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EXHIBIT 10.7
FURON COMPANY
DEFERRED COMPENSATION PLAN
(AS AMENDED AND RESTATED
EFFECTIVE FEBRUARY 1, 1998)
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TABLE OF CONTENTS
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ARTICLE I.
PURPOSE
1.1 Establishment of the Plan...........................................................1
1.2 Purpose of the Plan.................................................................1
1.3 Duration of the Plan................................................................1
1.4 Definitions.........................................................................1
ARTICLE II.
ADMINISTRATION
2.1 Committee...........................................................................4
2.2 Committee Action....................................................................4
2.3 Powers and Duties of the Committee..................................................4
2.4 Construction and Interpretation.....................................................5
2.5 Information.........................................................................5
2.6 Compensation, Expenses and Indemnity................................................5
2.7 Quarterly Statements................................................................6
ARTICLE III.
PARTICIPANTS
3.1 Participants........................................................................7
ARTICLE IV.
DEFERRALS
4.1 Deferrals...........................................................................8
4.2 Deferral Procedures.................................................................9
4.3 Deferral Options....................................................................9
4.4 Accounts............................................................................9
4.5 Discretionary Investment by Corporation............................................12
4.6 Change in Control..................................................................12
4.7 Payment of Deferred Amounts........................................................15
4.8 Acceleration of Payment of Deferred Amounts........................................16
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TABLE OF CONTENTS
(CONTINUED)
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ARTICLE V.
GENERAL PROVISIONS
5.1 Unfunded Obligation................................................................17
5.2 Beneficiary........................................................................17
5.3 Receipt or Release.................................................................18
5.4 Incapacity of Participant or Beneficiary...........................................18
5.5 Nonassignment......................................................................18
5.6 No Right to Continued Employment...................................................19
5.7 Withholding Taxes..................................................................19
5.8 Claims Procedure and Arbitration...................................................19
5.9 Termination and Amendment..........................................................21
5.10 Applicable Law.....................................................................21
5.11 Compliance with Laws...............................................................21
5.12 Plan Construction..................................................................22
5.13 Headings, etc. Not Part of Plan....................................................22
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FURON COMPANY
DEFERRED COMPENSATION PLAN
ARTICLE I.
PURPOSE
1.1 ESTABLISHMENT OF THE PLAN. Effective as of January 1, 1993, Furon
Company, a California corporation, established the Furon Company
Deferred Compensation Plan (the "PLAN"). This amendment and restatement
of the Plan is effective as of February 1, 1998.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to permit participating
employees of Furon Company and its Subsidiaries to defer the payment of
all or part of their annual salary and certain bonuses that they may
earn. The opportunity to elect such deferrals is provided in order to
help the Company attract and retain key employees who appreciate the tax
flexibility and other advantages of such a deferral program.
1.3 DURATION OF THE PLAN. Subject to prior termination by law or by the
Board of Directors of Furon Company pursuant to the right of termination
it has reserved under Section 5.9 hereof, the Plan shall continue in
effect indefinitely.
1.4 DEFINITIONS. Whenever the following words and phrases are used in the
Plan, with the first letter capitalized, they shall have the meanings
specified below:
"ACCOUNT" or "ACCOUNTS" shall mean a Participant's Deferral Account
and/or Stock Account.
"BENEFICIARY" or "BENEFICIARIES" shall have the meaning set forth in
Section 5.2.
"BOARD OF DIRECTORS" or "BOARD" shall mean the Board of Directors of the
Corporation.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMITTEE" shall mean the committee appointed in accordance with
Section 2.1 which shall administer the Plan.
"COMMON STOCK" shall mean the common stock, without par value, of the
Corporation, subject to adjustment pursuant to Section 4.4(b)(4).
"COMPANY" shall mean the Corporation and its Subsidiaries.
"CORPORATION" shall mean Furon Company, a California corporation, and
any successor corporation.
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"DEFERRAL ACCOUNT" shall mean the bookkeeping account maintained by the
Committee for each Participant that (1) is credited with (i) deferrals
elected pursuant to Section 4.1(a), (ii) the amounts that the
Participant elects to defer to such account pursuant to Section 4.1(b),
(iii) transfers elected by the Participant from his or her Stock
Account, and (iv) earnings or losses (determined with reference to the
deemed investments selected by the Participant) with respect to amounts
credited to such account; and (2) is debited for (i) payments from such
account, and (ii) transfers to the Participant's Stock Account.
"DEFERRED SHARE" shall mean a non-voting unit of measurement which is
deemed solely for bookkeeping purposes under the Plan to be equivalent
to one outstanding share of Common Stock (subject to Section 4.4(b)(4)).
"DISTRIBUTION SUBACCOUNTS" shall mean the subaccount of a Participant's
Deferral Account and/or Stock Account established separately to account
for deferred compensation which is subject to different distribution
elections.
"DIVIDEND EQUIVALENT" shall mean the amount of cash dividends or other
cash distributions paid by the Corporation on that number of shares of
Common Stock equal to the number of Deferred Shares credited to a
Participant's Stock Account as of the applicable record date for the
dividend or other distribution, which amount shall be credited in the
form of additional Deferred Shares to the Participant's Stock Account,
as provided in Section 4.4(b)(2).
