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 [x]
Filed by a party other than the registrant [ ]
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.
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 28, 1996
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 28, 1996 at 11:00 A.M., for the following
purposes:
1. To elect four directors (Class I) for a term of three years;
2. To approve an increase in the shares reserved under Key
Employee Annual Bonus Plan.
3. To ratify the appointment of independent auditors to examine
the Corporation's accounts for the fiscal year ending October
25, 1996; and
4. 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 29, 1995 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 27, 1995 also accompanies this
Notice.
By Order of the Board of Directors,
ROLF ENGH,
Secretary
Approximate Date of Mailing of Proxy Material:
January 26, 1996
PLEASE SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
[LOGO]
1101 THIRD STREET SOUTH
P.O. BOX 1461
MINNEAPOLIS, MINNESOTA 55440
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 28, 1996
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. Thomas R.
McBurney, Richard M. Rompala, Michael P. Sullivan and C. Angus Wurtele are the
directors in Class I, with terms expiring at the annual meeting in 1996. The
Board of Directors has nominated Messrs. McBurney, Rompala, Sullivan and Wurtele
for re-election as Class I 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 I below, to hold
office until the annual meeting in 1999 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 NOMINEES FOR TERM EXPIRING IN 1999
THOMAS R. MCBURNEY President, McBurney Management Advisors,
Director since 1987 a management consulting firm for small businesses
Age -- 57
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.
Mr. McBurney is also a director of Security American Financial Enterprises,
Wenger Corporation, Space Center Enterprises, Inc. and Greenspring Companies.
RICHARD M. ROMPALA President and Chief Executive Officer
Director since 1994 of the Corporation
Age -- 49
Mr. Rompala has held his present position as Chief Executive Officer since
October 1995 and President since March 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 -- 61
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 of the Corporation
Director since 1970
Age -- 61
Mr. Wurtele has held his present position as Chairman since 1973 and served as
Chief Executive Officer from 1973 through October 1995. 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 Former Senior Vice President-Customer
Director since 1991 Development/Direct Response,
Age -- 48 Department Store Division
of Dayton Hudson Corporation
Prior to 1996, Ms. Boren served 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. Ms. Boren is also a director of Inter-Regional
Financial Group Inc.
RICHARD N. CARDOZO Carlson Chair in Entrepreneurial Studies
Director since 1976 and Professor of Marketing, Curtis L. Carlson
Age -- 59 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 -- 59
Mr. Pajor has held his present position since 1994 and served as President and
Chief Operating Officer of the Corporation since 1981.
CLASS III DIRECTORS CONTINUING IN OFFICE UNTIL 1998
WILLIAM W. GEORGE President and Chief Executive Officer,
Director since 1984 Medtronic, Inc.
Age -- 53
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 -- 55
Mr. Melrose has held his present position as Chief Executive Officer since 1983
and Chairman since 1987. Mr. Melrose is also a director of BSI Corporation,
Donaldson Company, Inc. and The Toro Company.
GREGORY R. PALEN Chairman and Chief Executive Officer,
Director since 1992 Spectro Alloys Corporation; Chief
Age -- 40 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
Director since 1992 Officer, Ceridian Corporation
Age -- 57
Mr. Perlman was elected Chairman of the Board in November 1992 and has held the
position of President and Chief Executive Officer since 1990. Mr. Perlman is
also a director of Seagate Technology, Inc., Computer Network Technology, Kmart
Corporation and Inter-Regional Financial Group Inc.
BOARD COMMITTEES
The standing committees of the Board of Directors for 1995 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 1995.
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 Compensation and Nominating Committee held two 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 1995, each director attended 75% or more of the meetings of the
Board and of the committees on which the director served.
