Exhibit 10.9

 

CHANGE IN CONTROL EMPLOYMENT AGREEMENT

(As Amended Through December 10, 2008)

 

CHANGE IN CONTROL EMPLOYMENT AGREEMENT, dated as of the ____ day of _________ ,
2009 (this “Agreement”), by and between The Valspar Corporation, a Delaware
corporation (the “Company”), and [_______________] (the “Executive”).

 

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that
it is in the best interests of the Company and its stockholders 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
herein). The Board believes 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 and to encourage the
Executive’s full attention and dedication to the Company in the event of any
threatened or pending Change in Control, and to provide the Executive with
compensation and benefits arrangements upon a Change in Control that ensure that
the compensation and benefits expectations of the Executive will be satisfied
and that provide the Executive with compensation and benefits arrangements that
are competitive with those of other corporations. Therefore, in order to
accomplish these objectives, the Board has caused the Company to enter into this
Agreement.

 

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

 

Section 1.          Certain Definitions. (a) “Effective Date” means the first
date during the Change in Control Period (as defined herein) on which a Change
in Control occurs. Notwithstanding anything in this Agreement to the contrary,
if the Executive’s employment with the Company is terminated within the 12
months prior to the date on which the Change in Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of employment (i)
was at the request of a third party that has taken steps reasonably calculated
to effect such Change in Control or (ii) otherwise arose in connection with or
anticipation of a Change in Control (such a termination of employment, an
“Anticipatory Termination”) and if such Change in Control is consummated, then
for all purposes of this Agreement, the “Effective Date” means the date
immediately prior to the date of such termination of employment.

 

(b)        “Change in Control Period” means the period commencing on the date
hereof and ending on the second anniversary of the date hereof; provided,
however, that, commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof, the “Renewal Date”), unless previously terminated, the Change in
Control Period shall be automatically extended so as to terminate two years from
such Renewal Date, unless, at least 60 days prior to the Renewal Date, the
Company shall give notice to the Executive that the Change in Control Period
shall not be so extended.

 

(c)        “Affiliated Company” means any company controlled by, controlling or
under common control with the Company.

 

 

(d)

“Change in Control” means:

 

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(1)        Any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) (a “Person”) becomes the beneficial owner (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A)
the then-outstanding shares of common stock of the Company (the “Outstanding
Company Common Stock”) or (B) the combined voting power of the then-outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided, however,
that, for purposes of this Section 1(d), the following acquisitions shall not
constitute a Change in Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
Affiliated Company or (iv) any acquisition pursuant to a transaction that
complies with Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C);

 

(2)        Individuals who, as of the date hereof, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual was a member of the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board;

 

(3)        Consummation of a reorganization, merger, statutory share exchange or
consolidation or similar transaction involving the Company or any of its
subsidiaries, a sale or other disposition of all or substantially all of the
assets of the Company, or the acquisition of assets or stock of another entity
by the Company or any of its subsidiaries (each, a “Business Combination”), in
each case unless, following such Business Combination, (A) all or substantially
all of the individuals and entities that were the beneficial owners of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of the then-outstanding shares of common stock (or,
for a non-corporate entity, equivalent securities) and the combined voting power
of the then-outstanding voting securities entitled to vote generally in the
election of directors (or, for a non-corporate entity, equivalent governing
body), as the case may be, of the entity resulting from such Business
Combination (including, without limitation, an entity that, as a result of such
transaction, owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (C) at least
a majority of the members of the board of directors (or, for a non-corporate
entity, equivalent governing body) of the entity resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement or of the action of the Board providing for such Business
Combination; or

 

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(4)        Approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.

 

Section 2.          Employment Period. The Company hereby agrees to continue the
Executive in its employ, subject to the terms and conditions of this Agreement,
for the period commencing on the Effective Date and ending on the second
anniversary of the Effective Date (the “Employment Period”). The Employment
Period shall terminate upon the Executive’s termination of employment for any
reason.

 

Section 3.          Terms of Employment. (a) Position and Duties. (1) During the
Employment Period, (A) the Executive’s position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all respects with the most significant of those
held, exercised and assigned at any time during the 120-day period immediately
preceding the Effective Date, (B) the Executive’s services shall be performed at
the office where the Executive was employed immediately preceding the Effective
Date or at any other location less than 35 miles from such office, and (C) the
Executive shall not be required to travel on Company business to a substantially
greater extent than required during the 120-day period immediately prior to the
Effective Date.

