Exhibit 10(a)
CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement, dated _______________, ______, is
made by and between The Valspar Corporation, a Delaware corporation (the
"Company"), and ___________________________ (the "Executive").
A. The Board of Directors of the Company has determined that it is in the
best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change in
Control (as defined in Exhibit A to this Agreement) of the Company.
B. The Board believes that it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties
and risks created by a pending or threatened Change in Control, to
encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change in
Control and to provide the Executive with compensation and benefit
arrangements upon a Change in Control which ensure that the
compensation and benefit expectations of the Executive will be
satisfied and which are competitive with those of other corporations.
C. To accomplish these objectives, the Board has authorized this
Agreement.
In consideration of the premises and the mutual covenants contained in
this Agreement, the Company and the Executive agree as follows:
1. Definitions. The definitions set forth in Exhibit A to this
Agreement are incorporated herein by reference.
2. Term of Agreement. This Agreement shall continue in effect until the
earlier of (i) termination of Executive's employment prior to a Change in
Control and (ii) a Payment Event shall have occurred and the Company shall have
performed all of its obligations and satisfied all of its liabilities under this
Agreement.
3. Severance Payments. Upon a Payment Event, in lieu of any further
salary payments and any cash severance benefit otherwise payable to the
Executive, (a) the Company shall pay to the Executive in cash, within 10 days of
the Payment Event, the Severance Payment and (b) for a 36-month period after the
Payment Event or until such earlier time that the Executive becomes reemployed,
the Company shall arrange to provide the Executive with health insurance, life
insurance, dental insurance and disability insurance benefits substantially
similar to those available to the Executive prior to the Change in Control.
Notwithstanding any provision of any incentive compensation plan requiring
continued employment after the completed fiscal year or other measuring period
as a condition to payment, the Company shall pay to the Executive an amount, in
cash, equal to the amount of any incentive compensation that was allocated or
awarded to the Executive for a
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completed fiscal year or other measuring period preceding the occurrence of a
Payment Event not yet paid to the Executive.
4. Gross-Up Payment. Following a Payment Event, the Company shall cause
its independent auditors promptly to review, at the Company's sole expense, the
applicability of Section 4999 of the Code to the Total Payments to be received
by Executive. If such auditors determine that any of the Total Payments would be
subject to the excise tax imposed by Section 4999 of the Code, or any interest
or penalties with respect to such tax (such excise tax, together with any
interest and penalties, being collectively referred to as the "Excise Tax"),
then, in addition to any amounts otherwise payable under this Agreement, the
Company shall pay an additional cash payment (the "Gross-Up Payment") equal to
the Excise Tax imposed on the Total Payments (which Gross-Up Payment shall take
into account any Excise Tax or any other income and FICA taxes (determined using
the highest applicable rate) that may be imposed on the Gross-Up Payment),
within 30 days of such determination. If no determination by the Company's
auditors is made prior to the time a tax return reflecting the Total Payments is
required to be filed by Executive, Executive will be entitled to receive a
Gross-Up Payment calculated on the basis of the Total Payments reported by him
in such tax return, within 30 days of the filing of such tax return. In all
events, if any tax authority determines that a greater Excise Tax should be
imposed on the Total Payments than is determined by the Company's independent
auditors or reflected in Executive's tax return pursuant to this section,
Executive shall be entitled to receive the full Gross-Up Payment calculated on
the basis of the amount of Excise Tax determined to be payable by such tax
authority from the Company within 30 days of such determination.
5. Fees and Expenses. The Company shall pay to the Executive reasonable
legal fees and reasonable expenses incurred in good faith by the Executive in
obtaining the Severance Payment (including, but not limited to, all such fees
and expenses, if any, in seeking in good faith to obtain or enforce any benefit
or right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of the
Code to any payment or benefit provided hereunder). Such payment shall be made
within five business days after delivery of the Executive's written request for
payment accompanied with such evidence of fees and expenses incurred as the
Company reasonably may require.
6. Outplacement Services. Upon the occurrence of any Payment Event, the
Company shall provide the Executive with outplacement services substantially
similar to those available to the Executive prior to the Change in Control.
