SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [ ]
Filed by a party other than the registrant [x]
Check the appropriate box:
[ ] Preliminary proxy statement
[x] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
THE VALSPAR CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[x] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to exchange Act Rule 0-11:1
(4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
THE VALSPAR CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 22, 1995
The annual meeting of stockholders of The Valspar Corporation will be held at
the offices of the Corporation at 1101 Third Street South, Minneapolis,
Minnesota, on Wednesday, February 22, 1995 at 11:00 A.M., for the following
purposes:
1. To elect four directors (Class III) for a term of three years;
2. To ratify the appointment of independent auditors to examine the
Corporation's accounts for the fiscal year ending October 27, 1995; and
3. To transact such other business as may properly come before the meeting or
any adjournments thereof.
Stockholders of record at the close of business on December 30, 1994 are
entitled to notice of and to vote at the meeting.
Your attention is directed to the Proxy Statement accompanying this Notice
for a more complete statement of the matters to be considered at the meeting.
A copy of the Annual Report for the year ended October 28, 1994 also
accompanies this Notice.
By Order of the Board of Directors,
ROLF ENGH,
Secretary
Approximate Date of Mailing of Proxy Material:
January 20, 1995
PLEASE SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
THE VALSPAR CORPORATION
1101 THIRD STREET SOUTH
P.O. BOX 1461
MINNEAPOLIS, MINNESOTA 55440
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 22, 1995
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of proxies in the accompanying form. Shares will be voted
in the manner directed by the stockholders. A stockholder giving a proxy may
revoke it at any time before it is exercised by giving written notice of
revocation to the Office of the Secretary of the Corporation.
Proxies are being solicited by mail, and, in addition, directors, officers
and employees of the Corporation may solicit proxies personally, by
telephone, telegram, or letter at no additional compensation to them. The
Corporation will pay the expense of soliciting proxies, and will reimburse
brokerage firms and others for their expenses in forwarding proxy materials
to beneficial owners of Common Stock.
If a shareholder abstains from voting on any matter, the Corporation intends
to count the abstention as present for purposes of determining whether a
quorum is present at the Annual Meeting of Stockholders for the transaction
of business. Additionally, the Corporation intends to count broker
"non-votes" as present for purposes of determining the presence or absence of
a quorum for the transaction of business. A non-vote occurs when a nominee
holding shares for a beneficial owner votes on one proposal, but does not
vote on another proposal because the nominee does not have discretionary
voting power and has not received instructions from the beneficial owner.
Abstentions and non-votes will not be counted as votes cast for or against
items submitted for a vote of stockholders. Therefore, abstentions and broker
non-votes have the same effect as votes against the proposals.
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
As fixed by the Board of Directors in accordance with the Corporation's
By-Laws, the Board of Directors consists of eleven members, divided into
three classes of as nearly equal size as possible, each serving a term of
three years. William W. George, Kendrick B. Melrose, Gregory R. Palen and
Lawrence Perlman are the directors in Class III, with terms expiring at the
annual meeting in 1995. The Board of Directors has nominated Messrs. George,
Melrose, Palen and Perlman for re-election as Class III directors. Unless
otherwise directed by the stockholders, it is intended that shares
represented by proxy will be voted in favor of the election of the four
nominees listed in Class III below, to hold office until the annual meeting
in 1998 and until their successors are elected and qualify. If any of the
nominees is unable or unwilling to stand for election, it is intended that
shares represented by proxy will be voted for a substitute nominee
recommended by the Board of Directors, unless the stockholder otherwise
directs. The Board is not aware that any of the nominees is unable or
unwilling to stand for election.
NAMES, PRINCIPAL OCCUPATIONS FOR THE PAST FIVE YEARS AND SELECTED
OTHER INFORMATION CONCERNING NOMINEES AND DIRECTORS
CLASS I DIRECTORS CONTINUING IN OFFICE UNTIL 1996
THOMAS R. MCBURNEY President, McBurney Management Advisors, a management
Director since 1987 consulting firm for small businesses
Age - 56
Mr. McBurney has held his present position as President since 1990. Prior to
1990, Mr. McBurney served as Executive Vice President of The Pillsbury Company
and also served one year as Chairman of International Foods and two years as
Chairman of U.S. Foods Group, divisions of The Pillsbury Company. Mr. McBurney
is also a director of Security American Financial Enterprises, Wenger
Corporation, Space Center Enterprises, Inc. and Greenspring Companies.
RICHARD M. ROMPALA President of the Corporation
Director since 1994
Age - 48
Mr. Rompala has held his present position as President since 1994. Prior to
1994, Mr. Rompala served as Group Vice President - Coatings and Resins for two
years and Group Vice President - Chemicals for five years at PPG Industries,
Inc.