DIRECTOR COMPENSATION
Directors who are not officers of the Corporation receive an annual fee of
$16,000, 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, 1996,
directors who were not officers of the Corporation received an annual fee of
$14,000. 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. The outstanding loans bear an
interest rate ranging from 6.5% to 8%. The following lists each executive
officer whose loan from the Corporation exceeded $60,000 at any time during
fiscal 1995, and indicates (i) the largest loan amount outstanding for such
officer at any time since October 28, 1994, and (ii) the loan amount outstanding
for such officer as of December 29, 1995:
LARGEST AMOUNT
NAME OF OUTSTANDING AMOUNT OUTSTANDING
EXECUTIVE OFFICER SINCE OCTOBER 28, 1994 AS OF DECEMBER 29, 1995
Larry B. Brandenburger $430,871 $430,871
Stephen M. Briggs 219,203 218,448
Rolf Engh 188,647 182,691
Steven L. Erdahl 404,844 404,844
William L. Mansfield 186,203 185,847
Robert E. Pajor 325,196 241,062
Paul C. Reyelts 326,726 326,726
Richard M. Rompala 971,141 945,948
C. Angus Wurtele 420,721 308,144
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ended October 27, 1995, October
28, 1994 and October 29, 1993, 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, as
of the end of fiscal 1995, 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 1995 $520,763 $ 62,492 $282,254 13,195 $76,822
Chairman of the Board and 1994 499,712 74,957 439,648 10,370 85,630
Chief Executive Officer(6) 1993 476,838 47,684 308,991 -0- 70,214
Robert E. Pajor 1995 434,707 52,165 235,612 10,820 63,058
Vice Chairman 1994 409,700 61,455 360,455 8,366 68,408
1993 384,709 38,471 249,291 1,052 54,652
Richard M. Rompala 1995 431,539 51,785 233,894 8,800 74,716
President(6) 1994 223,082 250,000(7) 293,266 58,185 -0-
1993 -- -- -- -- --
William L. Mansfield 1995 195,769 23,492 153,874 8,815 25,537
Vice President, Packaging 1994 178,942 58,612 63,542 410 29,133
1993 169,712 20,026 6,110 435 20,735
Paul C. Reyelts 1995 220,769 26,492 112,710 4,760 28,988
Vice President, Finance 1994 202,885 30,433 158,656 4,240 36,171
1993 192,885 19,288 126,339 561 26,723
</TABLE>
* As of October 27, 1995.
(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 these fiscal years 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 1995, 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 27, 1995, 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, 21,419 shares, $827,309; Mr. Pajor, 17,453 shares, $674,122;
Mr. Rompala, 8,800 shares, $339,900; Mr. Mansfield, 2,070 shares,
$79,954; Mr. Reyelts, 8,124 shares, $313,790. Dividends are paid on
shares of restricted stock from the date of grant.
(4) Options indicated for fiscal 1995 were granted pursuant to the Key
Employee Annual Bonus Plan based on twice the level of each
individual's cash bonus for fiscal 1994, except that Mr. Rompala's 1994
option was granted in connection with his initial employment with the
Corporation. Options indicated for fiscal 1995 exclude options granted
in January 1996 pursuant to the Key Employee Annual Bonus Plan based on
twice the level of cash bonus for fiscal 1995. 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.
(6) As of October 28, 1995, Mr. Rompala was elected Chief Executive
Officer. Mr. Rompala joined the Company in March, 1994.
(7) Includes a bonus of $200,000 received upon joining the Company.
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 1995:
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 13,195 6.2 $34.50 1/5/05 $286,332 $725,461
Robert E. Pajor 10,820 5.1 34.50 1/5/05 234,794 594,884
Richard M. Rompala 8,800 4.2 34.50 1/5/05 190,960 483,824
William L. Mansfield 8,815 4.2 34.50 1/5/05 191,286 484,649
Paul C. Reyelts 4,760 2.3 34.50 1/5/05 103,292 261,705
</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 1995 and unexercised options
held as of October 27, 1995:
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 27, 1995 AT OCTOBER 27, 1995(2)
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
C. Angus Wurtele 0 -- 2,074 21,491 $ 19,185 $134,466
Robert E. Pajor 1,890 $ 37,559 25,695 17,513 561,501 109,248
Richard M. Rompala 0 -- 11,637 55,348 52,367 247,966
William L. Mansfield 2,600 69,592 11,021 9,143 252,012 41,600
Paul C. Reyelts 5,040 117,262 2,228 8,152 28,063 52,201
</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 27, 1995.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Nominating Committee of the Board of Directors (the
"Compensation Committee" or 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 8% from 1994
to 1995. The increases for 1995 reflected general corporate performance, based
on sales, expenses, profits, unit growth and return on equity for fiscal 1994.