"ELIGIBLE EMPLOYEE" shall mean any officer or employee of the Company.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"FAIR MARKET VALUE" shall mean on any date the closing price of the
Common Stock on the Composite Tape, as published in the Western Edition
of The Wall Street Journal, of the principal securities exchange or
market on which the Common Stock is so listed, admitted to trade, or
quoted on such date, or, if there is no trading of (or no available
closing price of) the Common Stock on such date, then the closing price
of the Common Stock as quoted on such Composite Tape on the next
preceding date on which there was trading in such shares. If the Common
Stock is not so listed, admitted or quoted, the Committee may designate
such other exchange, market or source of data as it deems appropriate
for determining such value for purposes of the Plan.
"PARTICIPANT" shall mean any Eligible Employee who has been selected by
the Committee in accordance with Section 3.1 to participate in the Plan.
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"PLAN" shall mean the Furon Company Deferred Compensation Plan set forth
herein, now in effect, or as amended from time to time.
"PLAN YEAR" shall mean the 12 consecutive month period beginning January
1 each year and ending the following December 31.
"STOCK ACCOUNT" shall mean a bookkeeping account maintained by the
Committee for each Participant that (1) is credited with Deferred Shares
with respect to (i) the amounts that the Participant elects to defer to
such account pursuant to Section 4.1(b), (ii) the deferrals elected by
the Participant pursuant to Section 4.1(c), (iii) transfers elected by
the Participant from his or her Deferral Account, and (iv) Dividend
Equivalents (if any); and (2) is debited with Deferred Shares with
respect to (i) payments or distributions from such account, and (ii)
transfers to the Participant's Deferral Account.
"SUBSIDIARY" shall mean any corporation or other entity of which more
than 50% of the outstanding voting stock or voting power is beneficially
owned directly or indirectly by the Corporation.
"TRUST PRICE" shall mean, for any calendar quarter, the average price
paid (or received) by the trustee of the Furon Company Employee Benefits
Trust to acquire (or sell) Common Stock in the 30-day period following
such quarter. If the trustee made no purchases (or sales) during such
period, the Trust Price shall be the volume-weighted average price of
the Common Stock on the New York Stock Exchange for such period.
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ARTICLE II.
ADMINISTRATION
2.1 COMMITTEE. The Committee shall be appointed by, and serve at the
pleasure of, the Board of Directors. Any member of the Board of
Directors and/or officer or employee of the Company may be appointed as
a Committee member. The number of members comprising the Committee shall
be determined by the Board which may from time to time vary the number
of members. A member of the Committee may resign by delivering a written
notice of resignation to the Board. The Board may remove any member by
delivering a certified copy of its resolution of removal to such member.
Vacancies in the membership of the Committee shall be filled promptly by
the Board.
2.2 COMMITTEE ACTION. The Committee shall act at meetings by affirmative
vote of a majority of the members of the Committee. Any action permitted
to be taken at a meeting may be taken without a meeting if, prior to
such action, a written consent to the action is signed by all members of
the Committee and such written consent is filed with the minutes of the
proceedings of the Committee. A member of the Committee shall not vote
or act upon any matter which relates solely to himself or herself as a
Participant. The Chairman or any other member or members of the
Committee designated by the Chairman may execute any certificate or
other written direction on behalf of the Committee.
2.3 POWERS AND DUTIES OF THE COMMITTEE. The Committee, on behalf of the
Participants and their Beneficiaries, shall enforce the Plan in
accordance with its terms, shall be charged with the general
administration of the Plan, and shall have all powers necessary to
accomplish its purposes, including, but not by way of limitation, the
following:
(1) To select the funds or portfolios available for the deemed
investment of Deferral Accounts;
(2) To construe and interpret the terms and provisions of the Plan;
(3) To compute and certify to the Corporation the amount and kind of
benefits payable to Participants and their Beneficiaries, and to
determine the time and manner in which such benefits are paid;
(4) To maintain all records that may be necessary for the
administration of the Plan;
(5) To provide for the disclosure of all information and the filing
or provision of all reports and statements to Participants,
Beneficiaries or governmental agencies as shall be required by
law;
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(6) To make and publish such rules for the regulation of the Plan
and procedures for the administration of the Plan as are not
inconsistent with the terms hereof;
(7) To appoint a plan administrator or any other agent, and to
delegate to them such powers and duties in connection with the
administration of the Plan as the Committee may from time to
time prescribe;
(8) To authorize all disbursement by the Corporation pursuant to the
Plan; and
(9) To direct any Corporation grantor trust established with respect
to the Plan (but the Committee's powers and duties shall not
extend to the Furon Company Employee Benefits Trust) concerning
the performance of various duties and responsibilities under the
related trust agreement.
2.4 CONSTRUCTION AND INTERPRETATION. The Committee shall have full
discretion to construe and interpret the terms and provisions of the
Plan, which interpretation or construction shall be final and binding on
all parties, including but not limited to the Corporation, its
Subsidiaries and any Participant or Beneficiary. The Committee shall
administer such terms and provisions in a uniform and nondiscriminatory
manner and in full accordance with any and all laws applicable to the
Plan.
2.5 INFORMATION. To enable the Committee to perform its functions, the
Corporation shall supply full and timely information to the Committee on
all matters relating to the compensation of all Participants, their
death or other cause of termination, and such other pertinent facts as
the Committee may require.
