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:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
VALSPAR CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] 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. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] 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:
THE VALSPAR CORPORATION
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 26, 1997
The annual meeting of stockholders of The Valspar Corporation will be
held at the Research Center of the Corporation at 312 South 11th Avenue,
Minneapolis, Minnesota, on Wednesday, February 26, 1997 at 11:00 A.M., for the
following purposes:
1. To elect three directors (Class II) for a term of three years;
2. To approve an increase in the shares reserved under the
Corporation's 1991 Stock Option Plan;
3. To take action on a proposed amendment of Article Fourth of
the Corporation's Certificate of Incorporation to increase the
authorized number of shares of stock;
4. To ratify the appointment of independent auditors to examine
the Corporation's accounts for the fiscal year ending October
31, 1997; and
5. 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 31, 1996
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 25, 1996 also
accompanies this Notice.
By Order of the Board of Directors,
ROLF ENGH,
Secretary
Approximate Date of Mailing of Proxy Material:
January 24, 1997
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 26, 1997
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.
The terms of Class II directors will expire at the annual meeting in 1997. The
Board of Directors has nominated Susan S. Boren and Robert E. Pajor for
re-election as Class II directors and has nominated Dr. Richard L. White as a
Class II director to fill the position previously held by Richard N. Cardozo,
who is not standing for re-election. Unless otherwise directed by the
stockholders, it is intended that shares represented by proxy will be voted in
favor of the election of the three nominees listed in Class II below, to hold
office until the annual meeting in 2000 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
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CLASS I DIRECTORS CONTINUING IN OFFICE UNTIL 1999
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THOMAS R. MCBURNEY President, McBurney Management Advisors,
Director since 1987 a management consulting firm for small businesses
Age - 58
Mr. McBurney has held his present position as President since 1990. Mr. McBurney
is also a director of Security American Financial Enterprises, Wenger
Corporation, Space Center Enterprises, Inc., Allina Health System and
Greenspring Companies.
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RICHARD M. ROMPALA President and Chief Executive Officer
Director since 1994 of the Corporation
Age - 50
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. Mr. Rompala is also a
director of Kerr-McGee Corporation.
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MICHAEL P. SULLIVAN President and Chief Executive Officer,
Director since 1990 International Dairy Queen, Inc.
Age - 62
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.
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C. ANGUS WURTELE Chairman of the Board of the Corporation
Director since 1970
Age - 62
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.
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CLASS II NOMINEES FOR TERM EXPIRING IN 2000
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SUSAN S. BOREN President, Trillium Advisors, Inc.
Director since 1991
Age - 49
Ms. Boren is the Principal of Trillium Advisors, Inc., a firm founded in 1996 to
advise executives and boards on the strategic integration of leadership,
governance and organizational values. Previously, she served for 15 years as an
executive with Dayton Hudson Corporation in senior financial, human resources,
operating and marketing positions.
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RICHARD L. WHITE, Ph.D. Executive Vice President,
New Nominee Bayer Corporation
Age - 57
Dr. White has held his present position as Executive Vice President since 1992.
Prior to 1992, Dr. White served as Senior Executive Vice President at Mobay
Corporation.
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ROBERT E. PAJOR Vice Chairman of the Corporation
Director since 1978
Age - 60
Mr. Pajor served as Vice Chairman of the Corporation from March 1994 through
December 1996. From June 1981 through February 1994, he served as President
and Chief Operating Officer. Mr. Pajor will continue to be employed by the
Corporation providing certain consulting services until January 5, 1998, at
which time he will resign as a director of the Corporation.
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CLASS III DIRECTORS CONTINUING IN OFFICE UNTIL 1998
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WILLIAM W. GEORGE Chairman and Chief Executive Officer,
Director since 1984 Medtronic, Inc.
Age - 54
Mr. George was elected Chairman of the Board in August 1996 and has held the
position of Chief Executive Officer since 1991. Prior to 1996, Mr. George served
as President since 1991. Mr. George is also a director of Medtronic, Inc.,
Imation Corp. and Dayton Hudson Corporation.
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KENDRICK B. MELROSE Chairman and Chief Executive Officer,
Director since 1984 The Toro Company
Age - 56
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., Jostens, Inc. and The Toro Company.