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 1995 ranged from 25% to 39% of salary. 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 1996
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. See
"Proposal Two -- Approval of Increase in Shares Reserved Under Key Employee
Annual Bonus Plan." Twenty-nine members of the Valspar Leadership Group (the top
100 managers of the Corporation), including all executive officers, were
selected to participate for fiscal year 1995 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 1995, 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 12% of salary,
reflecting the Corporation's 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 in
1995 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.
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. In December 1995, the Internal Revenue Service
issued final regulations under Section 162(m). The Committee will continue to
consider the continued deductibility of future compensation arrangements, in
light of the final regulations, as one factor to consider in executive
compensation decisions for executives. The Company will comply with the
regulations if compliance is consistent with corporate objectives. However,
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 is not fully deductible under Section 162(m).
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In setting Mr. Wurtele's base salary, the Committee considered 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 compared 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 4% from fiscal 1994 to fiscal 1995. This increase
reflected general corporate performance, based on sales, expenses, profits, unit
growth and return on equity. The Corporation also had a policy of granting
incentive bonuses to Mr. Wurtele under the Incentive Bonus Plan. Mr. Wurtele's
performance targets included net income, gallon sales growth, return on equity
and total expenses. Mr. Wurtele was eligible for a bonus of up to 45% of his
salary, depending upon the level of achievement of these performance targets.
Net income of the Corporation was weighted most heavily in connection with Mr.
Wurtele's compensation. Mr. Wurtele's bonus earned under the Incentive Bonus
Plan for fiscal 1995 was $141,127 if received in cash, or 27% of his salary. 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 1996 pursuant to the Key Employee Annual Bonus
Plan. Mr. Wurtele also has participated in the Deferred Bonus Plan which is
described above. For fiscal 1995, Mr. Wurtele's deferred bonus was $62,492, or
12% of salary, reflecting the Corporation's 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 1990 and the reinvestment of all dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG THE VALSPAR CORPORATION, THE S&P 500 INDEX AND A PEER GROUP*
[GRAPH]
CUMULATIVE TOTAL RETURN
1990 1991 1992 1993 1994 1995
Valspar $100 $149 $212 $267 $309 $332
Peer Group $100 $142 $175 $196 $222 $227
S&P 500 $100 $133 $147 $169 $176 $220
Assumes $100 invested on October 31, 1990 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., Standard Brands Paint Company, Pratt & Lambert, Inc., Lilly Industries,
Inc., Lawter International, Inc., Guardsman Products, Inc., Detrex
Corporation. Grow Group, Inc. was excluded from the Peer Group as a result of
being acquired by another company during 1995.
PROPOSAL NUMBER TWO
APPROVAL OF INCREASE IN SHARES RESERVED UNDER KEY EMPLOYEE ANNUAL BONUS PLAN
On December 13, 1995, the Board of Directors of the Corporation amended The
Valspar Corporation Key Employee Annual Bonus Plan (the "Annual Bonus Plan"),
subject to approval by the stockholders, to increase the total number of shares
of Common Stock available for issuance under the Annual Bonus Plan. The
amendment increases the total number of shares available for grants of
restricted stock under the Annual Bonus Plan by 500,000 shares, to a total of
700,000 shares. The additional shares will be used by the Corporation to
continue the existing bonus program consistent with the purposes of the Annual
Bonus Plan.
SUMMARY OF THE ANNUAL BONUS PLAN
On February 24, 1993, the stockholders of the Corporation adopted the Annual
Bonus Plan. The Corporation reserved up to 200,000 shares of Common Stock for
grants of restricted stock under the Annual Bonus Plan and filed a registration
statement covering the issuance of such shares. The Corporation adopted the
Annual Bonus Plan primarily to afford certain key employees (including executive
officers), upon whose judgment, initiatives and efforts the Corporation is
largely dependent for the successful conduct of its business, the opportunity to
obtain a proprietary interest in the growth and performance of the Corporation.
This purpose is accomplished by encouraging the conversion of performance based
cash bonuses to grants of the Corporation's restricted stock and by granting
options to acquire the Corporation's stock based on the performance of the
participant.