2.6 COMPENSATION, EXPENSES AND INDEMNITY. The members of the Committee shall
serve without compensation for their services hereunder. The Committee
is authorized at the expense of the Corporation to employ such legal
counsel as it may deem advisable to assist in the performance of its
duties hereunder. Expenses and fees in connection with the
administration of the Plan shall be paid by the Corporation. To the
extent permitted by applicable state law, the Corporation shall
indemnify and save harmless the Committee and each member thereof, the
Board of Directors and any delegate of the Committee who is an employee
of the Corporation against any and all expenses, liabilities and claims,
including legal fees to defend against such liabilities and claims
arising out of their discharge in good faith of responsibilities under
or incident to the Plan, other than expenses and liabilities arising out
of willful misconduct. This indemnity shall not preclude such further
indemnities as may be available under
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insurance purchased by the Corporation or provided by the Corporation
under any bylaw, agreement or otherwise, as such indemnities are
permitted under state law.
2.7 QUARTERLY STATEMENTS. Under procedures established by the Committee, a
Participant shall receive a statement with respect to such Participant's
Accounts as soon as administratively practicable following the end of
each calendar quarter.
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ARTICLE III.
PARTICIPANTS
3.1 PARTICIPANTS. The Committee shall determine and designate from the class
of Eligible Employees those individuals who are eligible to elect
deferrals under the Plan. To be selected for participation by the
Committee, an Eligible Employee must have significant responsibility for
the management, direction and/or success of the Company as a whole or a
particular business unit thereof. The Committee shall limit the class of
Participants to a select group of management or highly compensated
employees, as set forth in Sections 201, 301, and 401 of ERISA.
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ARTICLE IV.
DEFERRALS
4.1 DEFERRALS.
(a) SALARY DEFERRALS. Each Participant may elect to defer any
portion of his regular salary, but only to the extent that his
compensation (including salary, bonus amounts and taxable
payments of deferred compensation) payable during the Plan Year
exceeds the Social Security Wage Base for old age and survivors
benefits for that year. Any such election must be entered into
between the Participant and the Corporation by filing a deferred
compensation agreement form with the Corporation on or before
the December 1 prior to the beginning of the Plan Year for which
the deferral is to be effective. Salary reductions and Company
deferrals shall be made throughout the year based on the amount
by which a Participant's compensation for the year is expected
to exceed such Wage Base. Compensation which a Participant
elects to defer pursuant to this Section 4.1(a) shall be
credited to the Participant's Deferral Account in accordance
with Section 4.4(a).
(b) CASH BONUS DEFERRALS. Each Participant who is eligible for the
Company's Economic Value Added Plan (the "EVA Plan") may elect
to defer the payment of all or a portion of his cash bonus to be
earned during the current fiscal year, but only to the extent
that his compensation projected to be payable for the following
Plan Year (including salary, bonus amounts and taxable payments
of deferred compensation) exceeds the Social Security Wage Base
for old age and survivors benefits for such following year. Any
such election must be entered into between the Participant and
the Corporation by filing a deferred compensation agreement form
with the Corporation prior to October 1 of the fiscal year for
which the bonus is to be earned (December 14, in the case of
bonuses earned for fiscal year that begins in 1992). A
Participant may elect on his or her cash bonus election to have
a specified percentage of the cash bonus that he or she elects
to defer credited to his or her Stock Account in the form of
Deferred Shares in accordance with Section 4.4(b). The remaining
portion of any deferred cash bonus not credited to the
Participant's Stock Account in accordance with the preceding
sentence (or, if no Deferred Share election is made on the
Participant's cash bonus deferral election, the entire amount of
the cash bonus deferred pursuant to such election) will be
credited to the Participant's Deferral Account in accordance
with Section 4.4(a).
(c) STOCK BONUS DEFERRALS. Each Participant who is eligible for the
EVA Plan may elect to defer the delivery of all or a portion of
the Common Stock that he or she would otherwise receive under
such plan, but only to the
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extent that his compensation projected to be payable for the
following Plan Year (including salary, bonus amounts and taxable
payments of deferred compensation) exceeds the Social Security
Wage Base for old age and survivors benefits for such following
year. Any such election must be entered into between the
Participant and the Corporation by filing a deferred
compensation agreement form with the Corporation on or before
the October 1 prior to the beginning of the Plan Year for which
the deferral is to be effective. If a Participant elects to
defer the delivery of Common Stock pursuant to this Section
4.1(c), such Common Stock shall be credited in the form of
Deferred Shares to the Participant's Stock Account in accordance
with Section 4.4(b).
(d) WITHHOLDING LIMITATION. No election shall be effective to reduce
the salary, bonus, or other compensation payable to a
Participant for a calendar year to an amount which is less than
the amount that the Company is required to withhold from such
person's compensation for such calendar year for purposes of
federal, state and local (if any) income tax, employment tax
(including without limitation Federal Insurance Contributions
Act (FICA) tax), and other tax withholdings.
4.2 DEFERRAL PROCEDURES. If a deferral is elected, the election shall be
irrevocable and shall be made on a form and in a manner prescribed by
the Committee. The deferral shall authorize appropriate tax withholding
measures in accordance with Section 5.7. The Committee shall not permit
any deferral to be elected on a date that is after the time that a bonus
or award to which the election relates has become substantially earned
and determinable. If a Participant has not elected a deferral, any
compensation that may become payable to the Participant shall be paid in
accordance with the Company's normal practices. A deferral election
shall be effective only with respect to the Plan Year with respect to
which it is made.