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GREGORY R. PALEN Chairman and Chief Executive Officer,
Director since 1992 Spectro Alloys Corporation; Chief
Age - 41 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.
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LAWRENCE PERLMAN Chairman, President and Chief Executive
Director since 1992 Officer, Ceridian Corporation
Age - 58
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. and Computer Network Technology.
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BOARD COMMITTEES
The standing committees of the Board of Directors for 1996 were as
follows:
Name of Committee Membership
----------------- ----------
Audit Committee Susan S. Boren - Chair, Richard N. Cardozo,
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 - Chair and C. Angus Wurtele
Compensation Committee Susan S. Boren, William W. George, Thomas R.
McBurney, Kendrick B. Melrose, Lawrence
Perlman and Michael P. Sullivan - Chair
Governance Committee Susan S. Boren, Richard N. Cardozo, William
W. George, Thomas R. McBurney, Kendrick B.
Melrose, Gregory R. Palen, Lawrence Perlman,
Michael P. Sullivan and C. Angus Wurtele -
Chair
The Board of Directors met seven times during fiscal 1996.
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 Governance Committee held one meeting during the fiscal year at
which it reviewed nominations for Class II directors.
The Compensation 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 Governance 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 1996, 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. Cardozo and Mr. Perlman who each attended 5 of 7 such meetings.
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, 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. 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 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 of 6.5%. The
following lists each director and executive officer whose loan from the
Corporation exceeded $60,000 at any time during fiscal 1996, and indicates (i)
the largest loan amount outstanding for such director and officer at any time
since October 28, 1995, and (ii) the loan amount outstanding for such director
and officer as of December 31, 1996:
<TABLE>
<CAPTION>
LARGEST AMOUNT
NAME OF OUTSTANDING AMOUNT OUTSTANDING
EXECUTIVE OFFICER SINCE OCTOBER 28, 1995 AS OF DECEMBER 31, 1996
---------------------- ---------------------- -----------------------
<S> <C> <C>
Larry B. Brandenburger $437,964 $201,179
Stephen M. Briggs 227,650 208,232
Rolf Engh 189,001 174,719
Steven L. Erdahl 411,902 200,738
William L. Mansfield 188,482 164,685
Robert E. Pajor 245,778 145,919
Paul C. Reyelts 333,503 198,150
Richard M. Rompala 950,200 945,044
C. Angus Wurtele 310,940 213,151
</TABLE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ended October 25, 1996,
October 27, 1995 and October 28, 1994, the cash compensation paid by the
Corporation, as well as certain other compensation paid or accrued for those
years, to Richard M. Rompala, the Corporation's President and Chief Executive
Officer, and each of the four other most highly compensated executive officers
of the Corporation (together with Mr. Rompala, the "Named Executives"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL LONG TERM
COMPENSATION COMPENSATION AWARDS
-------------------- ----------------------------
Restricted
Stock Options (No. All Other
Name and Principal Position* Year Salary Bonus(1) Awards(2)(3) of Shares)(4) Compensation(5)
- ---------------------------- ---- ------ -------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Rompala 1996 $497,698 $ 54,747 $348,388 57,115 $40,315
President and 1995 431,539 51,785 233,894 8,800 74,716
Chief Executive Officer(6) 1994 223,082 250,000(7) 293,266 58,185 -0-
Robert E. Pajor 1996 459,719 50,569 321,804 5,375 57,262
Vice Chairman 1995 434,707 52,165 235,612 10,820 63,058
1994 409,700 61,455 360,455 8,366 68,408
Rolf Engh 1996 236,827 26,051 170,516 2,485 29,509
Vice President, International 1995 224,039 26,885 108,794 5,280 21,462
and Secretary 1994 200,000 30,000 175,960 -0- 15,000
Paul C. Reyelts 1996 236,827 26,051 163,410 2,570 29,182
Vice President, Finance 1995 220,769 26,492 112,710 4,760 28,988
1994 202,885 30,433 158,656 4,240 36,171
Stephen M. Briggs 1996 207,885 44,071 127,225 1,645 27,850
Vice President, Consumer 1995 194,712 32,370 54,033 9,495 23,794
Coatings Group 1994 179,522 44,966 112,298 1,216 20,374
</TABLE>
- ----------------------------
* As of October 25, 1996.