Administration and Types of Awards. The Annual Bonus Plan is administered by the
Board's Compensation Committee which has the power to interpret the Annual Bonus
Plan and select those key employees (including executive officers) who are
eligible to receive restricted stock and stock options pursuant to the Annual
Bonus Plan in connection with their cash bonus under the Corporation's Incentive
Bonus Plan. Twenty-nine members of the Valspar Leadership Group (the top 100
managers of the Corporation), including all executive officers, were selected to
participate for fiscal 1995 in the Annual Bonus Plan.
Prior to the beginning of each fiscal year, an employee selected for that fiscal
year to participate in the Annual Bonus Plan can elect to convert all or any
portion of the cash bonus that the participant may earn under the Annual Bonus
Plan into a grant of restricted stock. The number of shares granted shall be
determined by dividing twice the amount of the cash bonus that is converted into
restricted stock by the average closing price of the Corporation's Common Stock
for the ten business days immediately prior to the date on which the cash bonus
will otherwise be paid. On December 29, 1995, the closing sale price of the
Corporation's Common Stock was $44.625 per share.
The participant must be employed on the last day of any fiscal year to receive
any restricted stock grant for that fiscal year. Any restricted stock generally
shall be 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." For purposes of the Annual
Bonus Plan, a "change of control" means: (i) an increase or decrease of any
person's equity ownership in the Corporation by more than twenty percentage
points from the level on February 24, 1993, or (ii) certain changes in the
composition of the Corporation's Board of Directors.
In addition, each employee selected for the fiscal year to participate in the
Annual Bonus Plan who earns a cash bonus under the Incentive Bonus Plan shall
receive a nonqualified stock option. Such options are granted under the terms of
the 1991 Stock Option Plan and do not reduce the number of shares available for
restricted stock grants under the Annual Bonus Plan. Each option will be granted
on the date on which the participant's cash bonus option shall be determined,
with the number of shares subject to the option determined by dividing twice the
participant's total cash bonus by the average closing price of the Corporation's
Common Stock for the ten business days prior to the date on which the cash bonus
will be paid. The option price shall be the closing price of a share of the
Corporation's Common Stock on the day prior to the date on which the number of
shares included in the nonqualified stock option is determined. Generally, each
option shall have a term of ten years and shall become exercisable as to 20% of
shares on each of the five succeeding anniversaries of the date of grant. If the
participant's employment terminates because of death, disability, retirement or
a "change of control," the option shall immediately become fully exercisable.
Amendment. The Board of Directors or the Compensation Committee may terminate or
amend the Annual Bonus Plan at any time, except that the terms of the
nonqualified stock options or restricted stock grants then outstanding shall not
be affected without the consent of the participant. Neither the Board of
Directors nor the Compensation Committee may amend the Annual Bonus Plan without
the approval of the Corporation's stockholders if the amendment would materially
increase the total number of shares of Common Stock that may be granted to
participants, materially increase the benefits accruing to any participant or
materially modify the requirements as to eligibility for participation in the
Annual Bonus Plan.
Certain Federal Income Tax Considerations. Participants who receive all or any
portion of their cash bonus in the form of restricted stock are not required to
recognize compensation taxable as ordinary income in the year that the
restricted stock is granted. Instead, these participants will recognize
compensation taxable as ordinary income for the year in which the shares of
stock are no longer subject to a risk of forfeiture. Any dividends paid with
respect to restricted stock prior to the time that the risk of forfeiture lapses
will be treated as additional compensation income, while dividends paid after
the risk of forfeiture lapses will be taxed as dividend income.
Nonqualified stock options granted to participants under the terms of the 1991
Stock Option Plan are not intended to and do not qualify for the favorable tax
treatment available to incentive stock options under Section 422 of the Internal
Revenue Code. Generally, no tax results upon the grant of a nonqualified stock
option. In the year that the nonqualified stock option is exercised, the
participant must recognize compensation taxable as ordinary income equal to the
difference between the option price and the fair market value of the shares on
the date of exercise.
The Corporation will receive a deduction equal to the amount of compensation the
participant is required to recognize as ordinary income, whether from a cash
payment, the lapse of the risk of forfeiture on restricted stock or the exercise
of a nonqualified stock option, if the Corporation complies with any applicable
federal income tax withholding.
