accelerate exercisability of an Option; to correct errors, supply any omissions
or reconcile any inconsistencies in the Plan and/or any Option award agreement;
to supply additional conditions, terms and restrictions with respect to any
Options; to determine the fair market value of a Share, in accordance with the
Plan; and to make all other determinations necessary or advisable for
administering the Plan. The Committee also shall have the authority to require,
in its discretion, as a condition of the granting of any such Option, that the
employee agree (a) not to sell or otherwise dispose of Shares acquired pursuant
to the exercise of such Option for a period of six (6) months following the date
of the acquisition of such Option and (b) that in the event of termination of
employment of such employee, other than as a result of dismissal without cause,
such employee will not, for a period to be fixed at the time of the grant of the
Option, enter into any other employment or participate directly or indirectly in
any other business or enterprise which is competitive with the business of the
Company or any subsidiary corporation or parent corporation of the Company, or
enter into any employment in which such employee will be called upon to utilize
special knowledge obtained through employment with the Company or any subsidiary
corporation or parent corporation thereof.
In no event will an employee who is subject to the reporting
requirements of Section 16(a) of the Exchange Act be entitled to sell or
otherwise dispose of any Shares acquired pursuant to exercise of any such
Options for a period of six (6) months from the date of the acquisition of such
Options.
The determination of the Committee on matters referred to in
this Article III shall be conclusive.
The Committee may employ such legal or other counsel,
consultants and agents as it may deem desirable for the administration of the
Plan and may rely upon any opinion or computation received from any such
counsel, consultant or agent. Expenses incurred by the Committee in the
engagement of such counsel, consultant or agent shall be paid by the Company. No
member or former member of the Board of Directors, the Executive Committee or
the Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any award of Options granted hereunder.
In order to give management of the Company flexibility in
hiring new key employees and retaining key employees, the Vice President, Human
Resources and Administration of the Company is authorized to grant options to
purchase common stock of the Company under the Plan, provided that (1) no such
grant shall be made to an executive officer of the Company, (2) no such grant to
any individual shall exceed 25,000 shares of common stock of the Company, (3)
each grant shall be approved in writing by the Chief Executive Officer and Chief
Operating Officer of the Company and (4) the Vice President, Human Resources and
Administration or the Secretary of the Company shall notify the Committee in
writing of all such grants not later than the meeting of the Committee following
such grants.
IV. ELIGIBILITY
Options may be granted only to key or outstanding employees of
the Company or any subsidiary corporation or parent corporation of the Company
now existing or hereafter formed or acquired, except as hereinafter provided.
Any person who shall have retired from the active employment by the Company or
any subsidiary corporation or parent corporation of the Company, although such
person shall have entered into a consulting contract with the Company or a
subsidiary corporation or parent corporation of the Company, shall not be
eligible to receive an Option.
No person shall have any rights or claims under the Plan
except in accordance with the provisions of the Plan and the applicable Option.
The Plan does not create a right in any person to participate in the Plan, nor
does it create a right in any person to have any Options granted to him or her.
V. OPTION PRICE AND PAYMENT
The price for each Share purchasable under any Option shall be
equal to 100% of the fair market value of a Share on the date of grant;
provided, however, that in the case of an Incentive Option granted to a person
who, at the time such Option is granted, owns shares of the Company or any
subsidiary corporation or parent corporation of the Company possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or of any subsidiary corporation or parent corporation of the
Company, the purchase price for each Share shall be such amount as the
Committee, in its best judgment, shall determine to be not less than one hundred
ten percent (110%) of the fair market value per Share at the date the Option is
granted. In determining the stock ownership of an employee for any purpose under
the Plan, the rules of Section 424(d) of the Code shall be applied, and the
Committee may rely on representations of fact made to it by the employee and
believed by it in good faith to be true. Each Option shall state whether such
Option will be a qualified Incentive Option, a Non-Qualified Option or a
combination of the two types.
If the Shares are listed on a national securities exchange in
the United States on any date on which the fair market value per Share is to be
determined, the fair market value per Share shall be the closing quotation at
which such Shares are sold on such national securities exchange on the date such
Option is granted. In the event that the Shares are listed on a national
securities exchange in the United States on such date but the Shares are not
traded on such date, or such national securities exchange is not open for
business on such date, the fair market value per Share shall be determined as of
the closest preceding date on which such exchange shall have been open for
business and the Shares were traded. If the Shares are listed on more than one
national securities exchange in the United States on the date any such Option is
granted, the Committee shall determine which national securities exchange shall
be used for the purpose of determining the fair market value per Share.
If on the date any Option is granted a public market exists
for the Shares but such Shares are not listed on a national securities exchange
in the United States, the fair market value per Share shall be deemed to be the
closing price as reported by the Nasdaq National Market (or its successor
quotation system) for such Shares on the date such Option is granted. In the
event that there is no closing price reported by the Nasdaq National Market (or
its successor quotation system) for Shares on the date such Option is granted,
the fair market value per Share shall be the closing price reported by the
Nasdaq National Market (or its successor quotation system) for Shares on the
closest date preceding the date such Option is granted for which such quotations
are available.
If on the date any Option is granted no public market exists
for Shares, the fair market value per Share shall be determined by such other
reasonable valuation method as the Committee shall, in its discretion, select
and apply in good faith. For all purposes of this Plan, the fair market value
per Share shall be determined subject to Section 422(c)(7) of the Code.
For all purposes of this Plan, (i) the fair market value of a
Share shall be determined in accordance with this Article V and (ii) the
determination by the Committee of the fair market value of a Share shall be
conclusive.