(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 all or a portion of his bonus under the Incentive Bonus
Plan for fiscal 1996, 1995 and 1994 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 25, 1996, 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. Rompala,
14,134 shares, $710,233; Mr. Pajor, 22,826 shares, $1,147,006; Mr. Engh,
7,761 shares, $389,990; Mr. Reyelts, 10,694 shares, $537,373; Mr. Briggs,
5,324 shares, $267,531. Dividends are paid on shares of restricted stock
from the date of grant.
(4) Options indicated for fiscal 1996 were granted pursuant to the Key Employee
Annual Bonus Plan based on twice the level of each individual's cash bonus
for fiscal 1995, except that a portion of Mr. Rompala's 1996 option and his
1994 option were granted in connection with his initial employment with the
Corporation. Options indicated for fiscal 1996 exclude options granted in
January 1997 pursuant to the Key Employee Annual Bonus Plan based on twice
the level of cash bonus for fiscal 1996. 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 1996:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
-------------------------------------------------- POTENTIAL
REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL
OPTIONS RATE OF STOCK PRICE
GRANTED TO EXERCISE APPRECIATION FOR
EMPLOYEES PRICE OPTION TERM(3)
OPTIONS IN FISCAL PER EXPIRATION ------------------------
NAME GRANTED(1) YEAR SHARE(2) DATE 5% 10%
- ---- ---------- ---------- -------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Richard M. Rompala 51,780 35.9 $38.625 10/30/05 $1,257,995 $3,187,318
5,335 3.7 44.125 01/04/06 148,020 375,184
Robert E. Pajor 5,375 3.7 44.125 01/04/06 149,129 377,997
Rolf Engh 2,485 1.7 44.125 01/04/06 68,946 174,758
Paul C. Reyelts 2,570 1.8 44.125 01/04/06 71,305 180,735
Stephen M. Briggs 1,645 1.1 44.125 01/04/06 45,641 115,685
</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 1996 and unexercised
options held as of October 25, 1996:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED OCTOBER 25, 1996 AT OCTOBER 25, 1996(2)
ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Rompala 0 --- 25,034 99,066 $403,453 $1,324,478
Robert E. Pajor 21,269 $653,037 8,263 19,051 177,019 277,554
Rolf Engh 0 --- 19,956 19,309 517,816 417,372
Paul C. Reyelts 0 --- 4,028 8,922 86,897 130,418
Stephen M. Briggs 2,570 84,432 8,799 9,971 216,938 147,262
</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 25, 1996.
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__.
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
7.5% from 1995 to 1996. The increases for 1996 reflected general corporate
performance, based on sales, expenses, profits, unit growth and return on equity
for fiscal 1995.
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%-50% for executive officers in fiscal
1996) 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 1996 ranged from 34.5% to 40.8% of salary. Each
of the Named Executives elected to receive all or a portion of 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 1997 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. Thirty
members of the Valspar Leadership Group (the top 100 managers of the
Corporation), including all executive officers, were selected to participate for
fiscal year 1996 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 1996, 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 11% of salary for
fiscal 1996, 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. See "Proposal Two - Approval of Increase in Shares Reserved Under
the 1991 Stock Option Plan." 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 1996 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, except for an additional option granted to Mr. Rompala as described
under "Compensation of the Chief Executive Officer."
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. 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 in
excess of $1 million is not deductible under Section 162(m).
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In setting Mr. Rompala'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. Rompala's duties and
responsibilities. The Committee also compared Mr. Rompala'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 ___. Mr. Rompala's
base salary increased approximately 13.6% from fiscal 1995 to fiscal 1996. This
increase reflected general corporate performance, based on sales, expenses,
profits, unit growth and return on equity. The Corporation also granted an
incentive bonus to Mr. Rompala under the Incentive Bonus Plan. Mr. Rompala's
performance targets included net income, gallon sales growth, return on equity
and total expenses. Mr. Rompala was eligible for a bonus of up to 50% 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.