RESTRICTED STOCK GRANTED UNDER THE ANNUAL BONUS PLAN
Approximately 160,844 shares of restricted stock have been granted to date under
the Annual Bonus Plan. The maximum number of shares currently issuable for
restricted stock grants under the Annual Bonus Plan is 200,000. On adoption of
the proposed amendment, the maximum aggregate number of shares issuable under
the Annual Bonus Plan will be increased to 700,000.
The following table sets forth information as to the restricted stock that was
granted to each of the Named Executives and each of the groups described below
for performance in fiscal 1995 pursuant to the Annual Bonus Plan. Each grant of
restricted stock under the Annual Bonus Plan vests on the third anniversary of
its grant.
1995 RESTRICTED STOCK GRANTS
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL POSITION OR TITLE NUMBER OF
OR NUMBER IN GROUP AS OF OCTOBER 27, 1995 DOLLAR VALUE ($) SHARES GRANTED
<S> <C> <C> <C>
C. Angus Wurtele CEO and Chairman $ 282,254 6,437
Robert E. Pajor Vice Chairman 235,612 5,373
Richard M. Rompala President 233,894 5,334
William L. Mansfield Vice President, Packaging 153,874 3,509
Paul C. Reyelts Vice President, Finance 112,710 2,570
All executive officers
as a group, consisting of 9 persons $1,344,111 30,652
Non-executive employee group $ 778,171 17,746
</TABLE>
Each participant in the Annual Bonus Plan also received a nonqualified stock
option to purchase a number of shares of Common Stock approximately equal to the
number of shares of restricted stock set forth above, pursuant to the terms
described under "Summary of the Annual Bonus Plan".
VOTE REQUIRED
The Board recommends that the stockholders approve the increase in the shares
authorized for grants of restricted stock under the Annual Bonus Plan. The
affirmative vote of the majority of the shares represented at the annual meeting
is required for approval of the Annual Bonus Plan.
PROPOSAL NUMBER THREE
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 25, 1996. 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 1996 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 29, 1995 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 21,996,071 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, unless otherwise indicated, 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 2,678,736(1) 12.2%
1101 Third Street South
Minneapolis, MN 55415
Norwest Bank Minnesota, N.A. 3,937,707(2) 17.9%
6th and Marquette
Minneapolis, MN 55479
Nicholas Company, Inc. 1,112,200(3) 5.1%
700 North Water Street
Milwaukee, WI 54202
The Capital Group Companies, Inc. 2,304,140(4) 10.5%
333 South Hope Street
Los Angeles, CA 90071
(1) Includes 93,622 shares held as of October 31, 1995 through the Valspar
Stock Ownership Trust, 8,724 shares held as of October 31, 1995 through
the Valspar Profit Sharing Plan, 6,787 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 397,100 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 3,769,292 shares of Common Stock, including the
shares disclosed in Note (1) above.
(3) Nicholas Company, Inc., as an investment adviser, reports no voting
power over such shares and sole investment power over all such shares.
(4) Shares reported on Schedule 13G as of April 30, 1995. Certain operating
subsidiaries of The Capital Group Companies, Inc., exercised investment
discretion over various institutional accounts which held as of April
30, 1995, 2,304,140 shares of the Corporation. Capital Guardian Trust
Company, a bank, and one of such operating companies, exercised
investment discretion over 623,940 of said shares. Capital Research and
Management Company, a registered investment adviser, and Capital
International Limited and Capital International, S.A., other operating
subsidiaries, had investment discretion with respect to 1,509,000,
53,900 and 117,300 shares, respectively, of the above shares.
SHARE OWNERSHIP OF MANAGEMENT
The following table lists, as of December 29, 1995, 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 2,898 Gregory R. Palen 4,511(3)
Richard N. Cardozo 4,366 Robert E. Pajor 306,031(2)(4)
William W. George 15,697 Lawrence Perlman 2,306
William L. Mansfield 35,598(2) Paul C. Reyelts 175,774(2)(5)
Thomas R. McBurney 5,519 Richard M. Rompala 51,516(2)
Kendrick B. Melrose 6,146 Michael P. Sullivan 5,367(6)
All directors and executive
officers as a group 3,461,416(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, 1995 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 -- 77,779, 5,140; Mr. Rompala -- 229, 0; Mr.
Mansfield -- 4,392, 0; Mr. Reyelts -- 15,706, 4,376; and executive
officers as a group, 212,216, 20,681. 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, 29,532 shares; Mr. Rompala, 13,397 shares; Mr.
