SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
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 26, 1999
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) 361-2100
(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 30, 1999, 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 $93,900,000 based on the
closing price for the stock on November 30, 1999.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
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 [ ]
As of November 30, 1999, 11,878,982 shares of the registrant's common stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part 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
2000.
<PAGE>
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 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, tanning shields and bullet
resistant barriers; 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 performance characteristics, to customize such materials and to
provide technical and customer support in connection with the use of
its products in manufacturing. The Company has also constructed a plant
in Tampa, Florida for the production of wafers and dies for high
brightness light emitting diodes (LEDs) for use in the lighting
industry. The Company anticipates commercial production at the Tampa
plant during the second quarter of Fiscal 2000.
The manufacturing operations of the Company are conducted at
thirteen sites located in Arizona, Florida, Indiana, Iowa, Connecticut,
New Jersey, California, Georgia, and Wisconsin, through four business
segments: High Performance Plastics, Coated Fabrics, Specialty
Adhesives and Optoelectronics. The High Performance Plastics Segment of
the Company's business consists of the Company's wholly-owned
subsidiary High Performance Plastics, Inc. ("HPPI"). High Performance
Plastics manufactures specialty and general purpose thermoplastic
sheet, injection molding resins, color concentrates, extruded profiles
and fabricates acrylic sheet for the aerospace, marine, specialty and
general purpose markets as well as acrylic rods and tubes. The
Company's wholly-owned subsidiary, Uniroyal Engineered Products, Inc.
("UEPI"), operates two business segments, the Coated Fabrics Segment
and the Specialty Adhesives Segment. The Coated Fabrics Segment
manufactures the Company's line of vinyl coated fabrics. The Specialty
Adhesives Segment (formerly, the Specialty Foams and Adhesives
Segment), manufactures liquid adhesives and sealants. The
Optoelectronics Segment will manufacture epitaxial wafers, dies and
package-ready dies used in high brightness LEDs. See "Corporate
Developments Completion of the Uniroyal Optoelectronics, LLC Plant.
The Company's Fiscal 1999 net sales were approximately $201.4
million. Approximate net sales for each of the Company's four business
segments during such period were as follows: High Performance Plastics
- $130.2 million, Coated Fabrics - $42.3 million, and Specialty
Adhesives - $28.4 million, and Optoelectronics - $0.5 million. For
certain financial information with respect to the Company's business
segments, see "Note 19 to Consolidated Financial Statements."
Corporate Developments
The following are certain corporate developments which
occurred in Fiscal 1999. The descriptions of such developments should
be read in conjunction with the other parts of this Form 10-K and with
the Consolidated Financial Statements and Notes to Consolidated
Financial Statements and other financial information which form a part
hereof.
Investment in Preferred Stock
On November 30, 1998, the Company purchased 642,857 shares of
the Series I Redeemable Convertible Preferred Stock ("Preferred Stock")
of Emcore Corporation ("Emcore") for approximately $9.0 million ($14.00
per share). The shares were offered pursuant to a private placement by
Emcore.
Dividends on the Preferred Stock are cumulative and are
payable at Emcore's option in cash or additional shares of Preferred
Stock on March 31, June 30, September 30 and December 31, commencing
December 31, 1998 at the annual rate of 2% per share of Preferred Stock
on the liquidation preference thereof (equivalent to $0.28 per annum
per share of Preferred Stock).
Shares of the Preferred Stock are convertible at any time, at
the option of the holders thereof, into shares of common stock of
Emcore on a one for one basis, subject to adjustment for certain
events. On September 24, 1999, the closing sales price of Emcore's
common stock on the Nasdaq National Market was $14.4375.
The Preferred Stock is redeemable, in whole or in part, at the
option of Emcore at any time Emcore's common stock has traded at or
above $28.00 per share for 30 consecutive trading days, at a price of
$14.00 per share plus accrued and unpaid dividends, if any, to the
redemption date. Emcore is required to provide not less than 30 days
and not more than 60 days notice of the redemption. The shares of
Preferred Stock are subject to mandatory redemption by Emcore on
November 17, 2003.
On November 30, 1998, Emcore also made a capital contribution
to Uniroyal Optoelectronics, LLC of $5.0 million. The Company will fund
its equivalent capital contribution to the joint venture of
approximately $5.2 million as cash is required by the joint venture.
In June of 1999, the Company converted 270,000 shares of the
Preferred Stock into 270,000 shares of Emcore common stock. The Company
then sold its 270,000 shares of Emcore common stock for $4.8 million in
conjunction with a public stock offering by Emcore. The Company
recognized a gain on the sale of approximately $898,000, net of certain
transaction costs.
Subsequent to September 26, 1999, the Company converted
230,657 shares of the Preferred Stock and sold the underlying Emcore
common stock in the open market for an aggregate of $4.3 million. The
Company will recognize a gain on the sale of approximately $1.1
million, net of certain transaction costs, in Fiscal 2000.
Acquisition of Happel Marine, Inc.
On June 14, 1999, the Company acquired 100% of the common
stock of Happel Marine, Inc., an acrylic sheet fabricator for the
marine industry, for $5,193,500. The purchase price was comprised of
$909,252 in cash, unsecured promissory notes aggregating $2,911,007 and
145,078 shares of common stock of the Company valued at $1,373,241,
which approximated the market value of such shares on the acquisition
date. The promissory notes consist of a $2,400,000 note payable in four
equal annual installments beginning January 15, 2000, plus accrued
interest and a $511,007 note payable in two equal annual installments
beginning January 15, 2000 plus accrued interest. The purchase price
was subsequently increased for changes in working capital between April
30, 1999 and June 13, 1999 by $122,137. The increase was incorporated
into the note payable balances. The note balances increased to
$2,500,030 and $533,114, respectively. Effective September 1, 1999,
Happel Marine, Inc. was merged into a subsidiary of the Company and
became a division of HPPI.
Uniroyal Engineered Products, Inc.
On April 1, 1999, the Company transferred all of the net
assets of the Coated Fabrics Segment and all of the net assets of the
Specialty Adhesives Segment to a newly created wholly-owned subsidiary,
Uniroyal Engineered Products, Inc. On that same day, Uniroyal
Engineered Products, Inc. assumed the obligations of the Company under
the revolving credit agreement with the CIT Group/Business Credit, Inc.
("CIT").
Completion of the Uniroyal Optoelectronics, LLC Plant
The build-out of the Uniroyal Optoelectronics, LLC plant in
Tampa, Florida was substantially completed during Fiscal 1999 at a cost
of approximately $11 million. Additional machinery and equipment of
approximately $10 million was purchased during Fiscal 1999. The plant
will ultimately manufacture epitaxial wafers, dies and package-ready
devices for use in high brightness LEDs. The Company anticipates
commercial production at the Tampa plant in the second quarter of
Fiscal 2000. During Fiscal 1999, the Company incurred approximately
$4.6 million of start-up costs that are included in selling and general
administrative expenses.
Completion of the Disposition of the Automotive Operations
On October 17, 1997, the Company agreed to sell certain assets
of the automotive operations of the Coated Fabrics Segment located at
the Company's Port Clinton, Ohio facility for approximately $5.3
million plus the value of purchased inventories and plus or minus
adjustments contingent upon the transfer of certain automobile
programs. The Company received $4.9 million in July 1998 and received
approximately $1.5 million during Fiscal 1999. During the fiscal year
ended September 26, 1999, the Company recognized approximately $617,000
of income relating to the sale of the automotive operations. The
Company ceased production and closed the Port Clinton facility in
November 1998. The Port Clinton real property and certain machinery and
equipment not purchased by the buyer are listed as held for sale at
September 26, 1999.
<PAGE>
Business Segments
High Performance Plastics Segment
The High Performance Plastics Segment of the Company's
business accounted for approximately $130.2 million (approximately 65
percent (65%)) of the Company's net sales in Fiscal 1999. It consists
of two product groups: Royalite, which manufactures thermoplastic
products and Polycast, which manufactures acrylic products. The
products of this Segment include:
o thermoplastic sheet produced by Royalite for use in the
manufacture of seating, interior paneling and other
applications in the transportation, recreational,
agricultural and industrial vehicle and computer
manufacturing industries,
o acrylic sheet produced by Polycast for use in the
manufacture of aircraft canopies, cabin windows and
windshields, tanning bed shields, bullet resistant
barriers and other commercial applications,
o acrylic rods and tubes produced by Polycast and used in
the manufacture of displays, orthopedic devices and hard
contact lenses, and
o acrylic and thermoplastic parts and fittings for the
marine industry.
Royalite - Thermoplastic Products
General
Royalite is a leading manufacturer of custom thermoplastic
products. Royalite manufactures thermoplastic sheet from a variety of
polymers, such as acrylonitrile butadiene styrene (ABS) and polyvinyl
chloride (PVC), 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. Royalite's products include thermoplastic sheet, injection
molding resins, color concentrates and extruded profiles.
Royalite thermoplastic sheet is constructed of:
o solid plastic,
a core of cost effective plastic covered with a thin
o layer of high- quality thermoplastic, or
a base or subtrate of plastic foam surrounded by solid
o thermoplastic.
Royalite manufactures two general types of thermoplastic sheet:
o specialized sheet, made by varying the polymer and
chemical components of the sheet in order to achieve
particular performance characteristics, and
o general purpose sheet, which Royalite's customers use in a
variety of products that do not require such particular
performance characteristics.
Royalite sells its thermoplastic sheet to:
o equipment manufacturers, who incorporate the sheet into
their products,
o custom fabricators, thermoformers and injection molders,
who cut, form and process the material for specific
applications and supply finished components to original
equipment manufacturers (OEMs), and
o distributors, who resell raw sheet to equipment
manufacturers or custom fabricators.
Royalite maintains highly knowledgeable technical
representatives who work directly with customers seeking to ensure that
the materials used in the manufacture of a customer's product conform
to the customer's specifications and work efficiently with the
customer's manufacturing processes. When a customer is in the initial
stages of developing a product requiring a thermoplastic component,
Royalite uses 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.
"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 levels at
which it becomes economical for the customer to manufacture the
thermoplastic application by injection molding, a process that requires
greater up-front capital expenditures, but yields lower costs per
additional unit, relative to thermoforming, Royalite can continue to
supply the customer with the polymer resins and color thermoforming.
The Company believes that such product lines will enhance the
division's specialty sheet lines by assuring customers that Royalite
will be able to meet their specialized thermoplastic needs throughout
every stage of a product's life cycle.
Specialty Thermoplastic Sheet
Royalite sells specialty thermoplastic sheet into a number of
niche markets, depending upon the performance characteristics of the
sheet. The following table sets forth the particular performance
characteristics and the related principal uses of the specialized
sheet:
Performance Characteristics Principal Uses
--------------------------- -----------------------
Flame and smoke retardancy Mass transportation
vehicle seating and
interior panels,
aircraft interior parts
and computer and other
electronic equipment
component housings
Static dissipation and conductivity Computer chip carriers,
hard disc drive
housings and electronic
tote boxes
Weatherability/temperature resistance Marine and recreational
vehicle instrument
panels, interior parts
for agricultural and
other off road vehicles
and exterior boat parts
Buoyant, hydrodynamic and/or Canoes, kayaks, other
high strength-to-weight-ratio watersport crafts,
amusement park vehicles
and large exterior
equipment housings
The Company believes that Royalite has a substantial share of
the markets in which it competes for specialty thermoplastic sheet due
to Royalite's ability to manufacture sheet with the wide variety of
performance characteristics outlined above. In many cases, Royalite
customizes a product to meet its customers' exact specifications. Net
sales of specialty thermoplastic sheet accounted for approximately 67
percent (67%) of total net sales by Royalite during Fiscal 1999.
General Purpose Thermoplastic Sheet
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 mud flaps, which do not require that the
thermoplastic material used in their manufacture possess any of the
performance characteristics that distinguish specialty sheet. 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 one can put such sheet in the manufacture of
products. Such market is generally characterized by intense
competition, high volume and low margins. Royalite does not have a
significant share of this market. Sales of general purpose sheet during
Fiscal 1999 accounted for approximately 30 percent (30%) of total net
sales by Royalite.
Injection Molding Resins, Color Concentrates and Extruded
Profile Products
In addition to its extensive list of sheet products, Royalite
also produces injection molding resins, some of which use the same
proprietary formulations as the sheet products, and extruded profile
products.
Royalite introduced injection molding resin products as part
of the "life cycle sourcing" strategy that Royalite implemented to
satisfy each customer's needs for thermoplastic material for any
particular product from that product's development stage through
maturity. When an existing customer is ready to switch from
thermoforming to injection molding, the customer can avoid any
disruption in its production that may result from having to qualify a
thermoplastic material from another manufacturer by using its injection
molding resins and color concentrates, which have already been
customized to meet the customer's particular specifications.
The Company believes that there are significant opportunities
for growth in this market and that such product lines will enhance the
division's specialty sheet lines by assuring customers that Royalite
will be able to meet their specialized thermoplastic needs throughout
every stage of a product's life cycle. In addition to supporting
specialty sheet customers, the focus of the injection resin program has
widened to the injection resin market in total, not just sheet
conversions.
Royalite also produces extruded profile products, including
both proprietary and general purpose materials. The products are used
for applications requiring flexibility and resilience, such as boat
dock bumpers and gaskets that Polycast uses in the production of
acrylic sheet. This product line was implemented to utilize fully
Royalite's available production capacity at its Warsaw, Indiana
facility. Even though sales of extruded profile products constitute
less than three percent of net sales of Royalite for Fiscal 1999, the
Company believes that there are significant opportunities for growth in
this market. Extruded profile products sales are also enhanced by sales
of sheet, as many applications require thermoplastic material in sheet,
profile and injection resin forms.
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.
Royalite competes in this market principally by maintaining or
increasing its market share in the specialty thermoplastic niche
markets described above. See "- Royalite - Thermoplastic
Products-General." Royalite competes effectively in this market by
providing:
o custom product development,
o state-of-the-art color technology,
o strong customer service through technical support, and
o competitive prices.
Royalite has polymer expertise and capabilities to customize the
performance characteristics and color of its thermoplastic products,
unlike many of its competitors. Royalite's technological capabilities
have also permitted it to develop successful new products which enhance
its competitiveness in this Segment. For example, Royalite recently
introduced low smoke, low heat, fire retardant material for aircraft
and mass transit interiors and graffiti-resistance seating material,
developed for the mass transportation market. In addition, Royalite
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 customer's manufacturing
processes.
Royalite is also able to compete effectively with respect to
price due in part to its low production costs, its ability to produce
its own color concentrates and savings resulting from its use of
recycled material in the manufacture of thermoplastic sheet. See
"-Royalite - Thermoplastic Products - Raw Materials." The Company
believes that Royalite's ability to produce internally and to laminate
a thin layer of high quality colored thermoplastic film over a less
costly substrate allows Royalite 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.
Royalite's principal thermoplastics competitors, and the
markets in which Royalite competes, are set forth in the table below:
Market Principal Competitors
----------------------- ------------------------------
o Flame and smoke retardancy Empire Plastics
Kleerdex Company
Spartech Corporation
o Static dissipation and conductivity B. F. Goodrich Performance
Materials
H.M.S.
o Weatherability/temperature resistance Spartech Corporation
o Buoyant, hydrodynamic and/or high
strength-to-weight ratio Manufacturers of wood and
fiberglass products
o General purpose Primex Plastics Corp.
Spartech Corporation
Royalite's competitors have in the past increased their market
shares in the thermoplastic industry generally through acquisitions.
Marketing
Royalite'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), and
ROYALTHOTIC(R) (thermoplastic sheet designed to be thermoformed at low
temperatures to permit orthopedic medical practitioners to form
individual patient orthopedic devices).
Royalite markets its thermoplastic products primarily through
a national sales force of 14 sales representatives, who are its
employees, and through wholesale distributors to whom Royalite supplies
its products for resale to fabricators and manufacturers.
Representative customers and end users of Royalite's thermoplastic
products include:
o American Seating Company,
o Bombardier, Inc.,
o Commercial Plastics and Supplies Corp.,
o Curbell Plastics, a division of Curbell, Inc.,
o Hewlett-Packard Company,
o Laird Plastics, Inc.,
o The Boeing Company,
o National Railroad Passenger Corp. (Amtrak), and
o Seagate Technology, Inc.
Royalite has a broad customer base for its thermoplastic products and
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
Royalite 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 ABS resins and polyethylene,
polypropylene and PVC resins and alloys of such resins. Royalite 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. Royalite is currently in the last year of a three year
contract with GE Plastics. Royalite 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.
Royalite 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.
Polycast - Acrylic Products
General
Polycast 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. Polycast'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, depending on customer
requirements, they:
o weigh considerably less than, but are superior in
clarity and impact resistance to, common glass,
o are thermoformable,
o remain stable under sustained exposure to the elements, and
o can be processed to transmit or filter ultraviolet light.
Polycast manufactures acrylic sheet for three markets:
o 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, cabin windows and helicopter windshields,
o 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 windscreens
and enclosures, bullet-resistant security barriers for
banks, convenience stores and other businesses,
hockey rink protective barriers, furniture, tanning bed
shields and municipal aquarium transparent panels, and
o the general purpose market for acrylic sheet, in which
acrylic sheet is used for such applications as store
displays and signage, where high performance
characteristics are not required and which do not require
specialized manufacturing techniques.
Polycast's customers' use their acrylic rods and tubes for a variety of
applications, including the manufacture of:
o lighting fixtures,
o furniture,
o medical instruments,
o orthopedic devices, such as orthopedic braces, and
o lens materials used to replace defective lenses of the
eye in cataract surgery and certain types of hard contact
lenses.
Sales of acrylic rods and tubes during Fiscal 1999 accounted
for approximately 10 percent (10%) of total net sales of products by
Polycast.
Polycast manufactures acrylic products through cell cast
manufacturing, a process which enables Polycast to customize the
performance characteristics of its acrylic aerospace sheet and
specialized sheet, in order to meet the exact specifications of its
customers and to offer its products with a broader range of physical
characteristics than can be achieved through other manufacturing
processes, such as continuous cast, extrusion and calender processes.
For example, Polycast's scientific staff has used the cell cast process
to develop a specialized sheet which transmits rather than filters
ultraviolet rays for use in tanning beds and an aerospace sheet with
consistently high optical clarity and exact color shading for use in
constructing aerospace transparencies such as aircraft and helicopter
window products. Polycast can manufacture acrylic products in more than
60 colors and acrylic sheet in gauges 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.
Polycast markets aerospace acrylic sheet in the military and
commercial aerospace industries, which require products that meet
precise specifications. Polycast is one of approximately four acrylic
manufacturers in the United States qualified to produce acrylic sheet
meeting military manufacturing standards, specifications and
requirements ("MIL SPEC"). MIL SPEC qualification is a designation made
by the U.S. Navy's Naval Air Development Center and it is a
prerequisite for supplying the military aerospace industry. Polycast
and its predecessor companies have maintained this qualification since
1976. Polycast's aerospace acrylic sheet is also qualified by several
commercial aerospace manufacturers, including Bell-Helicopter, a
division of Textron, Inc., The Boeing Company, including its new
McDonnell-Douglas Division, and Sikorsky Aircraft Corporation, which
will only include a supplier's products on their "qualified product
lists" only after such products have met MIL SPEC requirements and
passed the manufacturer's additional and more stringent testing and
approval procedures. Although unlikely, 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 Polycast's results of operations, cash
flows, financial position or prospects.
Polycast sells its specialty acrylic sheet in a wide variety
of niche markets, including to manufacturers of:
o boat windscreens and enclosures,
o bullet resistant barriers and protective barriers for athletic
facilities,
o furniture and tanning bed shields, and
o aquariums.
Polycast markets its acrylic products to such industries
through customizing the performance and physical characteristics of its
specialty sheet to meet customer specifications. Sales of specialty and
aerospace acrylic sheet during Fiscal 1999 accounted for approximately
52 percent (52%) of total net sales of products by Polycast.
Polycast sells its general purpose acrylic sheet to various
markets, including to manufacturers of:
o displays,
o lighting fixtures,
o food service, and
o glazing applications.
Sales of general purpose acrylic sheet during Fiscal 1999
accounted for approximately 22 percent (22%) of total net sales of
products by Polycast.
Competition
Polycast 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 does Polycast. 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.
The Company believes that Polycast has a significant share of
the niche markets in which it sells its aerospace and specialty acrylic
sheet. See "- Polycast -Acrylic Products- General." Polycast's
principal competitors, and the markets in which it competes, are set
forth in the table below:
Market Principal Competitors
-------------------- ----------------------------------
o Aerospace acrylic sheet Cyro Industries, a division of Cytec
Industries, Inc.
Nordam, Inc.
Pilkington Aerospace Swedlow
Division, a subsidiary of
Pilkington plc.
Rohm Darmstadt GmbH
o Specialty acrylic sheet Cyro Industries, a division of Cytec
Industries, Inc.
Elf Atochem North America, Inc.
o Acrylic rod and tube Pilkington Aerospace Swedlow
Division, a subsidiary of
Pilkington plc.
o General purpose acrylic sheet Elf Atochem North America, Inc.
Cyro Industries, a division of Cytec
Industries, Inc.
Rohm Darmstadt GmbH
In order to compete with vertically integrated companies in
the aerospace acrylic sheet market, such as Pilkington and Nordam,
Polycast has formed alliances with certain customers to market products
for sale into the commercial aerospace markets that compete directly
with these vertically integrated companies.
Elf Atochem, Cyro and Ineos Acrylics, Inc. (formerly ICI
Acrylics, Inc.), 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
Polycast. Since Polycast does not itself produce MMA, Polycast is
unable to compete effectively with the low prices charged by these
companies for general purpose acrylic sheet. See "- Polycast - Acrylic
Products - Raw Materials."
Marketing
Polycast markets acrylic products under the POLYCAST(R) brand
name. Polycast also markets acrylic products with special performance
characteristics under individual brand names, such as:
o PILOTS' CHOICE(TM) (aerospace sheet with high optical clarity) for
helicopter windshields,
o SOLACRYL(R) (specialty sheet which transmits ultraviolet rays) for
tanning bed shields,
o POLYDOR(R) (thermoformable sheet) used for orthopedic product,
o S-A-R-coatings for specialty acrylic applications,
o VIPLEX(TM) (specialized fabrication of acrylic products) used in high
end marine applications, and
o TOWNSEND/GLASFLEX(TM) (acrylic rods and tubes) used in display and
medical applications.
Polycast markets its acrylic sheets, rods and tubes primarily
through five sales representatives, who are employees, and through
wholesale distributors.