MICHAEL P. SULLIVAN President and Chief Executive Officer,
Director since 1990 International Dairy Queen, Inc.
Age - 60
Mr. Sullivan has held his present position as President and Chief Executive
Officer since 1987. Mr. Sullivan is also a director of International Dairy
Queen, Inc., Allianz Life Insurance Company of North America and Opus U.S.
Corporation.
C. ANGUS WURTELE Chairman of the Board and Chief Executive
Director since 1970 Officer of the Corporation
Age - 60
Mr. Wurtele has held his present position since 1973. Mr. Wurtele is also a
director of Donaldson Company, Inc., General Mills, Inc., Bemis Company, Inc.
and IDS Mutual Fund Group.
CLASS II DIRECTORS CONTINUING IN OFFICE UNTIL 1997
SUSAN S. BOREN Senior Vice President-Customer Development/Direct
Director since 1991 Response, Department Store Division of Dayton Hudson
Age - 47 Corporation
Ms. Boren has held her present position as Senior Vice President since 1994 and
served as Group Vice President - Stores for Dayton's since 1991. Prior to 1991,
Ms. Boren served as Senior Vice President - Human Resources since 1989 for
Dayton Hudson Department Stores.
RICHARD N. CARDOZO Carlson Chair in Entrepreneurial Studies
Director since 1976 and Professor of Marketing, Curtis L. Carlson
Age - 58 School of Management, University of Minnesota
Mr. Cardozo has held his present position as Carlson Chair since 1987 and
professor since 1971.
ROBERT E. PAJOR Vice Chairman of the Corporation
Director since 1978
Age - 58
Mr. Pajor has held his present position since 1994 and served as President and
Chief Operating Officer of the Corporation since 1981.
CLASS III NOMINEES FOR TERM EXPIRING IN 1998
WILLIAM W. GEORGE President and Chief Executive Officer,
Director since 1984 Medtronic, Inc.
Age - 52
Mr. George has held his present position as President and Chief Executive
Officer since 1991 and served as President and Chief Operating Officer since
1989. Mr. George is also a director of Medtronic, Inc., The Toro Company and
Dayton Hudson Corporation.
KENDRICK B. MELROSE Chairman and Chief Executive Officer,
Director since 1984 The Toro Company
Age - 54
Mr. Melrose has held his present position as Chief Executive Officer since 1983
and Chairman since 1987. Mr. Melrose is also a director of Bio-Metric Systems,
Inc., Donaldson Company, Inc. and The Toro Company.
GREGORY R. PALEN Chairman and Chief Executive Officer,
Director since 1992 Spectro Alloys Corporation; Chief
Age - 39 Executive Officer, Palen/Kimball Company
Mr. Palen has held his present position as Chairman and Chief Executive Officer
with Spectro Alloys Corporation, an aluminum recycler and manufacturing company,
since 1988. He has been Chief Executive Officer of Palen/Kimball Company, a
mechanical service company, since May 1993 and previously had been President
since 1983. Mr. Palen is also a director of Palen/Kimball Company, North Central
Life Insurance Company, Summit Leasing, Spectro Alloys Corporation, Polaris
Industries Inc. and Information Management, Inc.
LAWRENCE PERLMAN Chairman, President and Chief Executive Officer,
Director since 1992 Ceridian Corporation
Age - 56
Mr. Perlman was elected Chairman of the Board in November 1992 and has held the
position of President and Chief Executive Officer since 1990. He was President
and Chief Operating Officer during 1989. Mr. Perlman is also a director of
Seagate Technology, Inc., Computer Network Technology, Inter-Regional Financial
Group and a Regent of the University of Minnesota.
BOARD COMMITTEES
The standing committees of the Board of Directors for 1994 were as follows:
NAME OF COMMITTEE MEMBERSHIP
Audit Committee Susan S. Boren, Richard N. Cardozo - Chair,
William W. George, Thomas R. McBurney, Kendrick
B. Melrose, Gregory R. Palen, Lawrence Perlman
and Michael P. Sullivan
Executive Committee Thomas R. McBurney, Robert E. Pajor, Richard M.
Rompala and C. Angus Wurtele -- Chair
Compensation and Susan S. Boren, William W. George - Chair,
Nominating Committee Thomas R. McBurney, Kendrick B. Melrose,
Lawrence Perlman and Michael P. Sullivan
The Board of Directors met six times during fiscal 1994.
The Audit Committee held two meetings during the fiscal year at which it
reviewed the extent and scope of the audit and non-audit services provided by
the Corporation's independent accountants, reviewed internal accounting
procedures and controls with the Corporation's financial and accounting
staff, and reviewed the comments made by the independent accountants in their
letter of recommendation to management.
The Executive Committee took corporate action four times during the fiscal
year when the Board was not in session.