7. No Mitigation. The Company agrees that if a Payment Event occurs,
the Executive is not required to seek other employment or to attempt in any way
to reduce any amounts payable to the Executive by the Company. The amount of any
payment or benefit provided for in Section 3 (other than in clause (b) thereof)
shall not be reduced by any compensation earned by the Executive as the result
of employment by another employer, by retirement benefits, by offset against any
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amount claimed to be owed by the Executive to the Company or any Subsidiary, or
otherwise.
8. Miscellaneous.
(a) Governing Law. All matters relating to the interpretation,
construction, validity and enforcement of this Agreement shall be governed by
the internal laws of the State of Minnesota without giving effect to any choice
or conflict of law provision or rule (whether of the State of Minnesota or any
other jurisdiction) that would cause the application of laws of any jurisdiction
other than the State of Minnesota.
(b) Entire Agreement. This Agreement contains the entire agreement of
the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings with respect to such subject matter, and the
parties hereto have made no agreements, representations or warranties relating
to the subject matter of this Agreement which are not set forth herein.
(c) Amendments. No amendment or modification of this Agreement shall be
deemed effective unless made in writing and signed by the parties hereto.
(d) No Waiver. No term or condition of this Agreement shall be deemed
to have been waived, nor shall there be any estoppel to enforce any provisions
of this Agreement, except by a statement in writing signed by the party against
whom enforcement of the waiver or estoppel is sought. Any written waiver shall
not be deemed a continuing waiver unless specifically stated, shall operate only
as to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.
(e) Successor to Company. In addition to any obligations imposed by law
upon any successor to the Company, the Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.
(f) Successor to Executive. This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amount would still be payable to
the Executive hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the executors, personal representatives or
administrators of the Executive's estate.
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(g) Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
If to the Company: The Valspar Corporation
1101 South Third Street
Minneapolis, Minnesota 55415
Attention: General Counsel
Fax: (612) 375-7313
If to the Executive:
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Fax:
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(h) Counterparts. This Agreement may be simultaneously executed in any
number of counterparts, and such counterparts executed and delivered, each as an
original, shall constitute but one and the same instrument.
(i) Severability. To the extent any provision of this Agreement shall
be invalid or unenforceable, it shall be considered deleted herefrom and the
remainder of such provision and of this Agreement shall be unaffected and shall
continue in full force and effect.
(j) Captions and Headings. The captions and paragraph headings used in
this Agreement are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the date set forth in the first paragraph.
THE VALSPAR CORPORATION
By
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Its
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EXHIBIT A
"Applicable Incentive Amount" means the target potential amount payable
to the Executive pursuant to all incentive compensation plans with a performance
period commencing coincident with or most recently prior to the date on which a
Payment Event occurs, assuming that the Executive were continuously employed by
the Company or a Subsidiary until the last day of the performance period.
"Cause" means (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company or a Subsidiary,
as such duties may be defined from time to time, or abide by the written
policies of the Company or of the Executive's primary employer (other than any
such failure resulting from the Executive's termination for Good Reason by the
Executive) after a written demand for substantial performance is delivered to
the Executive by the Board of Directors which demand specifically identifies the
manner in which the Board of Directors believes that the Executive has not
substantially performed the Executive's duties or has not abided by written
policies, or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its Subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive's act, or failure to act, was
in the best interest of the Company and its Subsidiaries.
"Change in Control" means any of the following: (i) any individual,
entity or group becomes a "Beneficial Owner" (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of at least 20% but less than 50% of the
voting stock of the Company in a transaction that is not previously approved by
the Board of Directors of the Company; (ii) any individual, entity or group
becomes a Beneficial Owner, directly or indirectly, of at least 50% of the
voting stock of the Company; (iii) the persons who were directors of the Company
immediately prior to any contested election or series of contested elections,
tender offer, exchange offer, merger, consolidation, other business combination,
or any combination of the foregoing cease to constitute a majority of the
members of the Board of Directors of the Company immediately following such
occurrence; (iv) any merger, consolidation, reorganization or other business
combination where the individuals or entities who constituted the Company's
shareholders immediately prior to the combination will not immediately after the
combination own at least 50% of the voting securities of the business resulting
from the combination; (v) the sale, lease, exchange or other transfer of all or
substantially all the assets of the Company to any individual, entity or group
not affiliated with the Company; (vi) the liquidation or dissolution of the
Company; or (vii) the occurrence of any other event by which the Company no
longer operates as an independent public company.