Upon the exercise of an Option granted hereunder, the Company
shall cause the purchased Shares to be issued only when it shall have received
the full purchase price for the Shares, and applicable taxes, if any, in
accordance with Article XV hereof, in cash; provided, however, that in lieu of
cash, the holder of an Option may, to the extent permitted by applicable law,
exercise an Option (a) in whole or in part, by delivering to the Company Shares
(in proper form for transfer and accompanied by all requisite stock transfer tax
stamps or cash in lieu thereof) owned by such holder for at least six (6) months
prior to such delivery having a fair market value equal to the cash exercise
price applicable to that portion of the Option being exercised by the delivery
of such shares, the fair market value of Common Shares so delivered to be
determined as of the date immediately preceding the date on which the Option is
exercised, or as may be required in order to comply with or to conform to the
requirements of any applicable laws or regulations, (b) in whole or in part, by
delivering to the Company authorization for the immediate sale of the Shares
that will be purchased by exercise of the Option and retention by Company of
such sale or liquidation proceeds (accompanied by all requisite authorizations
as legal counsel for the Company deem necessary) with respect to such numbers of
Shares having a fair market value equal to the cash exercise price applicable to
that portion of the Option being exercised by holder, the fair market value of
Shares to be so purchased and sold to be determined as of the date immediately
preceding the date on which the Option is exercised, or as may be required in
order to comply with or to conform to the requirements of any applicable laws or
regulations, or (c) in part, by delivering to the Company an executed promissory
note on such terms and conditions as the Committee shall determine, at the time
of grant, in its discretion; provided, however, that (i) the principal amount of
such note shall not exceed ninety percent (90%) (or such lesser percentage as
would be permitted by applicable margin regulations) of the aggregate purchase
price of the Shares then being purchased pursuant to the exercise of such Option
and (ii) payment for shares with a promissory note is permissible under
applicable law.
VI. TERM OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE
Any Option granted hereunder shall be exercisable at such
times, in such amounts and during such period or periods as the Committee shall
determine at the date of the grant of such Option; provided, however, that an
Incentive Option shall not be exercisable after the expiration of ten (10) years
from the date such Option is granted; provided, further, that in the case of an
Incentive Option granted to a person who, at the time such Incentive Option is
granted, owns stock of the Company or any subsidiary corporation or parent
corporation of the Company possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any
subsidiary corporation or parent corporation of the Company, such Incentive
Option shall not be exercisable after the expiration of five (5) years from the
date such Incentive Option is granted.
The Committee shall have the right to accelerate, in whole or
in part, from time to time, conditionally or unconditionally, rights to exercise
any Option granted hereunder.
To the extent that an Option is not exercised within the
period of exercisability specified therein, it shall expire as to the then
unexercised part.
Except to the extent otherwise provided under the Code, to the
extent that the aggregate fair market value of stock for which Incentive Options
(under all stock option plans of the Company and of any parent corporation or
subsidiary corporation of the Company) are exercisable for the first time by an
employee during any calendar year exceeds $100,000, such Options shall be
treated as Non-Qualified Options. For purposes of this limitation, (a) the fair
market value of stock is determined as of the time the Option is granted, and
(b) the limitation will be applied by taking into account Options in the order
in which they were granted.
In no event shall an Option granted hereunder be exercised for
a fraction of a Share or the lesser of fifty (50) Shares or the full number of
Shares then subject to the Option.
A person entitled to receive Shares upon the exercise of an
Option shall not have the rights of a stockholder with respect to such Shares
until the date of issuance of a stock certificate to such person for such
Shares; provided, however, that until such stock certificate is issued, any
holder of an Option using previously acquired Shares in payment of an option
exercise price shall continue to have the rights of a stockholder with respect
to such previously acquired Shares.
VII. TERMINATION OF EMPLOYMENT
Upon termination of employment of any employee of the Company
and all subsidiary corporations and parent corporations of the Company, any
Option previously granted to the employee, unless otherwise specified by the
Committee in the Option, shall, to the extent not theretofore exercised,
terminate and become null and void; provided, however, that:
(a) if the employee shall die while in the employ of
such corporation or during either the three (3) month or one
(1) year period, whichever is applicable, specified in clause
(b) below and at a time when such employee was entitled to
exercise an Option as herein provided, the legal
representative of such employee, or such person who acquired
such Option by bequest or inheritance or by reason of the
death of the employee, may, not later than one (1) year from
the date of death, exercise such Option, to the extent not
theretofore exercised, in respect of any or all of such number
of Shares as specified by the Committee in such Option; and
(b) if the employment of any employee to whom such Option
shall have been granted shall terminate by reason of the
employee's retirement (at such age or upon such conditions as
shall be specified by the Committee and stated in the Option),
disability (as described in Section 22(e)(3) of the Code) or
dismissal by the employer other than for cause (as defined
below), and while such employee is entitled to exercise such
Option as herein provided, such employee shall have the right
to exercise such Option so granted in respect of any or all of
such number of Shares as specified by the Committee in such
Option, at any time up to and including (i) three (3) months
after the date of such termination of employment in the case
of termination by reason of retirement or dismissal other than
for cause, and (ii) one (1) year after the date of termination
of employment in the case of termination by reason of
disability.
In no event, however, shall any person be entitled to exercise
any Option after the expiration of the period of exercisability of such Option,
as specified therein.
If an employee voluntarily terminates his or her employment,
or is discharged for cause, any Option granted hereunder shall, unless otherwise
specified by the Committee in the Option, forthwith terminate with respect to
any unexercised portion thereof.
If an Option granted hereunder shall be exercised by the legal
representative of a deceased grantee or by a person who acquired an Option
granted hereunder by bequest or inheritance or by reason of the death of any
employee or former employee, written notice of such exercise shall be
accompanied by a certified copy of letters testamentary or equivalent proof of
the right of such legal representative or other person to exercise such Option.
For the purposes of the Plan, the term "for cause" shall mean
(a) with respect to an employee who is a party to a written employment agreement
with, or, alternatively, participates in a compensation or benefit plan of the
Company or a subsidiary corporation or parent corporation of the Company, which
agreement or plan contains a definition of "for cause" or "cause" (or words of
like import) for purposes of termination of employment thereunder by the Company
or such subsidiary corporation or parent corporation of the Company, "for cause"
or "cause" as defined therein; or (b) in all other cases, (i) the willful
commission by an employee of an act that causes or may cause substantial damage
to the Company or a subsidiary corporation or parent corporation of the Company;
(ii) the commission by an employee of an act of fraud in the performance of such
employee's duties on behalf of the Company or a subsidiary corporation or parent
corporation of the Company; (iii) conviction of the employee for commission of a
felony in connection with the performance of his duties on behalf of the Company
or a subsidiary corporation or parent corporation of the Company, or (iv) the
continuing failure of an employee to perform the duties of such employee to the
Company or a subsidiary corporation or parent corporation of the Company after
written notice thereof and a reasonable opportunity to be heard and cure such
failure are given to the employee by the Committee.