 

(2)        During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive’s
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive’s responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that, to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive’s
responsibilities to the Company.

 

(b)        Compensation. (1) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary (the “Annual Base Salary”) at an
annual rate at least equal to 12 times the highest monthly base salary paid or
payable, including any base salary that has been earned but deferred, to the
Executive by the Company and the Affiliated Companies in respect of the one-year
period immediately preceding the month in which the Effective Date occurs. The
Annual Base Salary shall be paid at such intervals as the Company pays executive
salaries generally. During the Employment Period, the Annual Base Salary shall
be reviewed at least annually, beginning no more than 12 months after the last
salary increase awarded to the Executive prior to the Effective Date. Any
increase in the Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. The Annual Base Salary shall
not be reduced after any such increase and the term “Annual Base Salary” shall
refer to the Annual Base Salary as so increased.

 

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(2)        Annual Bonus. In addition to the Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the “Annual Bonus”) in cash at least equal to the Executive’s
target cash annual bonus for the fiscal year during which the Effective Date
occurs The Annual Bonus shall be paid no later than two and a half months after
the end of the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus pursuant to an
arrangement that meets the requirements of Section 409A of the Internal Revenue
Code of 1986, as amended (the “Code”).

 

(3)        Long-Term Cash and Equity Incentives, Savings and Retirement Plans.
During the Employment Period, the Executive shall be entitled to participate in
all long-term cash incentive, equity incentive, savings and retirement plans,
practices, policies and programs applicable generally to other peer executives
of the Company and the Affiliated Companies, but in no event shall such plans,
practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is applicable),
savings opportunities and retirement benefit opportunities, in each case, less
favorable, in the aggregate, than the most favorable of those provided by the
Company and the Affiliated Companies for the Executive under such plans,
practices, policies and programs as in effect at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and the Affiliated Companies.

 

(4)        Welfare Benefit Plans. During the Employment Period, the Executive
and/or the Executive’s family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and the Affiliated
Companies (including, without limitation, medical, retiree medical,
prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and the Affiliated Companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with benefits that are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company and
the Affiliated Companies. With respect to any retiree medical plan for which the
Executive and/or the Executive’s family becomes eligible prior to or during the
Employment Period, the Executive and/or the Executive’s family, as the case may
be, shall be remain eligible for participation and shall receive all benefits
under the plan for the period(s) set forth in the plan, even if the period(s)
extends beyond the Employment Period.

 

(5)        Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and the Affiliated Companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and the
Affiliated Companies.

 

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(6)        Fringe Benefits. During the Employment Period, the Executive shall be
entitled to fringe benefits, including, without limitation, tax and financial
planning services, payment of club dues, and, if applicable, use of an
automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and the
Affiliated Companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and the Affiliated Companies, provided that no
payment shall be made later than the last day of the second calendar year after
the year in which the expense that occurs and the Executive’s right to such
payment or benefit may not be liquidated or exchanged for any other benefit.

 

(7)        Office and Support Staff. During the Employment Period, the Executive
shall be entitled to an office or offices of a size and with furnishings and
other appointments, and to exclusive personal secretarial and other assistance,
at least equal to the most favorable of the foregoing provided to the Executive
by the Company and the Affiliated Companies at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as provided generally at any time thereafter with respect to other
peer executives of the Company and the Affiliated Companies.

 

(8)        Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
practices, policies and programs of the Company and the Affiliated Companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and the Affiliated Companies.

 

Section 4.          Termination of Employment. (a) Death or Disability. The
Executive’s employment shall terminate automatically if the Executive dies
during the Employment Period. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of “Disability”), it may give to
the Executive written notice in accordance with Section 11(b) of its intention
to terminate the Executive’s employment. In such event, the Executive’s
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the “Disability Effective Date”),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive’s duties. “Disability”
means the absence of the Executive from the Executive’s duties with the Company
on a full-time basis for 90 consecutive business days, or 90 business days
during any period of 120 consecutive business days, as a result of incapacity
due to mental or physical illness that is determined to be total and permanent
by a physician selected by the Company or its insurers and acceptable to the
Executive or the Executive’s legal representative (such agreement as to
acceptability not to be unreasonably withheld).

