<PAGE>   1

                                                                   EXHIBIT 10.7






                                  FURON COMPANY
                           DEFERRED COMPENSATION PLAN
                            (AS AMENDED AND RESTATED
                           EFFECTIVE FEBRUARY 1, 1998)




<PAGE>   2




                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
                                   ARTICLE I.
                                    PURPOSE
<S>                                                                                    <C>
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

</TABLE>


                                      -i-



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                                TABLE OF CONTENTS
                                  (CONTINUED)

<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
                                   ARTICLE V.
                               GENERAL PROVISIONS
<S>                                                                                       <C>
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
</TABLE>

                                      -ii-
<PAGE>   4

                                  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.


                                       1

<PAGE>   5

        "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.


                                       2


<PAGE>   6

        "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.




                                       3

<PAGE>   7

                                  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;


                                       4


<PAGE>   8

        (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 


                                       5


<PAGE>   9

        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.








                                       6

<PAGE>   10

                                  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.













                                       7



<PAGE>   11

                                  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 


                                       8



<PAGE>   12

                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.


                                       9



<PAGE>   13

        (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 


                                       10




<PAGE>   14

                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 






                                       11

<PAGE>   15

                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.







                                       12

<PAGE>   16

        (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;






                                       13

<PAGE>   17

                (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.



                                       14

<PAGE>   18

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 





                                       15

<PAGE>   19

        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.










                                       16


<PAGE>   20

                                   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.






                                       17
<PAGE>   21

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 




                                       18

<PAGE>   22

        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.



                                       19

<PAGE>   23

        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



                                       20


<PAGE>   24

                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 




                                       21



<PAGE>   25

        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:
                                             --------------------------------



                                       22