For the purposes of the Plan, an employment relationship shall
be deemed to exist between an individual and a corporation if, at the time of
the determination, the individual was an "employee" of such corporation for
purposes of Section 422 of the Code. If an individual is on leave of absence
taken with the consent of the corporation by which such individual was employed,
or is on active military service, and is determined to be an "employee" for
purposes of the exercise of an Option, such individual shall not be entitled to
exercise such Option during such period and while the employment is treated as
continuing intact unless such individual shall have obtained the prior written
consent of such corporation, which consent shall be signed by the chairman of
the board of directors, the president, a vice-president or other duly authorized
officer of such corporation.
A termination of employment shall not be deemed to occur by
reason of (i) the transfer of an employee from employment by the Company to
employment by a subsidiary corporation or a parent corporation of the Company or
(ii) the transfer of an employee from employment by a subsidiary corporation or
a parent corporation of the Company to employment by the Company or by another
subsidiary corporation or parent corporation of the Company.
VIII. EXERCISE OF OPTIONS
Options granted under the Plan may be exercised by the
optionee as to all or part of the Shares covered thereby by the giving of
written notice of the exercise thereof to the Corporate Secretary of the Company
at the principal business office of the Company, specifying the number of Shares
to be purchased and accompanied by payment of the purchase price stated in the
Option and applicable taxes, if any, in accordance with Article XV hereof.
Subject to the terms of Articles XIII, XIV and XVI hereof, the Company shall
cause certificates for the Shares so purchased to be delivered at the principal
business office of the Company, against payment of the full purchase price, on
the date specified in the notice of exercise.
IX. USE OF PROCEEDS
This Plan shall be unfunded. The cash proceeds of the sale of
Shares subject to the Options granted hereunder are to be added to the general
funds of the Company and used for its general corporate purposes as the Board of
Directors shall determine.
X. NONTRANSFERABILITY OF OPTIONS
No Option granted hereunder shall be transferable, whether by
operation of law or otherwise, other than by will or the laws of descent and
distribution, and any Option granted hereunder shall be exercisable, during the
lifetime of the grantee thereof, only by such grantee. Except to the extent
provided above, Options may not be assigned, transferred, pledged, hypothecated
or disposed of in any way (whether by operation of law or otherwise) and shall
not be subject to execution, attachment or similar process.
XI. ADJUSTMENT OF SHARES; EFFECT OF CERTAIN TRANSACTIONS
Notwithstanding any other provision contained herein, in the
event of any change in the Shares subject to the Plan or to any Option granted
under the Plan (through merger, consolidation (whether or not the Company is a
surviving corporation), reorganization, recapitalization, stock dividend, stock
split, split-up, split-off, spin-off, extraordinary dividend payable in cash or
property, combination of shares, exchange of shares, or other like change in
capital structure of the Company), an adjustment shall be made to each
outstanding Option such that each such Option shall thereafter be exercisable
for such securities, cash and/or other property as would have been received in
respect of the Shares subject to such Option had such Option been exercised in
full immediately prior to such change, and such an adjustment shall be made
successively each time any such change shall occur. The term "Shares" after any
such change shall refer to the securities, cash and/or property then receivable
upon exercise of an Option. In addition, in the event of any such change, the
Committee shall make any further adjustment to the maximum number of Shares
which may be acquired under the Plan pursuant to the exercise of Options, the
maximum number of Shares for which Options may be granted to any one employee of
the Company, and the number of Shares and price per Share subject to outstanding
Options as shall be equitable to prevent dilution or enlargement of rights under
such Options, and the determination of the Committee as to these matters shall
be conclusive; provided, however, that (a) each such adjustment with respect to
an Incentive Option shall comply with the rules of Section 424(a) of the Code
(or any successor provision), and (b) in no event shall any adjustment be made
which would render any Incentive Option granted hereunder other than an
"incentive stock option" as defined in Section 422 of the Code.
In the event of a "change in control" of the Company, all then
outstanding Options shall immediately become exercisable. For purposes of the
Plan, a "change in control" of the Company occurs if (a) more than fifty percent
(50%) of the total combined voting power of all classes of stock of the Company
normally entitled to vote for the election of directors of the Company is
acquired by another person, firm or corporation or by a cooperating group of
such individuals or entities, (b) the Board of Directors approves the sale of
all or substantially all of the property or assets of the Company, or (c) the
Board of Directors approves a consolidation or merger of the Company with
another corporation, the consummation of which would result in the occurrence of
an event described in clause (a) above.
Notwithstanding anything contained herein to the contrary, the
Committee, in its discretion, may determine that, upon the occurrence of a
transaction described in the preceding paragraph, each Option outstanding
hereunder shall terminate within a specified number of days after notice to the
holder, and such holder shall receive, with respect to each Share subject to
such Option, an amount equal to the excess of the fair market value of such
Shares immediately prior to the occurrence of such transaction over the exercise
price per Share of such Option; such amount shall be payable in cash, in one or
more of the kinds of property payable in such transaction, or in a combination
thereof, as the Committee in its discretion shall determine. The provisions
contained in the preceding sentence shall be inapplicable to an Option granted
within six (6) months before the occurrence of a transaction described above if
the holder of such Option is subject to the reporting requirements of Section
16(a) of the Exchange Act.
XII. RIGHT TO TERMINATE EMPLOYMENT
The Plan shall not impose any obligation on the Company or on
any subsidiary corporation or parent corporation thereof to continue the
employment of any holder of an Option and it shall not impose any obligation on
the part of any holder of an Option to remain in the employ of the Company or of
any subsidiary corporation or parent corporation thereof.