The Compensation and Nominating Committee held three meetings during the
fiscal year at which it reviewed and approved the compensation plans and
arrangements or granted options for officers, key employees and directors.
The Compensation and Nominating Committee will consider nominees for Board
membership submitted by stockholders. Any such recommendation should be
submitted in writing to the Corporation in care of Corporate Secretary, at
1101 Third Street South, Minneapolis, Minnesota 55415, along with the written
consent of such nominee to serve as a director if so elected. Candidates for
director should be persons with broad training and experience in their chosen
fields and who have earned distinction in their activities.
During fiscal 1994, each director attended 75% or more of the meetings of the
Board and of the committees on which the director served, with the exception
of Mr. Perlman, who attended 6 of 9 such meetings.
DIRECTOR COMPENSATION
Directors who are not officers of the Corporation receive an annual fee of
$14,000, an attendance fee of $1,000 for each meeting of the Board of
Directors and $1,000 for each meeting of a committee of the Board of
Directors not held the same day as a Board of Directors meeting. Prior to
January 1, 1995, directors who were not officers of the Corporate received an
annual fee of $12,000. At a director's option, the annual fee may be paid by
the Corporation purchasing shares of its Common Stock in the open market on
behalf of the director. Any costs of such purchases are paid by the
Corporation. In addition, immediately after each annual meeting of
stockholders, commencing with the 1993 annual meeting, each non-employee
director receives a grant of restricted stock under the Corporation's
Restricted Stock Plan for Non-Employee Directors (the "Directors Plan"). The
number of shares granted is determined by dividing one-half of the amount of
the director's fees earned by the non-employee director for his or her
services during the most recently ended fiscal year by the average closing
price of the Corporation's Common Stock for the ten business days immediately
prior to the date of the annual meeting. Grants of restricted stock for Board
service in fiscal 1992 and 1993 provide that the shares of restricted stock
are subject to forfeiture if the director's service is terminated within
three years from the date of grant for any reason other than death,
disability, retirement or a change of control of the Corporation. All grants
for service in fiscal 1994 and subsequent years provide that the shares of
restricted stock are not subject to forfeiture. The non-employee director
cannot sell, assign, pledge or otherwise transfer any of the shares of
restricted stock granted under the Directors Plan until he or she ceases to
be a member of the Board of Directors.
CERTAIN TRANSACTIONS
The Leveraged Equity Purchase Plan (the "LEPP"), which was approved by the
stockholders in February 1991, provides key employees (including executive
officers) with loans from the Corporation, up to an aggregate amount of
$6,000,000, to permit them to acquire Common Stock of the Corporation in the
open market. The LEPP is administered by the Compensation and Nominating
Committee, with the Committee selecting the individuals to be granted loans
and determining the size of such loans. A participant may borrow from the
Corporation 90% of the cost of the shares being purchased, such loan being
evidenced by a nonrecourse promissory note bearing interest at a reasonable
market rate and having a term up to five years. All loans reflected in the
table below were granted in fiscal 1991 and 1994. Loans granted in fiscal
1991 under the Plan bear an interest rate of 8% and loans granted in fiscal
1994 bear an interest rate of 6.5%. The following lists each executive
officer whose loan from the Corporation exceeded $60,000 at any time during
fiscal 1994, and indicates (i) the largest loan amount outstanding for such
officer at any time since October 30, 1993, and (ii) the loan amount
outstanding for such officer as of December 30, 1994:
<TABLE>
<CAPTION>
Largest Amount
Name of Outstanding Amount Outstanding
Executive Officer since October 30, 1993 as of December 30, 1994
<S> <C> <C>
Larry B. Brandenburger $231,222 $231,222
Stephen M. Briggs 219,203 219,203
Rolf Engh 188,114 188,114
Steven L. Erdahl 218,595 218,595
Robert E. Pajor 380,241 325,196
Paul C. Reyelts 168,981 157,386
Richard M. Rompala 971,141 971,141
C. Angus Wurtele 492,875 420,721
</TABLE>
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal years ended October 28, 1994,
October 29, 1993 and October 30, 1992, the cash compensation paid by the
Corporation, as well as certain other compensation paid or accrued for those
years, to C. Angus Wurtele, the Corporation's Chairman of the Board and Chief
Executive Officer, and each of the four other most highly compensated
executive officers of the Corporation (together with Mr. Wurtele, the "Named
Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION AWARDS
RESTRICTED STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) AWARDS(2)(3) (NO. OF SHARES)(4) COMPENSATION(5)
<S> <C> <C> <C> <C> <C> <C>
C. Angus Wurtele 1994 $499,712 $ 74,957 $439,648 10,370 $85,630
Chairman of the Board and 1993 476,838 47,684 308,991 -0- 70,214
Chief Executive Officer 1992 456,989 230,780 -0- -0-
Robert E. Pajor 1994 409,700 61,455 360,455 8,366 68,408
Vice Chairman 1993 384,709 38,471 249,291 1,052 54,652
1992 357,357 180,466 -0- 1,701
Richard M. Rompala 1994(6) 223,082 250,000(7) 293,266 58,185 -0-
President 1993 -- -- -- -- --
1992 -- -- -- --
Rolf Engh 1994 200,000 30,000 175,960 -0- 14,999
Vice President, 1993(8) 109,231 -0- -0- 31,500 -0-
International and Secretary 1992 -- -- -- --
Paul C. Reyelts 1994 202,885 30,433 158,656 4,240 36,171
Vice President, Finance 1993 192,885 19,288 126,339 561 26,723
1992 181,173 91,492 -0- 819
</TABLE>
(1) Includes, for these fiscal years, (i) cash bonuses under the Incentive
Bonus Plan and (ii) deferred bonuses awarded pursuant to the Deferred Bonus
Plan for Management, subject to forfeiture if the individual voluntarily
terminates employment or is discharged for cause within three years. Does not
include bonuses under the Incentive Bonus Plan for 1993 and 1994 received in
restricted stock pursuant to elections under the Key Employee Annual Bonus
Plan. See note (2) below and "Compensation Committee Report on Executive
Compensation."