4.3 DEFERRAL OPTIONS. If a deferral is elected, the Participant's period of
deferral shall end with the Participant's termination of employment with
the Company for any reason (including, without limitation, retirement,
death, permanent disability, resignation or termination by the Company).
In addition, the Participant shall have the right to elect on his or her
deferral election that amounts deferred pursuant to such election shall
become payable, in the absence of the occurrence of an event described
in the preceding sentence, upon the expiration of 5, 10, 15 or 20 years
following the original deferral.
4.4 ACCOUNTS. The Corporation shall establish a Deferral Account and a Stock
Account for each Participant. Accounts shall reflect the Corporation's
obligation to pay the deferred amount as provided in Section 4.7. The
Corporation may establish separate Distribution Subaccounts under each
of a Participant's Accounts.
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(a) DEFERRAL ACCOUNT.
(1) Amounts deferred pursuant to Section 4.1 to a
Participant's Deferral Account shall be credited in the form of
cash to such Account as of the end of the month in which such
amounts would have otherwise, in the absence of a deferral
election, been paid to the Participant.
(2) Assumed earnings (or losses) shall be credited to
the Participant's Deferral Account at the end of each calendar
quarter in the form of cash and shall be calculated based on the
Participant's Deferral Account balance as of the first day of
that quarter. The Committee may provide that deemed earnings (or
losses) shall be credited more frequently than quarterly. The
Corporation shall select, from time to time, two or more
investment funds which shall be used for purposes of determining
the amount of assumed earnings (or losses) to be credited to
Participants' Deferral Accounts. Each Participant shall be
notified of the funds available for selection, and then may
designate, on a form and in the manner prescribed by the
Committee, percentages of his or her Deferral Account which
shall be credited with earnings or losses that equal or "mirror"
the appreciation or depreciation in the funds to which such
percentages of his or her Deferral Account have been identified.
Each Participant shall be entitled to change the percentages of
his or her Deferral Account identified, on a form and in the
manner prescribed by the Committee, to any of the investment
funds as of the first day of each calendar quarter, provided
that notice is received by the Committee at least two weeks in
advance of such date. The Committee may, at any time and without
notice, change the number, types and/or particular funds
offered.
(3) As of the end of each fiscal year of the
Corporation, the Deferral Account of any Participant that has
increased in value during such year as a result of the crediting
of deemed earnings or losses shall be decreased, in accordance
with procedures adopted for the purpose by the Committee, by the
incremental marginal tax rate applicable to the Corporation for
such year.
(b) STOCK ACCOUNT.
(1) A Participant's Stock Account shall be credited once
each year. As soon as administratively practicable following the
close of the calendar quarter in which stock bonuses are or
would be paid under the EVA Plan, a Participant's Stock Account
shall be credited with a number of Deferred Shares equal to the
sum of (i) the number of EVA Plan bonus shares that would
otherwise have been paid at the end of such calendar
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quarter to the Participant that the Participant elected to defer
in accordance with Section 4.1(c), and (ii) the portion of the
Participant's cash bonus deferred to such account during the
preceding EVA Plan year in accordance with Section 4.1(b)
divided by the Trust Price for such first calendar quarter.
(2) As soon as administratively practicable following
the close of the first calendar quarter of each year, the
Participant's Stock Account shall be credited with additional
Deferred Shares in an amount equal to the amount of the Dividend
Equivalents representing cash dividends paid during the
preceding four quarters on that number of shares equal to the
aggregate Deferred Shares in the Participant's Stock Account as
of the beginning of the second quarter of the previous year,
divided by the Trust Price for such first calendar quarter.
(3) A Participant's Stock Account shall be a memorandum
account on the books of the Corporation. The Deferred Shares
credited to a Participant's Stock Account shall be used solely
as a device for the determination of the number of shares of
Common Stock to be eventually distributed to such Participant in
accordance with the Plan. The Deferred Shares shall not be
treated as property or as a trust fund of any kind. No
Participant shall be entitled to any voting or other stockholder
rights with respect to Deferred Shares granted or credited under
the Plan. The number of Deferred Shares credited (and the Common
Stock to which the Participant is entitled under the Plan) shall
be subject to adjustment in accordance with Section 4.4(b)(4).
(4) If any stock dividend, stock split,
recapitalization, merger, consolidation, combination or other
reorganization, exchange of shares, sale of all or substantially
all of the assets of the Corporation, split-up, split-off,
extraordinary redemption, liquidation or similar change in
capitalization or any distribution to holders of the
Corporation's Common Stock (other than cash dividends and cash
distributions) shall occur, proportionate and equitable
adjustments consistent with the effect of such event on
stockholders generally (but without duplication of benefits if
Dividend Equivalents are credited) shall be made in the number
and type of shares of Common Stock or other securities, property
and/or rights contemplated hereunder and of rights in respect of
Deferred Shares and Stock Accounts credited under the Plan so as
to preserve the benefits intended.
(c) TRANSFERS. Effective as of the end of the first calendar quarter
in each year, a Participant may elect: (i) to have the Committee
reduce the number of any Deferred Shares allocated to his or her
Stock Account and credit to such Participant's Deferral Account
an amount equal to the Trust
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Price for such quarter of the same number of shares of Common
Stock as the number of Deferred Shares so deducted; or (ii) to
have the Committee reduce the amount of cash credited to his or
her Deferral Account and credit a number of Deferred Shares to
such Participant's Stock Account, which number of Deferred
Shares shall be determined by dividing the cash amount of the
Participant's Deferral Account that he or she has elected to
transfer by the Trust Price for such quarter. Any such election
shall be filed with the Committee at least 20 days prior to the
end of the applicable quarter on a form and in a manner
prescribed by the Committee. A transfer election shall not
affect the crediting of Deferred Shares pursuant to Section
4.4(b)(1) with respect to deferrals during the preceding EVA
Plan year.