Representative domestic customers and end users of Polycast's
acrylic products include:
o Beech Aircraft Corp.,
o Bell-Helicopter Textron, Inc.,
o The Boeing Company,
o Cadillac Plastic and Chemical Co.,
o The Cessna Aircraft Company,
o Chris-Craft Industries, Inc.,
o Commercial Plastics and Supplies Corp.,
o Laird Plastics, Inc.,
o Llamas Plastics, Inc.,
o Sensormatic Electronics Corporation,
o Sierracin/Sylmar Corporation,
o Sikorsky Aircraft Corporation,
o Texstar, Inc.,
o Thunderbird Products Corp., and
o Wellcraft Marine.
Representative foreign customers and end users of Polycast's
acrylic products include:
o Airbus Industries,
o Agusta Helicopters,
o Embraer - Empresa Brasileira de Aeronautica S.A., and
o Hindustan Aeronautics Limited.
Polycast is not dependent upon a single customer or group of
customers for sales of its acrylic products.
Manufacturing Facilities
Polycast manufactures acrylic sheet at its facility in
Stamford, Connecticut and finishes and further processes acrylic sheet
for certain applications at its facilities in Goodyear, Arizona,
Hackensack, New Jersey, Melbourne, Florida and Rockledge, Florida. The
Hackensack facility also serves as the principal warehouse for acrylic
sheet products. Acrylic rods and tubes are produced at a facility in
Pleasant Hill, Iowa. The Company owns the manufacturing and processing
facilities in Stamford, Hackensack and Pleasant Hill and leases its
facilities in Goodyear, Melbourne and Rockledge. The manufacturing
operations formerly carried on in Stirling, New Jersey and Newport,
Delaware have been substantially consolidated into the Stamford,
Connecticut and Pleasant Hill, Iowa facilities during Fiscal 1998 and
Fiscal 1999. 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 Ineos Acrylics, Inc. or its predecessor
owners of the monomer business, ICI Acrylics, Inc. and E.I. duPont de
Nemours & Co., currently pursuant to a supply agreement which obligates
the division to purchase from Ineos and Ineos to supply the division
with its requirements for MMA through March 16, 2005, subject to
termination by the division upon eighteen months' advance notice or by
Ineos upon a three years' advance notice. Under the supply agreement,
the division is entitled to purchase MMA from other suppliers that
offer the product at prices lower than those Ineos is willing to match.
In addition, the supply agreement requires that any party that acquires
all or substantially all of Ineos's assets used to manufacture MMA
assume the obligations of Ineos 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 Ineos 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 Ineos) 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 $42.3 million (21 percent (21%)) of the Company's net
sales for Fiscal 1999, is a leading manufacturer of vinyl coated
fabrics and was a leading manufacturer of laminated composites. The
Segment's product lines consisted of products for the automobile
manufacturing industry, which accounted for 31 percent (31%) of total
net sales of the Segment for Fiscal 1999, and the well known
Naugahyde(R) brand name vinyl coated fabric products, which accounted
for 69 percent (69%) of total net sales of the Segment for such fiscal
year. See Item 1. "Corporate Developments - Completion of the
Disposition of the Automotive Operations" and "Note 15 to Consolidated
Financial Statements."
General
The Segment's automotive product line consisted of plastic
vinyl coated fabrics and vinyl laminated composites used by
manufacturers and custom fabricators in the production of:
o vehicle seat coverings,
o door panels,
o arm rests,
o consoles, and
o instrument panels.
The coated fabrics were durable, stain resistant, cost-effective
alternatives to leather and cloth coverings. The Company sold the
remaining business of the automotive operation of this Segment during
the last quarter of Fiscal 1998. The operation consisted of the vinyl
laminated composite line manufactured in Port Clinton, Ohio. The
Segment continued to operate the Port Clinton, Ohio facility under a
supply agreement until November 11, 1998.
The Segment's Naugahyde(R) vinyl coated fabrics products have
varying performance characteristics and are sold in various 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.
The Segment has a state-of-the-art production line which
produces coated fabrics and laminated composites in more than 600
colors and 45 textures and patterns.
Competition
The Coated Fabrics 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.
The Segment's principal competitors with respect to its
Naugahyde(R) products are:
o C. G. Spradling & Company,
o OMNOVA Solutions (formerly a part of GenCorp, Inc.), and
o Mobern, Inc.
Marketing
The Segment's coated fabrics products were introduced by one
of its predecessors more than 50 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 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. Approximately 32
percent (32%) of the Segment's non-automotive market sales in Fiscal
1999 were to distributors.
Representative customers and end users of the Segment's coated
fabrics include:
o Bombardier, Inc.,
o Club Car, Inc.,
o Deere & Co.,
o Freightliner Corporation,
o Harley-Davidson, Inc.,
o Kawasaki Heavy Industries, Inc.,
o Lazy-Boy, Incorporated,
o Michigan Seat Co.,
o Monaco Coach Corporation,
o Okamoto USA, Inc.,
o Polaris Industries, Inc.,
o Shelby Williams Industries, Inc., and
o Yamaha Motor Corporation, USA.
Manufacturing Facilities
The Segment manufactures its coated fabrics at its
facility located in Stoughton, Wisconsin. The Segment ceased
manufacturing at its facility in Port Clinton, Ohio on November 11,
1998. Both of these facilities are owned by the Company. See "Item
2. Properties."
Raw Materials
The principal raw materials for the Segment's coated fabrics
are casting paper, knit fabric, PVC plastic resins and plasticizers.
The Segment generally has multiple sources for these materials.
Specialty Adhesives Segment
The Company's Specialty Adhesives Segment accounted for
approximately $28.4 million (approximately 14% percent (14%)) of the
Company's total net sales for Fiscal 1999.
General
The Specialty Adhesives Segment comprises three general
product lines: roofing adhesives and sealants, industrial adhesives and
sealants and mirror mastics and sealants. The Segment is one of the
leading manufacturers of adhesives for fully-bonded, EPDM commercial
roofs. The Company supports Firestone Building Products Company, a
division of Bridgestone/Firestone, Inc. ("Firestone"), an industry
leader in the supply of Rubber Gard(R) EPDM single ply membrane, with a
full line of bonding, splice, primer and sealer products. Approximately
68 percent (68%) of the Segment's Fiscal 1999 sales were roofing
product shipments to Firestone. The fully-bonded adhesive products sold
to Firestone pass through a rigorous development and production
qualification process, resulting in an applied roof capable of
withstanding exposure to environmental extremes. The Segment also
produces and sells more than 200 industrial and commercial mirror
adhesives and sealants under the brand names of Silaprene(R), Hydra
Fast-En(R), Ultra/Bond(R), Extra/Build(R), SolidSeal(TM) and
SolidBond(TM). These products are marketed to the transportation
(non-automotive), furniture, foam fabrication and commercial mirror
installation industries.
The Segment has doubled the size of its industrial sales
force, introduced new Silaprene(R) products and packaging that feature
the well-recognized brand name, and expanded its water-based adhesive
line to position itself for increasingly stringent government
legislation regarding health and safety requirements.
In addition, the Company acquired, on March 31, 1997, the C.
Gunther Company ("Gunther"), a major marketer of mirror mastics to the
residential and commercial construction industry located in Cary,
Illinois. All Gunther operations were subsequently moved to the
Company's South Bend facility.
The Segment sells splice and bonding adhesives for the EPDM
rubber roofing market exclusively to Firestone pursuant to a five-year
contract which was entered into in Fiscal 1995 and extended on June 9,
1998, by an additional 34 months to expire on December 31, 2002 (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 splice and bonding
adhesives for the EPDM rubber roofing market. In Fiscal 1999, 1998 and
1997, Firestone purchased 68 percent (68%), 67 percent (67%) and 79
percent (79%), respectively, of the Segment's total net sales of
adhesives and sealants for such periods. Sales to Firestone during the
fiscal year ended September 26, 1999, represented 9.5 percent (9.5%) 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 on February 22, 2000.
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:
o Adco Technologies, Inc.,
o Ashland Chemical Company, and
o TACC International Corp.
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:
o Imperial Adhesives, Inc.,
o Manus Corporation,
o Minnesota Mining and Manufacturing Corporation,
o Palmer Products Corp., and
o Sika Corporation.
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(R). The Segment's
Silaprene(R) products have established name recognition in and are
important in the recreational vehicle and truck trailer manufacturing
markets. Hydra Fast-En(R) adhesives are beginning to establish market
share in the foam fabrication, plastic fabrication, recreational
vehicle and marine markets. Recognized trademarks in the mirror and
glass industry, purchased as part of the C. Gunther acquisition, are
Ultra/Bond(R), Extra/Build(R), Prime-N-Seal(TM), Premier(TM), Mirror &
More Cleaner(TM) and Seal-Kwik(TM).
The Segment's roofing adhesives and sealants are marketed
under Firestone's brand names. The Company indirectly holds an
important position in the splice adhesives and bonding adhesives market
through Firestone, which continues to control significant market share
of the EPDM rubber roofing market.
The Segment markets its industrial adhesives and sealants
throughout the United States and Canada primarily to manufacturers
through a network of 200 authorized distributors, 19 independent
representatives and five sales representatives 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.
Manufacturing Facilities
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 and spent an additional $6.7 million for
building renovations, new equipment and moving expenses. The move was
completed on February 18, 1997 and now provides a modern and efficient
manufacturing plant with significant additional capacity, an excellent
research center and office space for the High Performance Plastics
Segment's headquarters and certain other corporate operations. See
"Item 2. Properties."
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:
o Bayer Corporation,
o Cleveland Steel Container Corp.,
o Citgo Petroleum Corporation,
o duPont Dow Elastomers,
o Elf Atochem North America, Inc.
o Schenectady International,
o Ashland Chemical, and
o Sun Chemical Company, Inc.
The Company has long-term supply agreements with:
o Elf Atochem North America, Inc.,
o Cleveland Steel Container Corporation,
o duPont Dow Elastomers,
o Federal Packaging, and
o Sun Chemical Company, Inc.,
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 1,210 employees, including
approximately 830 hourly wage employees and 380 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 40 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 UNITE, New
York/New Jersey Regional Joint Board ALF-CIO, CLC. At the Company's
coated fabrics manufacturing facility located in Stoughton, Wisconsin,
another approximately 150 hourly employees of the Company are covered
by an agreement expiring on September 17, 2001 with Local 1207 of
P.A.C.E. (formerly known as the United Paperworkers International
Union). A separate agreement expiring on April 25, 2003 with the United
Steel Workers of America, United Rubber Workers Division (the "USWA")
covers approximately 40 hourly wage employees at the Company's
adhesives and sealants manufacturing facility located in South Bend,
Indiana. In connection with the Fiscal 1998 sale of the automotive
operations at Port Clinton, Ohio (see "Item 1. Corporate Developments
Completion of the Disposition of the Automotive Operations") the
Company terminated the 85 hourly wage employees at the Port Clinton,
Ohio facility in Fiscal 1999.
On July 20, 1995 the National Labor Relations Board certified
the United Paperworkers International Union, now known as P.A.C.E., as
the exclusive collective bargaining representative for the
approximately 160 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 on December 18, 1999, ratified a three year
contract that will expire on December 18, 2002.
During July 1999, negotiations with the United Rubber Workers
Union, in connection with the collective bargaining agreement covering
the hourly wage employees at the Company's adhesives and sealants
manufacturing facility located in South Bend, Indiana, broke down, and
a strike ensued for approximately three weeks. The strike did not have
an adverse effect on operations of the Specialty Adhesives Segment.
Richard D. Kimbel, the former President of United Rubber
Workers Union Local 65 (Mishawaka), is a director of the Company.
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), VIPLEX(TM). SILAPRENE(R),
HYDRA FAST-EN(R), GUNTHER ULTRA/BOND(R) and GUNTHER EXTRA/BUILD(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 2000 and 2004. No trademark registration of material
importance to the Company expired during Fiscal 1999. 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 20 patents and pending patents worldwide.
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 and acrylic sheet for use in commercial
aquariums (see "Business Segments - High Performance Plastics -
Polycast Acrylic Products"). The Company spent approximately $2.2
million for research and development during Fiscal 1999 compared to
approximately $2.7 million during Fiscal 1998. The decline in research
and development expenditures is primarily attributable to the exit from
the automotive operations of the Coated Fabrics Segment.
The Company currently employs a staff of 27 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:
12 at High Performance Plastics, eight at Coated Fabrics and seven at
Specialty Adhesives.
Backlog
At September 26, 1999, the Company had backlog orders aggregating
approximately $22.4 million, as compared to approximately $25.1 million
as of September 27, 1998. 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:
<PAGE>
September 26, September 27,
1999 1998
------------- -------------
(in thousands)
High Performance Plastics $ 13,604 $ 14,994
Coated Fabrics 4,434 5,368
Specialty Adhesives 4,394 4,747
--------- ---------
Total $ 22,432 $ 25,109
========= =========
Working Capital Items
Many of the markets in which the Company competes, including
the aerospace acrylic sheet market and the optoelectronics market, 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. Although the Company believes
that cash from its operations and its ability to borrow under its
revolving credit agreement (see "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 agreements 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.
In Fiscal 1999, 1998 and 1997, the amount of capital
expenditures related to environmental matters was immaterial and the
amount of such expenditures is expected to be immaterial in Fiscal
2000. 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. Through Fiscal 1999, the Company has incurred costs
of approximately $615,000 in connection with such remediation.
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") in the event that the United States,
Wisconsin or Indiana asserts a claim against the Company for response
costs associated with pre-petition disposal activities at certain
sites, the governmental party will be entitled to pursue its claim in
the ordinary course, and the Company will be entitled to assert all of
its defenses. However, if and when the Company is held liable, and if
the liability is determined to arise from pre-petition disposal
activities of its predecessors, the 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 of the predecessors). Such payment may be made in cash
or in the Company's stock, or a combination thereof, at the Company's
option. Claims arising from real property owned by the Company are not
affected by the EPA Settlement Agreement.
The Company received a letter dated October 30, 1997, from the
EPA, Region 5, informing the Company that it might be financially
responsible for a pollution incident at the plant formerly leased by
the Company at 312 North Hill Street, Mishawaka, Indiana. The EPA later
notified the Company that it expected the Company to pay for part or
all of the approximately $1.7 million of costs associated with the
clean-up of a portion of such plant. The Company and the EPA have
negotiated a settlement under the EPA Settlement Agreement, whereby the
EPA was given an allowed unsecured claim of $1.7 million under the Plan
of Reorganization of the Company's predecessors and the Company paid
$525,000 to the EPA in Fiscal 1999.
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 Uniroyal, Inc. unit sent
any hazardous materials to the site. The Company has entered into an
Administrative Order on Consent with the EPA and a Potentially
Responsible Parties Agreement with certain other potentially
responsible parties. 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.
The Company's acquisition of the assets of Townsend Plastics
in September 1997 included the building in which the business operates
in Pleasant Hill, Iowa. The seller retained the underlying real
property, which is leased to the Company for a term of ten years. The
Company also has an option to acquire such real property until
September 30, 2007. The real property is subject to a RCRA Facility
Investigation/Corrective Measures Study with Interim Measures ordered
by the EPA pursuant to RCRA. Two former lessees of the property are
performing corrective measures on the real property to remediate soil
and ground water contamination. The Company does not anticipate that
such corrective measures will interfere with the Company's use of the
property. The Company does not anticipate any liability to the Company
in connection with such contamination or corrective measures as long as
the Company remains a lessee of the property.
Based upon information available as of September 26, 1999, 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").
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, Polycast Technology 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")). 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 was 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").
The plan of reorganization of the Predecessor Companies was
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"). The Bankruptcy Court
issued its final decree closing the bankruptcy of the Predecessor
Companies on September 27, 1999.
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, and on February 4, 1997, the
Company repurchased the remaining 20 shares of preferred stock. On
November 13, 1997, the Company, certain officers and directors of the
Company and certain other persons purchased all of the common stock
held by the PBGC.
On April 14, 1998, the Company transferred all of the assets
of its High Performance Plastics Segment to a newly created
wholly-owned subsidiary, High Performance Plastics, Inc. (HPPI). On
that same day HPPI, as borrower entered into a credit agreement with
Uniroyal HPP Holdings, Inc. (the parent of HPPI and a wholly-owned
subsidiary of the Company), the Company and certain banks, including
Fleet National Bank. The credit agreement provided, among other things,
for the borrowing by HPPI of an aggregate principal amount of up to
$110 million. On April 14, 1998, HPPI paid approximately $95 million to
the Company. The Company used this amount to defease the outstanding
11.75% Senior Secured Notes due June 1, 2003, including the call
premium and interest accrued through the call date and to pay down its
revolving line of credit with CIT. The redemption of the outstanding
Senior Secured Notes was completed by June 1, 1998 at a call premium of
4.41%.
<PAGE>
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
LOCATION AND ENTITY OF FACILITY OF PROPERTY LEASED OR OWNED
- ------------------- ----------- ------------------ ---------------
<S> <C> <C> <C>
Corporate
- -----------
Sarasota, Florida 11,000 Corporate offices Leased
Stirling, New Jersey 50,000 Manufacture of acrylic sheet, rods & tubes Owned (Leased
- currently for sale to HPPI)
Port Clinton, Ohio 240,000 Previously manufactured coated fabrics Owned
products - currently for sale
High Performance Plastics Segment
- ----------------------------------
Goodyear, Arizona 25,000 Fabrication of acrylic sheet Leased
Redlands, California 60,000 Manufacture of thermoplastic products Owned
Stamford, Connecticut 81,000 Manufacture of cell cast acrylics Owned
Stamford, Connecticut 5,500 Offices Leased
Melbourne, Florida 46,250 Fabrication of acrylic sheet Leased
Rockledge, Florida 39,772 Fabrication of acrylic sheet Leased
Rome, Georgia 45,000 Manufacture of thermoplastic products Owned
South Bend, Indiana 12,000 Offices Leased from UEPI
Warsaw, Indiana 225,000 Manufacture of thermoplastic products, Owned
custom compounding and warehouse
Pleasant Hill, Iowa 49,000 Manufacture of acrylic rods & tubes Owned (Ground Lease
on Real Estate)
Hackensack, New Jersey 46,000 Manufacture of cell cast acrylics Owned
Stirling, New Jersey 50,000 Manufacture of acrylic sheet, rods & tubes Leased from Corporate
Coated Fabrics Segment
- ----------------------
Stoughton, Wisconsin 198,275 Manufacture of coated fabrics products Owned
Specialty Adhesives Segment
- ---------------------------
South Bend, Indiana 240,000 Manufacture of adhesives and sealants Owned (Portion
leased to HPPI)
Optoelectronics Segment
- -----------------------
Tampa, Florida 77,000 Manufacture of epitaxial wafers and
package-ready die Leased
</TABLE>
All of the properties owned by the High Performance Plastics Segment are subject
to the liens of mortgages securing HPPI's credit agreement with Fleet National
Bank. See "Note 10 to Consolidated Financial Statements."
In conjunction with plant consolidations at the Polycast
division, see "Note 2 to Consolidated Financial Statements," and in
order to address concerns of the Federal Trade Commission, see "Item 3.
Legal Proceedings", the Company plans to sell the Stirling, New Jersey
facility which is owned by the Company and leased to HPPI.
Item 3. Legal Proceedings
By letter dated January 30, 1998, the Denver Regional Office
of the U.S. Federal Trade Commission ("FTC") notified the Company that
it was conducting a non-public investigation into the Company's
acquisition of the Townsend Plastics Division of Townsend Industries in
September 1997. The purpose of the investigation was to determine
whether the transaction violated Section 7 of the Clayton Act, 15
U.S.C. Section 18, Section 5 of the Federal Trade Commission Act, 15
U.S.C. Section 45, or any other law enforced by the FTC. The Company
has been cooperating with the FTC in its investigation. The Company has
been in discussions with the staff of the FTC seeking to meet the
concerns of both the Company and the FTC. Management does not expect
the cost of compliance with the FTC requests to have a material adverse
effect upon the Company's results of operations, cash flows or
financial position. The Company is currently seeking to sell certain
assets to another entity that could compete with Townsend/Glasflex in
order to increase competition in the markets served by
Townsend/Glasflex.
The Company is involved in certain 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 - Predecessor Companies."
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fourth quarter of Fiscal
1999 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
30, 1999, the price per share of Common Stock was $16.50.
As of November 30, 1999, there were 1,048 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 26, 1999 September 27, 1998
----------------------------- -----------------------------
Quarter High Low High Low
-------------- --------- ---------- --------- -------------
<S> <C> <C> <C> <C>
-------------- --------- ---------- --------- ----------
First $ 10.750 $ 9.000 $ 6.625 $ 3.938
-------------- --------- ---------- --------- ---------
Second $ 10.125 $ 7.938 $ 9.000 $ 5.313
-------------- --------- ---------- -------- --------
Third $ 9.938 $ 7.250 $ 10.250 $ 7.750
-------------- -------- ---------- --------- --------
Fourth $ 12.625 $ 9.500 $ 10.875 $ 9.000
-------------- --------- ---------- --------- ---------
</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 was previously
restricted by the indenture in connection with the Company's Senior
Secured Notes. See "Note 10 to Consolidated Financial Statements."
<PAGE>
Item 6. Selected Financial Data
The following historical financial data as of September 26,
1999 and September 27, 1998 and for each of the three years in the
period ended September 26, 1999 have been derived from consolidated
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 28, 1997, September 29,
1996 and October 1, 1995 and for the fiscal years ended September 26,
1996 and October 1, 1995 have been derived from audited financial
statements of the Company. All of the financial data set forth below
should be read in conjunction with the Consolidated Financial
Statements and related notes and other financial information contained
in this Form 10-K.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
----------------- ---------------- ----------------- ---------------- --------------
September 26, September 27, September 28, September 29, October 1,
1999 1998 1997 1996 1995
----------------- ---------------- ----------------- ---------------- --------------
(in thousands, except share and per share data)
Operating Data:
<S> <C> <C> <C> <C> <C>
Net Sales $ 201,433 $ 220,616 $ 208,524 $ 209,348 $ 214,951
Depreciation and other amortization1 9,157 8,720 8,304 9,848 9,521
Income (loss) before interest, income
taxes, minority interest and extra-
ordinary item 12,836 22,817 10,594 (12,749) 9,549
Interest expense - net (9,352) (9,382) (9,384) (9,773) (10,029)
Income tax (expense) benefit (155) (5,607) (831) 8,121 189
Income (loss) before minority interest
and extraordinary item 3,329 8,027 379 (14,401) (291)
Minority interest 2,191 199 - - -
Extraordinary (loss) gain - (5,637) - - 363
Net income (loss) $ 5,520 $ 2,390 $ 379 $ (14,401) $ 72
Income (loss) per common share -
basic:2
Income (loss) before extraordinary
item $ 0.45 $ 0.61 $ 0.01 $ (1.13) $ (0.06)
Extraordinary (loss) gain - (0.43) - - 0.03
----------- ----------- ----------- ----------- ----------
Net income (loss) per share $ 0.45 $ 0.18 $ 0.01 $ (1.13) $ (0.03)
=========== =========== =========== =========== ==========
Average number of shares used in
computation3 12,157,996 13,231,542 13,316,965 13,167,466 13,014,910
=========== ========== ========== ========== ==========
Income (loss) per common share -
assuming dilution:2
Income (loss) before extraordinary
item $ 0.42 $ 0.55 $ 0.01 $ (1.13) $ (0.06)
Extraordinary (loss) gain - (0.39) - - 0.03
----------- ----------- ----------- ----------- ----------
Net income (loss) per share $ 0.42 $ 0.16 $ 0.01 $ (1.13) $ (0.03)
=========== =========== =========== =========== ==========
Average number of shares used in
computation 13,286,334 14,631,068 13,423,554 13,167,466 13,014,910
=========== ========== =========== =========== ==========
Balance Sheet Data:
Cash and cash equivalents $ 4,182 $ 5,585 $ 244 $ 2,023 $ 291
Working capital 20,294 36,146 33,358 29,148 31,292
Total assets 213,201 186,351 181,491 170,786 180,483
Long-term debt (including current
portion) 123,008 105,658 89,647 72,775 76,763
Stockholders' equity 31,133 32,311 40,032 43,499 57,669
(1) Excludes amortization of reorganization value in excess of amounts
allocable to identifiable assets of $377,000, $754,000, $765,00 and
$769,000 for the fiscal years ended September 27, 1998, September 28,
1997, September 29, 1996 and October 1, 1995, respectively.