XIII. PURCHASE FOR INVESTMENT
Except as hereinafter provided, the Committee may require the
holder of an Option granted hereunder, as a condition of exercise of such
Option, to execute and deliver to the Company a written statement, in form
satisfactory to the Committee, in which such holder represents and warrants that
such holder is purchasing or acquiring the Shares acquired thereunder for such
holder's own account, for investment only and not with a view to the resale or
distribution thereof, and agrees that any subsequent resale or distribution of
any of such Shares shall be made only pursuant to either (i) a Registration
Statement on an appropriate form under the Securities Act of 1933, as amended
(the "Securities Act"), which Registration Statement has become effective and is
current with regard to the Shares being sold, or (ii) a specific exemption from
the registration requirements of the Securities Act, but in claiming such
exemption the holder shall, prior to any offer of sale or sale of such Shares,
obtain a prior favorable written opinion of counsel, in form and substance
satisfactory to counsel for the Company, as to the application of such exemption
thereto. The foregoing restriction shall not apply to (x) issuances by the
Company so long as the Shares being issued are registered under the Securities
Act and a prospectus in respect thereof is current or (y) reofferings of Shares
by affiliates of the Company (as defined in Rule 405 or any successor rule or
regulation promulgated under the Securities Act) if the Shares being reoffered
are registered under the Securities Act and a prospectus in respect thereof is
current.
Nothing herein shall be construed as requiring the Company to
register Shares subject to any Option under the Securities Act. In addition, if
at any time the Committee shall determine that the listing or qualification of
the Shares subject to such Option on any securities exchange or under any
applicable law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection with, the granting
of an Option, or the issuance of Shares thereunder, such Option may not be
exercised in whole or in part unless such listing, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
XIV. ISSUANCE OF STOCK CERTIFICATES; LEGENDS,
PAYMENT OF EXPENSES
Upon any exercise of an Option which may be granted hereunder
and payment of the purchase price and applicable taxes, if any, in accordance
with Article XV hereof, in respect thereof in accordance with the terms of this
Plan and the Option, a certificate or certificates for the Shares shall be
issued by the Company in the name of the person exercising the Option and shall
be delivered to or upon the order of such person.
The Company may endorse such legend or legends upon the
certificates for Shares issued pursuant to the Plan and may issue such "stop
transfer" instructions to its transfer agent in respect of such Shares as the
Committee, in its discretion, determines to be necessary or appropriate to (a)
prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act, (b) implement the provisions of the Plan and
any agreement between the Company and the optionee or grantee with respect to
such Shares, or (c) permit the Company to determine the occurrence of a
disqualifying disposition, as described in Section 421(b) of the Code, of Shares
transferred upon exercise of an Incentive Option granted under the Plan.
The Company shall pay all issue or transfer taxes with respect
to the issuance or transfer of Shares, as well as all fees and expenses
necessarily incurred by the Company in connection with such issuance or
transfer, except fees and expenses which may be necessitated by the filing or
amending of a Registration Statement under the Securities Act, which fees and
expenses shall be borne by the recipient of the Shares unless such Registration
Statement has been filed by the Company for its own corporate purposes (and the
Company so states) in which event the recipient of the Shares shall bear only
such fees and expenses as are attributable to the inclusion of the Shares he or
she receives in the Registration Statement.
All Shares issued as provided herein shall be fully paid and
nonassessable to the extent permitted by law.
XV. WITHHOLDING TAXES
The Company may require an employee exercising a Non-Qualified
Option granted hereunder, or disposing of Shares acquired pursuant to the
exercise of an Incentive Option in a disqualifying disposition (within the
meaning of Section 421(b) of the Code), to reimburse the corporation that
employs such employee for any taxes required by any government to be withheld or
otherwise deducted and paid by such corporation in respect of the issuance or
disposition of such Shares. In lieu thereof, the corporation that employs such
employee shall have the right to withhold the amount of such taxes from any
other sums due or to become due from such corporation to the employee upon such
terms and conditions as the Committee shall prescribe. The corporation that
employs such employee may, in its discretion, hold the stock certificate to
which such employee is entitled upon the exercise of an Option as security for
the payment of such withholding tax liability, until cash sufficient to pay that
liability has been accumulated. In addition, at any time that the Company
becomes subject to a withholding obligation under applicable law with respect to
the exercise of a Non-Qualified Option (the "Tax Date"), except as set forth
below, a holder of a Non-Qualified Option may elect to satisfy, in whole or in
part, the holder's related personal tax liabilities (an "Election") by (a)
directing the Company to withhold from Shares issuable in the related exercise
either a specified number of Shares or Shares having a specified value (in each
case not in excess of the related personal tax liabilities), (b) tendering
Shares previously issued pursuant to the exercise of an Option or other shares
of the Company's common stock owned by the holder for at least six (6) months
prior to such tender or (c) combining any or all of the foregoing options in any
fashion. An Election shall be irrevocable. The withheld Shares and other Shares
tendered in payment shall be valued at their fair market value (determined in
accordance with the principles set forth in Article V hereof) on the Tax Date.
The Committee may disapprove of any Election, suspend or terminate the right to
make Elections or provide that the right to make Elections shall not apply to
particular Shares or exercises. The Committee may impose any additional
conditions or restrictions on the right to make an Election as it shall deem
appropriate. In addition, the Company shall be authorized to effect any such
withholding upon exercise of a Non-Qualified Option by retention of shares
issuable upon such exercise having a fair market value at the date of exercise
(as determined under Article V) which is equal to the amount to be withheld;
provided, however, that the Company shall not be authorized to effect such
withholding without the prior written consent of the employee if such
withholding would subject such employee to liability under Section 16(b) of the
Exchange Act. The Committee may prescribe such rules as it determines with
respect to employees subject to the reporting requirements of Section 16(a) of
the Exchange Act to effect such tax withholding in compliance with the Rules
established by the Securities and Exchange Commission (the "Commission") under
Section 16 of the Exchange Act and the positions of the staff of the Commission
thereunder expressed in no-action letters exempting such tax withholding from
liability under Section 16(b) of the Exchange Act.