 

(b)        Cause. The Company may terminate the Executive’s employment during
the Employment Period with or without Cause. “Cause” means:

 

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(1)        the willful and continued failure of the Executive to perform
substantially the Executive’s duties (as contemplated by Section 3(a)(1)(A))
with the Company or any Affiliated Company (other than any such failure
resulting from incapacity due to physical or mental illness or following the
Executive’s delivery of a Notice of Termination for Good Reason), after a
written demand for substantial performance is delivered to the Executive by the
Board of Directors of the Company that specifically identifies the manner in
which the Board believes that the Executive has not substantially performed the
Executive’s duties, or

 

(2)        the willful engaging by the Executive in illegal conduct or gross
misconduct that is materially and demonstrably injurious to the Company.

 

For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered “willful” unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive’s action or omission was in the best interests of the Company. Any
act, or failure to act, based upon (A) authority given pursuant to a resolution
duly adopted by the Board, or if the Company is not the ultimate parent
corporation of the Affiliated Companies and is not publicly traded, the board of
directors of the ultimate parent of the Company (the “Applicable Board”), or (B)
the advice of counsel for the Company shall be conclusively presumed to be done,
or omitted to be done, by the Executive in good faith and in the best interests
of the Company. The cessation of employment of the Executive shall not be deemed
to be for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Applicable Board
(excluding the Executive, if the Executive is a member of the Applicable Board)
at a meeting of the Applicable Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel for the Executive, to be heard before the
Applicable Board), finding that, in the good faith opinion of the Applicable
Board, the Executive is guilty of the conduct described in Section 4(b)(1) or
4(b)(2), and specifying the particulars thereof in detail.

 

(c)        Good Reason. The Executive’s employment may be terminated during the
Employment Period by the Executive for Good Reason or by the Executive
voluntarily without Good Reason. “Good Reason” means:

 

(1)        the assignment to the Executive of any duties inconsistent in any
respect with the Executive’s position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 3(a), or any action by the Company that results in a diminution in
such position, authority, duties or responsibilities (whether or not occurring
solely as a result of the Company’s ceasing to be a publicly traded entity),
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and that is remedied by the Company promptly after receipt of
notice thereof given by the Executive;

 

(2)        any failure by the Company to comply with any of the provisions of
Section 3(b), other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and that is remedied by the Company promptly after
receipt of notice thereof given by the Executive;

 

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(3)        the Company’s requiring the Executive (i) to be based at any office
or location other than as provided in Section 3(a)(1)(B) of this Agreement that
increases the distance or duration of the Executive’s commute, (ii) to be based
at a location other than the principal executive offices of the Company if the
Executive was employed at such location immediately preceding the Effective Date
or (iii) to be based at any location that increases the distance or duration of
the Executive’s commute;

 

(4)        any purported termination by the Company of the Executive’s
employment otherwise than as expressly permitted by this Agreement; or

 

(5)        any other action or inaction that constitutes a material breach by
the Company of this Agreement, including any failure by the Company to comply
with and satisfy Section 10(c).

 

For purposes of this Section 4(c) of this Agreement, any good faith
determination of Good Reason made by the Executive shall be conclusive. The
Executive’s mental or physical incapacity following the occurrence of an event
described above in clauses (1) through (5) shall not affect the Executive’s
ability to terminate employment for Good Reason and the Executive’s death
following delivery of a Notice of Termination for Good Reason shall not affect
the Executive’s estate’s entitlement to severance payments benefits provided
hereunder upon a termination of employment for Good Reason.

 

(d)        Notice of Termination. Any termination by the Company for Cause, or
by the Executive for Good Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 11(b). “Notice of
Termination” means a written notice that (1) indicates the specific termination
provision in this Agreement relied upon, (2) to the extent applicable, sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive’s employment under the provision so
indicated and (3) if the Date of Termination (as defined herein) is other than
the date of receipt of such notice, specifies the Date of Termination (which
Date of Termination shall be not more than 30 days after the giving of such
notice). The failure by the Executive or the Company to set forth in the Notice
of Termination any fact or circumstance that contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive’s or the
Company’s respective rights hereunder.