The transfers described in the preceding paragraph shall first
be allowed as of the end of the first calendar quarter in 1999.
The Committee may, in its sole discretion, allow Participants a
special opportunity during 1998 to elect a similar transfer
according to procedures established by the Committee. The Trust
Price applicable to such transfers shall be the Trust Price for
the quarter in which such transfer is allowed.
4.5 DISCRETIONARY INVESTMENT BY CORPORATION. The deferred amounts to be paid
to Participants are an unfunded obligation of the Corporation. The
Committee may annually direct that an amount equal to the deferred
amounts for that year shall be invested by the Corporation as the
Committee, in its sole discretion, shall determine. Prior to the
applicability of Section 4.6, the Committee may in its sole discretion
determine that all or some portion of an amount equal to the deferred
amounts shall be paid into one or more grantor trusts that may be
established by the Corporation for the purpose of providing a potential
source of funds to pay Plan benefits. Moreover, such payment of
previously deferred amounts to a grantor trust shall be required in
connection with Change in Control to the extent required by Section
4.6(e). The Committee may designate an investment advisor to direct the
investment of funds that may be used to pay benefits, including the
investment of the assets of any grantor trusts hereunder.
4.6 CHANGE IN CONTROL. In the Event of a Change in Control (as defined
below), the following rules shall apply:
(a) All Participants shall continue to have a fully vested,
nonforfeitable interest in their Account balances.
(b) Deferrals of amounts payable for the current year or a period
ending with the end of the current year shall continue in
accordance with existing elections and shall apply from the
normal payment dates for the amounts deferred.
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(c) The assumed earnings pursuant to Section 4.4(a) following a
Change in Control shall be determined on the basis of the
calculation formula and options in effect just prior to the
Change in Control and shall be compounded at intervals no less
frequent than those being used just prior to the Change in
Control.
(d) All payments of deferred amounts following a Change in Control
shall be made as follows:
(1) Payments that have already commenced shall continue to
be made no less rapidly than under the schedule in
effect just prior to the Change in Control.
(2) Payments that have not yet commenced shall be made in a
cash lump sum at the earliest possible payment date
under the normal rules for benefit commencement pursuant
to Section 4.3 as in effect on the day before the day of
the Change in Control and shall be in an amount equal to
the full Account balance on such date (for purposes of
this paragraph, the value of Deferred Shares shall equal
the Fair Market Value of a share of Common Stock on the
day before the Change in Control).
(e) If the Corporation has established a grantor trust in connection
with the Plan, the Corporation shall continue to make any
required payments to that trust in accordance with its funding
rules as in effect prior to the Change in Control.
(f) A Participant's termination of employment for purposes of the
Plan shall be deemed to include (but shall not be limited to)
any event (such as a constructive discharge) giving the
Participant the right to receive salary continuation or other
severance benefits following a Change in Control, as determined
under any plan, program, or agreement covering the Participant
that is in effect at the time of the Change in Control.
For purposes of the Plan, a "Change in Control" means any of the
following:
(1) The dissolution or liquidation of the Corporation;
(2) The merger, consolidation, or other reorganization of
the Corporation with or into one or more entities which
are not Subsidiaries, as a result of which 50% or less
of the outstanding voting securities of the surviving or
resulting entity are, or are to be, owned by former
shareholders of the Corporation;
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(3) The sale or transfer of substantially all of the
Corporation's business and/or assets to a person or
entity which is not a Subsidiary; or
(4) any "person", alone or together with all "affiliates and
"associates" of such person is or becomes (a) an
"Acquiring Person" as defined in the Rights Agreement,
originally dated as of March 21, 1989, by and between
the Corporation and The Bank of New York, successor
Rights Agent, or (b) the "beneficial owner" of 20% or
more of the outstanding voting securities of the
Corporation (the terms "person", "affiliates",
"associates" and "beneficial owner" are used as such
terms are used in the Exchange Act and the General Rules
and Regulations thereunder); provided, however, that a
"Change in Control" shall not be deemed to have occurred
if such "person" is the Corporation, any Subsidiary or
any employee benefit plan or employee stock plan of the
Corporation or of any Subsidiary, or any trust or other
entity organized, established or holding shares of such
voting securities by, for or pursuant to, the terms of
any such plan; or
(5) individuals who at the beginning of any period of two
consecutive calendar years constitute the Board cease
for any reason, during such period, to constitute at
least a majority thereof, unless the election, or the
nomination for election by the Corporation's
shareholders, of each new Board member was approved by a
vote of at least three-quarters of the Board members
then still in office who were Board members at the
beginning of such period.
If the approval of the shareholders of the Corporation for any
of the occurrences set forth in subsections (1) through (5) is
obtained prior to such occurrence, then such shareholder
approval shall constitute the event.
A Change of Control shall occur on the first day on which any of
the preceding conditions has been satisfied. However,
notwithstanding the foregoing, this Section 4.6 shall not apply
to any Participant who alone or together with one or more other
persons acting as a partnership, limited partnership, syndicate,
or other group for the purpose of acquiring, holding or
disposing of securities of the Corporation, triggers a "Change
in Control" within the meaning of paragraphs (1) and (2) above.
