Document:

Exhibit 10(r) to The Valspar Corporation Form 10-K dated October 28, 2005

Exhibit 10(r)  

VALSPAR CORPORATION

NONSTATUTORY STOCK OPTION AGREEMENT

UNDER 1991 STOCK OPTION PLAN – OFFICER  

By action of its shareholders, The
Valspar Corporation (“Valspar”) established the 1991 Stock Option Plan
(“1991 Plan”) authorizing the issue of not more than 20,000,000 shares of its
common stock (50 cents par value) to key employees, designed to stimulate and reward
interest and initiative in their employment. 

Pursuant to the provisions of the
1991 Plan and The Valspar Corporation Key Employee Annual Bonus Plan, Valspar hereby
grants _________________ (Optionee”), an officer of Valspar, a nonstatutory
option to purchase from Valspar _________ shares of its common stock at a price of
$______ per share, all in accordance with and subject to the following terms
and conditions: 

         1.       
          Period of Exercise – The Option becomes
          exercisable one year from the date of grant and will expire ten (10) years from
          the date of this Agreement. The Option may be exercised only while the Optionee
          is actively employed by Valspar and as provided in Section 6, dealing with
          termination of employment. 

         2.       
          Vesting of Rights – The Option may be
          exercised for up to, but not in excess of, the amounts of shares subject to the
          Option as specified below, based on the Optionee’s number of years of
          continuous employment with Valspar from the date hereof. In applying the
          following limitations, the amount of shares, if any, previously purchased by
          Optionee shall be counted in determining the amount of shares the Optionee can
          purchase at any time in accordance with said limitations. The Optionee may
          exercise the Option in the amounts and in accordance with the conditions set
          forth below: 

	  	(a)	After
one (1) year of such continuous employment, the Option may be exercised           for
one-third of the shares originally subject to the Option;  

	  	(b)  	After
two (2) years of such continuous employment, the Option may be exercised           for
two-thirds of the shares originally subject to the Option;  

	  	(c)  	At
the expiration of the third (3rd) year of such continuous employment, the
          Option may be exercised at any time and from time to time in whole or in part,
          but it shall not be exercisable after expiration of the exercise period set
          forth in Section 1 above.  

Notwithstanding the foregoing, in the
event that Optionee’s employment with Valspar terminates as a result of
Optionee’s death, disability or retirement after the age of sixty (60), Optionee
shall be entitled to purchase all of the stock covered by the Option at the time of such
termination of employment. 

         3.       
          Definitions – For the purposes of this
          Option, (i) disability shall mean permanent disability as that term is defined
          under the long term disability insurance coverage offered by Valspar to its
          employees at the time the determination is to be made; (ii) retirement shall
          mean the termination of employment with Valspar at any time after Optionee has
          attained the age of sixty (60) years for any reason other than cause; and (iii)
          termination for cause shall mean the termination of employment with Valspar as a
          result of an illegal act, gross insubordination, or willful violation of a
          Valspar policy by Optionee. 

         4.       
          Method of Exercise – The Optionee shall
          exercise his rights hereunder by (i) delivering to Valspar a tender letter
          substantially in the form hereto attached stating the number of shares to be
          purchased and (ii) payment to Valspar of the full amount of the purchase price
          for the shares then being purchased. In lieu of cash, all or part of the
          purchase price may be paid by surrender (or deemed surrender through
          attestation) to Valspar of previously acquired shares of common stock of
          Valspar, based on the fair market value at the closing price on the day
          preceding the date of exercise. Shares surrendered in lieu of cash must have
          been held by Optionee for a minimum of six (6) months. Upon effective exercise
          of the Option, Valspar shall promptly cause the shares being purchased to be
          issued to the Optionee. 

         5.       
          Conditions – By Optionee’s
          acceptance of this Option, the Optionee agrees that Optionee will during
          Optionee’s employment by Valspar devote Optionee’s full business time,
          energy and skill on behalf of Valspar, subject to absences permitted in
          accordance with established Valspar policy. 