(2) Includes effect of preferred stock dividends of $220,000, $420,000
and $420,000 declared for the Fiscal years ended September 28, 1997,
September 29, 1996 and October 1, 1995, respectively.
(3) See Exhibit 11.1, "Statement Regarding Computation of Earnings Per
Share."
</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. Consolidated Financial Statements and
Supplementary Data" appearing elsewhere in this Form 10-K.
Results Of Operations
Comparison of Fiscal 1999 with Fiscal 1998
Net Sales. The Company's net sales decreased approximately 9%
in Fiscal 1999 to $201.4 million from $220.6 million in Fiscal 1998.
The decrease is primarily attributable to the sale of the automotive
operations of the Coated Fabrics Segment in Fiscal 1998 and the gradual
phase-out of those operations. Excluding automotive operations from
both periods, sales increased approximately 5% in Fiscal 1999 compared
to Fiscal 1998.
Net sales in the High Performance Plastics Segment increased
in Fiscal 1999 by approximately 1% to $130.2 million from $128.6
million in Fiscal 1998. Declines in unit volume of Royalite
thermoplastic products and Polycast acrylic sheet were more than offset
by incremental sales resulting from the acquisition of ViPlex
Corporation in the third quarter of Fiscal 1998 and the acquisition of
Happel Marine, Inc. in the third quarter of Fiscal 1999.
The Coated Fabrics Segment's net sales decreased approximately
38% in Fiscal 1999 to $42.3 million from $67.9 million in Fiscal 1998.
The decrease resulted primarily from a decline in automotive sales due
to the gradual phase-out of its automotive operations. See "Item 1.
Business - Corporate Developments - Completion of the Disposition of
the Automotive Operations." Automotive sales approximated $13.1 million
during Fiscal 1999 compared to approximately $40.4 million in Fiscal
1998. Excluding automotive sales from both periods, sales of
Naugahyde(R) vinyl coated fabrics increased approximately 6% in Fiscal
1999 as compared to Fiscal 1998 as a result of an increase in unit
volume and selling prices.
Net sales in the Specialty Adhesives Segment increased in
Fiscal 1999 by approximately 18% to $28.4 million from $24.1 million in
Fiscal 1998. This increase in sales is primarily attributable a strong
demand for roofing adhesives and sealants and increased sales as a
result of a tolling agreement with a major adhesives company.
Net sales in the Optoelectronics Segment were $485,000 during
Fiscal 1999. The Segment is in the developmental stage. Inventory was
provided to the Segment under a supply agreement with the Segment's
joint venture partner. The Tampa, Florida production facility is
expected to begin production for commercial applications in the second
quarter of Fiscal 2000. The Segment did not have sales during Fiscal
1998.
Income Before Interest, Income Taxes, Minority Interest and
Extraordinary Item. In Fiscal 1999, the Company had income before
interest, income taxes, minority interest and extraordinary item of
$12.8 million as compared to income before interest, income taxes,
minority interest and extraordinary item of $22.8 million for Fiscal
1998. The decrease is primarily due to a loss of revenues associated
with the gradual phase-out of the automotive operations of the Coated
Fabrics Segment, temporary production inefficiencies as a result of a
major plant consolidation at the High Performance Plastics Segment and
start-up costs for the Optoelectronics Segment.
Income before interest, income taxes, minority interest and
extraordinary item for the High Performance Plastics Segment decreased
in Fiscal 1999 by approximately 4% to $15.5 million from $16.1 million
in Fiscal 1998. The decrease is due to temporary production
inefficiencies as a result of a major plant consolidation at the
Polycast acrylic division as well as reduced sales volume for both
Royalite thermoplastic products and Polycast acrylic products.
The Coated Fabrics Segment's income before interest, income
taxes, minority interest and extraordinary item in Fiscal 1999 was
approximately $4.2 million compared to income before interest, income
taxes, minority interest and extraordinary item of $8.9 million in
Fiscal 1998. The decrease of $4.7 million was principally due to the
loss of revenues from the gradual phase-out of its automotive
operations, as well as certain incremental costs related to the closure
of the Port Clinton, Ohio facility used to produce automotive products.
Income before interest, income taxes, minority interest and
extraordinary item for the Specialty Adhesives Segment increased
approximately 42% to $2.7 million in Fiscal 1999 from $1.9 million in
Fiscal 1998. The increase is primarily a result of increased sales
volume.
Loss before interest, income taxes, minority interest and
extraordinary item for the Optoelectronics Segment was $5.1 million in
Fiscal 1999 compared to a loss of $398,000 in Fiscal 1998. The loss is
attributable to start-up expenses incurred by the Optoelectronics
Segment.
Amortization of reorganization value in excess of amounts
allocable to identifiable assets in Fiscal 1999 was zero compared to
$377,000 in Fiscal 1998. The decrease resulted from the write-off of
the remaining reorganization value in excess of amounts allocable to
identifiable assets in the third quarter of Fiscal 1998. The write-off
was in conjunction with the reduction of the deferred tax valuation
allowance relating to the acquired tax loss carryforward benefits.
Approximately $4.5 million of miscellaneous expense in Fiscal
1999 was not allocated to any segment of the Company's business
compared to $3.3 million in Fiscal 1998.
Interest Expense. Interest expense in Fiscal 1999 and Fiscal
1998 approximated $9.4 million. Overall, the effect of the increase
in debt was offset by a decrease in overall interest rates obtained
through the Fiscal 1998 refinancing. See "Note 10 to Consolidated
Financial Statements."
Income Tax Expense. Income tax expense in Fiscal 1999 was
approximately $155,000 compared to $5.6 million in Fiscal 1998. The
provisions for income tax benefit were calculated by the Company
through use of the effective income tax rates based upon its actual
income. The Fiscal 1999 tax expense was reduced approximately $2.3
million due to a tax benefit recognized through the carryback effect of
a Fiscal 1999 capital loss.
Extraordinary Loss on the Extinguishment of Debt. The
extraordinary loss on the extinguishment of debt during Fiscal 1998 was
$5.6 million. This amount represents the loss recognized when the
Company early retired the remaining $72.3 million of its 11.75% Senior
Secured Notes, including a call premium payment of 4.41% and write-off
of applicable debt issuance cost and unamortized debt discount, net of
income tax benefit of approximately $2.8 million. See "Note 10 to
Consolidated Financial Statements."
Comparison of Fiscal 1998 with Fiscal 1997
Net Sales. The Company's net sales increased approximately
6% in Fiscal 1998 to $220.6 million from $208.5 million in Fiscal
1997.
Net sales in the High Performance Plastics Segment increased
in Fiscal 1998 by approximately 8% to $128.6 million from $118.8
million in Fiscal 1997. The increase is due to the net effect of an
increase in unit volume at Royalite which was slightly offset by a
small decline in overall average unit selling prices combined with the
net effect of a slight decline in unit volume at Polycast which was
more than offset by an increase in average unit selling prices. The
High Performance Plastics Segment also benefited from the acquisitions
of the Lucite(R) S-A-R business and Townsend Plastics which were
acquired during the fourth quarter of Fiscal 1997, and the acquisition
of ViPlex Corporation, which was acquired on May 22, 1998.
The Coated Fabrics Segment's net sales decreased approximately
1% in Fiscal 1998 to $67.9 million from $68.8 million in Fiscal 1997.
The decrease resulted primarily from a decline in automotive sales due
to the gradual phase-out of its automotive operations. The decline was
partially offset by an increase in selling prices for the Segment's
Naugahyde(R) vinyl coated fabrics.
Net sales in the Specialty Adhesives Segment increased in
Fiscal 1998 by approximately 15% to $24.1 million from $20.9 million in
Fiscal 1997. This increase in sales is primarily attributable to the
acquisition of C. Gunther Company on March 31, 1997, increased sales of
Hydra Fast-En(R) products, increased sales of Silaprene(R) primarily in
the truck body and trailer markets and increased sales as a result of a
tolling agreement with a major adhesives company.
Income Before Interest, Income Taxes, Minority Interest and
Extraordinary Item. In Fiscal 1998, the Company had income before
interest, income taxes, minority interest and extraordinary item of
$22.8 million as compared to income before interest, income taxes,
minority interest and extraordinary item of $10.6 million for Fiscal
1997. All of the Company's major business segments recorded significant
increases in Fiscal 1998.
Income before interest, income taxes, minority interest and
extraordinary item for the High Performance Plastics Segment increased
in Fiscal 1998 by approximately 54% to $16.1 million from $10.5 million
in Fiscal 1997. The increase was a result of a more favorable sales mix
leading to higher margins for both the Royalite and Polycast divisions,
incremental earnings from prior year and current year acquisitions and
a change in methodology for the allocation of corporate overhead
expenses.
The Coated Fabrics Segment's income before interest, income
taxes, minority interest and extraordinary item in Fiscal 1998 was
approximately $8.9 million compared to income before interest, income
taxes, minority interest and extraordinary item of $2.1 million in
Fiscal 1997. The increase of $6.8 million was principally due to the
net result of lower manufacturing costs for the Segment's automotive
operations as a result of the gradual phase-out, the reversal of rebate
accruals applicable to such business and a change in the methodology
for the allocation of corporate overhead expenses. Also, increased
production costs were incurred in Fiscal 1997 as a result of a raw
materials supplier's decision to exit its business. As a result, the
Segment incurred additional costs in Fiscal 1997 to qualify its
products using comparable raw materials available from other supply
sources.
Income before interest, income taxes, minority interest and
extraordinary item for the Specialty Adhesives Segment was $1.9 million
in Fiscal 1998 as compared to a loss before interest, income taxes,
minority interest and extraordinary item of $346,000 in Fiscal 1997.
The income before interest, income taxes, minority interest and
extraordinary item in Fiscal 1998 was due to significantly increased
sales, the incremental earnings from the acquisition of C. Gunther
Company, operating efficiencies as a result of the relocation to the
new South Bend facility and a change in methodology for the allocation
of corporate overhead expenses.
Loss before interest, income taxes, minority interest and
extraordinary item for the Optoelectronics Segment was $398,000 in
Fiscal 1998. The loss is attributable to start-up expenses incurred by
the Optoelectronics Segment. Planned principal operations have not yet
commenced. The Segment was not in existence during Fiscal 1997.
Amortization of reorganization value in excess of amounts
allocable to identifiable assets in Fiscal 1998 decreased to $377,000
from $754,000 in Fiscal 1997. The decrease resulted from the write-off
of the remaining reorganization value in excess of amounts allocable to
identifiable assets in the third quarter of Fiscal 1998. The write-off
was in conjunction with the reduction of the deferred tax valuation
allowance relating to the acquired tax loss carryforward benefits.
Approximately $3.3 million of miscellaneous expense in Fiscal
1998 was not allocated to any segment of the Company's business
compared to $958,000 in Fiscal 1997. During Fiscal 1998 the Company
changed its methodology for the allocation of corporate overhead
expenses from an allocation of 100% of certain corporate costs to an
allocation of costs based upon 3.0% - 3.5% of segment sales. Prior
fiscal year amounts were not restated.
Interest Expense. Interest expense in Fiscal 1998 and
Fiscal 1997 approximated $9.4 million. Overall, the effect of the
increase in debt was offset by a decrease in overall interest rates
obtained through the Fiscal 1998 refinancing. See "Note 10 to
Consolidated Financial Statements."
Income Tax Benefit. Income tax expense in Fiscal 1998 was
approximately $5.6 million as compared to an expense of $831,000 in
Fiscal 1997. The provisions for income tax benefit were calculated by
the Company through use of the effective income tax rates based upon
its actual income.
Extraordinary Loss on the Extinguishment of Debt. The
extraordinary loss on the extinguishment of debt during Fiscal 1998 was
$5.6 million. This amount represents the loss recognized when the
Company early retired the remaining $72.3 million of its 11.75% Senior
Secured Notes, including a call premium payment of 4.41% and write-off
of applicable debt issuance cost and unamortized debt discount, net of
income tax benefit of approximately $2.8 million. See "Note 10 to
Consolidated Financial Statements."
Liquidity and Capital Resources
For Fiscal 1999, the Company's operations provided
approximately $20.4 million of cash as compared to approximately $12.4
million of cash provided during Fiscal 1998. The increase in cash
provided by operating activities is primarily due to an increase in net
income and trade accounts payable.
Net cash used in investing activities of the Company in Fiscal
1999 was approximately $13.9 million as compared to approximately $3.8
million used during Fiscal 1998. The primary use of cash during Fiscal
1999 and Fiscal 1998 was to purchase property, plant and equipment. The
Fiscal 1999 capital spending is primarily related to the modernization
of the Polycast acrylics' facility in Stamford, Connecticut. The
Company also spent approximately $20 million on the new Optoelectronics
Segment facility in Tampa, Florida; however, the majority of the
capital expenditures for the Tampa facility were financed through
capitalized leases. Fiscal 1999 investing activities also included the
purchase of preferred stock of Emcore Corporation (partially offset by
a sale of a portion of the preferred stock) and the receipt of cash
related to the sale of the automotive operations of the Coated Fabrics
Segment. The Company also used $732,000 in Fiscal 1999 and $1.8 million
in Fiscal 1998 for business acquisitions.
Net cash used in financing activities was $7.8 million during
Fiscal 1999 as compared to $3.3 million used during Fiscal 1998. Cash
used in financing activities for Fiscal 1999 was primarily to repay
long-term debt as well as to repurchase Company stock for treasury.
Cash was provided in Fiscal 1999 through capital contributions by
minority interests in consolidated subsidiaries.
The Company at September 26, 1999, had approximately $4.2
million in cash and cash equivalents as compared to approximately $5.6
million at September 27, 1998. Working capital at September 26, 1999
was approximately $20.3 million compared to approximately $36.1 million
at September 27, 1998. At September 26, 1999, the Company had
borrowings of approximately $7.6 million under its $20 million
revolving credit agreement with Fleet National Bank (subject to a
borrowing base limitation of approximately $20 million at September 26,
1999) and $6.9 under its $10.0 million revolving credit agreement with
CIT (subject to a borrowing base limitation of $8.2 million at
September 26, 1999). See "Note 10 to Consolidated Financial
Statements."
During Fiscal 2000, the Company plans to spend an additional
$10.0 - $15.0 million related to capital expenditures for the
Optoelectronics Segment and $1.5 - $2.0 million to finish the
modernization of its Stamford, Connecticut facility. The Company is
also required to fund a capital contribution of approximately
$5,700,000 as cash is required by the Optoelectronics Segment. The
Company plans to fund the expenditures with cash from operations as
well as its ability to borrow under its revolving credit agreements.
The Company believes that cash from its operations and its
ability to borrow under the revolving credit facilities 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 its revolving credit facilities 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 effective
resistance to price increases in connection with its sales of acrylics
to the aerospace industry. Thus, in an inflationary environment the
Company might 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.
Year 2000
Many software applications and operational programs written in
the past were not designed to recognize calendar dates beginning in the
Year 2000. The failure of such applications or systems to properly
recognize the dates beginning in the Year 2000 could result in
miscalculations or system failures which could result in an adverse
impact on the Company's operations.
The Company has instituted a Year 2000 task force that reports
to the Audit Committee of the Board of Directors. The Company has also
initiated a comprehensive project, overseen by the task force, to
prepare its computer systems, communication systems and
manufacturing/testing equipment for the Year 2000. The project
primarily includes three phases which are: 1) identification and
assessment of all software, hardware and equipment that could
potentially be affected by the Year 2000 issue, 2) remedial action
necessary to bring such systems into compliance and 3) further testing,
if necessary. The Company has completed all phases of its Year 2000
project related to facilities, manufacturing processes and
communications. Central system modifications have been largely complete
since June of 1999 with final completion of all Year 2000 remedies
scheduled by December 31, 1999. The Company has primarily used internal
resources in its Year 2000 project thus far and has incurred costs of
less than $800,000.
The Company has also contacted critical suppliers of products
and services and customers to determine the extent to which the Company
might be vulnerable to such parties' failure to resolve their own Year
2000 issues. The Company does not have a concentration of dependence on
these parties. The effect, if any, on the Company's results of
operations from the failure of such parties to be Year 2000 ready is
not reasonably estimable.
The Company has formulated contingency plans with respect to
its reasonably likely worst case scenario which is the unavailability
of critical raw materials. The contingency plans for critical raw
materials include alternate materials or sources and advance inventory
purchases of certain materials.
Forward Looking Information
The information provided herein may contain forward-looking
statements relating to future events that involve risks and
uncertainties. Among the important factors which could cause actual
results to differ materially from those in the forward-looking
statements are cancellations, rescheduling or delays in product
shipments; manufacturing capacity constraints; lengthy sales and
qualification cycles; difficulties in the production process; the
effectiveness of the Company's capital expenditure programs; the future
financial performance of the Company; delays in developing and
commercializing new products; increased competition; the variability of
future operating results of the Company, changes in the industries in
which the Company competes or plans to compete, especially the high
performance plastics and high brightness, light emitting diode
industries, including overall growth of the industries and the
continued acceptance of the Company's products.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to various market risks, including
changes in interest rates. The Company's earnings and cash flows are
subject to fluctuations due to changes in interest rates on its
floating rate long-term debt and revolving credit advances. The
Company's risk management policy includes the use of derivative
financial instruments (interest rate swaps) to manage its interest rate
exposure. The counter parties are major financial institutions. The
Company does not enter into derivatives or other financial instruments
for trading or speculative purposes.
The Company's interest rate swaps involve the exchange of
fixed and variable interest rate payments without exchanging the
notional principal amount. Payments or receipts on the agreements are
recorded as adjustments to interest expense. At September 26, 1999, the
Company had outstanding swap agreements, maturing at various dates
through 2003, with an aggregate notional amount of $80.0 million. Under
these agreements the Company receives a floating rate based on
USD-LIBOR-BBA and pays a fixed weighted average interest rate of 5.80%.
These swaps effectively change the Company's payment of interest on
$80.0 million of its $99.5 million variable rate debt at September 26,
1999 to fixed rate debt.
The fair value of these interest rate swap agreements
represents the estimated receipts or payments that would be made to
terminate the agreements. At September 26, 1999, the Company would have
received approximately $195,000 to terminate the agreements. A decrease
of 100 basis points in the yield curve would result in a payment by the
Company of approximately $1.3 million to terminate the agreement. The
fair value is based on dealer quotes, considering current interest
rates.
At September 26, 1999, approximately $19.5 million of the
Company's floating rate long-term debt and revolving credit advances
was not covered under an interest swap agreement. For floating rate
debt, interest changes generally do not affect the fair market value
but do impact future earnings and cash flows assuming other factors are
held constant. Based upon this balance, a change of one percent in the
interest rate would cause a change in interest expense of approximately
$195,000 on an annual basis.
Item 8. Consolidated Financial Statements and Supplementary Data
See Index to Consolidated Financial Statements on Page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
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 executive compensation 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 security ownership of
directors and executive officers and substantial stockholders 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 certain relationships and
transactions between directors, executive officers and substantial
stockholders of the Company with 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
(a) Consolidated Financial Statements as of September 26, 1999
and September 27, 1998 and for the Years Ended September 26,
1999, September 27, 1998 and September 28, 1997:
Independent Auditors' Report F-2
Consolidated Balance Sheets as of September 26, 1999
and September 27, 1998 F-3
Consolidated Statements of Operations for the Years
Ended September 26, 1999, September 27, 1998 and
September 28, 1997 F-5
Consolidated Statements of Comprehensive Income
for the Years Ended September 26, 1999, September
27, 1998 and September 28, 1997 F-6
Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended September 26, 1999,
September 27, 1998 and September 28, 1997 F-7
Consolidated Statements of Cash Flows for the Years
Ended September 26, 1999, September 27, 1998 and
September 28, 1997 F-8
Notes to Consolidated Financial Statements F-10
(b) Consolidated Financial Statement Schedule:
Independent Auditors' Report S-1
Schedule II - Valuation and Qualifying Accounts S-2
(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.
(2)
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 March 28,
1997. (9)
4.2 Warrant Agreement, dated as of June 1, 1993,
between the Company and The Bank of New York, as
warrant agent. (2)
10.7 Amended and Restated Employment Agreement,
dated as of April 25, 1995, between Howard R.
Curd and the Company. (3)
10.8 Amended and Restated Employment Agreement,
dated as of April 25, 1995, between Oliver J.
Janney and the Company. (3)
10.9 Amended and Restated Employment Agreement,
dated as of April 25, 1995, between Robert L.
Soran and the Company. (3)
10.10 Amended and Restated Employment Agreement,
dated as of April 25, 1995, between George J.