(2) Pursuant to the Key Employee Annual Bonus Plan, each of these individuals
elected to receive his bonus under the Incentive Bonus Plan for fiscal 1994
and, if any, for fiscal 1993 in restricted stock, subject to forfeiture if
the individual's employment terminates within three years for any reason
other than death, disability, retirement or a change of control. See
"Compensation Committee Report on Executive Compensation." The restricted
stock received has a market value equal to twice the amount of the cash bonus
that would have been paid absent the election.
(3) As of October 28, 1994, such individuals held the following numbers of
shares of restricted stock with the following market values, based on the
closing sale price of the Company's common stock on such date: Mr. Wurtele,
8,226 shares, $300,249; Mr. Pajor, 6,637 shares, $242,250; Mr. Rompala, 0
shares, $0; Mr. Engh, 0 shares, $0; Mr. Reyelts, 3,363 shares, $122,749.
Dividends are paid on shares of restricted stock from the date of grant.
(4) Options indicated for fiscal 1994 were granted pursuant to the Key
Employee Annual Bonus Plan based on twice the level of each individual's cash
bonus for fiscal 1993, except that Mr. Rompala's option was granted in
connection with his initial employment with the Corporation. Options
indicated for fiscal 1994 exclude options granted in January 1995 pursuant to
the Key Employee Annual Bonus Plan based on twice the level of cash bonus for
fiscal 1994. See "Compensation Committee Report on Executive Compensation."
(5) Represents contributions or allocations by the Corporation to defined
contribution or savings plans (tax-qualified and supplemental) on behalf of
the Named Executive. The rules of the Securities and Exchange Commission
require the presentation of this information for fiscal 1994 and 1993 only.
(6) Mr. Rompala joined the Company in March, 1994.
(7) Includes a bonus of $200,000 received upon joining the Company.
(8) Mr. Engh joined the Company in April, 1993.
STOCK OPTIONS
The following table contains information concerning grants of stock options
under the Corporation's 1991 Stock Option Plan to the Named Executives during
fiscal 1994:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
POTENTIAL
REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL
OPTIONS EXERCISE RATE OF STOCK PRICE
GRANTED TO PRICE APPRECIATION FOR
EMPLOYEES PER EXPIRATION OPTION TERM(3)
NAME OPTIONS GRANTED(1) IN FISCAL YEAR SHARE(2) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
C. Angus Wurtele 10,370 6.2 $29.625 1/6/04 $ 193,203 $ 489,620
Robert E. Pajor 8,366 5.0 29.625 1/6/04 155,867 395,001
Richard M. Rompala 58,185 35.1 34.375 5/4/04 1,257,669 3,187,665
Rolf Engh 0 -- -- N/A N/A N/A
Paul C. Reyelts 4,240 2.6 29.625 1/6/04 78,995 200,192
</TABLE>
(1) All options granted become exercisable starting one year from date of
grant in 20% increments. Options include the right to pay the exercise price
in cash or in previously acquired Common Stock.
(2) Exercise price is the fair market value of the Corporation's Common
Stock, defined as the closing price on the day preceding the date that the
option is granted.