         6.       
          A – Termination of Employment –
          This Option shall be exercisable after a termination of Optionee’s
          employment with Valspar to the following extent, in each event not to exceed the
          original period of exercise of this Option: (a) If the Optionee’s
          employment with Valspar is terminated for cause, this Option and all of the
          Optionee’s rights hereunder shall thereupon terminate to the extent that
          this Option has not therefore been exercised. (b) In the event of termination of
          employment of the Optionee under any circumstances other than for cause,
          disability, or the Optionee’s death, this Option may be exercised at any
          time within thirty (30) days after such termination of employment to the extent
          the Optionee was entitled to purchase stock at the time of termination of
          employment. (c) If termination of employment occurs by reason of the
          Optionee’s retirement 

after the age sixty (60), this
Option may be           exercised at any time within three (3) years after such
termination. (d) If           termination occurs by reason of the Optionee’s
disability, this Option may           be exercised at any time within one (1) year
Optionee’s rights hereunder.           (e) If termination occurs by reason of the
Optionee’s death,           Optionee’s legal representative may exercise within
one (1) year           Optionee’s rights hereunder. (f) Nothing herein contained
shall confer on           the Optionee the right to continue in Valspar’s employ or
affect           Valspar’s rights to terminate or alter the terms of the Optionee’s
          employment at any time.  

         6.       
          B – Early Retirement – If an
          Optionee retires on or after age 55, all outstanding options will be 100% vested
          and he/she shall have up to an additional three (3) years to exercise this
          option beyond his/her termination date (not to exceed the original option term),
          provided that during this three (3) year period, the Optionee does not directly
          or indirectly render services (including consulting or research) to any person
          or business organization that is engaged in the development, manufacture and
          sale of a competitive product. 

Competitive Product means any
product, process or service (including any component thereof or research to develop
information useful in connection with a product or service) that is being designed,
developed, assembled, manufactured, marketed and sold by anyone other than Valspar and
which is of the same general type, performs similar functions, competes, with or is used
for the same purposes as a Valspar product. In the event the Optionee violates this
prohibition on competition for this three (3) year period, all unexercised options that
have been granted shall terminate immediately and be forfeited to the Company. 

         7.       
          Transferability – The rights of the
          Optionee hereunder are exercisable during the Optionee’s life only by the
          Optionee and are not transferable, voluntarily or involuntarily, except (a) at
          Optionee’s death by Will or applicable law of descent to the extent
          provided in Section 6 hereof or (b) as otherwise provided in this Section 7.
          Notwithstanding the preceding sentence, the vested portion of the Option may be
          transferred by Optionee to Optionee’s spouse, children, grandchildren,
          parents, stepchildren, former spouse, adoptive relationships, sisters or
          brothers (collectively, the “Family Members”), to trusts in which
          Family Members have more than fifty percent of the beneficial interest, to
          entities in which Family Members own more than fifty percent of the voting
          interests, to foundations in which the Optionee or Family Members control the
          management of assets, or to entities exempt from federal income taxation
          pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. 

         8.       
          Withholding – In any case where
          withholding is required or advisable under federal, state or local law in
          connection with any exercise by Optionee hereunder, the Optionee shall (i) pay
          cash, (ii) surrender previously acquired shares of common stock or (iii)
          authorize the withholding of shares from the shares issued upon exercise of any
          option for all taxes required to be withheld. 

         9.       
          Adjustments in Stock – In the event of a
          change in Valspar common stock as a result of a stock split or stock dividend,
          this Option may be adjusted by the Compensation Committee in such manner as it
          deems equitable to prevent dilution or enlargement of the Optionee’s rights
          hereunder by reason of such change. 

         10.     
          Mergers, Acquisition or Other Reorganization
          – The Compensation 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.     
          Change of Control – Upon any Change of
          Control, each outstanding option shall immediately become exercisable in full
          for the remainder of its term without regard to any vesting or installment
          exercise provisions then applicable to the option. The term “Change of
          Control” shall have the meaning as defined in the 1991 Plan. 

         12.     
          Construction – Interpretation and
          construction of the terms of this Option shall be made by the Compensation
          Committee in accordance with the provisions of the 1991 Plan and The Valspar
          Corporation Key Employee Annual Bonus Plan. 