 

(e)        Date of Termination. “Date of Termination” means (1) if the
Executive’s employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
such later date specified in the Notice of Termination, as the case may be, (2)
if the Executive’s employment is terminated by the Company other than for Cause
or Disability, the date on which the Company notifies the Executive of such
termination, (3) if the Executive resigns without Good Reason, the date on which
the Executive notifies the Company of such termination, and (4) if the
Executive’s employment is terminated by reason of death or Disability, the date
of death of the Executive or the Disability Effective Date, as the case may be.
The Company and the Executive shall take all steps necessary (including with
regard to any post-termination services by the Executive) to ensure that any
termination described in this Section 4 constitutes a “separation from service”
within the meaning of Section 409A of the Code, and notwithstanding anything
contained herein to the contrary, the date on which such separation from service
takes place shall be the “Date of Termination.”

 

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Section 5.          Obligations of the Company upon Termination. (a) By the
Executive for Good Reason; By the Company Other Than for Cause, Death or
Disability. If, during the Employment Period, the Company terminates the
Executive’s employment other than for Cause, death or Disability or the
Executive terminates employment for Good Reason:

 

(1)        the Company shall pay to the Executive, in a lump sum in cash within
30 days after the Date of Termination, the aggregate of the following amounts:

 

(A)       the sum of (i) the Executive’s Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (ii) the Executive’s business
expenses that are reimbursable pursuant to Section 3(b)(5) but have not been
reimbursed by the Company as of the Date of Termination; (iii) the Executive’s
Annual Bonus for the fiscal year immediately preceding the fiscal year in which
the Date of Termination occurs, if such bonus has been determined but not paid
as of the Date of Termination; (iv) any accrued vacation pay to the extent not
theretofore paid (the sum of the amounts described in subclauses (i), (ii),
(iii) and (iv), the “Accrued Obligations”) and (v) an amount equal to the
product of (x) the target Annual Bonus paid or payable, without regard to the
satisfaction of any applicable performance targets at their target performance
level, for the fiscal year during which the Employment Period is terminated
under this paragraph (the “Target Annual Bonus”) and (y) a fraction, the
numerator of which is the number of days in the current fiscal year through the
Date of Termination and the denominator of which is 365 (the “Pro Rata Bonus”);
provided, that notwithstanding the foregoing, if the Executive has made an
irrevocable election under any deferred compensation arrangement subject to
Section 409A of the Code to defer any portion of the Annual Bonus described in
clause (iii) above, then for all purposes of this Section 5 (including, without
limitation, Sections 5(b) through 5(d)), such deferral election, and the terms
of the applicable arrangement, shall apply to the same portion of the amount
described in such clause (iii), and such portion shall not be considered as part
of the “Accrued Obligations” but shall instead be an “Other Benefit” (as defined
below); and

 

(B)       the amount equal to ____ times the sum of the Executive’s Annual Base
Salary and the Target Annual Bonus;

 

(2)        for three years after the Executive’s Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy (the “Benefit Continuation Period”), the Company shall
provide health care and life insurance benefits to the Executive and/or the
Executive’s family at least equal to, and at the same after-tax cost to the
Executive and/or the Executive’s family, as those that would have been provided
to them in accordance with the plans, programs, practices and policies providing
health care and life insurance benefits and at the benefit level described in
Section 3(b)(4) if the Executive’s employment had not been terminated or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and the Affiliated
Companies and their families, including but not limited to any retiree medical
plan for which the Executive or the Executive’s family was eligible prior to or
as of the Date of Termination; provided, however, that, the health care benefits
provided during the Benefit Continuation Period shall be provided in such a
manner that such benefits (and the costs and premiums thereof) are

 