Zulanas, Jr. and the Company. (3)
10.16 Amended and Restated Uniroyal Technology
Corporation 1992 Stock Option Plan. (12)
10.28 Amended and Restated Uniroyal Technology
Corporation 1992 Non-Qualified Stock Option
Plan. (12)
10.34 Uniroyal Technology Corporation Deferred
Compensation Plan Effective as of August 1,
1995. (4)
10.35 Split-Dollar Insurance Agreement dated as of
August 15, 1995 by and between Uniroyal Technology
Corporation and Howard R. Curd. (5)
10.39 Financing Agreement dated as of June 5, 1996 by
and between The CIT Group/Business Credit, Inc.
and Uniroyal Technology Corporation. (6)
10.40 Amended and Restated Uniroyal Technology
Corporation 1994 Stock Option Plan. (12)
10.41 Amended and Restated Uniroyal Technology
Corporation 1995 Non-Qualified Stock Option
Plan. (12)
10.44 Shareholder Rights Agreement, dated as of December
18, 1996, between Uniroyal Technology Corporation
and The Bank of New York, as rights agent. (7)
10.45 First Amendment to Financing Agreement dated
September 5, 1997 by and between The CIT
Group/Business Credit, Inc. and Uniroyal
Technology Corporation. (10)
10.46 Credit Agreement between High Performance Plastics,
Inc., as Borrower, Uniroyal Technology Corporation,
Uniroyal HPP Holdings, Inc., the banks, financial
institutions and other institutional lenders named
therein, Fleet National Bank (as Initial Issuing
Bank, Swing Line Bank and Administrative Agent) and
DLJ Capital Funding, Inc., as Document Agent dated
April 14, 1998. (11)
10.47 Amendment and Consent Agreement dated April 14,
1998 by and between the CIT Group/Business
Credit, Inc. and Uniroyal Technology
Corporation. (11)
10.48 Consent Agreement dated April 1, 1999 by and
between The CIT Group/Business Credit, Inc. and
Uniroyal Technology Corporation. (12)
10.49 Assumption Agreement dated April 1, 1999 by and
between The CIT Group/Business Credit, Inc.,
Uniroyal Technology Corporation and Uniroyal
Engineered Products, Inc. (12)
10.50 Guaranty dated April 1, 1999 between The CIT
Group/Business Credit, Inc. and Uniroyal
Technology Corporation. (12)
11.1 Statement Regarding Computation of Per Share
Earnings
21.1 Subsidiaries of Uniroyal Technology Corporation
23.1 Independent Auditors' Consent (12)
27.1 Financial Data Schedule (Filed for EDGAR only)
(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 the Company's Form 8-K, dated June 9, 1993.
(3) Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended April 2, 1995 filed on May 12,
1995.
(4) Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended July 2, 1995 filed on August 14,
1995.
(5) Incorporated by reference to the Company's Form 10-Q for the quarterly
period ended July 2, 1995 filed 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.
(6) 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.
(7) Incorporated by reference to the Company's Registration Statement on
Form 8-A, dated December 20, 1996.
(8) Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended September 29, 1996 filed on December 27, 1996.
(9) Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 30, 1997 filed May 9, 1997.
(10) Incorporated by reference to the Company's Annual Report on Form
10-K for the year ended September 28, 1997 filed on December 22, 1997.
(11) Incorporated by reference to the Company's Annual Report on Form
8-K/A dated April 22, 1998.
(12) Filed with this report.
(d) Reports on Form 8-K:
No reports on Form 8-K were filed during the last quarter of
Fiscal 1999.
<PAGE>
Item 8. Consolidated Financial Statements and Supplementary Data.
<TABLE>
<CAPTION>
Index to Consolidated Financial Statements
Consolidated Financial Statements as of September 26, 1999 and
September 27, 1998 and for the Years Ended September 26, 1999,
September 27, 1998 and September 28, 1997:
<S> <C>
Independent Auditors' Report F-2
Consolidated Balance Sheets as of September 26, 1999 and September 27,1998 F-3
Consolidated Statements of Operations for the Years Ended September 26, 1999,
September 27, 1998 and September 28, 1997 F-5
Consolidated Statements of Comprehensive Income for the Years Ended
September 26, 1999, September 27, 1998 and September 28, 1997 F-6
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
September 26, 1999, September 27, 1998 and September 28, 1997 F-7
Consolidated Statements of Cash Flows for the Years Ended September 26,1999,
September 27, 1998 and September 28, 1997 F-8
Notes to Consolidated Financial Statements F-10
Consolidated Financial Statement Schedule:
Independent Auditors' Report S-1
Schedule II - 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 Consolidated
Financial Statements.
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Uniroyal Technology Corporation
We have audited the accompanying consolidated balance sheets of Uniroyal
Technology Corporation and subsidiaries (the "Company") as of September 26, 1999
and September 27, 1998, and the related consolidated statements of operations,
comprehensive income, changes in stockholders' equity and cash flows for each of
the three years in the period ended September 26, 1999. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
September 26, 1999 and September 27, 1998 and the results of its operations and
its cash flows for each of the three years in the period ended September 26,
1999, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Tampa, Florida
December 20, 1999
<PAGE>
<TABLE>
<CAPTION>
UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
September 26, September 27,
1999 1998
------------- -------------
Current assets:
<S> <C> <C>
Cash and cash equivalents (Note 2) $ 4,182 $ 5,585
Trade accounts receivable (less estimated reserve for
doubtful accounts of $238 and $246, respectively) (Notes 2 and 10) 23,069 26,320
Inventories (Notes 2, 3 and 10) 38,627 38,139
Deferred income taxes (Notes 2 and 11) 4,809 5,837
Prepaid expenses and other current assets 3,125 1,008
----------- ----------
Total current assets 73,812 76,889
Property, plant and equipment - net (Notes 2, 4 and 10) 88,653 65,551
Property, plant and equipment held for sale (Note 2) 4,467 5,924
Investment in preferred stock (Notes 2 and 5) 5,383 -
Note receivable (Note 6) 5,000 5,000
Goodwill - net (Notes 2 and 7) 12,452 8,951
Deferred income taxes - net (Notes 2 and 11) 9,028 7,759
Other assets - net (Notes 2, 8 and 10) 14,406 16,277
----------- -----------
TOTAL ASSETS $ 213,201 $ 186,351
=========== ===========
</TABLE>
<PAGE>
<TABLE>
UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(In thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 26, September 27,
1999 1998
------------- -------------
Current liabilities:
<S> <C> <C>
Current portion of long-term debt (Note 10) $ 14,087 $ 7,713
Trade accounts payable 23,011 15,302
Accrued expenses:
Compensation and benefits 11,662 9,743
Interest 1,512 149
Taxes, other than income 961 1,258
Accrued income taxes - 921
Other 2,285 5,657
----------- -----------
Total current liabilities 53,518 40,743
Long-term debt, net of current portion (Note 10) 108,921 97,945
Other liabilities (Note 9) 15,804 15,061
----------- -----------
Total liabilities 178,243 153,749
----------- -----------
Commitments and contingencies (Note 14)
Minority interest (Notes 1, 2 and 16) 3,825 291
Stockholders' equity (Note 12):
Preferred stock:
Series C - 0 shares issued and outstanding; par value
$0.01; 450 shares authorized - -
Common stock:
14,681,419 and 14,182,956 shares issued or to be issued,
respectively; par value $0.01; 35,000,000 shares
authorized 147 142
Additional paid-in capital 57,671 54,613
Deficit (6,112) (11,632)
Unrealized gain on securities held for sale - net 100 -
----------- -----------
51,806 43,123
Less treasury stock at cost - 2,671,987 and 1,499,868
shares, respectively (20,673) (10,812)
----------- -----------
Total stockholders' equity 31,133 32,311
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 213,201 $ 186,351
=========== ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Fiscal Years Ended
---------------------------------------------------
September 26, September 27, September 28,
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net sales $ 201,433 $ 220,616 $ 208,524
Costs, expenses and (other income):
Costs of goods sold 147,047 160,506 161,122
Selling and administrative 33,814 28,075 27,750
Amortization of reorganization value in excess of
amounts allocable to identifiable assets - 377 754
Depreciation and other amortization 9,157 8,720 8,304
Gain on sale of preferred stock (898) - -
Gain on sale of division (Note 15) (667) (512) -
Loss on assets to be disposed of (Notes 2 and 15) 144 633 -
--------- --------- ---------
Income before interest, income taxes, minority interest
and extraordinary item 12,836 22,817 10,594
Interest expense - net (9,352) (9,382) (9,384)
--------- --------- ---------
Income before income taxes, minority interest and
extraordinary item 3,484 13,435 1,210
Income tax expense (Notes 2 and 11) (155) (5,607) (831)
--------- --------- ---------
Income before minority interest and extraordinary item 3,329 7,828 379
Minority interest in net losses of consolidated joint
venture 2,191 199 -
--------- --------- ---------
Income before extraordinary item 5,520 8,027 379
Extraordinary loss on the extinguishment of debt - net
of income tax of $2,787 (Note 10) - (5,637) -
--------- --------- ---------
Net income $ 5,520 $ 2,390 $ 379
========= ========= =========
Net income per common share - basic (Notes 2 and 17)
Income before extraordinary item $ 0.45 $ 0.61 $ 0.01
Extraordinary loss - (0.43) -
--------- --------- ---------
Net income $ 0.45 $ 0.18 $ 0.01
========= ========= =========
Net income per common share - assuming dilution
(Notes 2 and 17)
Income before extraordinary item $ 0.42 $ 0.55 $ 0.01
Extraordinary loss - (0.39) -
--------- --------- ---------
Net income $ 0.42 $ 0.16 $ 0.01
========= ========= =========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Fiscal Years Ended
------------------------------------------------------
September 26, September 27, September 28,
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net income $ 5,520 $ 2,390 $ 379
Unrealized gain on securities available for sale,
net of income taxes:
Unrealized gain on securities available for
sale 648 - -
Less: reclassification adjustment for gains
realized in net income (548) - -
------- ------- -------
Net unrealized gain 100 - -
------- ------- -------
Comprehensive income (Note 2) $ 5,620 $ 2,390 $ 379
======= ======= =======
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
Accumulated
Preferred Additional Other
Stock Common Paid-In Comprehensive Treasury Stockholders'
Series B Stock Capital Deficit Income Stock Equity
--------- ------ --------- -------- ------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 29, 1996 $ 5,250 $ 133 $52,517 $(14,401) $ - $ - $ 43,499
Common stock issued for acquisitions - 4 1,483 - - - 1,487
Stock dividends paid - 1 - - - - 1
Redemption of Series B preferred stock (5,250) - - - - - (5,250)
Amounts received pursuant to Directors'
stock option plan - - 37 - - - 37
Purchases of treasury stock - - - - - (121) (121)
Net income - - - 379 - - 379
------- ----- ------- -------- ------- -------- --------
Balance at September 28, 1997 - 138 54,037 (14,022) - (121) 40,032
Common stock issued under stock option plans - 4 1,509 - - (894) 619
Common stock issued to employee benefit plan - - 191 - - - 191
Amounts received pursuant to Directors' stock
option plan - - 73 - - - 73
Purchases of treasury stock - - - - - (9,797) (9,797)
Tax benefit from exercise of stock options - - 117 - - - 117
Purchases of warrants - - (1,314) - - - (1,314)
Net income - - - 2,390 - - 2,390
------- ----- ------- -------- ------- -------- --------
Balance at September 27, 1998 - 142 54,613 (11,632) - (10,812) 32,311
Common stock issued for acquisitions - - 775 - - 598 1,373
Common stock issued under stock option plans - 5 1,693 - - (1,345) 353
Common stock issued to employee benefit plan - - 199 - - - 199
Amounts received pursuant to Directors' stock
option plan - - 121 - - - 121
Purchases of treasury stock - - - - - (9,114) (9,114)
Tax benefit from exercise of stock options - - 562 - - - 562
Purchases of warrants - - (292) - - - (292)
Net income - - - 5,520 - - 5,520
Comprehensive income - - - - 100 - 100
------- ----- ------- ------- ------- -------- --------
Balance at September 26, 1999 $ - $ 147 $57,671 $(6,112) $ 100 $(20,673) $ 31,133
======= ===== ======= ======= ======= ======== ========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Fiscal Years Ended
-------------------------------------------------------
September 26, September 27, September 28,
1999 1998 1997
-------------- ------------- ---------------
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 5,520 $ 2,390 $ 379
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and other amortization 9,157 8,720 8,304
Deferred tax expense 247 1,908 547
Provision for doubtful accounts 73 87 -
Amortization of debt issuance costs 568 513 431
Amortization of reorganization value in excess of
amounts allocable to identifiable assets - 377 754
Amortization of Senior Secured Notes discount - 63 114
Gain on sale of division (667) (512) -
Gain on sale of preferred stock (898) - -
Minority interest in net losses of consolidated
joint venture (2,191) (199) -
Loss on assets to be disposed of 144 633 -
Extraordinary loss on the extinguishment of debt - 5,637 -
Other 336 118 351
Changes in assets and liabilities:
Decrease (increase) in trade accounts receivable 3,998 2,834 (2,845)
Increase in inventories (27) (3,110) (398)
(Increase) decrease in prepaid expenses and other
assets (2,907) (6,131) 567
Increase (decrease) in trade accounts payable 7,441 (435) (1,080)
Decrease in accrued expenses (1,175) (841) (2,804)
Increase (decrease) in other liabilities 743 306 (884)
-------- -------- --------
Net cash provided by operating activities 20,362 12,358 3,436
-------- -------- --------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (10,445) (7,288) (12,200)
Purchase of preferred stock (9,144) - -
Proceeds from sale of preferred stock 4,822 - -
Proceeds from sale of division 1,567 5,306 4,657
Business acquisitions, net of cash acquired
Business acquisitions, net of cash acquired (732) (1,768) (7,986)
-------- -------- --------
Net cash used in investing activities (13,932) (3,750) (15,529)
-------- -------- --------
FINANCING ACTIVITIES:
Repayment of term loans (10,173) (2,372) (741)
Proceeds from term loans 2,582 - 1,500
Net increase (decrease) in revolving loan balances 3,086 (3,827) 15,169
Proceeds from refinancing - 90,000 -
Repurchase of Senior Secured Notes - (72,253) (243)
Redemption costs for Senior Secured Notes - (3,718) -
Refinancing costs - (3,545) -
Minority interest capital contributions 5,725 490 -
Redemption of Series B preferred stock - - (5,250)
Stock options exercised 353 619 -
Purchases of warrants (292) (1,314) -
Purchases of treasury stock (9,114) (7,347) (121)
-------- -------- --------
Net cash (used in) provided by financing activities (7,833) (3,267) 10,314
-------- -------- --------
Net (decrease) increase in cash and cash equivalents (1,403) 5,341 (1,779)
Cash and cash equivalents at beginning of year 5,585 244 2,023
-------- -------- --------
Cash and cash equivalents at end of year $ 4,182 $ 5,585 $ 244
======== ======== ========
</TABLE>
<PAGE>
UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Supplemental Disclosures:
Payments for income taxes and interest were as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Years Ended
-----------------------------------------------------------------
September 26, September 27, September 28,
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Income tax payments $ 1,109 $ 392 $ 82
Interest payments (net of capitalized
interest) 7,569 12,658 9,356
</TABLE>
<TABLE>
<CAPTION>
Non-cash investing activities were as follows (in thousands):
Fiscal Years Ended
-------------------------------------------------------------------
September 26, September 27, September 28,
1999 1998 1997
----------------- ------------- ---------------
<S> <C> <C> <C>
Business acquisitions purchased with
Company common stock $ 1,373 $ - $ 1,488
Business acquisitions purchased with
notes payable 3,033 1,000 1,000
</TABLE>
The proceeds from term loans for the fiscal year ended September 27, 1998 does
not include a $2,450,000 note payable issued for the purchase of 300,000 shares
of treasury stock (Notes 10 and 12).
The purchases of property, plant and equipment and the proceeds from term loans
for the fiscal years ended September 26, 1999 and September 28, 1997 do not
include $20,372,000 and $77,000, respectively, related to property held under
capitalized leases (Note 14). The Company did not enter into any capital lease
agreements during the fiscal year ended September 27, 1998.
Net cash used in financing activities for the fiscal year ended September 28,
1997 does not include the dividends declared on the Series B Preferred Stock
since they were paid with the issuance of 73,448 shares of the Company's common
stock. No dividends were paid during the fiscal years ended September 26, 1999
or September 27, 1998.
During the fiscal years ended September 26, 1999 and September 27, 1998, the
Company made matching contributions to its 401(k) Savings Plan of $199,000 and
$191,000, respectively, through the re-issuance of 19,672 shares and 30,260
shares of its common stock from treasury, respectively. No such contribution was
made during the fiscal year ended September 28, 1997.
See notes to consolidated financial statements.
<PAGE>
UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended September 26, 1999,
September 27, 1998 and September 28, 1997
1. THE COMPANY
The accompanying consolidated financial statements relate to Uniroyal
Technology Corporation, its wholly-owned subsidiaries, Uniroyal HPP
Holdings, Inc., Uniroyal Engineered Products, Inc., Uniroyal
Optoelectronics, Inc. and UnitechNJ, Inc., and its majority-owned
subsidiary, Uniroyal Liability Management Company (collectively, the
"Company"). Uniroyal HPP Holdings, Inc. includes its wholly-owned
subsidiary, High Performance Plastics, Inc. ("HPPI"), and HPPI's
operating divisions, Royalite Thermoplastics ("Royalite"), Polycast
Technology ("Polycast"), Townsend/Glasflex and ViPlex/Happel. Uniroyal
Engineered Products, Inc. includes its operating divisions, Uniroyal
Engineered Products ("UEP") and Uniroyal Adhesives and Sealants
("UAS"). Uniroyal Optoelectronics, Inc. includes its majority-owned
joint venture, Uniroyal Optoelectronics, LLC.
On April 1, 1999 the Company transferred all of the net assets of its
Coated Fabrics Segment and Specialty Adhesives Segment to a newly
created wholly-owned subsidiary, Uniroyal Engineered Products, Inc.
Uniroyal Liability Management Company, Inc. ("ULMC") is a special
purpose subsidiary created in the fiscal year ended September 26, 1999
to administer the Company's employee and retiree medical benefit
programs. The Company owns a controlling interest (69%) in the
subsidiary; therefore, the accompanying consolidated financial
statements include the subsidiary's results of operations.
UnitechNJ, Inc. is a special purpose subsidiary created in the fiscal
year ended September 26, 1999 to hold the Company's plant in Stirling,
New Jersey.
The Company is principally engaged in the manufacture and sale of high
performance plastics, coated fabrics and specialty adhesives. In
addition, the Company has a majority ownership of a joint venture in
the development stage that will ultimately manufacture and sell
epitaxial wafers, dies and package-ready devices for use in
optoelectronics applications.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of Uniroyal
Technology Corporation, its subsidiaries, its majority-owned subsidiary
and its majority-owned joint venture. All significant intercompany
transactions and balances have been eliminated. Minority interest
represents the minority shareholders' proportionate share of the equity
of the Company's majority-owned entities.
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 26, 1999 ("Fiscal 1999"), September
27, 1998 ("Fiscal 1998") and September 28, 1997 ("Fiscal 1997").
Use of Estimates
The preparation of consolidated 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 consolidated 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.
Financial Instruments
Interest rate swap agreements are used to manage interest rate
exposures. The interest rate differentials to be paid or received under
such swaps are recognized over the life of the agreements as
adjustments to interest expense.
The estimated fair value of amounts reported in the consolidated
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. The fair values of non-current
assets and liabilities approximate their carrying value.
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 associated with trade
accounts receivable.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using a monthly average basis or standard costs (which
approximates actual average costs) for raw materials and supplies and
the first-in, first-out ("FIFO") basis of accounting or standard costs
(which approximates actual FIFO 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 under the straight-line method based on the cost and estimated
useful lives of the related assets including assets held under capital
leases. Interest costs applicable to the construction of major plant
and expansion projects have been capitalized to the cost of the related
assets. Interest capitalized during Fiscal 1999 and Fiscal 1998
approximated $995,000 and $64,000, respectively.
Statement of Financial Accounting Standards ("SFAS") No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles and
goodwill related to those assets to be held and used and for long-lived
assets and certain identifiable intangibles to be disposed of. SFAS No.
121 requires that long-lived assets be renewed for impairment whenever
events or changes in circumstances indicate that the book value of the
asset may not be recoverable. The Company evaluates at each balance
sheet date whether events and circumstances have occurred that indicate
possible impairment. In accordance with SFAS No. 121, the Company uses
an estimate of the future undiscounted net cash flows of the related
assets over the remaining life in measuring whether the assets are
recoverable.
Property, Plant and Equipment Held for Sale
The Company has classified certain property, plant and equipment
related to its Port Clinton, Ohio ("Port Clinton") facility and its
Stirling, New Jersey ("Stirling") facility as held for sale.
In November of 1998, the Company ceased operations at its Port Clinton
facility in connection with its sale of the automotive operations of
the Coated Fabrics Segment (Note 15). The Company expects to dispose of
the remaining Port Clinton assets, including real property, during the
fiscal year ending October 1, 2000 ("Fiscal 2000") and is carrying the
property at fair value less cost to sell based upon an appraisal and a
current offer for the property. The fair value less cost to sell of the
property approximates $3,217,000 at September 26, 1999.
The Company had previously recorded an impairment loss for the Port
Clinton assets in Fiscal 1996 based upon a decision to sell the plant.
The Port Clinton facility incurred operating (losses) income of
($74,000), $3,263,000 and ($2,490,000) in Fiscal 1999, Fiscal 1998 and
Fiscal 1997, respectively.
During Fiscal 1998, in conjunction with plant consolidations at the
Polycast division and in order to address concerns of the Federal Trade
Commission ("FTC") (Note 14, "Townsend Acquisition"), the Company
decided to sell its Stirling facility and certain assets used in the
manufacture of acrylic rods and tubes. In accordance with SFAS No. 121,
the Company recorded a write-down of the related assets totaling
approximately $144,000 and $633,000, in Fiscal 1999 and Fiscal 1998,
respectively, related to this decision. The Company expects the
disposition of the Stirling facility and certain assets to be completed
in Fiscal 2000. The Company is carrying the related assets at fair
value less cost to sell based upon an appraisal and a current sales
offer. The fair value less cost to sell approximates $1,250,000 at
September 26, 1999. The Stirling facility incurred operating (losses)
income of ($261,000) and $196,000 in Fiscal 1998 and Fiscal 1997,
respectively. Separate operating results were not maintained in Fiscal
1999.
Investment in Preferred Stock
The Company accounts for the investment in preferred stock in
accordance with SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Management has classified this investment
as available for sale and, in accordance with SFAS No. 115, carries the
investment at fair value with the unrealized gains and losses, net of
income taxes, reported as a separate component of stockholders' equity.
The fair value is determined by the most recently traded price of the
underlying common stock at the balance sheet date.
Amortization
Debt issuance costs are amortized using the interest method over the
life of the related debt. Debt discount for the Senior Secured Notes
was amortized using the interest method over the life of the related
debt until the debt was repaid in Fiscal 1998 (Note 10). Patents and
trademarks are amortized using the straight-line method over periods
ranging from 7 to 20 years. Reorganization value in excess of amounts
allocable to identifiable assets was amortized on a straight-line basis
over 15 years until Fiscal 1998 when the remaining reorganization value
was reduced to zero in connection with the reduction of the deferred
tax valuation allowance related to acquired tax loss carryforward
benefits (Note 11). Goodwill is amortized on a straight-line basis over
25 years. Goodwill is reported net of accumulated amortization of
$784,000 and $372,000 at September 26, 1999 and September 27, 1998,
respectively.