XVI. LISTING OF SHARES AND RELATED MATTERS
The Board of Directors may delay any issuance or delivery of
Shares if it determines that listing, registration or qualification of Shares
covered by the Plan upon any national securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the sale or
purchase of Shares under the Plan, until such listing, registration,
qualification, consent or approval shall have been effected or obtained, or
otherwise provided for, free of any conditions not acceptable to the Board of
Directors.
XVII. AMENDMENT OF THE PLAN
The Board of Directors may, from time to time, amend the Plan,
provided that no amendment shall be made, without the approval of the
stockholders of the Company where such approval is necessary to satisfy (i) any
requirements of the Code relating to Incentive Options or (ii) applicable state
law, that will (a) increase the total number of Shares reserved for Options
under the Plan (other than an increase resulting from an adjustment provided for
in Article XI hereof), (b) reduce the exercise price of any Incentive Option
granted hereunder, (c) modify the provisions of the Plan relating to
eligibility, (d) extend the duration of the Plan or the period during which
Options may be exercised pursuant to Article VI hereof, or (e) materially
increase the benefits accruing to participants under the Plan. The Committee
shall be authorized to amend the Plan and the Options granted thereunder to
permit the Incentive Options granted thereunder to qualify as incentive stock
options within the meaning of Section 422 of the Code and the Treasury
regulations promulgated thereunder. The rights and obligations under any Option
granted before amendment of the Plan or any unexercised portion of such Option
shall not be adversely affected by amendment of the Plan or the Option without
the consent of the holder of such Option.
XVIII. TERMINATION OR SUSPENSION OF THE PLAN
The Board of Directors may at any time suspend or terminate
the Plan; provided, however, that the Board of Directors shall not suspend or
terminate the Plan prior to granting the Options on the dates set forth in
Article II to the key employees of the Company listed on Subsections A and B of
Annex A hereto. The Plan shall terminate at the close of business on the
Termination Date. Options may not be granted while the Plan is suspended or
after it is terminated. Rights and obligations under any Option granted while
the Plan is in effect shall not be altered or impaired by suspension or
termination of the Plan, except upon the written consent of the person to whom
the Option was granted. The power of the Committee to construe and administer
any Options granted prior to the termination or suspension of the Plan under
Article III nevertheless shall continue after such termination or during such
suspension.
XIX. SAVINGS PROVISION
With respect to persons subject to Section 16 of the Exchange
Act, transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision of the Plan or action by the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law determined by the
Committee in its sole discretion.
XX. GOVERNING LAW
The Plan and such Options as may be granted hereunder and all
related matters shall be governed by, and construed and enforced in accordance
with, the laws of the State of Florida from time to time obtaining.
XXI. PARTIAL INVALIDITY
The invalidity or illegality of any provision herein shall not
be deemed to affect the validity of any other provision.
XXII. EFFECTIVE DATE
The Plan shall become effective at 9:00 A.M., Sarasota,
Florida time, on January 1, 1994 (the "Effective Date"); provided, however, that
if the Plan is not approved by a vote of the stockholders of the Company at an
annual meeting or any special meeting or by unanimous written consent within
twelve (12) months after the Effective Date, any Options granted hereunder shall
be Non-Qualified Options whether or not initially designated as such by the
Committee.
UNIROYAL TECHNOLOGY CORPORATION
1995 NON-QUALIFIED STOCK OPTION PLAN
AS AMENDED, EFFECTIVE DECEMBER 11, 1996
1. Purpose of the Plan.
This Uniroyal Technology Corporation 1995 Non-Qualified Stock Option
Plan (the "Plan") is intended as an incentive to retain as independent directors
on the Board of Directors (the "Board") of Uniroyal Technology Corporation (the
"Company") persons of training, experience and ability, to encourage the sense
of proprietorship of such persons and to stimulate the active interests of such
persons in the development and financial success of the Company. It is further
intended that options issued pursuant to this Plan (the "Options") shall not be
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
2. Shares and Options.
Subject to adjustments provided in Paragraph 8 hereof, a total number
of up to the number of shares (the "Shares") of Common Stock, $.01 par value
("Stock"), of the Company calculated by multiplying the number of Directors (as
hereinafter defined) participating in the Plan by the number calculated pursuant
to Paragraph 3(b) hereof shall be subject to the Plan during the term of the
Plan; such number shall be recalculated at the beginning of each fiscal year of
the Company and at the time of any changes in the number of Directors
participating in the Plan to include the number of shares added to the Plan in
such fiscal year. The Shares subject to the Plan shall consist of authorized and
unissued shares or previously issued shares reacquired and held by the Company,
or any corporation or entity of which the Company directly or indirectly
controls 50% or more of the total combined voting power of all classes of its
stock having voting power (any such corporation or entity being hereinafter
referred to as a "Subsidiary"), and such number of Shares pursuant to the
preceding sentence shall be and hereby is reserved for sale for such purpose.
Any of such Shares that may remain unsold and that are not subject to
outstanding Options at the termination of the Plan shall cease to be reserved
for the purpose of the Plan, but until termination of the Plan the Company shall
at all times reserve a sufficient number of Shares to meet the requirements of
the Plan. Should any Option expire or be canceled prior to its exercise in full,
the Shares theretofore subject to such Option may not again be subjected to an
Option under the Plan.
3. Formula for Automatic Grant of Options.
(a) Options shall be granted to each person who, as of the
dates set forth in Section 3(b) below, is a director of the Company (each such
person being hereinafter referred to as a "Director"). Each person to whom an
Option is granted under this Plan, or any successor to the rights of such person
under this Plan by reason of the death of the original grantee, hereafter shall
be referred to as an "Optionee." Each Option shall be evidenced by an option
agreement, in a form specified by the Board, containing terms and conditions
that are not inconsistent with this Plan or applicable laws ("Option
Agreement"). The Grant Date of such Option shall be stated in the Option
Agreement evidencing such Option (such date of grant being referred to herein as
the "Grant Date"). Neither the Plan nor any Option granted under the Plan shall
confer upon any person any right to continue to serve as a Director.