Mansfield, 12,866 shares; Mr. Reyelts, 4,028 shares; and executive
officers as a group, 97,701 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 263 shares owned by household member for which Mr.
Sullivan disclaims any beneficial ownership.
(7) Represents 15.7% 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.
1997 STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Annual Meeting in 1997
must be submitted to the Corporation in appropriate written form on or before
September 30, 1996.
By Order of the Board of Directors,
ROLF ENGH,
Secretary
Minneapolis, Minnesota
January 26, 1996
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 28, 1996 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 vote as indicated in this example [x]
(1) To elect four directors (Class I) for a term of three years:
THOMAS R. MCBURNEY, RICHARD M. ROMPALA, MICHAEL P. SULLIVAN, C. ANGUS WURTELE
FOR all nominees listed WITHHOLD authority
(except as marked to to vote for all
the contrary) nominees listed
[ ] [ ]
(Instructions: To withhold authority to vote for any nominee, write that
nominee's name in the space provided below.)
(2) To approve an increase in the shares reserved under the Corporation's Key
Employee Annual Bonus Plan.
For Against Abstain
[ ] [ ] [ ]
(3) Ratification of the appointment of Ernst & Young LLP as the independent
public accountants of the Corporation.
For Against Abstain
[ ] [ ] [ ]
(4) 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, 2 and 3.
_____________________________________
_____________________________________
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.
APPENDIX A
THE VALSPAR CORPORATION
KEY EMPLOYEE ANNUAL BONUS PLAN
PURPOSE:
The purpose of The Valspar Corporation Key Employee Annual Bonus Plan is to more
closely align the goals and motivation of management with those of other Valspar
shareholders and to provide key personnel with a long-term capital appreciation
opportunity. This purpose is accomplished by granting options to acquire Valspar
stock based on the performance of the Participant and Valspar and by encouraging
the conversion of performance based cash bonuses to grants of restricted Valspar
stock.
DEFINITIONS:
"Bonus and Election Form" shall mean the form used from time to time by Valspar
for Participants to make elections under the Plan for each Fiscal Year.
"Cash Bonus Amount" shall mean the amount determined for a Participant for a
particular Fiscal Year as set forth in Section 2 below. The amount of the Cash
Bonus Amount will not change if all or part is converted into a restricted stock
grant pursuant to the terms of this Plan.
"Change of Control" shall be deemed to have occurred if (i) any person increases
or decreases its percentage equity ownership in Valspar by more than twenty
percentage points from that person's percentage equity ownership in Valspar on
the date hereof or (ii) a majority of the members of the board of directors of
Valspar were not nominated and approved by the board of directors as it existed
prior to the election of such directors. For the purposes of this definition, a
"person" shall include an individual, corporation, partnership, trust or other
legal entity or any group of such persons acting in concert. In calculating the
ownership interest of any person, all securities for which such person is a
beneficial owner as that term is used in Rule 13d-3, as then in effect, under
the Securities Exchange Act of 1934 shall be included.
"Compensation Committee" shall mean the compensation committee of the Board of
Directors of Valspar as constituted from time to time; provided, however, each
member of the Compensation Committee shall be a "disinterested person" within
the meaning of Rule 16b-3, as then in effect, under the Securities Exchange Act
of 1934.
"Disability" shall mean permanent disability as that term is defined under the
long term disability insurance coverage offered by Valspar to its employees at
the time the determination is to be made.
"Eligible Employee" shall mean an Employee that the Compensation Committee has
determined to permit to become a Participant.
"Employee" shall mean each person who is an employee of Valspar which term shall
include both full and part-time employees but shall not include independent
contractors providing services to Valspar.
"Fiscal Year" shall mean the period corresponding with each of the fiscal years
of Valspar.
"Option Plan" shall mean The Valspar Corporation 1991 Stock Option Plan.
"Participant" shall mean an Eligible Employee that has executed a Bonus and
Election Form and who remains a Participant pursuant to the provisions of
Section 1 of the Plan.
"Plan" shall mean The Valspar Corporation Key Employee Annual Bonus Plan, as set
forth herein and as amended from time to time.
"Plan Administrator" shall mean the person or persons designated as such from
time to time by the Compensation Committee. If no person is designated as the
Plan Administrator, the Plan Administrator shall be the Secretary of Valspar.