Rompala's compensation. Mr. Rompala's bonus earned under the Incentive Bonus
Plan for fiscal 1996 was $174,194 if received in cash, or 35% of his salary. As
described above under "Compensation of Executive Officers - Bonus Programs," Mr.
Rompala elected to receive the bonus in restricted stock and will also receive
stock options in January 1997 pursuant to the Key Employee Annual Bonus Plan.
Mr. Rompala also has participated in the Deferred Bonus Plan which is described
above. For fiscal 1996, Mr. Rompala's deferred bonus was $54,747, or 11% of
salary, reflecting the Corporation's three-year trailing average for earnings
per share growth, return on average equity and gallon sales growth. In addition
to his options under the Key Employee Annual Bonus Plan as described above, he
was granted an option at the beginning of fiscal 1996 to purchase 51,780 shares.
This option was granted under an agreement entered into in connection with Mr.
Rompala's initial employment in 1994.
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 1991 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*
<TABLE>
<CAPTION>
================================================================================================
CUMULATIVE TOTAL RETURN
=================== ================================================================================================
1991 1992 1993 1994 1995 1996
- ------------------- -------------- --------------- ---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Valspar $100 $142 $179 $208 $225 $287
- ------------------- -------------- --------------- ---------------- --------------- --------------- ----------------
Peer Group $100 $124 $138 $156 $162 $212
- ------------------- -------------- --------------- ---------------- --------------- --------------- ----------------
S&P 500 $100 $110 $126 $131 $166 $206
=================== ============== =============== ================ =============== =============== ================
</TABLE>
Assumes $100 invested on October 31, 1991 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, Lilly Industries, Inc., Lawter
International, Inc. and Detrex Corporation. Grow Group, Inc., Guardsman
Products, Inc. and Pratt & Lambert, Inc. were excluded from the Peer Group
as a result of being acquired by another company during 1995 or 1996.
PROPOSAL NUMBER TWO
APPROVAL OF INCREASE IN SHARES RESERVED UNDER THE 1991 STOCK OPTION PLAN
In December 1996, the Corporation's Board of Directors amended the
1991 Stock Option Plan (the "Plan"), subject to approval by the stockholders, to
increase the total number of shares reserved for issuance upon exercise of
options to be granted under the Plan. The amendment increases the total number
of shares available for stock option grants by 1,000,000 shares to a total of
2,000,000 shares.
SUMMARY OF THE 1991 STOCK OPTION PLAN
On February 27, 1991, the stockholders of the Corporation adopted the
1991 Stock Option Plan (the "Plan"). The Corporation reserved up to 1,000,000
shares of Common Stock for option grants under the Plan and filed a registration
statement covering the issuance of such shares. The purpose of the Plan is to
promote the success of the Corporation by facilitating the employment and
retention of competent personnel and by furnishing incentives to employees and
others upon whose efforts the success of the Corporation will depend to a large
degree by encouraging stock ownership in order to increase such individuals'
proprietary interest in the Corporation's success.
TERM. Incentive stock options may be granted pursuant to the Plan
through December 11, 2000, ten years from the date the Plan was adopted by the
Board. Nonqualified Stock Options may be granted pursuant to the Plan until the
Plan is discontinued or terminated by the Board of Directors.
ADMINISTRATION. The Plan is administered by a committee (the
"Committee") appointed by the Board from time to time which shall consist of not
less than three members of the Board who qualify under Rule 16b-3 under the
Securities Exchange Act of 1934. The Plan vests broad powers in the Committee to
administer and interpret the Plan, including the authority to select the
individuals to be granted options and to prescribe the type, form and conditions
of the options (which may vary from optionee to optionee). The Board has
appointed the Compensation Committee to serve as the Committee administering the
Plan.
ELIGIBILITY. All salaried officers and employees of the Corporation or
any subsidiary of the Corporation, and all other persons performing services for
the Corporation (including directors, consultants or advisors) are eligible to
receive options under the Plan. The Corporation currently has approximately
2,800 employees and an undetermined number of advisors or consultants.