(b) Upon the later of adoption of the Plan or 30 days after an
individual shall initially become a Director or shall be reelected as a Director
(the "Grant Date"), such individual shall be granted an Option to purchase
10,000 Shares in the case of the initial grants upon adoption of this Plan and
5,000 Shares in the case of any grants thereafter. Such Options shall be in
addition to any options to purchase Shares to which any Director may be entitled
pursuant to any other plan of or arrangement with the Company.
4. Option Price.
(a) Each Option shall have an exercise price for the related
Shares that is equal to the Fair Market Value of such Shares (determined as set
forth in Section 4(b) below) on the Grant Date.
(b) The fair market value of a Share on the Grant Date ("Fair
Market Value") shall be (i) the highest closing price of the Stock on any
established national exchange or exchanges or the Nasdaq National Market (or its
successor system), whichever is applicable, on such date or, if no sale of Stock
is made on such date, the next preceding date on which there was a sale of such
Stock, or (ii) if the Stock is not listed on an established stock exchange or
the Nasdaq National Market, the closing price of the Stock in the New York
over-the-counter market as reported by the National Association of Securities
Dealers, Inc. for such date or, if no sale of Stock is reported for such date,
the next preceding date on which there was a reported sale of Stock.
5. Option Period.
The Options granted under this Plan shall be for a term of
three (3) years from the date of granting of each Option (the "Option Period").
6. Exercise of Options: Certain Conditions to Grant.
(a) An Option may be exercised in whole or in part at any
time beginning nine (9) months after the Grant Date
.
(b) Method of Exercise: An Option granted under this Plan
shall be deemed exercised when the person entitled to exercise the Option (a)
delivers written notice to the Secretary of the Company of the decision to
exercise, (b) concurrently tenders to the Company full payment for the Shares to
be purchased pursuant to the exercise (including applicable withholding taxes,
if any), and (c) complies with such other reasonable requirements as the Board
establishes pursuant to Section 9 of the Plan. Payment for Shares with respect
to which an Option is exercised may be made in cash, by certified check or
wholly or partially in the form of Common Stock having a Fair Market Value equal
to the exercise price; provided, however, that in lieu of cash, the holder of an
Option may, if the terms of such Option so provide and to the extent permitted
by applicable law, exercise an Option in whole or in part, by delivering to the
Company Shares (in proper form for transfer and accompanied by all requisite
stock transfer tax stamps or cash in lieu thereof) owned by such holder for at
least six (6) months prior to such delivery and having a Fair Market Value equal
to the cash exercise price applicable to that portion of the Option being
exercised by the delivery of such shares, the Fair Market Value of the Shares so
delivered to be determined as of the date immediately preceding the date on
which the Option is exercised, or as may be required in order to comply with or
to conform to the requirements of any applicable laws or regulations.
No person will have the rights of a shareholder with respect to Shares
subject to an Option granted under this Plan until a certificate or certificates
for the Shares have been delivered to him or her.
An Option granted under this Plan may be exercised in increments of not
less than ten (10) shares, or, if greater, ten percent (10%) of the full number
of Shares as to which it can be exercised. A partial exercise of an Option will
not affect the holder's right to exercise the Option from time to time in
accordance with this Plan as to the remaining Shares subject to the Option.
(c) Notwithstanding the foregoing payment provisions, the
Board may refuse to recognize the method of exercise set forth in Section 6(b),
if, in the opinion of counsel to the Company, (i) the Optionee is, or within the
six (6) months preceding such exercise was, subject to reporting under Section
16(a) of the Exchange Act, and (ii) there is a substantial likelihood that the
method of exercise selected by the Optionee would subject the Optionee to
substantial risk of liability under Section 16 of the Exchange Act.
(d) Notwithstanding any provision herein to the contrary, in
the event a Director is removed as a director of the Company as a result of his
or her permanent and total disability (as defined in Section 22(e)(3) of the
Code), he or she may, but only within the period of time one (1) year from the
date of such removal (but not later than the expiration of the Option Period),
exercise his or her Option to the extent he or she was entitled to exercise it
at the date of such removal. To the extent the Optionee was not entitled to
exercise the Option at the date of such removal, or if he or she does not
exercise such Option (which he or she was entitled to exercise) within the time
specified herein, the Option shall terminate.
(e) In the event of the death of an Optionee during his or her
term of service as a Director of the Company, to the extent the Optionee was
entitled to exercise the Option at the time of his or her death, the Option may
be exercised within a one-year period following the date of death (but not later
than the expiration of the term of the Option) by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance.
To the extent the Optionee was not entitled to exercise the Option at the date
of his or her death, the Option shall terminate.
(f) Termination of Services: If a Director ceases continuous
service as a Director for any reason other than death or disability (such
disability being determined by the Board in its sole discretion, provided that
no Director shall participate in any such determination relating to himself or
herself), all Options held by the Director shall lapse on the earlier of the end
of the Option Period or ninety (90) days following the effective date of the
termination of the Director's services to the Company. The Option may be
exercised only for the number of Shares for which it could have been exercised
on such termination date, subject to any adjustment under Section 8.
7. Non-Transferability of Options.
Except as hereinafter provided, no Option and no rights or
interest therein shall be assignable or transferable by an Optionee and may not
be sold, pledged, encumbered or otherwise alienated or hypothecated, otherwise
than by will or the laws of descent and distribution, and during the lifetime of
an Optionee, Options are exercisable only by the Optionee or his or her legal
representative. The Board may, in its discretion, authorize all or a portion of
any Option granted to an Optionee to be on terms which permit transfer by such
Option to (i) the Optionee's spouse, former spouse, children, grandchildren or
any other member of the Optionee's immediate family (collectively, "Immediate
Family Members"); (ii) a trust or trusts for the exclusive benefit of any
Immediate Family Members; (iii) one or more family partnerships, family limited
partnerships, family limited liability companies or similar entities of which or
in which any Immediate Family Members and/or the Optionee are the only partners,
members, shareholders or other owners; or (iv) such other persons or entities
permitted by the Board in its discretion; provided that (x) the Option Agreement
pursuant to which such Option is granted must expressly provide for
transferability in a manner consistent with this Section 7; (y) any transfer of
an Option shall be in accordance with any other terms, conditions, rules and
limitations prescribed by the Board; and (z) subsequent transfers of previously
transferred Options shall be prohibited, otherwise than by will or the laws of
descent and distribution. Following the valid transfer of any Option, the
transferred Option shall continue to be subject to the same terms and conditions
as were applicable immediately prior to such transfer, provided that the
applicable transferee of such Option shall be treated under the Plan and the
applicable Option Agreement as the Optionee, except that the terms of paragraphs
(d), (e) or (f) of Section 6 hereof, dealing with exercise of an Option
following termination of a Director's service with the Company (and any similar
terms and conditions of the applicable Option Agreement), shall continue to be
applied with respect to the original Optionee, so that following any such
termination, any transferee of the original Optionee's Option may only exercise
such Option for the period specified in such paragraphs (and any similar terms
and conditions of the applicable Option Agreement).