"Retirement" shall mean the termination of employment with Valspar at any time
after the Employee has attained the age of sixty years for any reason other than
Termination for Cause.
"Stock" shall mean the common stock of Valspar, par value $.50 per share.
"Termination for Cause" shall mean the termination of employment with Valspar as
a result of an illegal act, gross insubordination or willful violation of a
Valspar policy by an Employee.
"Valspar" shall mean The Valspar Corporation, a Delaware corporation, with its
principal offices in Minneapolis, Minnesota.
PLAN:
1. Participants.
From time to time, the Compensation Committee shall determine the Employees
who will be Eligible Employees under the Plan. As soon as possible after the
Compensation Committee has made its determination, the Plan Administrator will
notify each Eligible Employee of her/his eligibility. An Eligible Employee shall
become a participant by executing a Bonus and Election Form and filing it with
the Plan Administrator. A Participant will cease being a Participant upon the
earlier of (i) her/his termination of employment with Valspar for any reason or
(ii) a determination by the Compensation Committee that he/she shall no longer
be an Eligible Employee.
2. Cash Bonus Amount.
Each Participant will be eligible to earn a Cash Bonus Amount calculated as
a percentage of that Participant's base salary for the Fiscal Year based on the
performance of the Participant and/or Valspar for such Fiscal Year as determined
by the Participant and his/her supervisor and as recorded in writing in an
individual bonus plan for such Participant. A Participant must be an Employee on
the last day of the Fiscal Year to earn any Cash Bonus Amount.
3. Restricted Stock Grant.
(a) A Participant may elect prior to the beginning of each Fiscal Year to
convert all or any portion of his/her Cash Bonus Amount for that Fiscal Year
into a grant of restricted Stock. The number of shares of Stock contained in the
grant of restricted Stock for each Fiscal Year shall be determined by dividing
twice the Cash Bonus Amount for that Fiscal Year that is converted into a grant
of restricted Stock by the average closing price of one share of Stock on the
New York Stock Exchange for the ten business days immediately prior to the date
on which the Cash Bonus Amount for such Fiscal Year was to be paid.
(b) Notwithstanding the fact that the number of shares of Stock contained
in the grant of restricted Stock is not determined until after the end of each
Fiscal Year, a Participant who is a Participant on the last day of a Fiscal Year
shall be entitled to his/her Cash Bonus Amount and/or grant of restricted Stock
for such Fiscal Year even if such Participant is not a Participant on the date
the Cash Bonus Amount is determined or paid or when the number of shares of
Stock to be contained in the grant of restricted Stock is determined or the
certificate representing those shares is issued.
(c) Immediately upon determination of the number of shares of Stock
contained in the grant of restricted Stock, Valspar shall cause to be issued a
stock certificate representing such shares of Stock in the name of the
Participant. All certificates representing shares of Stock that are subject to
the risk of forfeiture set forth in Section 3(d) below shall be held for Valspar
by the Plan Administrator; provided, however, the person in whose name the
certificate is issued shall be entitled to vote the shares represented by such
certificate and receive dividends attributable thereto until such time, if ever,
the shares are forfeited pursuant to Section 3(d) below.
(d) The shares of Stock contained in each grant of restricted Stock are
forfeitable for three years from the date of the grant if the Participant's
employment with Valspar terminates for any reason other than death, Disability,
Retirement or Change of Control. Such shares of Stock shall not be forfeitable
if the Participant's employment with Valspar terminates during such three year
period as a result of the Participant's death, Disability or Retirement or a
Change of Control of Valspar or if the Participant's employment with Valspar
terminates after the end of such three year period. At such time as the
foregoing risk of forfeiture lapses, the certificate representing the shares of
Stock shall be distributed to the person in whose name it was issued, or if
appropriate that person's estate. If the shares of Stock are forfeited, the
certificate representing those shares shall be cancelled.
4. Nonstatutory Stock Options.
(a) For each Fiscal Year, each Participant that earns a Cash Bonus Amount
for that Fiscal Year, will be granted a nonstatutory stock option under the
Option Plan. The number of shares of Stock included in the nonstatutory stock
option will be determined by dividing twice the Cash Bonus Amount by the average
closing price of one share of Stock on the New York Stock Exchange for the ten
business days prior to the date on which the Cash Bonus Amount for such Fiscal
Year was to be paid.