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excluded from the Executive’s income for federal income tax purposes and, if the
Company reasonably determines that providing continued coverage under one or
more of its health care benefit plans contemplated herein could be taxable to
the Executive, the Company shall provide such benefits at the level required
hereby through the purchase of individual insurance coverage; provided, however,
that if the Executive becomes re-employed with another employer and is eligible
to receive health care and life insurance benefits under another
employer-provided plan, the health care and life benefits provided hereunder
shall be secondary to those provided under such other plan during such
applicable period of eligibility. Following the end of the Benefit Continuation
Period, the Executive shall be eligible for continued health coverage as
required by Section 4980B of the Code or other applicable law (“COBRA
Coverage”), as if the Executive’s employment with the Company had terminated as
of the end of such period, and the Company shall take such actions as are
necessary to cause such COBRA Coverage not to be offset by the provision of
benefits under this Section 5(a)(2) and to cause the period of COBRA Coverage to
commence at the end of the Benefit Continuation Period. For purposes of
determining eligibility (but not the time of commencement of benefits) of the
Executive for retiree welfare benefits pursuant to the retiree welfare benefit
plans, the Executive shall be considered to have remained employed until the end
of the Benefit Continuation Period and to have retired on the last day of such
period, and the Company shall take such actions as are necessary to cause the
Executive to be eligible to commence in the applicable retiree welfare benefit
plans as of the applicable benefit commencement date.

 

(3)        the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services substantially similar to those available to
the Executive immediately prior to the Date of Termination, provided that such
outplacement benefits shall end not later than the last day of the second
calendar year that began after the Date of Termination and the Executive’s right
to such outplacement may not be liquidated or exchanged for any other benefit;
and

 

(4)        except as otherwise set forth in the last sentence of Section 6, to
the extent not theretofore paid or provided, the Company shall timely pay or
provide to the Executive any Other Benefits (as defined in Section 6) in
accordance with the terms of the underlying plans or agreements.

 

Notwithstanding the foregoing provisions of this Section 5(a)(1) and except as
otherwise provided in Section 11(g) with respect to an Anticipatory Termination,
in the event that the Executive is a “specified employee” within the meaning of
Section 409A of the Code (as determined in accordance with the methodology
established by the Company as in effect on the Date of Termination) (a
“Specified Employee”), amounts that would otherwise be payable and benefits that
would otherwise be provided under Section 5(a)(1) during the six-month period
immediately following the Date of Termination (other than the Accrued
Obligations) shall instead be paid, with interest on any delayed payment at the
rate equal to the ninety-day London Interbank Offered Rate, determined on the
first day during such six-month period, plus 3.00% (such rate referred to herein
as “Interest”), or provided, as the case may be, on the first business day after
the date that is six months following the Executive’s “separation from service”
within the meaning of Section 409A of the Code (the “Delayed Payment Date”).

 

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(b)        Death. If the Executive’s employment is terminated by reason of the
Executive’s death during the Employment Period, the Company shall provide the
Executive’s estate or beneficiaries with the Accrued Obligations (subject to the
proviso set forth in Section 5(a)(1)(A) to the extent applicable) and the Pro
Rata Bonus and the timely payment or delivery of the Other Benefits (subject to
the proviso set forth in Section 5(a)(1)(A) to the extent applicable), and shall
have no other severance obligations under this Agreement. The Accrued
Obligations and the Pro Rata Bonus shall be paid to the Executive’s estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of the Other Benefits, the term
“Other Benefits” as utilized in this Section 5(b) shall include, without
limitation, and the Executive’s estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits provided by the
Company and the Affiliated Companies to the estates and beneficiaries of peer
executives of the Company and the Affiliated Companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in
effect on the date of the Executive’s death with respect to other peer
executives of the Company and the Affiliated Companies and their beneficiaries.

 

(c)        Disability. If the Executive’s employment is terminated by reason of
the Executive’s Disability during the Employment Period, the Company shall
provide the Executive with the Accrued Obligations and Pro Rata Bonus and the
timely payment or delivery of the Other Benefits (subject to the proviso set
forth in Section 5(a)(1)(A) to the extent applicable) in accordance with the
terms of the underlying plans or agreements, and shall have no other severance
obligations under this Agreement. The Accrued Obligations (subject to the
proviso set forth in Section 5(a)(1)(A) to the extent applicable) and the Pro
Rata Bonus shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination, provided, that in the event that the Executive is a
Specified Employee, the Pro Rata Bonus shall be paid, with Interest, to the
Executive on the Delayed Payment Date. With respect to the provision of the
Other Benefits, the term “Other Benefits” as utilized in this Section 5(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the most favorable
of those generally provided by the Company and the Affiliated Companies to
disabled executives and/or their families in accordance with such plans,
programs, practices and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive’s family, as in effect at any
time thereafter generally with respect to other peer executives of the Company
and the Affiliated Companies and their families.