8. Adjustments.
(a) The existence of the Plan and the Options granted hereunder shall
not affect or restrict in any way the right or power of the Board or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of bonds, debentures, preferred or prior preference stocks ahead of or affecting
the Stock or the rights thereof, the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding.
(b) In the event of any change in capitalization affecting the Stock,
such as a stock dividend, stock split, extraordinary dividend payable in cash or
other property, recapitalization, merger, consolidation, split-up, combination,
exchange of shares, other form of reorganization, or any other change affecting
the Shares, the Board, in its discretion, may make proportionate adjustments it
deems appropriate to reflect such change with respect to (i) the maximum number
of Shares which may be sold or awarded to any Optionee, (ii) the number of
Shares covered by each outstanding Option, and (iii) the price per share in
respect of the outstanding Options. Notwithstanding the foregoing, the Board may
increase the aggregate number of Shares for which Options may be granted under
the Plan solely to reflect the change, if any, of the capitalization of the
Company.
9. Securities Laws Restrictions.
The Company shall have no obligation to register Shares covered by the
Plan under the Securities Act of 1933, as amended. Whether or not the Options
and Shares covered by the Plan have been registered under the Securities Act of
1933, as amended, each person exercising an Option under the Plan may be
required by the Company to give a representation in writing that he or she is
acquiring Shares for his or her own account for investment and not with a view
to, or for sale in connection with, the distribution of any part thereof. As a
condition of any transfer of the certificate evidencing Shares, the Company may
require such other agreements or undertakings, if any, that it may deem
necessary or appropriate to ensure compliance with any provisions of the Plan or
any law or regulation. Certificates for Shares delivered under the Plan may be
subject to such stock-transfer orders and other restrictions as counsel for the
Company may deem advisable under the rules, regulations, and other requirements
of the Securities and Exchange Commission, any stock exchange or other market
upon which the Stock is then listed, and any applicable federal or state
securities law. The Company may cause a legend or legends to be placed on any
such certificates to refer to such restrictions.
10. Amendment, Modification, Suspension or Discontinuance of this Plan.
(a) Except as set forth in Sections 10(b), 10(c) and 10(d)
below, without shareholder approval, the Board may at any time amend, modify,
suspend, discontinue or terminate the Plan, including, without limitation, for
the purpose of meeting or addressing any changes in legal requirements or for
any other purpose permitted by law.
(b) Except as set forth in Section 10(c) below, to comply with
the restrictions set forth in Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities and Exchange Act of 1934, as amended,
or any successor rule ("Rule 16b-3"), and to comply with the Code and
accompanying regulations, but subject to changes in law or other legal
requirements (including any change in the provisions of Rule 16b-3 and the Code
and accompanying regulations that would permit otherwise), the Board must obtain
approval of the stockholders of the Company to make any amendment that would (i)
increase the aggregate number of shares of Stock that may be issued under the
Plan pursuant to Sections 2 and 3 of the Plan (except for adjustments pursuant
to Section 8 of the Plan), (ii) modify materially the requirements as to
eligibility for participation in the Plan, or (iii) increase materially the
benefits accruing to the Optionees under the Plan, including, but not limited
to, an increase in the number of Shares subject to an Option, a reduction in the
Option exercise price described in Section 4(a) hereof, an extension of the
period during which Options may be granted or exercised under the Plan or a
change in the vesting period or timing of Option grants.
(c) Notwithstanding Sections 10(a) and 10(b), under no
circumstances may the Board amend, alter, discontinue or terminate the Plan so
as to impair the vested rights of Optionees under any Option theretofore granted
under the Plan with or without their written consent.
11. Government Regulations.
The Plan, and the granting and exercise of Options thereunder, and the
obligation of the Company to sell and deliver Shares under such Options, shall
be subject to all applicable laws, rules and regulations, and to such approvals
by any governmental agencies, national securities exchanges or other markets as
may be required.
12. Costs of Plan; Plan Unfunded
The costs and expenses of administering the Plan shall be borne by the
Company. The Plan shall be unfunded. Neither the Company nor the Board shall be
required to establish any special or separate fund or to make any other
segregation of assets to assure the issuance of Shares upon exercise of any
Option under the Plan and issuance of Shares upon exercise of Options shall be
subordinate to the claims of the Company's general creditors. Proceeds from the
sale of Shares pursuant to Options shall constitute general funds of the
Company. None of the Company, any subsidiary of the Company or the Board shall
be deemed to be a trustee of any amounts to be paid under the Plan.
13. Governing Law.
The Plan and all actions taken thereunder shall be governed by and
construed in accordance with the laws of the State of Florida.
14. Effective Date.
The Plan shall be effective as of February 14, 1996, the date on which
it was approved by a majority of the Company's stockholders.
15. Termination or Suspension of the Plan
If the Plan is suspended or terminated by the Board pursuant to Section
10 hereof, the Plan shall terminate at the close of business on the date of such
Board action. Options may not be granted while the Plan is suspended or after it
is terminated. Rights and obligations under any Option granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except upon the written consent of the person to whom the Option was
granted. The power of the Administrator to construe and administer any Options
granted prior to the termination or suspension of the Plan nevertheless shall
continue after such termination or during such suspension.
With respect to persons subject to Section 16 of the Exchange Act,
transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3. To the extent any provision of the Plan or action by
the Board fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Board.