(3) These assumed values result from certain prescribed rates of stock price
appreciation. The actual value of these option grants is dependent on future
performance of the Common Stock and overall stock market conditions. There is
no assurance that the values reflected in this table will be achieved.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executives concerning the exercise of options during fiscal 1994 and
unexercised options held as of October 28, 1994:
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT IN-THE-MONEY OPTIONS
ON VALUE OCTOBER 28, 1994 AT OCTOBER 28, 1994(2)
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
C. Angus Wurtele 0 N/A 0 10,370 N/A $ 71,942
Robert E. Pajor 1,700 $43,456 22,132 12,146 $452,728 139,134
Richard M. Rompala 0 N/A 0 58,185 N/A 127,280
Rolf Engh 0 N/A 6,300 25,200 79,167 316,668
Paul C. Reyelts 0 N/A 5,412 5,248 103,529 51,040
</TABLE>
(1) The value realized on the exercise of options is based on the difference
between the exercise price and the fair market value of the Corporation's
Common Stock on the date of exercise.
(2) The value of unexercised in-the-money options is based on the difference
between the exercise price of the options and the fair market value of the
Corporation's Common Stock on October 28, 1994.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
comprised entirely of independent non-employee directors. The Committee is
responsible for setting and administering the policies which govern both
annual compensation and stock ownership programs. The Company's incentive
plans are designed to condition a significant amount of an executive's
compensation on the performance of the executive and of the Company as a
whole. The compensation plans are also designed to encourage employee stock
ownership. The Compensation Committee believes such ownership effectively
motivates executives to increase shareholder value and aligns the interests
of employees with those of the shareholders. In its administration of the
various compensation plans, the Committee focuses on these goals of tying
compensation to performance and encouraging executive stock ownership.
COMPENSATION OF EXECUTIVE OFFICERS
Salary. In setting each executive officer's base salary, the Committee
considers quantitative measures related to the Corporation's financial
performance as well as a number of qualitative measures related to the
executive's duties and responsibilities. The Committee also compares the
salary of its executive officers with salaries of executive officers of other
companies of similar size and profitability, including, but not limited to,
the companies in the peer group used in connection with the stock performance
graph on page 11. Increases in base salary are determined on a calendar year
basis in December of each year. The base salary of the Named Executives
increased by an average of 5.3% from 1993 to 1994. The increases for 1994
reflected general corporate performance, based on sales, expenses, profits,
unit growth and return on equity for fiscal 1993.
Bonus Programs. Since prior to fiscal 1988, the Corporation has had a policy
of granting incentive bonuses to its key employees (including executive
officers), referred to as the "Incentive Bonus Plan." In the first quarter of
each fiscal year, specific performance targets are identified for each
participant in the Incentive Bonus Plan, including both general corporate
measures of performance (such as net income, gallon sales growth, return on
equity and total expenses) and specific measures of performance within the
participant's area of responsibility. After the end of such fiscal year, if
the participant remains employed by the Corporation, a bonus of up to a
specified percentage of the participant's salary (45% for executive officers)
will be paid, depending on the level of achievement of such participant's
performance targets. For executive officers, general corporate performance
measures and specific measures within the executive's area of responsibility
are included. Among these corporate performance measures, net income is
generally weighted most heavily. The bonus earned by the Named Executives
under the Incentive Bonus Plan for fiscal 1994 ranged from 39% to 44% of
salary, reflecting the Corporation's strong financial results. Each of the
Named Executives elected to receive the bonus in restricted stock pursuant to
the Key Employee Annual Bonus Plan described in the following paragraph, with
the restricted stock vesting in three years and with the market value of the
shares of restricted stock equal to twice the amount of the cash bonus on the
date of grant. The Named Executives also will receive stock options in
January 1995 pursuant to the Key Employee Annual Bonus Plan, with the
aggregated market value of the shares covered by the option on the date of
grant equal to twice the amount of the cash bonus.
Pursuant to the Key Employee Annual Bonus Plan, adopted for fiscal 1993 and
subsequent years, the Committee may select those key employees (including
executive officers) who are eligible to participate in the plan. Prior to the
beginning of each fiscal year, an employee selected for that fiscal year to
participate in the plan can elect to convert all or any portion of his or her
cash bonus under the Incentive Bonus Plan into a grant of restricted stock, with
the number of shares granted having a market value equal to twice the amount of
the cash bonus. The participant must be employed on the last day of the fiscal
year to receive the restricted stock grant for that fiscal year, and the
restricted stock is granted in January of the following year. The restricted
stock is forfeitable for three years from the date of grant if the participant's
employment with the Corporation terminates for any reason other than death,
disability, retirement or a change of control. In addition, each employee
selected for the fiscal year to participate in this plan who earns a cash bonus
under the Incentive Bonus Plan also receives a non-qualified stock option, with
the number of shares subject to the option determined by dividing twice the
participant's total cash bonus by the market value of the Common Stock.
Twenty-seven members of the Valspar Leadership Group (the top 100 managers of
the Corporation), including all executive officers, were selected to participate
for fiscal year 1994 in the plan. The remaining members of the Valspar
Leadership Group were selected to participate in the Annual Option Bonus Plan,
in which a participant receives stock options, with the number of options equal
to the cash bonus under the Incentive Bonus Plan divided by the market value of
the Common Stock.