Research and Development Expenses
Research and development expenditures are expensed as incurred.
Research and development expenditures were $2,201,000, $2,657,000 and
$3,674,000 in Fiscal 1999, Fiscal 1998 and Fiscal 1997, respectively.
Employee Compensation
The cost of post-retirement benefits is recognized in the consolidated
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 deferred tax asset of approximately
$27,539,000. A valuation allowance of $13,702,000 has been established
due to uncertainty regarding the ability to utilize the capital loss
carryforward against capital gains which may or may not be generated in
the future. Realization of the remaining asset is dependent on
generating sufficient taxable income prior to expiration of loss
carryforwards available to the Company. Although realization is not
assured, management believes it is more likely than not that all of the
remaining 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.
Stock-Based Compensation
In Fiscal 1997, the Company adopted only the disclosure provisions of
SFAS No. 123, Accounting for Stock-Based Compensation. As permitted
under this standard, the Company has elected to follow Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
Employees, in accounting for its stock options. Proforma information
regarding net income and earnings per share, as calculated under the
provisions of SFAS 123, are disclosed in Note 12.
Comprehensive Income
The Company adopted SFAS No. 130, "Reporting Comprehensive Income,"
during Fiscal 1999. SFAS No. 130 establishes standards for the
reporting and display of comprehensive income and its components.
Comprehensive income is defined as the change in equity of a business
during a period from transactions and other events and circumstances
from non-owner sources. It includes all changes in equity during a
period except those resulting from investments by owners and
distributions to owners. SFAS No. 130 requires that the Company's
change in unrealized gains and losses on equity securities available
for sale be included in comprehensive income. The net unrealized gain
on securities available for sale is shown net of tax expense of $63,000
for the year ended September 26, 1999. The adoption of SFAS No. 130 had
no impact on the Company's net income or stockholders' equity in Fiscal
1998 and Fiscal 1997.
Income Per Common Share
The Company has adopted and retroactively applied the requirements of
SFAS No. 128, Earnings Per Share, to all periods presented. This change
did not have a material impact on the computation of the earnings per
share data (Note 17).
New Accounting Pronouncements
In June 1998, FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting
and reporting standards for derivative instruments and hedging
activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and
measure those instruments at fair value. The accounting for changes in
the fair value of a derivative (that is, gains and losses) depends upon
the intended use of the derivative and resulting designation. SFAS No.
133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. The Company has not evaluated the effect, if any,
that the adoption of SFAS 133 will have on the Company's consolidated
financial statements.
Reclassifications
Certain prior years' amounts have been reclassified to conform with the
current year's presentation.
3. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 26, September 27,
1999 1998
------------- -------------
<S> <C> <C>
Raw materials, work in process and supplies $ 24,324 $ 22,844
Finished goods 14,303 15,295
-------- --------
Total $ 38,627 $ 38,139
======== ========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in
thousands):
<TABLE>
<CAPTION>
Estimated September 26, September 27,
Useful Lives 1999 1998
------------ ------------ ------------
<S> <C> <C>
Land and improvements - $ 5,620 $ 5,465
Buildings and improvements 5-40 years 28,872 21,969
Machinery, equipment and office
furnishings 3-20 years 78,826 70,259
Construction in progress - 18,992 3,645
-------- --------
132,310 101,338
Accumulated depreciation (43,657) (35,787)
-------- --------
Total $ 88,653 $ 65,551
======== ========
</TABLE>
Depreciation expense was $8,395,000, $8,047,000 and $7,906,000 for
Fiscal 1999, Fiscal 1998 and Fiscal 1997, respectively.
5. INVESTMENT IN PREFERRED STOCK
On November 30, 1998, the Company purchased 642,857 shares of the
Series I Redeemable Convertible Preferred Stock ("Preferred Stock") of
Emcore Corporation ("Emcore") for approximately $9,000,000 ($14.00 per
share). The shares were offered pursuant to a private placement by
Emcore.
Dividends on the Preferred Stock are cumulative and are payable at
Emcore's option, in cash or additional shares of Preferred Stock on
March 31, June 30, September 30 and December 31, commencing December
31, 1998 at the annual rate of 2% per share of Preferred Stock on the
liquidation preference thereof (equivalent to $0.28 per annum per share
of Preferred Stock).
Shares of the Preferred Stock are convertible at any time, at the
option of the holders thereof, into shares of common stock of Emcore on
a one for one basis, subject to adjustment for certain events. On
September 24, 1999, the closing sales price of Emcore's common stock on
the Nasdaq National Market was $14.4375.
The Preferred Stock is redeemable, in whole or in part, at the option
of Emcore at any time Emcore's common stock has traded at or above
$28.00 per share for 30 consecutive trading days, at a price of $14.00
per share plus accrued and unpaid dividends, if any, to the redemption
date. Emcore is required to provide not less than 30 days and not more
than 60 days notice of the redemption. The shares of Preferred Stock
are subject to mandatory redemption by Emcore on November 17, 2003 at a
price of $14.00 per share plus accrued and unpaid dividends.
In June of 1999, the Company converted 270,000 shares of the Preferred
Stock into 270,000 shares of Emcore common stock. The Company then sold
its 270,000 shares of Emcore common stock for $4,822,200 in conjunction
with a public stock offering by Emcore. The Company recognized a gain
on the sale of approximately $898,000, net of certain transaction
costs.
The remaining Preferred Stock and the underlying common stock of Emcore
have been registered under the Securities Act of 1933.
Subsequent to September 26, 1999 and as of December 10, 1999, the
Company converted 230,657 shares of the Preferred Stock into 230,657
shares of Emcore common stock. The Company then sold its 230,657 shares
of Emcore common stock in the open market for approximately $4,288,000,
and will recognize a gain of approximately $1,059,000, net of certain
transaction costs, in the first quarter of Fiscal 2000.
6. NOTE RECEIVABLE
On June 10, 1996, the Company sold substantially all the assets net of
certain liabilities of its Ensolite closed cell foam division to
Rubatex Corporation ("Rubatex") for $25,000,000. Proceeds consisted of
cash of $20,000,000 and an unsecured promissory note receivable (the
"Note") in the amount of $5,000,000 of RBX Group, Inc. ("RBX"), the
parent of Rubatex. Interest on the Note is payable semi-annually at
11.75% per annum. The Note matures on May 1, 2006.
In January 1998, the Company brought suit to compel RBX to honor a
mandatory early redemption obligation under the terms of the $5,000,000
Note. In March 1998, Rubatex filed a counterclaim asserting that the
Ensolite machinery purchased was in breach of the Company's warranties
when Rubatex purchased it in June 1996. The Company believes that the
Rubatex counterclaim is wholly without merit. RBX did not make the
semi-annual interest payment on the Note of $293,750 on May 1, 1998.
The Company stopped accruing interest on the Note as of June 29, 1998.
As of September 26, 1999 and September 27, 1998, the Company has
accrued interest receivable related to the Note of approximately
$387,000. Accrued interest of approximately $739,000 has not been
accrued by the Company. The Note represents a concentration of credit
risk to the Company.
7. BUSINESS ACQUISITIONS
On June 14, 1999, the Company acquired 100% of the common stock of
Happel Marine, Inc., a fabricator for the marine industry, for
$5,193,500. The purchase price was comprised of $909,252 in cash,
unsecured promissory notes aggregating $2,911,007 (Note 10), and
145,078 shares of common stock of the Company valued at $1,373,241
which approximated the market value of such shares on the acquisition
date. The purchase price was adjusted for changes in working capital
between April 30, 1999 and June 13, 1999. This resulted in an increase
of the purchase price of $122,137, which was paid through an increase
in the promissory notes. Happel Marine, Inc. was merged into Uniroyal
HPP Holdings on September 1, 1999, which in turn contributed the net
assets to HPPI.
On May 22, 1998, HPPI acquired 100% of the common stock of ViPlex
Corporation, an acrylic sheet fabricator for the marine industry, for
$2,700,000 consisting of $1,700,000 in cash and unsecured promissory
notes aggregating $1,000,000 (Note 10). The purchase price was adjusted
for changes in working capital between September 30, 1997 and May 22,
1998. This resulted in an increase in the purchase price of $114,000,
which was paid in cash. ViPlex Corporation was merged into HPPI as of
December 31, 1998.
The above business combinations were accounted for by the purchase
method in accordance with APB Opinion No. 16. The results of operations
of the above named businesses are included in the consolidated
financial statements from their respective purchase dates in Fiscal
1999 and Fiscal 1998.
In Fiscal 1999 and Fiscal 1998, the Company acquired the following
assets and liabilities (net of cash received of $177,000 and $46,000,
respectively,) in the above transactions (in thousands):
<TABLE>
<CAPTION>
<PAGE>
September 26, September 27,
1999 1998
------------- -------------
<S> <C> <C>
Accounts receivable $ 820 $ 457
Inventory 461 501
Prepaids and other assets 24 32
Property, plant and equipment 870 188
Goodwill 3,894 1,841
Notes payable (3,280) (1,000)
Other liabilities (684) (251)
------- -------
Net value of purchased assets 2,105 1,768
Value of common stock issued (1,373) -
------- -------
Cash paid for acquisitions $ 732 $ 1,768
======= =======
</TABLE>
The acquired goodwill will be amortized over its estimated useful life
of 25 years.
The pro forma effect of these acquisitions on the Company's net sales,
income before extraordinary item, net income and earnings per share,
had the acquisitions occurred on September 28, 1998 and September 29,
1997, respectively, is not considered material - either quantitatively
or qualitatively.
8. OTHER ASSETS
Other assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 26, September 27,
1999 1998
------------- -------------
<S> <C> <C>
Patents and trademarks $ 4,521 $ 4,871
Technology license 5,000 4,500
Debt issuance costs 2,725 3,268
Deposits 472 2,802
Other 1,688 836
--------- ---------
Total $ 14,406 $ 16,277
========= =========
</TABLE>
Patents and trademarks are reported net of accumulated amortization of
$3,191,000 and $2,841,000 at September 26, 1999 and September 27, 1998,
respectively.
During the fiscal year ended September 27, 1998, the Company paid
$4,500,000 to Emcore Corporation ("Emcore") in connection with a
technology license dated September 29, 1997, for certain technology
relating to the manufacture of epitaxial wafers used in high brightness
light emitting diodes ("LEDs") for lamps and display devices (Note 16).
During the fiscal year ended September 26, 1999, the Company paid the
final installment of $500,000 related to the technology license. The
technology license will be amortized over the estimated life of the
technology once sales from internal production have commenced.
During the fiscal year ended September 27, 1998, the Company
capitalized approximately $3,545,000 of debt issuance costs incurred in
connection with the Fleet Financing (Notes 10 and 18). Also, in
connection with the Fleet Financing, the Company wrote off
approximately $3,439,000 of debt issuance costs associated with its
Senior Secured Notes which is included in the loss on the early
extinguishment of debt during the fiscal year ended September 27, 1998
(Note 10). Debt issuance costs are shown net of accumulated
amortization of $846,000 and $278,000 at September 26, 1999 and
September 27, 1998, respectively.
At September 27, 1998, deposits include $1,797,000 paid to Emcore in
Fiscal 1998 as a down payment for machinery ordered from Emcore by
Uniroyal Optoelectronics, LLC. During Fiscal 1999, the deposit was
reclassed to property, plant and equipment upon delivery of the
machines from Emcore.
9. OTHER LIABILITIES
Other liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 26, September 27,
1999 1998
------------- -------------
<S> <C> <C>
Accrued retirement benefits $ 15,047 $ 13,841
Taxes, other than income 180 745
Other 577 475
----------- -----------
Total $ 15,804 $ 15,061
=========== ===========
</TABLE>
<PAGE>
10. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 26, September 27,
1999 1998
------------- -------------
<S> <C> <C>
Term A Advance $ 25,500 $ 30,000
Term B Advance 59,550 60,000
Revolving credit agreements 14,428 11,342
Unsecured promissory notes 5,174 4,117
Capital lease obligations 18,356 199
----------- -----------
123,008 105,658
Less current portion (14,087) (7,713)
----------- -----------
Long-term debt, net of current portion $ 108,921 $ 97,945
=========== ===========
</TABLE>
Debt amounts become due during subsequent fiscal years ending in
September as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
2000 $ 14,087
2001 18,086
2002 9,625
2003 11,635
2004 10,024
Subsequent years 59,551
-----------
Total debt $ 123,008
===========
</TABLE>
Interest expense for Fiscal 1999, 1998 and 1997 was approximately
$9,588,000, $9,927,000 and $10,061,000, respectively.
HPPI Credit Agreement
---------------------
On April 14, 1998, the Company transferred all of the assets of its
High Performance Plastics Segment to a newly created wholly-owned
subsidiary, HPPI. On that same day HPPI, as borrower, entered into a
credit agreement with Uniroyal HPP Holdings, Inc. (the parent of HPPI
and a wholly-owned subsidiary of the Company), the Company, the banks,
financial institutions and other institutional lenders named therein,
Fleet National Bank (as Initial Issuing Bank, Swing Line Bank and
Administrative Agent) ("Fleet") and DLJ Capital Funding, Inc. as
Documentation Agent (the "Credit Agreement"), providing among other
things, for the borrowing by HPPI of an aggregate principal amount of
up to $110,000,000 (the "Fleet Financing"). The $110,000,000 line under
the Credit Agreement is composed of a $30,000,000 Term A Advance, a
$60,000,000 Term B Advance and a $20,000,000 Revolving Credit Advance.
The Term A Advance is payable in equal quarterly installments of
$1,500,000 beginning on December 31, 1998 and ending on September 30,
2003. Interest on the Term A Advance is initially payable monthly at
the Prime Rate (as defined in the Credit Agreement) plus 1.25% for
Prime Rate advances or not later than the end of each three-month
period at the Eurodollar Rate (as defined in the Credit Agreement) plus
2.25% for Eurodollar Rate advances during the first six months of the
Credit Agreement. After the first six months, the applicable margin for
each Prime Rate advance and each Eurodollar Rate advance will be
determined quarterly by reference to HPPI's ratio of Consolidated Debt
to EBITDA (as defined in the Credit Agreement). The applicable margins
on the Term A Advance range from 0.50% - 1.25% for the Prime Rate
advances and 1.50% - 2.25% for Eurodollar Rate advances and were 1.25%
and 2.25%, respectively, at September 26, 1999. The weighted average
interest rate on the Term A Advance during Fiscal 1999 and Fiscal 1998
was 7.36% and 7.84%, respectively.
The Term B Advance is payable in quarterly installments of $150,000
beginning on December 31, 1998 through September 30, 2003, semiannual
installments of $5,000,000 on March 31, 2004 and September 30, 2004 and
a final payment of $47,000,000 on March 31, 2005. Interest on the Term
B Advance is initially payable monthly at Prime Rate plus 1.50% for
Prime Rate advances or not later than the end of each three-month
period at the Eurodollar Rate plus 2.50% for Eurodollar Rate advances
during the first six months of the Credit Agreement. After the first
six months, the applicable margin for each Prime Rate advance and
Eurodollar Rate advance will be determined quarterly by reference to
HPPI's ratio of Consolidated Debt to EBITDA (as defined in the Credit
Agreement). The applicable margins on Term B Advances range from 1.00%
- 1.50% for Prime Rate advances and 2.00% - 2.50% for Eurodollar Rate
advances and were 1.50% and 2.50%, respectively, at September 26, 1999.
The weighted average interest rate on the Term B Advance during Fiscal
1999 and Fiscal 1998 was 7.57% and 8.09%, respectively.
Under the Revolving Credit Advance, HPPI may borrow the lesser of
$20,000,000 or the sum of 85% of Eligible Receivables plus 50% of the
value of Eligible Inventory as defined in the Credit Agreement.
Interest is payable under the same terms as the Term A Advance. The
Revolving Credit Advance matures on September 30, 2003. At September
26, 1999, the Company had approximately $7,550,000 of outstanding
borrowings under the Revolving Credit Advance and approximately
$12,450,000 of availability. The weighted average interest rate on the
Revolving Credit Advance during Fiscal 1999 and Fiscal 1998 was 8.31%
and 8.20%, respectively.
The advances under the Credit Agreement are collateralized by a lien on
substantially all of the non-cash assets of HPPI. The Credit Agreement
contains certain covenants which limit, among other things, HPPI's
ability to incur additional debt, sell its assets, pay cash dividends,
make certain other payments and redeem its capital stock. The Credit
Agreement also contains covenants which require the maintenance of
certain ratios. HPPI was in compliance with these covenants at
September 26, 1999. The Credit Agreement also contains annual mandatory
pre-payments of principal equal to 50% of HPPI's annual Excess Cash
Flow (as defined in the Credit Agreement) beginning September 26, 1999.
No such prepayment was due on September 26, 1999.
Under the terms of the Credit Agreement, HPPI is required to obtain and
keep in effect one or more interest rate Bank Hedge Agreements (as
defined in the Credit Agreement) covering at least 50% of the Term A
and Term B Advances, for an aggregate period of not less than three
years. On May 14, 1998, HPPI entered into three interest rate swap
agreements with two banks. The first agreement is a fixed rate swap on
$30,000,000 notional amount that expires on May 14, 2003. HPPI's fixed
LIBOR rate of interest on this swap is 5.985%. HPPI pays or receives
interest based upon the differential between HPPI's fixed LIBOR rate
and the bank's floating LIBOR rate. The bank's floating LIBOR rate is
adjusted monthly. The second agreement is a cancelable interest rate
swap on $30,000,000 notional amount that expires on May 14, 2003.
HPPI's fixed LIBOR rate of interest on this swap is 5.7375%. HPPI pays
or receives interest based upon the differential between HPPI's fixed
LIBOR rate and the bank's floating LIBOR rate. The bank's floating
LIBOR rate is adjusted quarterly. The bank has the option to cancel
this swap on May 14, 2001. The third agreement is a cancelable interest
rate swap on $20,000,000 notional amount that expires on May 14, 2000.
HPPI's fixed LIBOR rate of interest on this swap is 5.6725%. HPPI pays
or receives interest based upon the rate differential between HPPI's
fixed LIBOR rate and the bank's floating LIBOR rate. The bank's
floating LIBOR rate is adjusted quarterly. The bank had the option to
cancel this swap on May 14, 1999 which it did not exercise. The
differential on interest rate swaps is accrued as interest rates change
and is recognized as an adjustment to interest expense over the life of
the agreements. The fair value of these interest rate swap agreements
represents the estimated receipts or payments that would be made to
terminate the agreements. At September 26, 1999, the Company would have
received approximately $195,000 to terminate the agreements.
On April 14, 1998, HPPI paid $94,944,000 to the Company which in turn
used such amount to defease the outstanding 11.75% Senior Secured Notes
due June 1, 2003 ("Senior Secured Notes") including the call premium
and interest accrued through the call date and to pay down its
revolving line of credit and secured term loan with the CIT
Group/Business Credit, Inc. ("CIT"). The redemption of the Senior
Secured Notes was completed on June 1, 1998 at a call premium of 4.41%
($3,264,000). In connection with the June 1, 1998 redemption, the
Company incurred an extraordinary loss on the extinguishment of debt of
approximately $5,637,000 (net of applicable income taxes of
approximately $2,787,000).
CIT Credit Agreement
--------------------
On April 14, 1998 the Company entered into an Amendment and Consent
Agreement with CIT whereby the Company's existing revolving credit
arrangement was amended to permit the Company to borrow the lesser of
$10,000,000 or the sum of 85% of Eligible Receivables plus 55% of
Eligible Inventories as defined in the agreement. On April 1, 1999, in
connection with the creation of Uniroyal Engineered Products, Inc., the
CIT revolving credit agreement was assumed by Uniroyal Engineered
Products, Inc. The collateral securing the credit line includes only
the assets of Uniroyal Engineered Products, Inc. Interest on the CIT
revolving credit agreement is payable monthly at Prime plus .5% per
annum or at the LIBOR rate plus 2.75% per annum 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 Uniroyal Engineered Products, Inc.
trade accounts receivables and inventories 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 26, 1999. At September 26,
1999, the Company had approximately $6,878,000 of outstanding
borrowings under the revolving credit agreement and $1,369,000 of
availability. The Company had $4,000 of outstanding borrowings under
this agreement at September 27, 1998. The weighted average interest
rates on the CIT revolving credit agreement was 8.28% during Fiscal
1999 and 9.00% during Fiscal 1998.
Unsecured Promissory Notes
On June 14, 1999, in connection with the purchase of Happel Marine,
Inc. (Note 7), the Company issued unsecured promissory notes for
$2,400,000 and $511,007. The $2,400,000 note is payable in four equal
annual installments beginning January 15, 2000, plus accrued interest
at the stated rate of 7.75% per annum. The $511,007 note is payable in
two equal annual installments beginning January 15, 2000, plus accrued
interest at the stated rate of 7.75%. The notes were adjusted to
$2,500,030 and $533,114, respectively, in connection with a subsequent
purchase price adjustment in September, 1999.
The Company has entered into various unsecured promissory notes
aggregating approximately $1,470,000 at September 26, 1999 in
connection with prior year business acquisitions and a treasury stock
purchase at stated rates ranging from 5.5% to 8.0%. To the extent the
stated rates were below current market rates, the Company imputed
interest at the market rate in effect on the date of the respective
transaction.
Capital Lease Obligations
-------------------------
The Company leases certain machinery and equipment under non-cancelable
capital leases which extend for varying periods up to 5 years. Capital
lease obligations entered into during Fiscal 1999 were primarily
related to the Company's majority owned joint venture, Uniroyal
Optoelectronics, LLC. The Company is a guarantor of the Uniroyal
Optoelectrics, LLC capital lease obligations. The weighted average
interest rate on these obligations was 8.8% (Note 14).