 

(d)        Cause; Other Than for Good Reason. If the Executive’s employment is
terminated for Cause during the Employment Period, the Company shall provide the
Executive with the Executive’s Annual Base Salary through the Date of
Termination, and the timely payment or delivery of the Other Benefits
(disregarding the proviso set forth in Section 5(a)(1)(A) to the extent
applicable), and shall have no other severance obligations under this Agreement.
If the Executive voluntarily terminates employment during the Employment Period,
excluding a termination for Good Reason, the Company shall provide to the
Executive the Accrued Obligations and the Pro Rata Bonus and the timely payment
or delivery of the Other Benefits, subject to the proviso set forth in Section
5(a)(1)(A) to the extent applicable, and shall have no other severance
obligations under this Agreement. In such case, all the Accrued Obligations and
the Pro Rata Bonus shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination, provided, that in the event that the
Executive is a Specified Employee, the Pro Rata Bonus shall be paid, with
Interest, to the Executive on the Delayed Payment Date.

 

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Section 6.          Non-Exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive’s continuing or future participation in any plan,
program, policy or practice provided by the Company or the Affiliated Companies
and for which the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such rights as the Executive may have
under any other contract or agreement with the Company or the Affiliated
Companies. Amounts that are vested benefits or that the Executive is otherwise
entitled to receive under any plan, policy, practice or program of or any other
contract or agreement with the Company or the Affiliated Companies at or
subsequent to the Date of Termination (“Other Benefits”) shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement. Without limiting the generality
of the foregoing, the Executive’s resignation under this Agreement with or
without Good Reason, shall in no way affect the Executive’s ability to terminate
employment by reason of the Executive’s “retirement” under any compensation and
benefits plans, programs or arrangements of the Affiliated Companies, including
without limitation any retirement or pension plans or arrangements or to be
eligible to receive benefits under any compensation or benefit plans, programs
or arrangements of the Affiliated Companies, including without limitation any
retirement or pension plan or arrangement of the Affiliated Companies or
substitute plans adopted by the Company or its successors, and any termination
which otherwise qualifies as Good Reason shall be treated as such even if it is
also a “retirement” for purposes of any such plan. Notwithstanding the
foregoing, if the Executive receives payments and benefits pursuant to Section
5(a) of this Agreement, the Executive shall not be entitled to any severance pay
or benefits under any severance plan, program or policy of the Company and the
Affiliated Companies, unless otherwise specifically provided therein in a
specific reference to this Agreement.

 

Section 7.          Full Settlement; Legal Fees. The Company’s obligation to
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense, or other claim, right or action that the Company may have
against the Executive or others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement,
and except as specifically provided in Section 5(a)(2), such amounts shall not
be reduced whether or not the Executive obtains other employment. The Company
agrees to pay as incurred (within 10 days following the Company’s receipt of an
invoice from the Executive), at any time from the Effective Date of this
Agreement through the Executive’s remaining lifetime (or, if longer, through the
20th anniversary of the Effective Date) to the full extent permitted by law, all
legal fees and expenses that the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus, in each case, Interest. In order to comply with Section 409A
of the Code, in no event shall the payments by the Company under this Section 7
be made later than the end of the calendar year next following the calendar year
in which such fees and expenses were incurred, provided, that the Executive
shall have submitted an invoice for such fees and expenses at least 10 days
before the end of the calendar year next following the calendar year in which
such fees and expenses were incurred. The amount of such legal fees and expenses
that the Company is obligated to pay in any given calendar year shall not affect
the legal fees and expenses that the Company is obligated to pay in any other
calendar year, and the Executive’s right to have the Company pay such legal fees
and expenses may not be liquidated or exchanged for any other benefit.

 

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Section 8.

Certain Additional Payments by the Company.

 

(a)        Anything in this Agreement to the contrary notwithstanding and except
as set forth below, in the event it shall be determined that any Payment would
be subject to the Excise Tax, then the Executive shall be entitled to receive an
additional payment (the “Gross-Up Payment”) in an amount such that, after
payment by the Executive of all taxes (and any interest or penalties imposed
with respect to such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, but excluding any income taxes and penalties
imposed pursuant to Section 409A of the Code, the Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. The
Company’s obligation to make Gross-Up Payments under this Section 8 shall not be
conditioned upon the Executive’s termination of employment.