OPTIONS. When an option is granted under the Plan, the Committee in its
discretion will specify the number of shares of Common Stock which may be
purchased upon exercise of the option, the option price (which may not be less
than 100% of the fair market value of the Corporation's Common Stock at the
closing price on the day preceding the date of grant), the term of the option
and whether it will be an incentive or nonqualified stock option. The market
value of the Corporation's Common Stock was $56 5/16 on January 3, 1997.
The term during which the option may be exercised and whether the
option will be exercisable immediately, in stages, or otherwise will be set by
the Committee when the option is granted, but in no event will the term of an
incentive stock option exceed ten years.
The Committee may impose additional or alternative conditions and
restrictions on the incentive or nonqualified stock options granted under the
Plan; however, each incentive stock option must contain such limitations and
restrictions upon its exercise as are necessary to ensure that the option will
be an incentive stock option as defined under the Internal Revenue Code.
Upon exercise of an option under the Plan, the exercise price is to be
paid in cash, by check or by delivering Common Stock of the Corporation valued
at its then fair market value. Each option granted under the Plan is
nontransferable during the lifetime of the optionee.
AMENDMENT. The Board of Directors may from time to time suspend or
discontinue the Plan or revise or amend it in any respect; provided, however,
that no such revision or amendment shall impair the terms and conditions of any
option which is outstanding on the date of such revision or amendment to the
material detriment of the optionee without the consent of the optionee. In
addition, no such revision or amendment may, without the approval of the
Corporation's stockholders, (i) materially increase the number of shares subject
to the Plan except as provided in the case of stock splits, consolidations,
stock dividends or similar events, (ii) change the designation of the class of
individuals eligible to receive options; or (iii) materially increase the
benefits accruing to optionees under the Plan. Furthermore, the Plan may not,
without approval of the Corporation's stockholders, be amended in any manner
which will cause the incentive stock options to fail to meet the requirements of
incentive stock options as defined under the Internal Revenue Code.
The Committee may equitably adjust the maximum number of shares of
Common Stock reserved for issuance under the Plan, the number of shares covered
by each outstanding option and the option price per share in the event of stock
splits or consolidations, stock dividends or other transactions in which the
Corporation receives no consideration. The Committee may also provide for the
protection of optionees in the event of a merger, liquidation, or reorganization
of the Corporation.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
Some of the options to be granted to employees pursuant to the 1991
Plan may be intended to qualify as "incentive" stock options under Section 422
of the Internal Revenue Code. Under such Section, the optionee realizes no
taxable income when the incentive stock option is granted. In addition, an
optionee generally will not realize taxable compensation income upon the
exercise of an incentive stock option if he or she exercises it as an employee
or within three months after termination of employment (or within one year after
termination if the termination results from a permanent and total disability).
The amount by which the fair market value of the shares purchased exceeds the
aggregate option price at the time of exercise will be alternative minimum
taxable income for purposes of applying the alternative minimum tax. If the
optionee does not dispose of the shares acquired upon such exercise for a period
of two years from the granting of the incentive stock option and one year after
exercise of the option, the optionee will not realize any taxable income until
he sells the shares. If the applicable holding periods are not satisfied, then
any gain realized in connection with the disposition of such stock will
generally be taxable as ordinary compensation income in the year in which the
disposition occurred, to the extent of the difference between the fair market
value of such stock on the date of exercise and the option exercise price. The
Company is entitled to a tax deduction only to the extent, and at the time, the
participant realizes compensation income. The balance of any gain will be
characterized as a capital gain.
Nonqualified stock options granted under the Plan are not intended to
and do not qualify for the favorable tax treatment described above for incentive
stock options. Under present law, an optionee will not realize any taxable
income on the date an option is granted to the optionee pursuant to the Plan.
Upon exercise of the option, however, the optionee will realize, in the year of
exercise, ordinary income to the extent of the difference between the option
price and the fair market value on the date of exercise. Upon the sale of
shares, any resulting gain or loss will be treated as capital gain or loss. The
Corporation will receive a deduction in its fiscal year in which options are
exercised, equal to the amount of compensation required to be included as
ordinary income by those optionees exercising options.