In addition, the Management Committee, consisting of all executive officers for
fiscal 1994, participate in the Deferred Bonus Plan, which provides for the
award of deferred cash incentive bonuses. On January 1 of each year, the
Corporation calculates the amount of the deferred bonus for each executive
officer with respect to the Corporation's preceding fiscal year. The amount of
such deferred bonus equals a percentage, ranging from 0% to 15% of the
employee's salary earned in the previous fiscal year, depending on the
Corporation's three-year trailing averages for earnings per share growth, return
on average equity and gallon sales growth computed as set forth in the Deferred
Bonus Plan. These three factors are weighted equally under the plan. The
deferred bonus earned for each of the Named Executives was 15% of salary,
reflecting the Corporation's strong three-year trailing average for these
factors. The deferred bonus becomes payable on the third anniversary of the
calculation date (the "Maturity Date"), and is subject to forfeiture if the
participant voluntarily terminates employment or is discharged for cause prior
to such date. Additionally, the deferred bonus will at the maturity date be
applied toward payment of any outstanding loans under the Corporation's
Leveraged Equity Purchase Plan.
Option Programs. In 1991, the Corporation's stockholders approved the
adoption of the Corporation's 1991 Stock Option Plan and the reservation of
1,000,000 shares of common stock for issuance upon exercise of options
granted thereunder. Options granted under the 1991 Plan are granted at
exercise prices equal to the fair market value of the Corporation's Common
Stock at the closing price on the day preceding the date of grant. The
options granted to the Named Executives, except Richard Rompala, in 1994 were
calculated under the Key Employee Annual Bonus Plan as described under "Bonus
Programs" above, with the aggregated market value of the shares of each
option equal to twice the amount of the executive's cash bonus. The Committee
agreed to grant Mr. Rompala's stock options at the time he commenced
employment with the Corporation.
Deductibility of Compensation. Section 162(m) of the Internal Revenue Code,
enacted in 1993, generally limits to $1 million the tax deductibility of
compensation paid by a public company to its chief executive and four other
most highly compensated executive officers. Certain performance-based
compensation is not subject to the limitation, and regulations have been
proposed under Section 162(m). Based on these proposed regulations, the
Committee believes that certain components of the Corporation's executive
compensation constitute performance-based compensation and are not subject to
the limitation, at least until 1997 when applicable transition rules cease to
be effective. Based on this preliminary conclusion, the Committee believes
the compensation of each of the executive officers will be less than $1
million for the foreseeable future. Further, the Committee believes the new
law and proposed regulations require further clarification and, accordingly,
has not yet taken any specific action or adopted any policy with respect to
the deductibility of compensation under Section 162(m). The Committee intends
to consider ways to maximize the deductibility of future executive
compensation. In the event that total compensation in future years would
exceed the $1 million cap by a significant amount, the Committee will
consider the continued deductibility of future compensation arrangements, but
deductibility will not be the sole factor used by the Committee in
ascertaining appropriate levels or modes of compensation. Since corporate
objectives may not always be consistent with the requirements for full
deductibility, it is conceivable that the Corporation may enter into
compensation arrangements in the future under which compensation in excess of
$1 million is not deductible under Section 162(m).
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In setting Mr. Wurtele's base salary, the Committee considers quantitative
measures related to the Corporation's financial performance as well as a
number of qualitative measures related to Mr. Wurtele's duties and
responsibilities. The Committee also compares Mr. Wurtele's salary with
salaries of chief executive officers of other companies of similar size and
profitability, including, but not limited to, the companies in the peer group
used in connection with the stock performance graph on page 11. Mr. Wurtele's
base salary increased approximately 5% from fiscal 1993 to fiscal 1994. This
increase reflected general corporate performance, based on sales, expenses,
profits, unit growth and return on equity. The Corporation also has a policy
of granting incentive bonuses to Mr. Wurtele under the Incentive Bonus Plan.