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4.7 PAYMENT OF DEFERRED AMOUNTS. A Participant shall have a fully vested,
nonforfeitable interest in his or her Account balance at all times.
However, vesting does not confer a right to payment. Upon the expiration
of the deferral period selected by the Participant, the Corporation
shall pay to such Participant (or to the Participant's Beneficiary, in
the case of the Participant's death), the Participant's benefits in the
form of:
(a) a single lump sum, or
(b) substantially equal installments payable not less frequently than
annually over a 5, 10, 15 or 20 year period, as selected by the
Participant.
The form of payment (lump sum or number of installments) shall be as
specified by the Participant on his compensation deferral agreement and
shall be irrevocable, with respect to deferrals for that year, once
made. A Participant's Deferral Account shall be paid in the form of
cash, with cash payment equal to the balance of the Participant's
Deferral Account, plus any assumed earnings on his or her Deferral
Account (determined by the Committee pursuant to Section 4.4) on the
outstanding Deferral Account balance to the date of distribution.
Deferred Shares credited to a Participant's Stock Account shall be
distributed in an equivalent number of whole shares of Common Stock;
provided that the Committee may, in its sole discretion, pay Deferred
Shares in the form of cash or may give Participants the ability to elect
shares or cash. The Common Stock to be delivered shall be shares owned
by the Corporation or any Corporation grantor trust which were acquired
through purchase on the open market. Fractional share interests shall be
settled in cash. Unless payment has commenced in accordance with an
election under Section 4.3, payment (or distribution of any shares in
respect of Deferred Shares) shall commence or be made in January of the
year following the Participant's retirement, death, permanent
disability, resignation or other termination of employment, provided
that with respect to a Participant who retires with advance notice in
December or January, the Committee, in its discretion, may direct that
payment shall commence or be made on the December 31 nearest the
retirement date, on the January 31 following the retirement date or in
January of the year following retirement.
The cumulative amount by which the assumed earnings of a participant's
Deferral Account has been reduced to reflect the Corporation's
incremental marginal tax rate in prior years shall represent a bonus
pool that shall be distributed to such participant. Each payment of
deferred compensation to a participant or beneficiary under this plan
shall be accompanied by a payment of a share from this pool that shall
equal the net total amount of such reductions (adjusted by the amount of
any previous bonus payments under this paragraph) times the ratio of
assumed earnings being distributed to total assumed earnings
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that remain to be paid at the time of payment. For this purpose, assumed
earnings will be considered distributed first, before deferral amounts.
4.8 ACCELERATION OF PAYMENT OF DEFERRED AMOUNTS. The Committee, in its
discretion, may accelerate the payment of the unpaid balance of a
Participant's Account in the event of the Participant's retirement,
death, permanent disability, resignation or termination of employment,
or upon its determination that the Participant (or his Beneficiary in
the case of his death) has incurred a severe, unforeseeable financial
hardship creating an immediate and heavy need for cash that cannot
reasonably be satisfied from sources other than an accelerated payment
from the Plan. The Committee in making its determination may consider
such factors and require such information as it deems appropriate.
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ARTICLE V.
GENERAL PROVISIONS
5.1 UNFUNDED OBLIGATION. The deferred amounts to be paid to Participants
pursuant to the Plan are unfunded obligations of the Corporation.
Participants and their beneficiaries, heirs, successors, and assigns
shall have no legal or equitable rights, claims, or interest in any
specific property or assets of the Company or any Company grantor trust.
Except as provided in Section 4.6, the Company is not required to
segregate any monies from its general funds, to create any trusts, or to
make any special deposits with respect to this obligation. Title to and
beneficial ownership of any investments including grantor trust
investments which the Committee has determined and directed the
Corporation to make to fulfill obligations under the Plan shall at all
times remain the general, unpledged, unrestricted assets of the
Corporation. At the time a Participant's period of deferral ends, the
Corporation may direct that the Participant's Plan benefits be paid
directly from a Corporation grantor trust in lieu of payment from other
Corporation assets. Any investments and the creation or maintenance of
any trust or Accounts shall not create or constitute a trust or a
fiduciary relationship between the Committee or the Company and a
Participant, or otherwise create any vested or beneficial interest in
any Participant or his or her Beneficiary or his or her creditors in any
assets of the Company whatsoever. The Participants shall have no claim
for any changes in the value of any assets which may be invested or
reinvested by the Corporation in an effort to match its liabilities
under the Plan. The Corporation's obligation under the Plan shall be
merely that of an unfunded and unsecured promise of the Corporation to
pay money in the future, and the rights of the Participants and
Beneficiaries shall be no greater than those of unsecured general
creditors.
5.2 BENEFICIARY. The term "Beneficiary" shall mean the person or persons to
whom payments are to be paid pursuant to the terms of the Plan in the
event of the Participant's death. A Participant may designate a
Beneficiary on a form provided by the Committee, executed by the
Participant, and delivered to the Committee. The Committee may require
the consent of the Participant's spouse to a designation relating to a
marital property interest of the spouse if the designation specifies a
Beneficiary other than the spouse. A Participant may change a
Beneficiary designation at any time. If no Beneficiary is designated, if
the designation is ineffective, or if the Beneficiary dies before the
balance of the Account is paid, the balance shall be paid to the
Participant's surviving spouse, or if there is no surviving spouse, to
the Participant's estate.