THE STOCK OPTION GRANTS UNDER THE 1991 STOCK OPTION PLAN
Approximately 847,475 option shares have been granted to date under the
1991 Stock Option Plan (the "Plan"). The maximum number of shares currently
issuable for stock grants under the Plan is 1,000,000. On adoption of the
proposed amendment, the maximum aggregate number of shares issuable under the
Plan will be increased to 2,000,000.
VOTE REQUIRED
The Board recommends that the stockholders approve the increase in the
shares reserved under the 1991 Stock Option Plan. The affirmative vote of a
majority of the shares represented at the annual meeting is required for
approval.
PROPOSAL NUMBER THREE
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Board of Directors has adopted a resolution proposing that Article
Fourth of the Corporation's Certificate of Incorporation be amended to increase
the authorized number of shares of common stock from 30 million to 120 million
shares.
The amendment would be effected by adoption of the following resolution
at the Annual Meeting of Stockholders:
"RESOLVED: That the first sentence of Article Fourth of the
Certificate of Incorporation of The Valspar Corporation be and
it hereby is amended to read as follows:
'Fourth. The total number of shares of stock which
the corporation shall have authority to issue is one
hundred twenty million (120,000,000) shares of Common
Stock of the par value of Fifty Cents ($.50) per
share.'"
If the amendment is adopted, the Board of Directors proposes to effect
a 2-for-1 split of the Corporation's common stock, which would double the number
of shares held by each stockholder. The reason for the stock split is to provide
greater marketability for the Corporation's common stock. After the split there
would be approximately 43.8 million shares of common stock outstanding. The
remainder of approximately 76.2 million shares would be available for previously
authorized and future stock options, for possible future stock splits, for
possible acquisitions, and for additional equity financing. At the present time,
there are no plans to use any of the additional common stock for acquisitions or
equity financing.
VOTE REQUIRED
The Board recommends that the stockholders approve the amendment of
Article Fourth of the Corporation's Certificate of Incorporation. The amendment
requires the affirmative vote of holders of a majority of the outstanding shares
of stock.
PROPOSAL NUMBER FOUR
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 31, 1997. 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 1997 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 31, 1996 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 21,892,005 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 2,671,350(1) 12.2%
1101 Third Street South
Minneapolis, MN 55415
Norwest Bank Minnesota, N.A. 3,930,822(2) 17.9%
6th and Marquette
Minneapolis, MN 55479
The Capital Group Companies, Inc. 2,458,790(3) 11.2%
333 South Hope Street
Los Angeles, CA 90071
- --------------------------------
(1) Includes 93,919 shares held as of October 31, 1996 through the Valspar
Stock Ownership Trust, 9,327 shares held as of October 31, 1996 through the
Valspar Profit Sharing Plan, 12,788 shares which may be acquired within 60
days by exercise of an outstanding option, 30,126 shares owned by Mr.
Wurtele's wife and 691,040 shares held for his benefit as co-trustee with
Norwest Bank Minnesota, N.A. Does not include 386,950 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) Shares reported on Schedule 13G as of December 29, 1995. Norwest Bank
Minnesota, N.A., as trustee, reports shared investment and voting power
over 3,746,278 shares of Common Stock, including the shares disclosed in
Note (1) above.
(3) Shares reported on Schedule 13G as of December 29, 1995. Certain operating
subsidiaries of The Capital Group Companies, Inc., exercised investment
discretion over various institutional accounts which held as of December
29, 1995, 2,458,790 shares of the Corporation. Capital Guardian Trust
Company, a bank, and one of such operating companies, exercised investment
discretion over 506,090 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 1,753,900, 83,000 and 115,800 shares,
respectively, of the above shares.
SHARE OWNERSHIP OF MANAGEMENT
The following table lists, as of December 31, 1996, the beneficial
ownership of Common Stock for all directors, Nominees, each of the Named
Executives and all directors, Nominees and executive officers as a group. Except
as otherwise indicated, no director, Nominee or executive officer owns as much
as 1% of the total outstanding shares of Common Stock.