 

(b)        Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required, the amount of such Gross-Up Payment and the assumptions to
be utilized in arriving at such determination, shall be made by such nationally
recognized certified public accounting firm as may be designated by the
Executive (the “Accounting Firm”). The Accounting Firm shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change in Control, the Executive may appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments that
will not have been made by the Company should have been made (the
“Underpayment”), consistent with the calculations required to be made hereunder.
In the event the Company exhausts its remedies pursuant to Section 8(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.

 

(c)        The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable, but no later than 10 business days after the Executive is informed
in writing of such claim. The Executive shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which the Executive gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that the Company desires to contest such claim,
the Executive shall:

 

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(1)        give the Company any information reasonably requested by the Company
relating to such claim,

 

(2)        take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,

 

(3)        cooperate with the Company in good faith in order effectively to
contest such claim; and

 

 

(4)

permit the Company to participate in any proceedings relating to such claim;

 

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section 8(c),
the Company shall control all proceedings taken in connection with such contest,
and, at its sole discretion, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the applicable taxing
authority in respect of such claim and may, at its sole discretion, either pay
the tax claimed to the appropriate taxing authority on behalf of the Executive
and direct the Executive to sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that, if the Company pays such claim and directs
the Executive to sue for a refund, the Company shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties) imposed with respect to such payment or with
respect to any imputed income in connection with such payment; and provided,
further, that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company’s control of the contest shall be limited to issues
with respect to which the Gross-Up Payment would be payable hereunder, and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.

 

(d)        If, after the receipt by the Executive of a Gross-Up Payment or
payment by the Company of an amount on the Executive’s behalf pursuant to
Section 8(c), the Executive becomes entitled to receive any refund with respect
to the Excise Tax to which such Gross-Up Payment relates or with respect to such
claim, the Executive shall (subject to the Company’s complying with the
requirements of Section 8(c), if applicable) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after payment by the Company of an amount on the
Executive’s behalf pursuant to Section 8(c), a determination is made that the
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then the amount of such payment shall offset, to the extent thereof, the amount
of Gross-Up Payment required to be paid.

 

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(e)        Any Gross-Up Payment, as determined pursuant to this Section 8, shall
be paid by the Company to the Executive within five days of the receipt of the
Accounting Firm’s determination; provided that, the Gross-Up Payment shall in
all events be paid no later than the end of the Executive’s taxable year next
following the Executive’s taxable year in which the Excise Tax (and any income
or other related taxes or interest or penalties thereon) on a Payment are
remitted to the Internal Revenue Service or any other applicable taxing
authority or, in the case of amounts relating to a claim described in Section
8(c) that does not result in the remittance of any federal, state, local and
foreign income, excise, social security and other taxes, the calendar year in
which the claim is finally settled or otherwise resolved. Notwithstanding any
other provision of this Section 8, the Company may, in its sole discretion,
withhold and pay over to the Internal Revenue Service or any other applicable
taxing authority, for the benefit of the Executive, all or any portion of any
Gross-Up Payment, and the Executive hereby consents to such withholding.

 

(f)        Definitions. The following terms shall have the following meanings
for purposes of this Section 8.

 

(i)         “Excise Tax” shall mean the excise tax imposed by Section 4999 of
the Code, together with any interest or penalties imposed with respect to such
excise tax.

 

(ii)        A “Payment” shall mean any payment or distribution in the nature of
compensation (within the meaning of Section 280G(b)(2) of the Code) to or for
the benefit of the Executive, whether paid or payable pursuant to this Agreement
or otherwise

 

Section 9.          Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or the Affiliated
Companies, and their respective businesses, which information, knowledge or data
shall have been obtained by the Executive during the Executive’s employment by
the Company or the Affiliated Companies and which information, knowledge or data
shall not be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive’s employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those persons designated
by the Company. In no event shall an asserted violation of the provisions of
this Section 9 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.

 

Section 10.        Successors. (a) This Agreement is personal to the Executive,
and, without the prior written consent of the Company, shall not be assignable
by the Executive other than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive’s legal representatives.