(b) Each such option shall be evidenced by an option agreement between the
Participant and Valspar which shall be prepared and executed as soon as possible
after the determination of the number of shares of Stock to be covered by the
option. The option agreement shall provide for an exercise price per share equal
to the closing price of one share of Stock on the New York Stock Exchange on the
day prior to the date on which the number of shares of Stock included in the
nonstatutory stock option is determined, a term of ten years, vesting at the
rate of 20% per year so that the option will be fully exercisable five years
after the date of grant and will permit the option to be exercised by
surrendering other shares of Stock owned by the Participant. The option
agreement shall also provide for full vesting in the event that the
Participant's employment with Valspar terminates as a result of death,
Disability, Retirement or Change of Control. Except in the case of Termination
for Cause, the option agreement shall permit the exercise of the vested portion
of the option within thirty days (one year in the event of death) after the
Employee's termination of employment with Valspar.
5. Miscellaneous.
(a) The Board of Directors of Valspar or the Compensation Committee may, at
any time and without further action on the part of the shareholders of Valspar,
terminate this Plan or make such amendments as it deems advisable and in the
best interests of Valspar; provided, however, that no such termination or
amendment shall, without the consent of the Participant, materially adversely
affect or impair the right of the Participant with respect to a Cash Bonus
Amount that the Participant has already earned or a grant of restricted Stock or
a nonstatutory stock option that the Participant has already received; and
provided, further, that unless the shareholders of Valspar shall have approved
the same, no amendment shall, either directly or indirectly:
(1) Materially increase the total number of shares of Stock that
may be awarded under this Plan to all Participants;
(2) Materially increase the benefits accruing to Participants
under the Plan; or
(3) Materially modify the requirements as to eligibility for
participation in the Plan.
(b) Valspar shall be entitled to withhold and deduct from future wages of a
Participant or from the Cash Bonus Amount, or make other arrangements for the
collection of, all legally required amounts necessary to satisfy any and all
federal, state and local withholding and employment-related tax requirements
attributable to the lapse of restrictions applicable to the grant of restricted
Stock pursuant to the Plan, or shall require the Participant promptly to remit
the amount of such withholding tax obligations to Valspar before issuing any
certificate for shares of Stock awarded under a grant of restricted Stock.
Subject to such rules as the Compensation Committee may adopt, the Committee
may, in its sole discretion, permit a Participant to satisfy such withholding
tax obligations, in whole or in part, with shares of Stock having an equivalent
fair market value or by electing to have Valspar withhold shares of Stock having
an equivalent fair market value from the shares that may be issued pursuant to a
grant of restricted Stock; provided, however, that the Participant must comply
with any applicable provisions of Rule 16b-3 or its successor, as then in
effect, of the General Rules and Regulations under the Securities and Exchange
Act of 1934, as amended.
APPENDIX B
AMENDMENT TO KEY EMPLOYEE ANNUAL BONUS PLAN
Dated December 13, 1995
WHEREAS, on October 21, 1992 this Board of Directors adopted The
Valspar Corporation Key Employee Annual Bonus Plan (the "Plan"), and the Board
reserved 200,000 shares of Common Stock of the Corporation for grants of
restricted stock under the Plan; and
WHEREAS, 118,432 shares of restricted stock have been granted to date
under the Plan, and the Board believes that an increase in the reserve for
restricted stock grants under the Plan is appropriate to accommodate anticipated
future restricted stock awards under the Plan, in order to further the purposes
of the Plan.
NOW, THEREFORE, BE IT RESOLVED, that the Plan be, and it hereby is,
amended, subject to shareholder approval, to provide that an aggregate 700,000
shares of Common Stock of the Corporation shall be available for grants of
restricted stock pursuant to the Plan.
FURTHER RESOLVED, that the following officers of the Corporation be authorized
and empowered to execute and deliver on behalf of the Corporation a Registration
Statement on Form S-8 covering the additional shares subject to the Plan, and to
take any and all other actions necessary or appropriate to further the purposes
of the foregoing resolutions: Chairman of the Board, Vice Chairman, President
Vice President-Finance, Secretary and Treasurer.