<TABLE>
<CAPTION>
NAME SHARES(1) NAME SHARES(1)
- ---- --------- ---- ---------
<S> <C> <C> <C>
Susan S. Boren................. 3,477 Robert E. Pajor.................. 313,018(2)(4)
Stephen M. Briggs.............. 35,026(2) Gregory R. Palen................. 5,079(3)
Richard N. Cardozo............. 4,583 Lawrence Perlman................. 2,874
Rolf Engh...................... 37,845(2) Paul C. Reyelts.................. 181,316(2)(5)
William W. George.............. 16,265 Richard M. Rompala............... 82,210(2)
Thomas R. McBurney............. 6,120 Michael P. Sullivan.............. 5,946(6)
Kendrick B. Melrose............ 6,725 Richard L. White................. 0
All directors and executive officers as a group................................. 3,521,220(2)(7)
</TABLE>
- ----------------------------------
(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, 1996 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. Rompala
- 425 and 344; Mr. Pajor - 78,072 and 14,456; Mr. Engh - 642 and 2,033; Mr.
Reyelts - 15,995 and 4,745; Mr. Briggs - 1,523 and 588 and executive
officers as a group, 120,736 and 22,166. 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. Rompala, 38,217 shares; Mr. Pajor, 13,176 shares; Mr. Engh, 21,509
shares; Mr. Reyelts, 6,342 shares; Mr. Briggs, 8,701 shares; and executive
officers as a group, 101,599 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 a household member for which Mr.
Sullivan disclaims any beneficial ownership.
(7) Represents 16.1% 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.
1998 STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Annual
Meeting in 1998 must be submitted to the Corporation in appropriate written form
on or before September 30, 1997.
By Order of the Board of Directors,
ROLF ENGH,
Secretary
Minneapolis, Minnesota
January 24, 1997
--------------------------------------------------------------------------
PLEASE SIGN, DATE AND RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE.
--------------------------------------------------------------------------
THE VALSPAR CORPORATION
1991 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN
The purposes of the 1991 Stock Option Plan (the "Plan") are (i) to enhance
the ability of The Valspar Corporation (the "Company") and its subsidiary
companies to attract and retain superior personnel and (ii) to stimulate
and reward their interest and initiative. The Plan is designed to enable
key officers and employees, and certain other key individuals who perform
services for the Company, to contribute to the Company's strategic
performance objectives by making such individuals eligible to receive
options to purchase common stock of the Company as provided herein.
Subject to the provisions of the Plan, options may contain such terms and
conditions as shall be required so as to be either nonqualified stock
options or incentive stock options as defined in Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code"). Subject to such
limits as may be imposed by existing or future laws or by the Plan,
nonqualified stock options or incentive stock options or both may be
granted to eligible individuals.
2. STOCK SUBJECT TO THE PLAN
Shares to be issued under the Plan shall be common stock of the Company
(par value $.50 per share) ("common stock"), not to exceed a maximum of
500,000 shares*, and may be unissued shares or reacquired shares. If any
options granted under the Plan expire or terminate without having been
exercised in full, such unpurchased shares shall be available for other
option grants. If shares of common stock are delivered as full or partial
payment upon exercise of an option, the number of shares so delivered
shall again be available for other option grants.
3. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee"), appointed
from time to time by the Company's Board of Directors (the "Board"),
consisting of not less than three members of the Board. Each Committee
member shall be a "disinterested" person within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934 (the "Exchange Act") or any
successor Rule. The Committee shall determine from time to time (i) the
individuals to whom grants will be made; (ii) the number of shares to be
granted; and (iii) the terms and provisions of each option (which need not
be identical). Each grant shall be in such form and content as the
Committee shall determine. The Committee may from time to time adopt rules
for carrying out the Plan and for its interpretation and construction
which rules shall be final, conclusive and binding on all parties. All
determinations of the Committee shall be made by a majority of the
Committee. Any determination reduced to writing and signed by all members
shall be as effective as if it had been made by a majority vote at a duly
constituted meeting.