11. 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 26, September 27, September 28,
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Income tax calculated at the statutory
rate applied to income before income
tax and extraordinary item $ 1,925 $ 4,636 $ 408
Increase (decrease) resulting from:
Exclusion of extraordinary loss on the
extinguishment of debt - (2,787) -
Amortization of reorganization value
in excess of amounts allocable to
identifiable assets - 101 155
Capital loss from medical benefits
subsidiary (15,980) - -
Valuation allowance 13,702 - -
State income tax 309 515 354
Other 199 355 (86)
----------- ----------- -----------
Income tax expense $ 155 $ 2,820 $ 831
=========== =========== ===========
</TABLE>
<PAGE>
Allocation of income tax expense is as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Years Ended
--------------------------------------------------------
September 26, September 27, September 28,
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Income before extraordinary item $ 155 $ 5,607 $ 831
Extraordinary item - (2,787) -
----------- ------------ -----------
Income tax expense $ 155 $ 2,820 $ 831
=========== =========== ===========
</TABLE>
Income tax expense (benefit) consisted of the following components (in
thousands):
<TABLE>
<CAPTION>
Fiscal Years Ended
--------------------------------------------------------
September 26, September 27, September 28,
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Current:
Federal $ (80) $ 397 $ -
State (12) 515 284
---------- ----------- -----------
Total $ (92) $ 912 $ 284
========== =========== ===========
Net deferred tax expense:
Federal $ (75) $ 1,908 $ 477
State 322 - 70
---------- ----------- -----------
Total $ 247 $ 1,908 $ 547
========== =========== ===========
Total:
Federal $ (155) $ 2,305 $ 477
State 310 515 354
---------- ----------- -----------
Total $ 155 $ 2,820 $ 831
========== =========== ===========
</TABLE>
The components of the deferred tax assets and liabilities were as
follows (in thousands):
<TABLE>
<CAPTION>
September 26, 1999
-----------------------------------------------------------
Assets Liabilities Total
----------------- ----------------- ----------------
<S> <C> <C> <C>
Current
Accrued expenses deductible in future
periods $ 4,809 $ - $ 4,809
========== ========= ==========
Non-Current
Acquired tax loss carryforward
benefits $ 4,951 $ - $ 4,951
Net operating loss carryforward 5,496 - 5,496
Capital loss 13,702 - 13,702
Valuation allowance (13,702) - (13,702)
Book basis in excess of tax basis of
assets - (8,044) (8,044)
Long-term accrual of expenses
deductible in future periods 6,286 - 6,286
AMT credit carryforward 339 - 339
---------- ---------- ----------
Total $ 17,072 $ (8,044) $ 9,028
========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 27, 1998
-----------------------------------------------------------
Assets Liabilities Total
----------------- ----------------- ----------------
<S> <C> <C> <C>
Current
Accrued expenses deductible in future
periods $ 5,837 $ - $ 5,837
========== ========= ==========
Non-Current
Acquired tax loss carryforward
benefits $ 3,078 $ - $ 3,078
Net operating loss carryforward 5,731 - 5,731
Book basis in excess of tax basis of
assets - (8,115) (8,115)
Long-term accrual of expenses
deductible in future periods 7,065 - 7,065
---------- --------- ----------
Total $ 15,874 $ (8,115) $ 7,759
========== ========= ==========
</TABLE>
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 September 27, 1992
bankruptcy reorganization of the Company's predecessors. The annual
limitation on utilization of the acquired net operating loss
carryforward for tax purposes is approximately $1,600,000 per year.
In Fiscal 1998, the Company reduced the deferred tax valuation
allowance relating to acquired tax loss carryforward benefits. In
accordance with SFAS No. 109, Accounting for Income Taxes, the
reduction was applied to reduce reorganization value in excess of
amounts allocable to identifiable assets which resulted in such asset
being reduced to zero in Fiscal 1998.
In Fiscal 1999, the Company established a subsidiary to administer the
Company's employee medical benefits program. The Company realized a
one-time combined federal and state capital loss tax benefit of
approximately $15,980,000 arising from the sale of a portion of the
stock of this subsidiary. However, due to the uncertainty regarding the
Company's ability to utilize this capital loss in the future, only $2.3
million of this benefit was recognized in Fiscal 1999 as an offset
against current and previous capital gains.
12. 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 26, 1999, approximately 14,681,419 shares
of common stock were issued.
On December 18, 1996, the Board designated a new series of preferred
stock of the Company termed Series C Junior Participating Preferred
Stock, $.01 par value ("Series C Preferred") and reserved 450 shares of
the 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 a Shareholder Rights Plan. The Rights will trade with
the common stock and be detachable from the common stock and
exercisable only in the event of an acquisition of or grant of the
right to acquire 15% or more of the common stock by one party or common
group or a tender offer to acquire 15% or more of the common stock.
Common 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 declared no such dividends during
Fiscal 1999, Fiscal 1998 and Fiscal 1997.
Treasury Stock Transactions
During Fiscal 1999 and Fiscal 1998, the Company received 130,382 and
92,285 shares of its common stock, respectively, in lieu of cash for
the exercise of stock options from officers and employees of the
Company. These shares were valued at approximately $1,345,000 in Fiscal
1999 and $894,000 in Fiscal 1998 (which were calculated based on the
closing market value of the stock on the day prior to the exercise
dates) and are included as treasury shares as of September 26, 1999 and
September 27, 1998.
During Fiscal 1999 and Fiscal 1998, the Company repurchased 905,485 and
502,000 shares of its common stock, respectively, in the open market
for approximately $8,451,000 and $4,479,000, respectively.
During Fiscal 1999, the Company received 253,290 shares of its common
stock in connection with the final distributions of the bankruptcy
proceedings, 18,271 of which were purchased at a cost of approximately
$181,000.
No such shares were received or purchased during Fiscal 1998.
During Fiscal 1999, the Company repurchased 47,712 shares of its common
stock from the Uniroyal Technology Corporation Employee Stock Ownership
Plan for approximately $482,000. No such shares were repurchased during
Fiscal 1998.
During Fiscal 1998, the Company repurchased 500,000 shares of its
common stock for $2,187,500 in connection with the sale by the Pension
Benefit Guaranty Corporation ("PBGC") of all of its holdings of the
Company's common stock. Also during Fiscal 1998, The Company
repurchased 300,000 shares of its common stock, previously issued in
connection with the Fiscal 1997 purchase of Townsend Plastics, for
$250,000 cash and an unsecured promissory note for $2,450,000 (Note 10)
and repurchased 50,000 shares of its common stock, previously issued in
connection with the Fiscal 1997 acquisition of C. Gunther Company, for
$431,250.
Subsequent to the fiscal year ended September 26, 1999 and as of
December 10, 1999, the Company repurchased approximately 132,450 shares
of its common stock in the open market for approximately $1,263,000.
Warrants
The Company has 537,535 warrants outstanding to purchase an aggregate
of 537,535 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 Company
originally issued 800,000 warrants to purchase an aggregate of 800,000
shares of its common stock in connection with the issuance of its
Senior Secured Notes. The warrants were detachable from the Senior
Secured Notes and, therefore, were allocated a portion of the proceeds
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. During Fiscal 1999 and Fiscal 1998, the Company
repurchased 45,615 and 216,850, respectively, of its outstanding
warrants for approximately $292,000 and $1,314,000, respectively. As of
September 26, 1999, no warrants had been exercised.
Stock Compensation Plans
At September 26, 1999, the Company has four stock-based compensation
plans, which are described below. The Company applies APB Opinion No.
25 and related interpretations in accounting for its plans.
Accordingly, no compensation cost has been recognized for these plans
except as indicated below. Had compensation cost been determined based
on the fair value at the grant dates for awards under those plans
consistent with the method of FASB Statement No. 123, the Company's net
income and earnings per share would have been reduced to the pro forma
amounts indicated below (in thousands, except earnings per share
information):
<TABLE>
<CAPTION>
Fiscal Years Ended
-----------------------------------------------------------
September 26, September 27, September 28,
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net income
As reported $ 5,520 $ 2,390 $ 379
Pro forma $ 4,778 $ 2,175 $ 308
Earnings per share - basic
As reported $ 0.45 $ 0.18 $ 0.01
Pro forma $ 0.39 $ 0.16 $ 0.01
Earnings per share - assuming dilution
As reported $ 0.42 $ 0.16 $ 0.01
Pro forma $ 0.36 $ 0.15 $ 0.01
</TABLE>
The fair value of each option grant is estimated on the date of the
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants for the fiscal years ended
September 26, 1999, September 27, 1998 and September 28, 1997,
respectively: expected volatility of 44.16%, 45.46% and 45.89%,
dividend yield of 0% for all years, risk-free interest rates of 6.014%,
4.523% and 6.042% and expected lives of 3 to 10 years.
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 on September 27, 1992. Generally, of the options granted under
this plan, 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 Compensation Committee, but
no 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 available 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 from the date of the grant of each option. Compensation expense
related to these options was $109,000, $64,000 and $28,000 during
Fiscal 1999, Fiscal 1998 and Fiscal 1997, respectively.
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 approximately 812,000 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 or, in the case of new directors, 30 days after
becoming an eligible director of the Company. 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.
No director who is not an officer of the Company may receive options to
purchase more than an aggregate of 30,000 shares of Common Stock in any
calendar year under all of the Company's Stock Option Plans. The plan
was amended by the Stockholders in 1999 to increase the annual amount
from 10,000 to 17,500 shares of the Company's common stock.
The following table summarizes all stock option transactions for the
fiscal years ended September 26, 1999 and September 27, 1998:
<TABLE>
<CAPTION>
Fiscal Years Ended
-------------------------------------------------------------------------
September 26, 1999 September 27, 1998
--------------------------------- ---------------------------------
Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price
---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C>
Outstanding at Beginning of Year 2,176,393 $ 5.05 1,895,250 $ 3.36
Grants 187,100 $ 7.76 762,658 $ 8.09
Exercised (498,463) $ 3.41 (475,595) $ 3.19
Forfeited (17,500) $ 7.84 (5,920) $ 3.57
--------- ---------
Outstanding at End of Year 1,847,530 $ 5.74 2,176,393 $ 5.05
========= =========
Exercisable at End of Year 1,029,605 1,295,815
========= =========
Weighted-average fair value of
options granted during the year $ 3.69 $ 3.38
</TABLE>
<PAGE>
The following table summarizes information about stock options at
September 26, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------------------------------- --------------------------------
Number Weighted-Average Weighted- Number Weighted-
Range of Outstanding Remaining Average Exercisable Average
Exercise Prices at 9/26/99 Contractual Life Exercise Price at 9/26/99 Exercise Price
---------------- ------------ ----------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
$1.470 - $ 2.063 51,633 5.41 Years $ 1.66 51,633 $ 1.66
$2.625 - $ 3.156 481,949 5.17 Years $ 2.82 403,757 $ 2.81
$3.250 - $ 4.000 228,832 3.22 Years $ 3.48 225,892 $ 3.48
$4.125 - $ 5.063 323,768 4.41 Years $ 4.21 298,348 $ 4.14
$7.000 - $ 8.625 182,000 2.31 Years $ 7.87 37,310 $ 7.09
$9.125 - $10.000 579,348 8.77 Years $ 9.62 12,665 $ 9.60
--------- ---------
1,847,530 5.65 Years $ 5.74 1,029,605 $ 3.52
========= =========
</TABLE>
Employee Stock Ownership Plan
The Company established the Uniroyal Technology Corporation Employee
Stock Ownership Plan (the "ESOP") in 1992. The ESOP was 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. Employees eligible for the
initial distribution generally were 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 were
discretionary. The initial contribution was 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 became 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 nor did they have any ESOP
expense during Fiscal 1999, Fiscal 1998 and Fiscal 1997. During Fiscal
1999, the Company merged the ESOP into the three existing employee
savings plans effective February 6, 1998. No further contributions are
to be made to the Plan, no further benefits will accrue to any
participants in the Plan and the accounts of all participants in the
Plan as of February 6, 1998 are vested.
13. EMPLOYEE COMPENSATION
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 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 (Note 14), and Uniroyal, Inc. ("Uniroyal") (not
affiliated with the Company) who are class members under a federal
district court order. The Company and Uniroyal 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 a Voluntary Employee
Benefits Association ("VEBA") established to provide benefits to
certain retirees of the Predecessor Companies and UPC. The Company's
post-retirement benefit plans are not funded.
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 consolidated 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 was expected to be
approximately 16 years.
The components of net periodic benefit costs are as follows (in
thousands):
<TABLE>
<CAPTION>
<PAGE>
September 26, September 27, September 28,
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Service cost $ 61 $ 52 $ 67
Interest cost 1,864 2,212 2,315
Amortization of prior service credit (14) (14) (14)
Amortization of transition obligation 1,114 1,114 1,134
Recognized actuarial loss 151 289 205
--------- --------- ---------
Net periodic benefit cost $ 3,176 $ 3,653 $ 3,707
========= ========= =========
</TABLE>
<PAGE>
A reconciliation of the beginning and ending balances of benefit
obligations and the funded status of the plans are as follows (in
thousands):
<TABLE>
<CAPTION>
September 26, September 27,
1999 1998
------------- -------------
<S> <C> <C>
Change in benefit obligations:
Benefit obligation at beginning of year $ 34,163 $ 34,221
Service cost before expenses 61 52
Interest cost 1,864 2,212
Benefit payments (2,649) (2,752)
Actuarial (gain)/loss (4,788) 430
----------- -----------
Benefit obligation at end of year $ 28,651 $ 34,163
=========== ===========
Reconciliation of funded status:
Benefit obligation at end of year $ 28,651 $ 34,163
Unrecognized actuarial loss (2,762) (7,701)
Unrecognized prior service credit 247 261
Unrecognized transition obligation (10,022) (11,137)
----------- -----------
Net amount recognized at year-end $ 16,114 $ 15,586
=========== ===========
</TABLE>
The weighted average discount rate assumptions were 6.75% at September
26, 1999, 6.25% at September 27, 1998 and 7.0% at September 28, 1997.
The assumed health care cost trend rate used in measuring the
healthcare benefits for Fiscal 1999 was a 6.0% average annual rate of
increase in the per capita cost health care benefits. This rate is
assumed to change over the years as follows: 5.8% for the fiscal years
beginning in 2000, 5.3% for the fiscal years beginning in 2003, 5.1%
for the fiscal years beginning in 2005, 4.9% for the fiscal years
beginning in 2010, 4.8% for the fiscal years beginning in 2015 and 4.8%
for the fiscal years beginning in 2020 and later.
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plan. A one-percentage-point
change in assumed cost trend would have the following effects for
Fiscal 1999 (in thousands):
<TABLE>
<CAPTION>
1% Point Increase 1% Point Decrease
----------------- -----------------
<S> <C> <C>
Effect on total of service and interest cost components for 1999 $ 172 $ (165)
Effect on year-end 1999 post-retirement benefit obligation 2,476 (2,131)
</TABLE>
Post-retirement Benefit Plan
----------------------------
Effective October 1, 1998, the Company established an unfunded
post-retirement defined benefit plan for officers and certain key
employees of the Company. The net periodic benefit cost recognized in
Fiscal 1999 was approximately $525,000 and consisted entirely of
service cost. The following tables provide a reconciliation of the
changes in the plan's benefit obligations and a reconciliation of the
funded status for Fiscal 1999 (in thousands):
<TABLE>
<S> <C>
Accrued benefit obligation at September 27, 1998 $ -
Service cost 525
Benefits paid -
----------
Accrued benefit obligation at September 26, 1999 $ 525
==========
Projected benefit obligation $ 484
Unrecognized prior service cost -
Unrecognized loss 41
----------
Accrued benefit obligation at September 26, 1999 $ 525
==========
</TABLE>
The discount rate used as of September 26, 1999 was 7.75%.
In connection with the post-retirement defined benefit plan, the
Company purchased life insurance contracts on the lives of officers and
certain key employees of the Company during Fiscal 1999. Life insurance
premiums of approximately $383,000 were paid by the Company in Fiscal
1999 with respect to these policies. As of September 26, 1999, $303,000
has been capitalized to reflect the cash surrender value of the
contracts.
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
three defined contribution savings plans. The plans provide for
employee contributions and employer matching 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 $.66 based on years of service. The
expenses pertaining to these plans amounted to approximately $334,000,
$618,000 and $649,000 for the fiscal years ended in 1999, 1998 and
1997, 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
pre-tax 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 $242,000, $168,000 and $141,000 for the
fiscal years ended 1999, 1998 and 1997. During Fiscal 1999 and Fiscal
1998 the Company contributed 19,672 and 30,260 shares of its common
stock with a market value of approximately $199,000 and $191,000,
respectively, to the savings plan. The Company did not make any such
contributions during Fiscal 1997.
14. COMMITMENTS AND CONTINGENCIES
Bankruptcy Proceedings
----------------------
On September 27, 1992 the Company acquired the businesses of certain
direct and indirect subsidiaries of The Jesup Group, Inc. ("Jesup") for
$54,400,000 of the Company's common and preferred stocks. These
subsidiaries (collectively, the "Predecessor Companies") are the
current operating divisions of the Company. The Predecessor Companies
previously filed petitions with the United States Bankruptcy Court for
the Northern District of Indiana, South Bend Division (the "Bankruptcy
Court") seeking protection from their creditors under Chapter 11 of the
United States Bankruptcy Code. On August 20, 1992 the Bankruptcy Court
approved the Third Amended Plan of Reorganization under Chapter 11 of
the Bankruptcy Code for Polycast Technology Corporation and its
Affiliated Debtors (the "Plan"). The Plan was substantially consummated
at the close of business on September 27, 1992 (the "Effective Date").
As a result of the bankruptcy and the consummation of the Plan at
September 27, 1992, the Company recorded certain adjustments to present
its consolidated financial statements at September 27, 1992 in
conformity with Statement of Position 90-7 "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"), of
the American Institute of Certified Public Accountants. Under the
provisions of SOP 90-7, the Company was required to adopt fresh start
reporting as of September 27, 1992 because (i) the reorganization value
of the Company (approximate fair value on the Effective Date) was less
than the total of all post-petition liabilities and pre-petition
allowed claims and (ii) holders of the voting shares of the Predecessor
Companies before the Effective Date received less than 50 percent (50%)
of the voting shares of the Company.
As of September 26, 1999, all 10,000,000 shares of the Company's common
stock allocated for the disposition of bankruptcy claims have been
issued for full settlement to the holders of unsecured claims against
the estates of the Predecessor Companies and to the Company's ESOP. The
Bankruptcy Court issued its final decree closing the bankruptcy of the
Predecessor Companies on September 27, 1999.
Townsend Acquisition
--------------------
By letter dated January 30, 1998, the Denver Regional Office of the FTC
notified the Company that it was conducting a non-public investigation
into the Company's acquisition of the Townsend Plastics Division of
Townsend Industries, Inc. in September 1997. The purpose of the
investigation was to determine whether the transaction violated Section
7 of the Clayton Act, 15 USC Section 18, Section 5 of the Federal Trade
Commission Act, 15 USC Section 45, or any other law enforced by the
FTC. The Company has been cooperating with the FTC in its
investigation. The Company has been in discussions with the staff of
the FTC seeking to meet the concerns of both the Company and the FTC.
Management does not expect the cost of compliance with the FTC requests
to have a material adverse effect upon the Company's results of
operations, cash flows or financial position. The Company is currently
seeking to sell certain assets to another entity that could compete
with Townsend/Glasflex in order to increase competition in the markets
served by Townsend/Glasflex.
Litigation
----------
The Company is also engaged in litigation arising from 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 clean-up 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 appropriate company might be
subject to liability for clean-up 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 clean-up. 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 pre-petition 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
clean-up 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 for those
owned by the Company (the "Additional Sites"), arising from
pre-petition disposal activity. The Company also agreed to share with
such 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
pre-petition 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 pre-petition disposal activities, the
Company or such Predecessor Company may pay the claims 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). 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 received a letter dated October 30, 1997, from the EPA,
Region 5, informing the Company that it might be financially
responsible for a pollution incident at the facility formally leased by
the Company at 312 North Hill Street, Mishawaka, Indiana. The EPA
notified the Company that it expected the Company to pay for part or
all of the approximately $1,700,000 of costs associated with the
clean-up of a portion of such plant. The Company and the EPA negotiated
a settlement whereby the EPA was given an allowed unsecured claim of
$1,700,000 under the Plan, and the Company made a payment of $525,000
to the EPA in March of 1999. The liability had been fully accrued for
in a prior fiscal year.
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 Uniroyal, Inc. unit sent any
hazardous materials to the site. The Company has entered into an
Administrative Order on Consent with the EPA and a Potentially
Responsible Parties Agreement with certain other potentially
responsible parties. 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.
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 had placed $1,000,000 in an
escrow account to be used for such clean-up in accordance with the
terms of the agreement for the purchase of the facility. As of
September 26, 1999, the Company had incurred approximately $615,000 of
related remediation costs.
The Company's acquisition of assets of Townsend Plastics in September
1997, included the building in which the business operates in Pleasant
Hill, Iowa. The seller retained the underlying real property, which is
leased to the Company for a term of ten years. The Company also has an
option to acquire such real property until September 30, 2007. The real
property is subject to a RCRA Facility Investigation/Corrective
Measures Study with Interim Measures ordered by the EPA pursuant to
RCRA. Two former lessees of the property are performing corrective
measures on the real property to remediate soil and ground water
contamination. The Company does not anticipate that such corrective
measures will interfere with the Company's use of the property. The
Company does not anticipate any liability to the Company in connection
with such contamination or corrective measures as long as the Company
remains a lessee of the property.
Based on information available as of September 26, 1999, 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 4) consists of the following (in
thousands):
<TABLE>
<CAPTION>
September 26, September 27,
1999 1998
------------- -------------
<S> <C> <C>
Buildings and improvements $ 5,426 $ -
Machinery, equipment and office furnishings 5,662 1,153
Construction in progress 9,755 -
---------- ----------
20,843 1,153
Less accumulated amortization (479) (351)
---------- ----------
Total $ 20,364 $ 802
========== ==========
</TABLE>
The approximate minimum future lease obligations on long-term
non-cancelable capital lease obligations included in long-term debt
(Note 10) during subsequent fiscal years ending in September are as
follows (in thousands):
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
2000 $ 5,023
2001 4,549
2002 4,772
2003 4,768
2004 3,464
-------
22,576
Less imputed interest (4,220)
--------
Total $ 18,356
========
</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>
<CAPTION>
Fiscal Year
-----------
<S> <C>
2000 $ 2,639
2001 1,906
2002 1,769
2003 1,664
2004 1,534
Subsequent years 2,606
--------
Total $ 12,118
========
</TABLE>
Rent expense was approximately $2,027,000, $1,463,000 and $1,264,000
for Fiscal 1999, Fiscal 1998 and Fiscal 1997, 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 26, 1999 and September 27, 1998 participant deferrals, which
are included in accrued liabilities, were $726,000 and $519,000,
respectively. The expense during the Fiscal 1999, Fiscal 1998 and
Fiscal 1997 was $208,000, $184,000 and $161,000, 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. Annual insurance premiums of $186,000 are paid by the Company
with respect to these policies. As of September 26, 1999 and September
27, 1998, $929,000 and $717,000, respectively, has been capitalized to
reflect the cash surrender value of these contracts due the Company,
net of loan balances.
As of September 26, 1999, the Company had employment contracts with
four officers of the Company, providing for total annual payments of
approximately $1,509,000 plus bonuses through September 1, 2000.