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5.3 RECEIPT OR RELEASE. Any payment to a Participant or the Participant's
Beneficiary in accordance with the provisions of the Plan shall, to the
extent thereof, be in full satisfaction of all claims against the
Committee, the Company, and any trustee of any Company grantor trust.
The Committee may require such Participant or Beneficiary, as a
condition precedent to such payment, to execute a receipt and release to
such effect.
5.4 INCAPACITY OF PARTICIPANT OR BENEFICIARY. Every person receiving or
claiming benefits under the Plan shall be conclusively presumed to be
mentally competent and of age until the date on which the Committee
receives a written notice, in a form and manner acceptable to the
Committee, that such person is incompetent or a minor, for whom a
guardian or other person legally vested with the care of his person or
estate has been appointed; provided, however, that if the Committee
finds that any person to whom a benefit is payable under the Plan is
unable to care for his or her affairs because of incompetency, or
because he or she is a minor, any payment due (unless a prior claim
therefor shall have been made by a duly appointed legal representative)
may be paid to the spouse, a child, a parent, a brother or sister, or to
any person or institution considered by the Committee to have incurred
expense for such person otherwise entitled to payment. To the extent
permitted by law, any such payment so made shall be a complete discharge
of liability therefor under the Plan.
If a guardian of the estate of any person receiving or claiming benefits
under the Plan is appointed by a court of competent jurisdiction,
benefit payments may be made to such guardian provided that proper proof
of appointment and continuing qualification is furnished in a form and
manner acceptable to the Committee. In the event a person claiming or
receiving benefits under the Plan is a minor, payment may be made to the
custodian of an account for such person under the Uniform Gifts to
Minors Act. To the extent permitted by law, any such payment so made
shall be a complete discharge of any liability therefor under the Plan.
5.5 NONASSIGNMENT. The Corporation shall pay all amounts payable hereunder
only to the person or persons designated by the Plan and not to any
other person or corporation. No part of a Participant's Accounts shall
be liable for the debts, contracts, or engagements of any Participant,
his or her Beneficiary, or successors in interest, nor shall a
Participant's Accounts be subject to execution by levy, attachment, or
garnishment or by any other legal or equitable proceeding, nor shall any
such person have any right to alienate, anticipate, commute, pledge,
encumber, or assign any benefits or payments hereunder in any manner
whatsoever. If any Participant, Beneficiary or successor in interest is
adjudicated bankrupt or purports to anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge any distribution or payment
from the Plan, voluntarily or involuntarily, the Committee, in its
discretion, may cancel such distribution or payment (or any part
thereof) to or for the benefit of such
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Participant, Beneficiary or successor in interest in such manner as the
Committee shall direct.
5.6 NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan shall be construed
to confer upon any Participant any right to continued employment with
the Company, nor shall the Plan interfere in any way with the right of
the Company to terminate the employment of such Participant at any time
without assigning any reason therefor.
5.7 WITHHOLDING TAXES. The Company may satisfy any state or federal
employment tax withholding obligation with respect to compensation
deferred under the Plan by deducting such amounts from any compensation
payable by the Company to the Participant. There shall be deducted from
each payment made under the Plan or any other compensation payable to
the Participant (or Beneficiary) all taxes which are required to be
withheld by the Company in respect to any payment or distribution of
shares under the Plan. The Company shall have the right to reduce any
payment by the amount of cash sufficient to provide the amount of said
taxes. As a condition precedent to the payment of any benefits under the
Plan, if the Company (for any reason) elects not to (or cannot) satisfy
the withholding obligation from the amounts otherwise payable under the
Plan, the Participant shall pay or provide for payment in cash of the
amount of any taxes which the Company may be required to withhold with
respect to the benefits hereunder.
5.8 CLAIMS PROCEDURE AND ARBITRATION. A person who believes that he or she
is being denied a benefit to which he or she is entitled under the Plan
(hereinafter referred to as "Claimant") may file a written request for
such benefit with the Committee, setting forth his or her claim. The
request must be addressed to the Committee at the Company's then
principal executive offices.
Upon receipt of a claim, the Committee shall advise the Claimant that a
reply will be forthcoming within ninety (90) days and shall, in fact,
deliver such reply within such period. The Committee may, however,
extend the reply period for an additional ninety (90) days for special
circumstances. If the claim is denied in whole or in part, the Committee
shall inform the Claimant in writing, using language calculated to be
understood by the Claimant, setting forth: (i) the specified reason or
reasons for such denial, (ii) the specific reference to pertinent
provisions of the Plan on which such denial is based, (iii) a
description of any additional material or information necessary for the
Claimant to perfect his or her claim and an explanation why such
material or such information is necessary, (iv) appropriate information
as to the steps to be taken if the Claimant wishes to submit the claim
for review, and (v) the time limits for requesting a review set forth
below.
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Within sixty (60) days after the receipt by the Claimant of the written
opinion described above, the Claimant may request in writing that the
Committee review its determination. Such request must be addressed to
the Committee at the Company's then principal executive offices. The
Claimant or his or her duly authorized representative may, but need not,
review the pertinent documents and submit issues and comments in writing
for consideration by the Committee. If the Claimant does not request a
review within such sixty (60) day period, he or she shall be barred and
estopped from challenging the Company's determination.