Mr. Wurtele's performance targets include net income, gallon sales growth,
return on equity and total expenses. A bonus of up to 45% of Mr. Wurtele's
salary is paid, depending upon the level of achievement of these performance
targets. Net income of the Corporation is weighted most heavily in connection
with Mr. Wurtele's compensation. Mr. Wurtele's bonus earned under the
Incentive Bonus Plan for fiscal 1994 was $219,824 if received in cash, or 44%
of his salary, reflecting the Corporation's strong financial results. As
described above under "Compensation of Executive Officers -- Bonus Programs,"
Mr. Wurtele elected to receive the bonus in restricted stock and will also
receive stock options in January 1995 pursuant to the Key Employee Annual
Bonus Plan. Mr. Wurtele also participates in the Deferred Bonus Plan which is
described above. For fiscal 1994, Mr. Wurtele's deferred bonus was $74,957,
or 15% of salary, reflecting the Corporation's strong three-year trailing
average for earnings per share growth, return on average equity and gallon
sales growth.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS:
Susan S. Boren Kendrick B. Melrose
William W. George Lawrence Perlman
Thomas R. McBurney Michael P. Sullivan
STOCK PERFORMANCE GRAPH
The graph below compares the Corporation's cumulative total shareholder
return for the last five fiscal years with the cumulative total return of (1)
the Standard & Poor's 500 Stock Index and (2) a Peer Group of companies
selected by the Corporation on a line-of-business basis. The graph assumes
the investment of $100 in the Corporation's Common Stock, the S&P 500 Index
and the Peer Group at the end of fiscal 1989 and the reinvestment of all
dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG VALSPAR CORPORATION, THE S&P 500 INDEX AND A PEER GROUP*
CUMULATIVE TOTAL RETURN
1989 1990 1991 1992 1993 1994
Valspar $100 $101 $151 $214 $270 $313
Peer Group $100 $ 92 $130 $161 $180 $203
S&P 500 $100 $ 89 $115 $123 $137 $139
Assumes $100 invested on October 31, 1989 in the Common Stock of The Valspar
Corporation, the S&P 500 Index and a line-of-business Peer Group, including
reinvestment of dividends.
*PPG Industries, Inc., Rohm and Haas Company, Ferro Corporation, NL
Industries, Inc., H.B. Fuller Company, The Sherwin-Williams Company, RPM,
Inc., Grow Group, Inc., Standard Brands Paint Company, Pratt & Lambert, Inc.,
Lilly Industries, Inc., Lawter International, Inc., Guardsman Products, Inc.,
Detrex Corporation.
PROPOSAL NUMBER TWO
APPOINTMENT OF AUDITORS
Unless otherwise directed by the stockholders, shares represented by proxy at
the meeting will be voted in favor of ratification of the appointment of the
firm of Ernst & Young LLP to examine the accounts of the Corporation for the
year ending October 27, 1995. Management believes that neither Ernst & Young
LLP nor any of its partners presently has or has held within the past three
years any direct or indirect interest in the Corporation. A representative of
Ernst & Young LLP is expected to be present at the 1995 annual meeting and
will be given an opportunity to make a statement if so desired and to respond
to appropriate questions.
At least once each year, the non-officer directors, acting as the Audit
Committee, review the services that may be provided by Ernst & Young LLP
during the year, consider the effect that performing such services might have
on audit independence, and approve guidelines under which management may
engage Ernst & Young LLP to perform non-audit services.
OUTSTANDING SHARES AND VOTING RIGHTS
Stockholders of record on December 30, 1994 will be entitled to receive
notice of and vote at the meeting. As of the record date, there were
outstanding and entitled to be voted at the meeting 21,544,479 shares of
Common Stock, each share being entitled to one vote.
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following information concerning ownership of Common Stock of the
Corporation is furnished as of the record date with respect to all persons
known by the Corporation to be the owner, of record or beneficially, of more
than five percent of the outstanding Common Stock of the Corporation. Unless
otherwise indicated, the stockholders listed in the table below have sole
voting and investment powers with respect to the shares indicated.
NAME AND ADDRESS SHARES PERCENT
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
C. Angus Wurtele 2,674,626(1) 12.4%
1101 Third Street South
Minneapolis, MN 55415
Norwest Bank Minnesota, N.A. 3,986,383(2) 18.5%
6th and Marquette
Minneapolis, MN 55479
Nicholas Company, Inc. 1,114,200(3) 5.2%
700 North Water Street
Milwaukee, WI 54202
(1) Includes 93,246 shares held as of October 31, 1994 through the Valspar
Stock Ownership Trust, 7,896 shares held as of October 31, 1994 through the
Valspar Profit Sharing Plan, 2,074 shares which may be acquired within 60
days by exercise of an outstanding option, 10,000 shares owned by Mr.
Wurtele's wife and 691,040 shares held for his benefit as co-trustee with
Norwest Bank Minnesota, N.A. Includes 4,850 shares held in trust for a child
for which his wife is co-trustee and 36,000 shares held in trust for a child
for which Norwest Bank Minnesota, N.A. is co-trustee. Does not include
400,900 shares held in trust for benefit of adult children for which Norwest
Bank Minnesota, N.A. is co-trustee. Mr. Wurtele disclaims any beneficial
ownership of such excluded shares.
(2) Norwest Bank Minnesota, N.A., as trustee, reports shared investment and
voting power over 3,809,300 shares of Common Stock, including the shares
disclosed in Note (1) above.