16. Interpretation.
(a) If any provision of the Plan is held invalid for any reason, such
holding shall not affect the remaining provisions hereof, but instead the Plan
shall be construed and enforced as if such provision had never been included in
the Plan.
(b) Headings contained in this Agreement are for convenience only and
shall in no manner be construed as part of this Plan.
(c) Any reference to the masculine, feminine, or neuter gender shall be
a reference to such other gender as is appropriate.
17. Taxes; Compliance with Law; Approval of Regulatory Bodies.
The Company, if necessary or desirable, may pay or withhold the amount
of any tax attributable to any Shares deliverable or amounts payable under this
Plan, and the Company may defer making any such delivery or payment until it is
indemnified to its satisfaction or paid for that tax in accordance with such
procedures as may be adopted by the Board.
Options are exercisable, and Shares can be delivered under this Plan,
only in compliance with all applicable federal and state laws and regulations,
including, without limitation, state and federal securities laws, and the rules
of all stock exchanges or other markets on which the Company's stock is listed
at any time. An Option is exercisable only if either (a) a registration
statement pertaining to the Shares to be issued upon exercise of the Option has
been filed with the Securities and Exchange Commission and has become effective
and remains effective on the date of exercise, or (b) an exemption from the
registration requirements of applicable securities laws is available. This Plan
does not require the Company, however, to file such a registration statement or
to assure the availability of such exemptions. Any certificate issued to
evidence Shares issued under the Plan may bear such legends and statements, and
shall be subject to such transfer restrictions, as the Board deems advisable to
assure compliance with federal and state laws and regulations and with the
requirements of this Section. Each Option may not be exercised, and Shares may
not be issued under this Plan, until the Company has obtained the consent or
approval of every regulatory body, federal or state, having jurisdiction over
such matters as the Board deems advisable.
Each person who acquires the right to exercise an Option by bequest or
inheritance may be required by the Board to furnish reasonable evidence of
ownership of the Option as a condition to his exercise of the Option. In
addition the Board may require such consents and releases of taxing authorities
as the Board deems advisable.
18. Liability of the Company.
The Company, its parent and any Subsidiary that is in existence or
hereafter comes into existence shall not be liable to any person for any tax
consequences expected but not realized by an Optionee or other person due to the
exercise of an Option.
19. Duration of Plan.
Options may be granted under this Plan only during the 10 years
immediately following the effective date of this Plan, unless the Plan is
terminated earlier pursuant to Sections 10 and 15 hereof.
20. Miscellaneous.
(a) By accepting any benefit under the Plan, each Optionee and each
person claiming under or through such Optionee shall be conclusively deemed to
have indicated his or her acceptance and ratification of, and consent to, all of
the terms and conditions of the Plan and any action taken under the Plan by the
Company, the Board or their delegees.
(b) No person shall have any rights or claims under the Plan except in
accordance with the provisions of the Plan and any Option Agreement. Except as
expressly provided for in the Plan, no Director or other person shall have any
claim or right to be granted an Option under the Plan.
AMENDMENT NO. 3
TO
TECHNICAL COLLABORATION AGREEMENT
AGREEMENT made as of the 1st day of March, 1996, between Uniroyal
Technology Corporation ("UTC") and Okamoto Industries, Inc. ("OKAMOTO").
Recitals
OKAMOTO entered into a Technical Collaboration Agreement dated June 8,
1988, with Uniroyal Plastics Company, Inc. ("PLASTICS"), which was thereafter
amended by Amendment No. 1, dated January 21, 1992, and Amendment No. 2, dated
July 31, 1992 (collectively the "Agreement"). The Agreement was assigned by
PLASTICS with the consent of OKAMOTO to Uniroyal Engineered Products, Inc. which
has been merged into UTC. The parties desire to further amend the Agreement.
In consideration of the covenants hereinafter set forth, it is agreed
as follows:
1. The Agreement is amended in inserting after the second sentence of
Section 5 the following sentence: "The UTC fiscal year shall be the twelve month
period ending on the Sunday following the last Friday in September of each
year."
2. The second sentence of Section 5 of the Agreement, as previously
amended, is hereby deleted and the following is substituted therefor effective
from January 1, 1996:
"During each UTC fiscal year, Royalties shall be in an
amount equal to the percentage of the total revenues
from the sales of Licensed Products as follows: (a)
sales to Japanese Auto Manufacturers - 3%; and (b)
sales to Auto Manufacturers and Manufacturers - 1%"
3. The third sentence of Section 5 of the Agreement is amended by
adding after the terms "Japanese Manufacturers, Auto Manufacturers" the words
"and Manufacturers".
4. Section 11 of the Agreement is hereby amended by adding a second
paragraph to read as follows: "OKAMOTO will provide UTC with technical
information about Licensed Products for sale to Auto Manufacturers and
Manufacturers, will provide technical education for production of such products
at UTC's plants and will support UTC's sales efforts to such manufacturers."
5. Section 13 of the Agreement is hereby amended in its entirety and
the following is substituted: "This Agreement shall have a term expiring on
September 28, 2003."
6. Except as modified and amended herein, the Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have, by their duly authorized
representatives, executed this Agreement as of the day and year first above
written.
UNIROYAL TECHNOLOGY CORPORATION
By: /S/ Robert L. Soran
------------------------
Title: President
OKAMOTO INDUSTRIES, INC.
By: /S/
------------------------
Title: President
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements
(Nos.33-74748 and 33-80500) of Uniroyal Technology Corporation on Form S-3 and
the Registration Statements (Nos. 33-73944, 33-74746, 33-92256 and 33-97250) of
Uniroyal Technology Corporation on Form S-8 of our reports dated December 20,
1996, appearing in the Annual Report on Form 10K of Uniroyal Technology
Corporation for the year ended September 29, 1996.
/S/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
Tampa, Florida
December 20, 1996
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<LEGEND>
This schedule contains summary information extracted from the Balance Sheet as
of September 29, 1996 and the Statement of Operations for the fiscal year ended
September 29, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
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<NAME> Uniroyal Technology Corporation
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