"Code" means the Internal Revenue Code of 1986, as the same may be
amended from time to time.
"Common Stock" means the Company's Common Stock, $.50 par value per
share.
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"Disability" means any physical or mental illness or impairment that
renders Executive unable to substantially perform all of such Executive's duties
and services hereunder in a satisfactory manner for a period of 60 consecutive
days.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Good Reason" means (i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including status,
title and reporting requirement), authority, duties or responsibilities or any
other action by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive; (ii) the Company's requiring the Executive to be based at any office
or location which is not within 100 miles from (A) Executive's place of
employment immediately prior to a Change in Control or (B) the Company's
headquarters; (iii) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; (iv) any
failure by the Company to comply with and satisfy Section 8(e) of this
Agreement; (v) a reduction in the Executive's annual base salary as in effect on
the date hereof or as the same may be increased from time to time; (vi) the
failure by the Company or a Subsidiary to pay to the Executive any portion of
the Executive's compensation within seven days of the date of such compensation
is due; (vii) the failure by the Company or a Subsidiary to continue in effect
any compensation plan in which the Executive participates immediately prior to
the Change in Control which is material to the Executive's total compensation
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan or arrangement) has been made with respect to such plan, or the
failure by the Company or a Subsidiary to continue the Executive's participation
therein (or in such substitute or alternative plan or arrangement) on a basis
not materially less favorable, both in terms of the amount of benefits provided
and the level of the Executive's participation relative to other participants,
as existed at the time of the Change in Control; or (viii) the failure by the
Company or a Subsidiary to continue to provide the Executive with benefits
substantially similar to those enjoyed by the Executive under any of the
Company's or a Subsidiary's retirement, life insurance, medical, health and
accident, or disability plans in which the Executive was participating at the
time of the Change in Control, the taking of any action by the Company or a
Subsidiary which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit enjoyed by the
Executive at the time of the Change in Control, or the failure by the Company or
a Subsidiary to provide the Executive with the number of paid vacation days to
which the Executive is entitled on the basis of years of service with the
Company and its Subsidiary in accordance with the Company's or a Subsidiary's
normal vacation policy in effect at the time of the Change in Control.
"Payment Event" means the occurrence of a Change in Control coincident
with or followed at any time before the end of the 24-month period immediately
following the month in which the Change in Control occurred, by the termination
of the Executive's employment with the Company or a Subsidiary for any reason
other than (A) by the Executive without Good Reason, (B) by the Company as a
result of
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the Disability of the Executive or for Cause or (C) as a result of the death of
the Executive.
"Person" means any individual, firm, corporation or other entity, and
shall include any successor (by merger or otherwise) of such entity.
"Severance Payment" means an amount equal to (a) the higher of (i)
three times the sum of Executive's annual base salary in effect immediately
prior to the occurrence of the Change in Control and the Applicable Incentive
Amount or (ii) three times the sum of Executive's annual base salary in effect
immediately prior to the occurrence of the Payment Event and the Applicable
Incentive Amount, plus (b) the Stub Period Incentive Amount.
"Stub Period Incentive Amount" means the pro rata portion of the
Applicable Incentive Amount for the year in which a Payment Event occurs,
determined by (a) multiplying the Applicable Incentive amount by the number of
days between the first day of the performance period commencing coincident with
or most recently prior to the date on which a Payment Event occurs and the date
of the Payment Event, and (b) dividing the product by 365 days.
"Subsidiary" means a corporation or other entity or enterprise, whether
incorporated or unincorporated, of which at least a majority of the securities
or other interests having by their terms ordinary voting power to elect a
majority of the board of directors or others serving similar functions with
respect to such corporation or other entity or enterprise is owned, directly or
indirectly, by the Company.
"Total Payments" means any payment or benefits received or to be
received by Executive payable pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company as a result of the
termination of Executive's employment with the Company.