15. SALE OF THE AUTOMOTIVE DIVISION OF THE COATED FABRICS SEGMENT
During the fourth quarter of Fiscal 1996, management of the Company
concluded that, based not only on its decision to sell, but also on
discussions with interested buyers, a sale of the automotive operations
of the Coated Fabrics Segment was probable. The automotive operations
were comprised of 100% of the operations at the Port Clinton, Ohio
("Port Clinton") facility and a portion of overall operations at the
Stoughton, Wisconsin facility ("Stoughton"). Further, on December 11,
1996, the Board of Directors approved the closure of the Port Clinton
operation of the Coated Fabrics Segment during the fiscal year ending
September 28, 1997 in the event a sale did not occur. Port Clinton had
incurred operating losses of approximately $7,640,000 and $5,540,000
during the fiscal years ended September 29, 1996 and October 1, 1995.
In accordance with SFAS No. 121, the Company recorded a write-down of
long-lived assets related to the automotive operations totaling
approximately $8,900,000 during the fiscal year ended September 29,
1996. The related assets were classified as held for sale and
depreciation ceased on September 29, 1996. The carrying value of the
remaining long-lived assets to be disposed of was $3,217,000 as of
September 26, 1999 and $4,530,000 as of September 27, 1998. The Company
expects to dispose of the remaining automotive assets, the majority of
which represent the real property at Port Clinton, in Fiscal 2000.
On May 15, 1997 the Company agreed to sell certain assets of the
automotive division of the Coated Fabrics Segment located at the
Company's Stoughton, Wisconsin, facility ("Stoughton") to Textileather
Corporation, a subsidiary of Canadian General-Tower, Limited ("CGT")
for $6,657,500. The Company received $4,657,500 in cash and
Textileather retained $2,000,000 which was to be paid pursuant to the
terms of a supply agreement and to bear interest at the rate of 9% per
annum. Under the terms of the supply agreement, the Company agreed to
continue to manufacture and supply Stoughton automotive products to its
customers until Textileather Corporation could transfer production of
the Stoughton automotive products to its own facility. The $2,000,000
plus accrued interest was payable in stages and contingent upon the
successful transfer of certain automotive programs to Textileather
Corporation. The first installment was due September 30, 1997. The
Company requested payment and was denied payment by CGT. On October 10,
1997, the Company filed suit against CGT and Textileather Corporation
in the Dane County, Wisconsin Circuit Court. The Company sought damages
for non-payment of the holdback and declaratory and injunctive relief.
On October 30, 1997, the defendants filed their answer, basically
denying the claims. Textileather Corporation later commenced an
arbitration in Madison, Wisconsin in connection with claims by
Textileather Corporation under the asset purchase agreement. The two
cases were settled on July 17, 1998. As part of the settlement the
Company retained in perpetuity certain automotive programs it had
previously sold, and two programs were retained until February 28,
1999. In addition, Textileather made a cash payment to the Company of
approximately $379,000 which was recorded by the Company as a gain, and
also transferred ownership back to the Company of an asset located at
the Company's Port Clinton, Ohio facility.
On October 17, 1997 the Company further agreed to sell certain assets
at Port Clinton to CGT for $5,325,000 plus the value of purchased
inventories and plus or minus adjustments contingent upon the transfer
of certain automotive programs to CGT as defined in the agreement. On
July 10, 1998, the Company received $4,930,000 from CGT under this
agreement relative to assets related to the Company's door panel
program. Under the terms of a supply agreement, the Company agreed to
continue to manufacture and supply customers of the door panel programs
until CGT could transfer the production of the door panels to its own
facility. The Company stopped producing door panels at its Port
Clinton, Ohio facility in November, 1998. The Company received an
additional $800,000 when CGT secured purchase orders for the twelve
months following the door panel closing from certain customers as
identified in the agreement. The Company also received an additional
$900,000 on July 19, 1999 for certain customer approvals and resulting
transfer to CGT of purchased assets that relate to the Company's
instrument panel programs. During Fiscal 1999 and Fiscal 1998, the
Company recognized a gain of $667,000 and $133,000, respectively, in
connection with this transaction.
Management believes that the Company will not have any further
significant gain or loss upon the disposal of the remaining Port
Clinton assets.
16. JOINT VENTURE
As of September 29, 1997, the Company entered into a technology
agreement with Emcore to acquire certain technology for the manufacture
of epitaxial wafers used in high brightness LEDs for lamps and display
devices. Included in other assets at September 26, 1999 are license
fees relating to the technology agreement of $5,000,000 paid to Emcore
during the fiscal year ended September 26, 1999 and September 27, 1998
(Note 8). On the date of the transaction, Thomas J. Russell, the
Chairman of the Board of Directors of Emcore, was a director and major
stockholder of the Company and Howard R. Curd, the Chairman of the
Board of Directors and Chief Executive Officer of the Company, was a
director and stockholder of Emcore. Subsequent to the transaction,
Thomas J. Russell resigned from the Board of Directors of the Company
and Howard R. Curd resigned from the Board of Directors of Emcore.
Uniroyal Optoelectronics, Inc., a wholly-owned subsidiary of the
Company, entered into a joint venture (Uniroyal Optoelectronics, LLC)
with Emcore which Uniroyal Optoelectronics, Inc. manages and owns a 51%
interest. Emcore is the 49% owner. In July 1998, both owners
capitalized the joint venture through cash contributions of $510,000 by
the Company and $490,000 by Emcore.
During Fiscal 1999, Emcore made additional capital contributions to the
joint venture of $5,500,000. The Company is required to fund its
equivalent contribution of approximately $5,700,000 as cash is required
by the joint venture.
Included in selling and general administrative expenses of the Company
for Fiscal 1999 and Fiscal 1998 are $4,345,000 and $302,000,
respectively, of joint venture start-up costs.
In July 1998, the joint venture entered into a supply agreement with
Emcore whereby Emcore agreed to supply epitaxial wafers, dies and
package-ready devices to the joint venture until the joint venture was
ready to produce its own products. During Fiscal 1999, Uniroyal
Optoelectronics, LLC sales of approximately $479,000 were a result of
product supplied by Emcore.
In July 1998, the joint venture entered into a lease agreement for a
facility in Tampa, Florida and has completed construction of leasehold
improvements. It is anticipated that the joint venture will begin
production for commercial applications in the second quarter of Fiscal
2000.
17. INCOME (LOSS) PER COMMON SHARE
FASB has issued SFAS No. 128, Earnings Per Share, which was required to
be adopted for financial statement periods ending after December 15,
1997. SFAS No. 128 requires that the primary and fully diluted earnings
per share be replaced by "basic" and "diluted" earnings per share,
respectively. The basic calculation computes earnings per share based
only on the weighted average number of shares outstanding as compared
to primary earnings per share which included common stock equivalents.
The diluted earnings per share calculation is computed similarly to
fully diluted earnings per share. The Company has adopted SFAS No. 128
for the fiscal years ended September 26, 1999, September 27, 1998 and
September 28, 1997.
<PAGE>
The reconciliation of the numerators and denominators of the basic and
diluted earnings per share computation is as follows:
<TABLE>
<CAPTION>
For the Fiscal Year Ended September 26, 1999
-------------------------------------------------------------------------
Income (Numerator) Shares (Denominator) Per Share Amount
-------------------- ---------------------- -------------------
<S> <C> <C> <C>
Income before extraordinary item
item $ 5,520,000
Basic EPS
---------
Income available to
common stockholders 5,520,000 12,157,996 $ 0.45
==========
Effect of Dilutive Securities
-----------------------------
Stock options 828,460
Warrants 299,878
----------
Diluted EPS
-----------
Income available to common
stockholders $ 5,520,000 13,286,334 $ 0.42
=============== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
For the Fiscal Year Ended September 27, 1998
-----------------------------------------------------------------------
Income (Numerator) Shares (Denominator) Per Share Amount
----------------------- ------------------------- ---------------------
<S> <C> <C> <C>
Income before extraordinary
item $ 8,027,000
Basic EPS
----------
Income available to
common stockholders 8,027,000 13,231,542 $ 0.61
==========
Effect of Dilutive Securities
-----------------------------
Stock options 1,070,122
Warrants 329,404
----------
Diluted EPS
-----------
Income available to common
stockholders $ 8,027,000 14,631,068 $ 0.55
=============== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
For the Fiscal Year Ended September 28, 1997
---------------------------------------------------------------------------
Income (Numerator) Shares (Denominator) Per Share Amount
----------------------- ------------------------- -------------------------
<S> <C> <C> <C>
Income before extraordinary
item $ 379,000
Less: Preferred stock dividends (220,000)
---------------
Basic EPS
---------
Income available to
common stockholders 159,000 13,316,965 $ 0.01
==========
Effect of Dilutive Securities
-----------------------------
Stock options 106,589
----------
Diluted EPS
-----------
Income available to common
stockholders $ 159,000 13,423,554 $ 0.01
=============== ========== ==========
</TABLE>
Additional stock options to purchase 578,848, 577,848 and 1,224,478
shares of common stock at various prices were outstanding at September
26, 1999, September 27, 1998 and September 28, 1997, respectively.
These shares were not included in the computation of diluted earnings
per share because the exercise price was greater than the average
market price of the common shares. Warrants to purchase 800,000 shares
of common stock at $4.375 per share were not included in the
computation of diluted earnings per share at September 28, 1997 because
the exercise price was greater than the average market price of the
common shares.
The calculation for earnings per share for Fiscal 1997 has been revised
to include the effect of the dividends paid to the owners of preferred
stock paid in common stock.
18. RELATED PARTY TRANSACTIONS
The Company has an agreement with an investment banking firm that
employs relatives of one of the Company's executive officers. The
investment banking firm has provided financial advisory services to the
Company for fees of approximately $157,000, $732,000 and $274,000
during Fiscal 1999, Fiscal 1998 and Fiscal 1997, respectively. Of the
$732,000 incurred during Fiscal 1998, $650,000 was incurred in
connection with the Fleet Financing.
During the fiscal years ended September 26, 1999 and September 27,
1998, the Company incurred legal fees of approximately $299,000 and
$326,000, respectively, with a law firm of which one of the Company's
directors is a senior partner. Approximately $231,000 of the legal fees
incurred in Fiscal 1998, were incurred in connection with the Fleet
Financing. No legal fees were paid to this firm during the fiscal year
ended September 28, 1997.
19. SEGMENT INFORMATION
The Company adopted SFAS No. 131, "Disclosures About Segments of
Enterprise and Related Information," which establishes standards for
reporting information about a Company's operating segments, in the
fourth quarter of Fiscal 1999. Operating segments are defined as
components of an enterprise for which separate financial information is
available that is evaluated on a regular basis by the chief operating
decision maker, or decision making group, in deciding how to allocate
resources to an individual segment and in assessing performance of the
Segment.
The Company's operations are classified into four reportable segments:
High Performance Plastics, Coated Fabrics, Specialty Adhesives and
Optoelectronics. The High Performance Plastics Segment manufactures
thermoplastic and acrylic products. The Coated Fabrics Segment
manufactures vinyl coated fabric products. The Specialty Adhesives
Segment manufactures industrial adhesives and sealants. The
Optoelectronics Segment will manufacture epitaxial wafers, dies and
package-ready dies used in high brightness light-emitting diodes (LEDs)
once operations commence.
The Company's reportable segments are strategic business units that
offer different products and are managed separately based on
fundamental differences in their operations.
The High Performance Plastics Segment includes Uniroyal HPP Holdings,
Inc. and its subsidiary, High Performance Plastics, Inc. The Coated
Fabrics Segment includes Uniroyal Engineered Products, Inc.'s operating
division, Uniroyal Engineered Products. The Specialty Adhesives Segment
includes Uniroyal Engineered Products, Inc.'s operating division,
Uniroyal Adhesives and Sealants. The Optoelectronics Segment includes
Uniroyal Optoelectronics, Inc. and its majority-owned subsidiary,
Uniroyal Optoelectronics, LLC. All other subsidiaries are considered
part of corporate.
The Company's assets and operations are located in the United States.
The principal markets for the Company's products are in the United
States. Export sales to foreign countries, based upon where the
products are shipped to, were approximately $8,758,000, $11,639,000 and
$7,189,000 in Fiscal 1999, Fiscal 1998 and Fiscal 1997, respectively.
No single customer accounted for 10% or more of the Company's net
sales.
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. Management evaluates
a Segment's performance based upon profit or loss from operations
before interest and income taxes. Intersegment sales are not
significant.
<PAGE>
Segment data for Fiscal 1999, Fiscal 1998 and Fiscal 1997 is as follows
(in thousands):
<TABLE>
<CAPTION>
September 26, September 27, September 28,
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net Sales:
High Performance Plastics $ 130,219 $ 128,580 $ 118,847
Coated Fabrics 42,341 67,906 68,772
Specialty Adhesives 28,388 24,130 20,905
Optoelectronics 485 - -
----------- ----------- -----------
Total $ 201,433 $ 220,616 $ 208,524
=========== =========== ===========
Operating Income (loss):
High Performance Plastics $ 15,518 $ 16,109 $ 10,547
Coated Fabrics 4,202 8,868 2,105
Specialty Adhesives 2,686 1,911 (346)
Optoelectronics (5,080) (398) -
Corporate (4,490) (3,673) (1,712)
----------- ----------- -----------
Total $ 12,836 $ 22,817 $ 10,594
=========== =========== ===========
Identifiable assets:
High Performance Plastics $ 111,067 $ 101,490 $ 92,034
Coated Fabrics 23,547 35,959 43,654
Specialty Adhesives 15,972 15,755 15,012
Optoelectronics 22,474 2,677 -
Corporate 40,141 30,470 30,791
----------- ----------- -----------
Total $ 213,201 $ 186,351 $ 181,491
=========== =========== ===========
Depreciation and amortization:
High Performance Plastics $ 5,652 $ 5,481 $ 4,941
Coated Fabrics 1,702 1,704 1,847
Specialty Adhesives 873 842 882
Optoelectronics 210 1 -
Corporate 720 1,069 1,388
----------- ----------- -----------
Total $ 9,157 $ 9,097 $ 9,058
=========== =========== ===========
Capital Expenditures:
High Performance Plastics $ 7,564 $ 5,399 $ 2,951
Coated Fabrics 535 448 1,213
Specialty Adhesives 578 911 7,311
Optoelectronics 21,353 292 -
Corporate 787 238 802
----------- ----------- -----------
Total $ 30,817 $ 7,288 $ 12,277
=========== =========== ===========
</TABLE>
Included in each Segment's operating income in Fiscal 1999 is an
allocation of corporate overhead based upon 3.5% of Segment sales with
the exception of the Optoelectronics Segment for which the corporate
overhead allocation was $876,000.
During Fiscal 1998, the Company changed its methodology for the
allocation of corporate overhead from an allocation of 100% of certain
corporate costs to an allocation of costs based upon 3.0 - 3.5% of
Segment sales. Prior fiscal year allocations were not restated. Had
prior year allocations been restated for consistency with current year
allocations, it would have resulted in additional corporate overhead
allocation to the High Performance Plastics, Coated Fabrics and
Specialty Adhesives Segments' in Fiscal 1998 of $245,000, $177,00 and
$48,000, respectively. It would have resulted in (less) additional
corporate overhead allocation to the High Performance Plastics, Coated
Fabrics and Specialty Adhesives Segments in Fiscal 1997 of
($2,386,000), $273,000 and ($772,000), respectively.
<PAGE>
20. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (in thousands):
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
1999 ------------- -------------- ------------- --------------
----
<S> <C> <C> <C> <C>
Net sales $ 49,089 $ 49,273 $ 51,086 $ 51,985
Gross profit 11,298 14,022 14,798 14,268
Income before extraordinary item 19 1,059 1,931 2,511
Net Income 19 1,059 1,931 2,511
Earnings per common share:
Basic:
Income before extraordinary item $ - $ 0.09 $ 0.16 $ 0.21
Net income $ - $ 0.09 $ 0.16 $ 0.21
Diluted:
Income before extraordinary item $ - $ 0.08 $ 0.15 $ 0.19
Net income $ - $ 0.08 $ 0.15 $ 0.19
1998
----
Net sales $ 51,182 $ 54,533 $ 56,905 $ 57,996
Gross profit 14,281 14,774 15,731 15,324
Income before extraordinary item 1,363 1,744 2,618 2,302
Net income 1,363 1,744 (3,019) 2,302
Earnings per common share:
Basic:
Income before extraordinary item $ 0.10 $ 0.13 $ 0.20 $ 0.18
Net income $ 0.10 $ 0.13 $ (0.23) $ 0.18
Diluted:
Income before extraordinary item $ 0.10 $ 0.12 $ 0.18 $ 0.16
Net income $ 0.10 $ 0.12 $ (0.20) $ 0.16
</TABLE>
21. Subsequent to the Company's year end, a nonbinding letter of intent was
signed with a potential buyer of HPPI, which may result in a
substantial gain if consummated. The potential sale is subject to a
number of conditions including the negotiation of definitive
agreements, approval by the Board of Directors of both companies,
clearance by the appropriate governmental agencies and additional due
diligence and investigation. Either party may terminate the
discussions. Due to the contingencies involved, the Company is unable
to predict whether or when a transaction with the potential buyer will
be consummated.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Uniroyal Technology Corporation
We have audited the consolidated balance sheets of Uniroyal Technology
Corporation and subsidiaries (the "Company") as of September 26, 1999 and
September 27, 1998, and the related consolidated statements of operations,
comprehensive income, changes in stockholders' equity and cash flows for the
years ended September 26, 1999, September 27, 1998 and September 28, 1997 and
have issued our report thereon dated December 20, 1999 (included in this Form
10-K). Our audits also included the accompanying consolidated financial
statement schedule listed in Item 14 of this Form 10-K. This consolidated
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 consolidated financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Tampa, Florida
December 20, 1999
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARY
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
DESCRIPTION PERIOD EXPENSES ACCTS. DEDUCTION END OF PERIOD
(a) (b)
<S> <C> <C> <C> <C> <C>
Year ended September 26, 1999
Estimated reserve for doubtful
accounts $ 246 $ 73 $ 21 $ (102) $ 238
======= ======= ======= ======= =======
Year ended September 27, 1998
Estimated reserve for doubtful
accounts $ 257 $ 87 $ 27 $ (125) $ 246
======= ======= ======= ======= =======
Year ended September 28, 1997
Estimated reserve for doubtful
accounts $ 369 $ - $ 53 $ (165) $ 257
======= ======= ======= ======= =======
</TABLE>
(a) Amount represents recovery of amounts previously written-off and reserve
established for receivables of an acquired business.
(b) Amount includes write-off of uncollectible accounts.
<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 23, 1999 /s/ Howard R. Curd
---------------------
By: 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/ Robert L. Soran /s/ Richard D. Kimbel
------------------- ---------------------------
Robert L. Soran, Director, President Richard D. Kimbel, Director
and Chief Operating Officer Date: December 23, 1999
Date: December 23, 1999
/s/ George J. Zulanas, Jr. /s/ Curtis L. Mack
-------------------------- ----------------------------
George J. Zulanas, Jr., Vice President, Curtis L. Mack, Director
Treasurer and Chief Financial Officer Date: December 23, 1999
Date: December 23, 1999
/s/ Howard R. Curd /s/ Roland H. Meyer
------------------- ----------------------------
Howard R. Curd, Director, Chairman of Roland H. Meyer, Director
the Board and Chief Executive Officer Date: December 23, 1999
Date: December 23, 1999
/s/ Peter C. B. Bynoe /s/ John A. Porter
---------------------- ----------------------------
Peter C. B. Bynoe, Director John A. Porter, Director
Date: December 23, 1999 Date: December 23, 1999
/s/ Thomas E. Constance
------------------------
Thomas E. Constance, Director
Date: December 23, 1999
<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, Director, Chairman of the Peter C.B. Bynoe, Director
Board and Chief Executive Officer Date: December 23, 1999
Date: December 23, 1999
/s/ Robert L. Soran /s/ Thomas E. Constance
-------------------- ------------------------
Robert L. Soran, Director, President and Thomas E. Constance, Director
Chief Operating Officer Date: December 23, 1999
Date: December 23, 1999
/s/ Richard D. Kimbel
------------------------
Richard D. Kimbel, Director
Date: December 23, 1999
/s/ Curtis L. Mack
-------------------------
Curtis L. Mack, Director
Date: December 23, 1999
/s/ Roland H. Meyer
-------------------------
Roland H. Meyer, Director
Date: December 23, 1999
/s/ John A. Porter
-------------------------
John A. Porter, Director
Date: December 23, 1999
EXHIBIT 10.16
UNIROYAL TECHNOLOGY CORPORATION
1992 STOCK OPTION PLAN
AS AMENDED
TO DECEMBER 14, 1999
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 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 two 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.
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.
EXHIBIT 10.28
UNIROYAL TECHNOLOGY CORPORATION
1992 NON-QUALIFIED STOCK OPTION PLAN
AS AMENDED,
TO
FEBRUARY 23, 1999
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) 30,000 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.
EXHIBIT 10.40
UNIROYAL TECHNOLOGY CORPORATION
1994 STOCK OPTION PLAN, AS AMENDED
TO DECEMBER 14, 1999, 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 1,900,000 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 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 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 two 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.
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.
EXHIBIT 10.41
UNIROYAL TECHNOLOGY CORPORATION
1995 NON-QUALIFIED STOCK OPTION PLAN
AS AMENDED THROUGH FEBRUARY 23, 1999
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,
5,000 Shares in the case of other grants prior to the 1999 annual meeting of the
stockholders and 17,500 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.
EXHIBIT 10.48
CONSENT AGREEMENT
April 1,1999
Uniroyal Technology Corporation
Uniroyal Engineered Products, Inc.
2 North Tamiami Trail
Sarasota, Florida 34236-5568
Gentlemen:
Reference is made to the Financing Agreement between Uniroyal Technology
Corporation ("UTC") and us dated June 5, 1996 (herein the "Financing Agreement")
together with all amendments, supplements, documents and instruments executed in
conjunction therewith (herein collectively with the Financing Agreement the
"Financing Documents"). Capitalized terms used herein and defined in the
Financing Documents shall have the meanings specified therein unless otherwise
specifically defined herein,
You have advised us that effective as of April 1, 1999 (the "Effective Date") as
part of a corporate restructuring (the "Restructuring") UTC will assign,
transfer and convey to its wholly owned subsidiary, Uniroyal Engineered
Products, Inc. (herein "UEP") all of the assets of the Specialty Adhesives and
Coated Fabrics segments of UTC (including but not limited to all Collateral
under the Financing Agreement but excluding Port Clinton, Ohio real property) as
an equity investment and UEP will assume substantially all of the liabilities of
the Specialty Adhesives and Coated Fabrics segments of UTC (including but not
limited to all Obligations under the Financing Agreement).
This letter is to confirm our agreement that, effective immediately upon
fulfillment to our satisfaction of the Conditions Precedent (as defined below),
we hereby consent to the Restructuring.