(3) Nicholas Company, Inc., as an investment advisor, reports no voting power
over such shares and sole investment power over all such shares.
SHARE OWNERSHIP OF MANAGEMENT
The following table lists, as of December 30, 1994, the beneficial ownership
of Common Stock for all directors, each of the Named Executives and all
directors and executive officers as a group. Except as otherwise indicated,
no director or executive officer owns as much as 1% of the total outstanding
shares of Common Stock.
Name Shares(1) Name Shares(1)
Susan S. Boren 2,250 Gregory R. Palen 3,877(3)
Richard N. Cardozo 4,112 Robert E. Pajor 291,496(2)(4)
Rolf Engh 13,268(2) Lawrence Perlman 1,675
William W. George 15,432 Paul C. Reyelts 161,479(2)(5)
Thomas R. McBurney 4,860 Richard M. Rompala 29,090(2)
Kendrick B. Melrose 5,487 Michael P. Sullivan 4,708(6)
All directors and executive
officers as a group 3,355,864(2)(7)
(1) Except as otherwise indicated, each person possesses sole voting and
investment power with respect to shares shown as beneficially owned.
(2) Includes shares indirectly owned as of October 31, 1994 through the
Valspar Stock Ownership Trust and the Valspar Profit Sharing Plan,
respectively and over which each participant has sole voting power, as
follows: Mr. Pajor - 77,404, 5,133; Mr. Rompala - 0, 0; Mr. Engh - 161,
1,807; Mr. Reyelts - 15,292, 2,056; and executive officers as a group,
208,902, 17,259. Also includes the following numbers of shares which may be
acquired within 60 days by exercise of outstanding options under the
Corporation's stock option plans, as follows: Mr. Pajor, 27,585 shares; Mr.
Rompala, -0- shares; Mr. Engh, 6,300 shares; Mr. Reyelts, 7,268 shares; and
executive officers as a group, 71,091 shares.
(3) Includes 60 shares owned by Mr. Palen's wife.
(4) Includes 40,000 shares owned by Mr. Pajor's wife. Mr. Pajor beneficially
owns 1.4% of the outstanding Common Stock.
(5) Includes 800 shares owned by Mr. Reyelts' wife.
(6) Does not include 729 shares owned by household members for which Mr.
Sullivan disclaims any beneficial ownership.
(7) Represents 15.6% of the outstanding Common Stock. Includes shares owned
by C. Angus Wurtele as indicated under "Share Ownership of Certain Beneficial
Owners" above.
ADDITIONAL INFORMATION
OTHER BUSINESS
Management is not aware of any matters to be presented for action at the
meeting, except matters discussed in the Proxy Statement. If any other
matters properly come before the meeting, it is intended that the shares
represented by proxies will be voted in accordance with the judgment of the
persons voting the proxies.
1996 STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Annual Meeting in
1996 must be submitted to the Corporation in appropriate written form on or
before September 29, 1995.
By Order of the Board of Directors,
ROLF ENGH,
Secretary
Minneapolis, Minnesota
January 20, 1995
PLEASE SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
PROXY
THE VALSPAR CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints THOMAS R. MCBURNEY, ROBERT E. PAJOR, RICHARD M.
ROMPALA and C. ANGUS WURTELE, and each of them, as proxies with full power of
substitution, to vote on behalf of the undersigned the same number of shares
which the undersigned is then entitled to vote, at the Annual Meeting of the
Stockholders of The Valspar Corporation to be held on Wednesday, February 22,
1995 at 11:00 A.M., at the offices of the Corporation at 1101 Third Street
South, Minneapolis, Minnesota, and at any adjournments thereof, on any matter
properly coming before the meeting, and specifically the following:
(continued on the other side)
PLEASE MARK YOUR VOTES [ ](filled in square box) OR [x]
(1) To elect four directors (Class III) for a term of three years:
WILLIAM W. GEORGE, KENDRICK B. MELROSE, GREGORY R. PALEN, LAWRENCE PERLMAN
FOR all Nominees listed
(except as marked to
the contrary)
[ ]
WITHHOLD authority
to vote for all
nominees listed
[ ]
(Instructions: To withhold authority to vote for any nominee, write that
nominee's name in the space provided below.)
(2) Ratification of the appointment of
Ernst & Young LLP as the independent
public accountants of the Corporation.
For Against Abstain
[ ] [ ] [ ]
(3) The undersigned authorizes the Proxies to vote in their discretion upon
such other business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR items 1 and 2.
Signature of Stockholder(s)
Date:
Note: Please sign your name exactly as it is shown at the left. When signing as
attorney, executor, administrator, trustee, guardian or corporate officer,
please give your full title as such. EACH joint owner is requested to sign.
Please sign, date and return this proxy promptly in the enclosed
postage paid envelope.