4. ELIGIBILITY
Options will be granted only to salaried officers and employees of the
Company or of a subsidiary (as defined in Section 425 of the Code) and to
any other individual who performs services for the Company and contributes
to its strategic performance objectives, including, without limitation,
members of the Board of Directors, consultants and advisors ("Optionee");
provided, however, that a consultant or advisor shall not be eligible to
receive stock options hereunder unless such consultant or advisor renders
bona fide services to the Company or a subsidiary and such services are
not in connection with the offer or sale of securities in a
capital-raising transaction; and provided further, however, that if an
option is granted to a non-employee director or any persons serving as a
"disinterested" member of a committee administering a stock plan of the
Company, such option grant must also be approved by the Company's
stockholders.
5. OPTION PRICE
The exercise price of each option shall be not less than 100% of the fair
market value of the common stock at the closing price on the day preceding
the date that such option is granted.
6. EXERCISE OF OPTION
The Committee may prescribe at the time of grant that the option will be
exercisable in full or in installments at any time or from time to time,
except that, no option may be exercised within six (6) months after grant
if this exception is required in order to comply with Rule 16b-3 of the
Exchange Act. Optionee is not required to exercise options in the
sequential order that the options were granted. An option shall be
exercised by written notice in a form designated by the Company
accompanied by full payment of the purchase price. All or part of the
purchase price may be paid by surrender of previously acquired shares of
common stock valued at the fair market value at the closing price on the
day preceding the date of exercise. Until an option is exercised and the
stock certificate issued, the Optionee shall have no rights as a
stockholder with respect to such option.
7. WITHHOLDING OF TAXES
Upon exercise of an option, the Optionee shall pay cash for all taxes
required to be withheld.
8. NON-TRANSFERABILITY
Options shall not be transferable, voluntarily or involuntarily, except by
will or applicable laws of descent and distribution. Only the Optionee or
Optionee's legal representative or guardian may exercise the option.
9. DILUTION OR OTHER ADJUSTMENTS
The number of shares subject to the Plan, the outstanding options and the
exercise price may be adjusted by the Committee as it deems equitable in
the event of stock split, stock dividend, recapitalization,
reclassification or similar event to prevent dilution or enhancement of
option rights.
10. MERGERS, ACQUISITION OR OTHER REORGANIZATION
The Committee may make provision, as it deems equitable, for the
protection of Optionees with grants of outstanding options in the event of
(a) merger of the Company into, or the acquisition of substantially all of
the stock or assets of the Company by, another entity; or (b) liquidation;
or (c) other reorganization of the Company.
11. AMENDMENT OF THE PLAN
The Plan may be amended, suspended or discontinued in whole or in part at
any time and from time to time by the Board, provided however that no
amendment to increase the number of shares with respect to which options
may be granted, or to increase materially the benefits accruing to
Optionees, or to materially modify the requirements as to eligibility,
shall be effective without stockholder approval where the failure to
obtain such approval would adversely affect the compliance of the Plan
with Rule 16b-3 under the Exchange Act or successor rule and with other
applicable law, including the Code. No amendment of the Plan shall
adversely affect in a material manner any right of any Optionee with
respect to a prior grant without such Optionee's written consent.
12. DURATION OF THE PLAN
The Plan shall become effective as of December 12, 1990, subject to
stockholder approval. Incentive Stock Options may be granted from time to
time during a period of ten (10) years from the effective date.
Nonqualified stock options may be granted from time to time from the
effective date until the Plan is discontinued or terminated by the Board.
* Adjusted to 1,000,000 shares due to 2-for-1 stock split in March 1992.
THE VALSPAR CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints THOMAS R. MCBURNEY, 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 26, 1997, at 11:00
A.M., at the Research Center of the Corporation at 312 South 11th Avenue,
Minneapolis, Minnesota, and at any adjournments thereof, on any matter properly
coming before the meeting, and specifically the following:
(1) To elect three directors (Class II) for a term of three years:
FOR all nominees listed WITHHOLD authority
(except as marked to to vote for all
the contrary) nominees listed
[ ] [ ]
SUSAN S. BOREN, ROBERT E. PAJOR, RICHARD L. WHITE
(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 1991
Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(3) To approve the amendment of Article Fourth of the Corporation's Certificate
of Incorporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(4) Ratification of the appointment of Ernst & Young LLP as the independent
public accountants of the Corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(5) 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, 3 AND 4.
___________________________________________
___________________________________________
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.