Within sixty (60) days after the Committee's receipt of a request for
review, after considering all materials presented by the Claimant, the
Committee will inform the Claimant in writing, in manner calculated to
be understood by the Claimant, of its decision setting forth the
specific reasons for the decision and containing specific references to
the pertinent provisions of the Plan on which the decision is based. If
special circumstances require that the sixty (60) day time period be
extended, the Committee will so notify the Claimant and will render the
decision as soon as possible, but no later than one hundred twenty (120)
days after receipt of the request for review.
Following a Change in Control of the Corporation (as determined under
Section 4.6) the claims procedure shall include the following
arbitration procedure.
Since time will be of the essence in determining whether any payments
are due to the Participant under the Plan following a Change in Control,
a Participant may submit any claim for payment to arbitration as
follows: On or after the second day following the termination of the
Participant's employment or other event triggering a right to payment),
the claim may be filed orally with an arbitrator of the Participant's
choice and thereafter the Corporation shall be notified orally. The
arbitrator must be:
(a) a member of the National Academy of Arbitrators or one who
currently appears on arbitration panels issued by the Federal
Mediation and Conciliation Service or the American Arbitration
Association; or
(b) a retired judge of the State in which the claimant is a resident
who served at the appellate level or higher. The arbitration
hearing shall be held within 10 days (or as soon thereafter as
possible) after filing of the claim unless the Participant and
the Corporation agree to a later date. No continuance of said
hearing shall be allowed without the mutual consent of the
Participant and the Corporation. Absence from or
nonparticipation at the hearing by either party shall not
prevent the issuance of an award. Hearing procedures which will
expedite the hearing may be ordered at the arbitrator's
discretion, and the arbitrator may close the hearing in his or
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her sole discretion upon deciding he or she has heard sufficient
evidence to satisfy issuance of an award. In reaching a
decision, the arbitrator shall have no authority to ignore,
change, modify, add to or delete from any provision of the Plan,
but instead is limited to interpreting the Plan. The
arbitrator's award shall be rendered as expeditiously as
possible, and in no event, later than seven days after the close
of the hearing. If the arbitrator finds that any payment is due
to the Participant from the Corporation, the arbitrator shall
order the Corporation to pay that amount to the Participant
within 48 hours after the decision is rendered. The award of the
arbitrator shall be final and binding upon the Participant and
the Corporation. Judgment upon the award rendered by the
arbitrator may be entered in any court in any State of the
United States. In the case of any arbitration regarding this
Agreement, the Participant shall be awarded the Participant's
costs, including attorney's fees. Such fee award may not be
offset against the deferred compensation due hereunder. The
Corporation shall pay the arbitrator's fee and all necessary
expenses of the hearing, including stenographic reporter if
employed.
5.9 TERMINATION AND AMENDMENT. The Board may from time to time amend,
suspend or terminate the Plan, in whole or in part, and if the Plan is
suspended or terminated, such board may reinstate any or all of its
provisions. No amendment, suspension or termination may impair the right
of a Participant or a designated Beneficiary to receive the deferred
compensation benefit accrued prior to the effective date of such
amendment, suspension or termination in accordance with the terms of the
Plan at such prior time. The Committee may however, in connection with
the termination of this Plan and in its sole discretion, elect to
accelerate the distribution of benefits and pay benefits in the form of
a lump sum rather than installments. Following a Change in Control, as
defined in Section 4.6, the change in control provisions of such section
and arbitration provisions of Section 5.8 may not be changed.
5.10 APPLICABLE LAW. The Plan shall be construed and governed in accordance
with applicable federal law and, to the extent not preempted by such
federal law, the laws of the State of California. If any provisions of
this instrument shall be held by a court of competent jurisdiction to be
invalid or unenforceable, the remaining provisions hereof shall continue
to be fully effective.
5.11 COMPLIANCE WITH LAWS. The Plan and the offer, issuance and delivery of
shares of Common Stock and/or the payment of money through the deferral
of compensation under the Plan are subject to compliance with all
applicable federal and state laws, rules and regulations (including but
not limited to state and federal securities law) and to such approvals
by any listing, agency or any regulatory or governmental authority as
may, in the opinion of counsel for the Corporation, be necessary or
advisable in connection therewith. Any securities
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delivered under the Plan shall be subject to such restrictions, and the
person acquiring such securities shall, if requested by the Corporation,
provide such assurances and representations to the Corporation as the
Corporation may deem necessary or desirable to assure compliance with
all applicable legal requirements.
5.12 PLAN CONSTRUCTION. It is the intent of the Corporation that transactions
pursuant to the Plan satisfy and be interpreted in a manner that
satisfies the applicable requirements of Rule 16b-3 promulgated under
the Exchange Act ("Rule 16b-3") so that, to the extent elections are
timely made, the crediting of Deferred Shares, the distribution of
shares of Common Stock and any other event with respect to Deferred
Shares under the Plan will be entitled to the benefits of Rule 16b-3 or
other exemptive rules under Section 16 of the Exchange Act and will not
be subjected to avoidable liability thereunder.
5.13 HEADINGS, ETC. NOT PART OF PLAN. Headings and subheadings in the Plan
are inserted for convenience of reference only and are not to be
considered in the construction of the provisions hereof.
IN WITNESS WHEREOF, the undersigned duly authorized officer of the
Corporation has executed this amendment and restatement of the Plan on this
______ day of ____________, 1998.
FURON COMPANY
By:
---------------------------------
Print Name:
-------------------------
Its:
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