 

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(b)        This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns. Except as provided in Section 10(c),
without the prior written consent of the Executive this Agreement shall not be
assignable by the Company.

 

(c)        The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume expressly 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.
The “Company” means the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid that assumes and agrees to perform this
Agreement by operation of law or otherwise.

 

Section 11.        Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.

 

(b)        All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:

 

if to the Executive:

 

At the most recent address on file at the Company.

 

if to the Company:

 

The Valspar Corporation

1101 Third Street South

P.O. Box 1461

Minneapolis, Minnesota 55415

Attention: General Counsel

 

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

 

(c)        The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.

 

(d)        The Company may withhold from any amounts payable under this
Agreement such United States federal, state or local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or regulation.

 

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(e)        The Executive’s or the Company’s failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.

 

(f)        The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is “at will”
and, subject to Section 1(a), prior to the Effective Date, the Executive’s
employment may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this Agreement. From and after the Effective Date, except as
specifically provided herein, this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof in effect
immediately prior to the execution of this Agreement.

 

(g)       Notwithstanding any provision in this Agreement to the contrary, in
the event of an Anticipatory Termination, any payments that are deferred
compensation within the meaning of Section 409A of the Code that the Company
shall be required to pay pursuant to Section 5(a)(1) of this Agreement shall be
paid as follows: (i) if such Change in Control is a “change in control event”
within the meaning of Section 409A of the Code, (A) except as provided in clause
(i)(B), on the date of such Change in Control, or (B) if the Executive is a
Specified Employee and the Delayed Payment Date is later than the Change in
Control, on the Delayed Payment Date, and (ii) if such Change in Control is not
a “change in control event” within the meaning of Section 409A of the Code, (A)
except as provided in clause (ii)(B), on the first business day following the
first anniversary of the date of such Anticipatory Termination (the “Payment
Date”), or (B) if the Executive is a Specified Employee and the Delayed Payment
Date is later than the date of such Change in Control, on the Delayed Payment
Date. In the event of an Anticipatory Termination, any payments or benefits that
are not deferred compensation within the meaning of Section 409A of the Code
that the Company shall be required to pay or provide pursuant to Section 5(a) of
this Agreement shall be paid or shall commence being provided on the date of the
Change in Control. Interest with respect to the period, if any, from the date of
the Change in Control through the actual date of payment shall be paid on any
delayed cash amounts.

 

(h)       Within the time period permitted by the applicable Treasury
Regulations, the Company may, in consultation with the Executive, modify the
Agreement, in the least restrictive manner necessary and without any diminution
in the value of the payments to the Executive, in order to cause the provisions
of the Agreement to comply with the requirements of Section 409A of the Code, so
as to avoid the imposition of taxes and penalties on the Executive pursuant to
Section 409A of the Code.

 

(i)        In the event the payments to be provided to the Executive under
Section 5(a) are not to be paid until the Delayed Payment Date, then within five
(5) business days of the Executive’s Date of Termination, the Company shall
deliver cash, in an amount equal to the aggregate of the cash amounts payable
under Section 5(a) (plus the estimated Interest) and, to the extent not
previously paid (or immediately payable within five (5) days of the
determination in accordance with Section 8(e) of this Agreement), any unpaid
portion of the then-estimated Gross-Up Payment (as determined by the Accounting
Firm), to a “rabbi trust” (the “Trust”) to be established by the Company with a
nationally recognized financial institution as trustee (the “Trustee”) to be
held by the Trustee pursuant to the terms of the trust agreement entered into
between the Company and the Trustee prior to the Effective Date; provided,
however, that the Trust shall not be funded if the funding thereof would result
in taxable income to the Executive by reason of Section 409A(b) of the Code; and
provided, further, in no event shall any Trust assets at any time be located or
transferred outside of the United States, within the meaning of Section 409A(b)
of the Code. Any fees and expenses of the Trustee shall be paid by the Company.

 

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Section 12.        Survivorship. Upon the expiration or other termination of
this Agreement or the Executive’s employment, the respective rights and
obligations of the parties hereto shall survive to the extent necessary to carry
out the intentions of the parties under this Agreement.

 

IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and,
pursuant to the authorization from the Board, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.

 

 

 

 

[officer]

 

The Valspar Corporation
 

By:

 

 

 

Its:

 

 

 

 

 

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