In addition, as of the Effective Date and effective immediately upon fulfillment
to our satisfaction of the Conditions Precedent (as defined below), it is hereby
mutually agreed that Section 6, Paragraph 9 of the Financing Agreement shall be,
and hereby is amended by the addition thereto of the following additional
negative covenants as clauses H and I:
"H. Declare or pay any dividend of any kind on, or purchase, acquire,
redeem or retire, any of the capital stock or equity interest, of any
class whatsoever, whether now or hereafter outstanding, except that the
Company may declare and pay dividends on its capital stock to Uniroyal
Technology Corporation (herein the "Parent"), provided that after
giving effect to any such dividend payment (x) the Company's
Availability (to be computed on the basis of all of the Company's
debts, obligations and payables being current in accordance with the
Company's normal business practices) hereunder is at least $1,500,000
and (y) no Default or Event of Default has occurred or would occur
hereunder; and
"I. Pay management, consulting or other similar fees to any person,
corporation or other entity affiliated with the Company, except that
the Company may pay management fees to the Parent subject to and in
accordance with the existing Management Agreement between the Company
and the Parent, provided that (x) the aggregate amount of such fees
during any fiscal year shall not exceed the amount set forth in such
Management Agreement as in effect on the date hereof and (y) no such
fees shall be paid if a Default or Event of Default has occurred or
would occur after giving effect to any such payment."
The foregoing consent shall be, and hereby is, subject to the fulfillment to our
satisfaction of each of the following conditions precedent (herein each a
"Condition Precedent" and collectively the "Conditions Precedent").
(i) the execution of, and delivery to, CITBC of the following documents;
(x) an assumption agreement (herein the "Assumption Agreement") (in the
form of Exhibit A annexed hereto); and (y) a guaranty (in the form of
Exhibit B annexed hereto) executed by UTC (the "UTC Guaranty") covering
all of UEP's Obligations to CITBC.
(ii) CITBC's receipt of, and satisfaction with, the following:
(x) a Secretary's Certificate (in form and substance satisfactory to
CITBC) certifying Board of Directors Resolutions for each of UTC and
UEP authorizing the Restructuring and the execution and delivery of
this Consent Agreement, the Assumption Agreement, the UTC Guaranty and
all other documents and/or agreements executed in conjunction herewith
and/or therewith; (y) an opinion of counsel to UTC and UEP (in form and
substance satisfactory to CITBC) as to the due authorization and
consummation of the Restructuring, and the due authorization,
execution, delivery and binding effect of this Consent Agreement, the
Assumption Agreement, the UTC Guaranty and all documents and agreements
executed in connection with the Restructuring and this Consent
Agreement; (z) the results of all UCC, Tax and Judgement Lien searches
requested by CITBC in connection with the Restructuring; (aa) a
Certificate of Insurance together with a Loss Payable Endorsement in
CITBC's favor (in form and substance satisfactory to CITBC) confirming
continuing insurance coverage of the Collateral for UEP after the
Restructuring; and (bb) executed Landlord Waivers and other appropriate
Notices of Security Interest to Warehouses and/or Processors for all
Inventory locations of UEP, provided that, in lieu of any such waiver
or notice CITBC may (at its option) establish an Availability Reserve
in accordance with the terms and provisions of the Financing Agreement.
You further agree to pay all Out-of-Pocket Expenses incurred in connection with
this Consent Agreement and the transactions contemplated hereby, all of which
may (at our option) be charged to your Revolving Loan Account.
Except to the extent set forth herein, no other waiver of, or change in any of
the terms, provisions or conditions of the Financing Agreement is intended or
implied.
If the foregoing is in accordance with your understanding of our agreement,
kindly so indicate by signing and returning the enclosed copy of this letter.
Very truly yours,
THE CIT GROUP/BUSINESS CREDIT, INC.
By:/s/ Kevin O'Hara
Title: AVP
Read and Agreed to:
UNIROYAL TECHNOLOGY CORPORATION
By:/s/ George J. Zulanas, Jr.
Title: VP
UNIROYAL ENGINEERED PRODUCTS, INC.
By:/s/ Robert L. Soran
Title: President
EXHIBIT 10.49
ASSUMPTION AGREEMENT
April 1,1999
Uniroyal Technology Corporation
Uniroyal Engineered Products, Inc.
2 North Tamiami Trail
Sarasota, Florida 34236-5568
Gentlemen:
Reference is made to the Financing Agreement between Uniroyal Technology
Corporation ("UTC") and us dated June 5, 1996 (herein the "Financing Agreement")
together with all amendments, supplements, documents and instruments executed in
conjunction therewith (herein collectively with the Financing Agreement the
"Financing Documents"). Capitalized terms used herein and defined in the
Financing Documents shall have the meanings specified therein unless otherwise
specifically defined herein.
You have advised us that effective as of April 1, 1999 (the "Effective Date") as
part of a corporate restructuring (the "Restructuring") you will assign,
transfer and convey to your wholly owned subsidiary, Uniroyal Engineered
Products, Inc. (herein "UEP") all of the assets of the Specialty Adhesives and
Coated Fabrics segments of UTC (including but not limited to all Collateral
under the Financing Agreement but excluding the Port Clinton, Ohio real
property) as an equity investment and UEP will assume substantially all of your
liabilities (including but not limited to all Obligations under the Financing
Agreement) but excluding the Port Clinton, Ohio real property. The purpose of
this letter is to confirm the following:
1. That UEP has assumed all of the obligations of the Specialty Adhesives
and Coated Fabrics segments of UTC under the Financing Agreement
including but not limited to any and all indebtedness, liabilities and
obligations now or hereafter owed to us by UTC whether arising pursuant
to the aforementioned Financing Agreement or otherwise;
2. That any and all liens, encumbrances, collateral, security interest,
UCC financing statements, mortgages, transfers and any and all
assignments of any right, claim or interest in and to any assets or
property of any nature whatsoever (collectively "Liens") heretofore
given or granted to us by UTC are ratified, confirmed and assumed by
UEP and shall continue without interruption, in full force and effect,
surviving said Restructuring, and shall apply to any and all such
assets or property owned by UTC and/or UEP prior to said Restructuring,
or acquired by UEP as a result of such Restructuring; and in
furtherance of the foregoing provisions of this paragraph, UEP hereby
specifically grants to CITBC a lien upon and security interest in all
of its now owned and hereafter acquired Collateral (as defined in the
Financing Agreement) to secure all of its present and future
indebtedness, liabilities and obligations to CITBC, including but not
limited to all Obligations (as defined in the Financing Agreement);
3. That, effective as of the Effective Date, UEP hereby adopts, ratifies
and confirms all of the terms, provisions and conditions of the
Financing Agreement and the other Financing Documents and shall be
substituted as a party thereto and to all of our agreements and
arrangements with UTC with the same force and effect as if such
agreements and arrangements had been entered into between ourselves and
UEP and such agreements and arrangements are hereby incorporated
herein-by reference in their entirety. We are marking our books
accordingly, and as of the Effective Date, the account of UTC on our
books, shall be transferred to UEP; and
4. We ask UTC and UEP to represent and warrant to us, by executing and
returning to us a copy of this letter, the following:
(a) UTC has assigned transferred and conveyed to UEP all of the assets
of UTC's Specialty Adhesives and Coated Fabrics segments (including but
not limited to all Collateral under the Financing Agreement but
excluding the Port Clinton, Ohio real property);
(b) UEP has assumed substantially all of UTC's liabilities (including
but not limited to all Obligations under the Financing Agreement);
(c) UTC and UEP agree to make available to us, at our request, any and
all documents executed in connection with the Restructuring, including
but not limited to those demonstrating the transfer of assets to, and
the assumption of liabilities by, UEP; and
(d) UTC and UEP agree to execute and deliver to us (at their cost and
expense) any and all documents (including without limitation,
amendments to our to our existing Uniform Commercial Code financing
statements and/or new Uniform Commercial Code financing statements)
requested by us to continue, without interruption, our Liens upon all
assets and property constituting Collateral under the Financing
Documents and/or otherwise subject to a Lien in our favor or for our
benefit.
Except as otherwise specifically provided herein, no other change in the terms,
provisions or conditions of the Financing Agreement or any of the other
Financing Documents is intended or implied. If the foregoing is in accordance
with your understanding of our agreement, please sign the enclosed copy of this
letter to so indicate.
Very truly yours,
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ Kevin O'Hara
Title: AVP
Read and Agreed to:
UNIROYAL TECHNOLOGY CORPORATION
By:/s/ George J. Zulanas, Jr.
Title: VP
UNIROYAL ENGINEERED PRODUCTS, INC.
By:/s/ Robert L. Soran
Title: President
EXHIBIT 10.50
April 1,1999
To: THE CIT GROUP/BUSINESS CREDIT, INC.
1211 Avenue of the Americas
New York, New York 10036
GUARANTY
Re: Uniroyal Engineered Products, Inc.
(the "Company")
Address: 2 North Tamiami Trail
Sarasota, Florida 34236-5568
Gentlemen:
Reference is made to that certain Financing Agreement dated June 5,
1996, as amended (herein the "Agreement") between you and the above-named
Company. The undersigned (herein "Guarantor") hereby unconditionally guarantees
and agrees to be liable for the full and indefeasible payment and performance
when due of all now existing and future indebtedness, obligations or liabilities
of the Company to you, howsoever arising, whether direct or indirect, absolute
or contingent, secured or unsecured, whether arising under the Agreement as now
written or as amended or supplemented hereafter, or by operation of law or
otherwise, including, without limitation, all Obligations (as defined in the
Agreement) of the Company to you. Further Guarantor agrees to pay to you on
demand the amount of all expenses (including reasonable attorney's fees)
incurred by you in collecting or attempting to collect any of the Company's
obligations to you, whether from the Company, or from any other obligor, or from
the Guarantor, or in realizing upon any collateral; and agrees to pay any
interest at the highest lawful rate on all amounts payable to you hereunder,
even if such amount cannot be collected from the Company. (All of the
aforementioned obligations, liabilities, expenses and interest are hereinafter
collectively called the "Obligations"). To the extent you receive payment on
account of Obligations guaranteed hereby, which payment is thereafter set aside
or required to be repaid by you in whole or in part, then, to the extent of any
sum not finally retained by you (regardless of whether such sum is recovered
from you by the Company, its trustee, or any other party acting for, on behalf
of or through the Company or its representative), the Guarantor's obligation to
you under this Guaranty, as amended, modified or supplemented, shall remain in
full force and effect (or be reinstated) until the Guarantor has made payment to
you therefor, which payment shall be due upon demand.
This Guaranty is executed as an inducement to you to make loans or
advances to the Company or otherwise to extend credit or financial
accommodations to the Company, or to enter into or continue a financing
arrangement with the Company, and is executed in consideration of your doing or
having done any of the foregoing. Guarantor agrees that any of the foregoing
shall be done or extended by you in your sole discretion, and shall be deemed to
have been done or extended by you in consideration of and in reliance upon the
execution of this Guaranty, but that nothing herein shall obligate you to do any
of the foregoing.
Notice of acceptance of this Guaranty, the making of loans or advances,
or the extension of credit under the Agreement, the amendment, execution or
termination of the Agreement or any other agreements in connection therewith,
and presentment, demand, protest, notice of protest, notice of non-payment and
all other notices to which the Guarantors may be entitled (whether under this
Guaranty or the Agreement), and your reliance on this Guaranty are hereby
waived. Guarantor also waives notice of; changes in terms or extensions of the
time of payment, the taking and releasing of collateral or guarantees and the
settlement, compromise or release of any Obligations, and agree that, as to the
Guarantor, the amount of the Obligations shall not be diminished by any of the
foregoing. Guarantor also agrees that you need not attempt to collect any
Obligations from any other obligor or to realize upon any collateral, but may
require the Guarantor to make immediate payment of Obligations to you when due
or at any time thereafter. You shall not be liable for failure to collect
Obligations or to realize upon any collateral or security therefor, or any part
thereof, or for any delay in so doing, nor shall you be under any obligation to
take any action whatsoever with regard thereto.
This Guaranty is absolute, unconditional and continuing, regardless of
the validity, regularity or enforceability of any of the Obligations or the fact
that a security interest or lien in any collateral or security therefor may not
be enforceable by you or may otherwise be subject to equities or defenses or
prior claims in favor of others or may be invalid or defective in any way and
for any reason, including any action, or failure to act, on your part. Payment
by the Guarantor shall be made to you at your office from time to time on demand
as Obligations become due, and one or more successive or concurrent actions may
be brought hereon against the Guarantor either in the same action or in separate
actions. In the event any claim or action, or action on any judgment, based on
this Guaranty, is made or brought against the Guarantor, the Guarantor agrees
not to assert against you any set-off or counterclaim which the Company may
have, and, further, the Guarantor agrees not to deduct, set-off, or seek to
counterclaim for or recoup, any amounts which are or may be owed by you to the
Guarantor, or for any loss of contribution from any other guarantor.
Furthermore, in any litigation based on the Guaranty in which you and the
Guarantor shall be adverse parties, the Guarantor hereby waives trial by jury
and waive the right to interpose any defense based upon any Statute of
Limitations or any claim of laches and waive the performance of each and every
condition precedent to which the Guarantor might otherwise be entitled by law.
The Guarantor hereby consents to the in personam jurisdiction of the courts of
the State of New York. In the event that you bring any action or suit in any
court of record of New York State or the Federal Government to enforce any or
all liabilities of the Guarantor hereunder, service of process may be made on
the Guarantor by mailing a copy of the summons to the Guarantor at the address
below set forth.
All sums at any time to the credit of the Guarantor and any property of
the Guarantor on which you at any time have a lien or security interest, or of
which you at any time have possession, shall secure payment and performance of
all Obligations and any and all other obligations of the Guarantor to you
however arising. The Guarantor shall have no right of subrogation,
indemnification or recourse to any Obligations or collateral or guarantees
therefor, or to any assets of the Company.
Upon the occurrence of any of the following events:
(1) any Event of Default under, or termination of, the Agreement;
(2) failure of any of the Guarantor to observe or perform any
agreements, warranties or covenants contained herein; or
(3) (a) dissolution or cessation of the Guarantor's business;
(b) calling of a meeting of the creditors of the Guarantor for
the purposes of compromising the debts of such Guarantor;
(c) failure of the Guarantor to meet its debts as they mature;
(d) commencement by the Guarantor of any bankruptcy,
insolvency, arrangement, reorganization, receivership or
similar proceeds under federal or state law (herein
collectively "Insolvency Proceeding");
(e) commencement of any Insolvency Proceeding against the
Guarantor, then, in the case of event (1) above the liability
of the Guarantor for the entire Obligations shall mature, and
in the case of events (2) and (3)(a) through (e) above the
liability of the Guarantor with respect to which such event
relates for the entire Obligations shall mature even if the
liability of the Company therefor does not.
This Guaranty may be terminated as to the Guarantor only as of any
Anniversary Date (as defined in the Agreement) and then only upon actual receipt
by one of your officers of at least ninety (90) days prior written notice of
termination sent by registered or certified mail; provided however, that the
Guarantor so terminating this Guaranty shall remain bound hereunder, and this
Guaranty shall continue in full force and effect, with respect to any and all
Obligations created or arising prior to the effective date of such termination
and with respect to any and all extensions, renewals or modifications of said
pre-existing Obligations. This is a continuing agreement and written notice as
above provided shall be the only means of termination, notwithstanding the fact
that for certain periods of time there may be no Obligations owing to you by the
Company.
Your books and records showing the account between you and the Company
shall be admissible in evidence in any action or proceeding as prima facie proof
of the items therein set forth. Your monthly statements rendered to the Company
shall be binding upon the Guarantor (whether or not the Guarantor received
copies thereof) and shall constitute an account stated between you and the
Company unless you shall have received a written statement of the Company's
exceptions within thirty (30) days after the statement was mailed to the
Company.
The Guarantor expressly waives any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution or any other claim which it
may now or hereafter have against the Company or any other person directly or
contingently liable for the Obligations guaranteed hereunder, or against or with
respect to the Company's property (including, without limitation, property
collateralizing its Obligations to you) arising from the existence or
performance of this Guaranty.
This Guaranty embodies the whole agreement of the parties and may not
be modified except in writing, and no course of dealing between you and the
Guarantor shall be effective to change or modify this Guaranty. Your failure to
exercise any right hereunder shall not be construed as a waiver of the right to
exercise the same or any other right at any other time and from time to time
thereafter, and such rights shall be considered as cumulative rather than
alternative. No knowledge of any breach or other nonobservance by any of the
Guarantors of the terms and provisions of this Guaranty shall constitute a
waiver thereof, nor a waiver of any obligations to be performed by the Guarantor
hereunder.
This Guaranty may be assigned by you and shall be for your benefit and
for the benefit of any of your assignees or transferees, and shall cover any
Obligations owed to you at the time of assignment or transfer as well as any and
all future Obligations, loans, advances or extensions of credit made to the
Company by, or otherwise owed by the Company to, such assignee or transferee.
This instrument is executed and given in addition to, and not in substitution,
reduction, replacement, or satisfaction of, any other endorsements or guarantees
of the Obligations, now existing or hereafter executed by any or all of the
Guarantors or others in your favor.
When used in this agreement, all pronouns shall, wherever applicable,
be deemed to include the singular and plural as well as the masculine, feminine,
and neuter genders. This agreement shall inure to the benefit of you, your
successors and assigns and any parent, subsidiary or affiliate of yours; shall
be binding upon the Guarantor and upon the successors and assigns of the
Guarantor; and shall pertain to the Company and its successors and assigns.
This Guaranty may be executed in any number of counterparts, each of
which when so executed shall be deemed an original and such counterparts shall
together constitute but one and the same document.
This Guaranty shall be governed by and construed in accordance with the
laws of the State of New York.
IN WITNESS WHEREOF the Guarantor has executed and delivered this
Guaranty effective as of the date above set forth.
UNIROYAL TECHNOLOGY CORPORATION
By:/s/ Robert L. Soran
Title: President
<TABLE>
<CAPTION>
EXHIBIT 11.1
UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
Computation of Per Share Earnings
September 26, September 27, September 28, September 29, October 1,
1999 1998 1997 1996 1995
-------------- ------------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
NET INCOME (LOSS)
(in thousands):
Income (loss) before
extraordinary item $ 5,520 $ 8,027 $ 379 $ (14,401) $ (291)
Less: Preferred stock
dividends - - (220) (420) (420)
----------- ----------- ----------- ----------- -----------
Income (loss) before extra-
ordinary item available to
common stockholders 5,520 8,027 159 (14,821) (711)
Extraordinary (loss) gain - (5,637) - - 363
----------- ----------- -------------- ---------------- -----------
Net income (loss) for basic
and diluted earnings per
share $ 5,520 $ 2,390 $ 159 $ (14,821) $ (348)
=========== =========== =========== =========== ===========
SHARES:
Weighted average number
of shares outstanding for
basic earnings per share 12,157,996 13,231,542 13,316,965 13,167,466 13,014,910
Additional shares issuable
under stock options and
warrants for diluted
earnings per share 1,128,338 1,399,526 106,589 - -
----------- ----------- ---------- ---------- ----------
Weighted average number
of shares outstanding for
diluted earnings per
share 13,286,334 14,631,068 13,423,554 13,167,466 13,014,910
=========== ========== ========== ========== ==========
BASIC EARNINGS(LOSS)PER SHARE:
Income (loss) before
extraordinary item $ 0.45 $ 0.61 $ 0.01 $ (1.13) $ (0.06)
Extraordinary (loss) gain - (0.43) - - 0.03
----------- ----------- ---------- -------------- -----------
Net income (loss) $ 0.45 $ 0.18 $ 0.01 $ (1.13) $ (0.03)
=========== =========== ========== ============== ===========
DILUTED EARNINGS(LOSS) PER SHARE:
Income (loss) before
extraordinary item $ 0.42 $ 0.55 $ 0.01 $ (1.13) $ (0.06)
Extraordinary (loss) gain - (0.39) - - 0.03
----------- ----------- ----------- ------------- -----------
Net income (loss) $ 0.42 $ 0.16 $ 0.01 $ (1.13) $ (0.03)
=========== =========== =========== ============= ===========
</TABLE>
EXHIBIT 21.1
UNIROYAL TECHNOLOGY CORPORATION
Subsidiaries of Uniroyal Technology Corporation
The following table sets forth, with respect to each subsidiary of the
Company, the state of organization and the percentage of voting securities
currently owned by the Company:
<TABLE>
<CAPTION>
Percentage of Voting Securities Directly or
Subsidiary Name State of Organization Indirectly Owned by the Company
- --------------- --------------------- -------------------------------
<S> <C> <C>
Uniroyal HPP Holdings, Inc. Delaware 100%
High Performance Plastics, Inc. Delaware (a)
Uniroyal Engineered Products, Inc. Delaware 100%
Uniroyal Optoelectronics, Inc. Delaware 100%
Uniroyal Optoelectronics, LLC Delaware (b)
UnitechNJ, Inc. Delaware 100%
Uniroyal Liability Management Delaware 69%
Company, Inc.
BayPlas2, Inc. Delaware (c)
(a) A wholly-owned subsidiary of Uniroyal HPP Holdings, Inc.
(b) A joint venture with Emcore Corporation whereby Uniroyal Optoelectronics,
Inc. is a 51% owner.
(c) A wholly-owned subsidiary of Uniroyal Liability Management Company, Inc.
</TABLE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration
Statements (No. 33-88268, No. 33-95256 and No. 33-97250) of Uniroyal
Technology Corporation on Form S-8 of our reports dated December 20,
1999, appearing in the Annual Report on Form 10-K of Uniroyal
Technology Corporation for the year ended September 26, 1999.
DELOITTE & TOUCHE LLP
Tampa, Florida
December 23, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the
Consolidated Balance Sheet as of September 26, 1999 and the
Consolidated Statement of Operations for the fiscal year ended
September 26, 1999 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 890096
<NAME> Uniroyal Technology Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Sep-26-1999
<PERIOD-START> Sep-28-1998
<PERIOD-END> Sep-26-1999
<CASH> 4,182
<SECURITIES> 0
<RECEIVABLES> 23,307
<ALLOWANCES> (238)
<INVENTORY> 38,627
<CURRENT-ASSETS> 73,812
<PP&E> 139,511
<DEPRECIATION> (46,391)
<TOTAL-ASSETS> 213,201
<CURRENT-LIABILITIES> 53,518
<BONDS> 108,921
0
0
<COMMON> 147
<OTHER-SE> 30,986
<TOTAL-LIABILITY-AND-EQUITY> 213,201
<SALES> 201,433
<TOTAL-REVENUES> 202,998
<CGS> 147,047
<TOTAL-COSTS> 190,162
<OTHER-EXPENSES> 43,115
<LOSS-PROVISION> 73
<INTEREST-EXPENSE> 9,352
<INCOME-PRETAX> 3,484
<INCOME-TAX> 155
<INCOME-CONTINUING> 5,520
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,520
<EPS-BASIC> 0.45
<EPS-DILUTED> 0.42
</TABLE>