	Dated:	THE VALSPAR CORPORATION
	 
	Accepted and Confirmed	 
	as of the Above Date	By
		

	 	Its President and Chief Executive Officer
	 
	

	              (Optionee's Signature)Exhibit 10.1

 

EXTENSION OF NOTE AND LIEN

 

	
            THE STATE OF TEXAS
 	
            §
 	
             

	
             
	
            §
 	
            KNOW ALL MEN BY THESE PRESENTS:
 
	
            COUNTY OF TARRANT
 	
            §
 	
             

				

 

THAT Enclaves of Spring Magnolia II LLC, a Texas limited liability company (hereinafter referred to as the “Undersigned”), being legally obligated to pay the hereinafter described Promissory Note (the “Note”) and who, if not presently primarily liable for the payment of the Note, does hereby expressly assume the payment thereof, said Note being in the original principal sum of Seven Hundred Eighty-Eight Thousand Seven Hundred Fifty and No/100 Dollars ($788,750.00) dated May 13, 2005, executed and delivered by the Undersigned to the order of Orinda Capital Partners, L.P., a Texas limited partnership (hereinafter referred to as “Noteholder”), and being more fully described in a Deed of Trust (herein so called) of even date therewith recorded as Document Number D205148516 of the Deed of Trust Records of Tarrant County, Texas, said Note being secured by the liens therein created or mentioned against the real property more particularly described therein (the “Property”), and who now desires to extend or rearrange the time or manner of payment of said Note and to extend and carry forward said liens on said Property; and

 

WHEREAS, the Undersigned has agreed to pay Noteholder the sum of $150,134.25 (the “Extension Payment”), which sum represents a partial payment of principal on the Note in the sum of $100,000, together with the payment of accrued and unpaid interest on the Note through December 31, 2005, in the sum of $50,134.25; and

 

WHEREAS, Noteholder, being the legal owner and holder of said Note and of the liens securing same, in consideration of the premises and at the request of the Undersigned, has agreed to extend or rearrange the time or manner of payment of said Note as hereinafter provided:

 

NOW, THEREFORE, in consideration of the extension or rearrangement of the time or manner of payment of said Note as hereinafter set forth by Noteholder, the Undersigned (a) has paid the Extension Payment to Noteholder, (b) does hereby renew said Note and the indebtedness evidenced thereby and promises to pay to the order of Noteholder in the City of Dallas, Dallas County, Texas, the sum of Six Hundred Eighty-Eight Thousand Seven Hundred Fifty and No/100 Dollars ($688,750.00) (being the present unpaid balance of said Note after the payment of the Extension Payment by the Undersigned to Noteholder), together with interest thereon at the rate and in the manner of payment provided in the Note from December 31, 2005 until its extended maturity on March 1, 2006, (c) does hereby extend said liens on
said Property until said indebtedness and Note as so renewed and extended has been fully paid, and agrees that such extension or rearrangement shall in no manner affect or impair said Note or the liens securing the same and that said liens shall not in any manner be waived, the purpose of this instrument being simply to extend or rearrange the time or manner of payment of said Note and indebtedness and to carry forward all liens securing the same, which are acknowledged by the Undersigned to be valid and subsisting, and (d) does hereby further agree that all terms and provisions of said original Note and of the instrument or instruments creating or fixing the liens securing the same shall be and remain in full force and effect as therein written, except as otherwise expressly provided herein.

 

The Undersigned hereby acknowledges that the Deed of Trust was mistakenly signed in the name of its Managing Member rather than in the name of the Undersigned. By its execution below, the Undersigned and said Managing Member each do hereby ratify and affirm the Deed of Trust and the liens and interests granted thereby against the Property, effective as of May 13, 2005, to the same extent as if said Deed of Trust were properly signed in the name and on behalf of the Undersigned and recorded in the appropriate public records of Tarrant County, Texas. 

 

 

 

 

EXECUTED as of the 31st day of December, 2005.

 

	
            ACCEPTED AND AGREED to by the
 	
             
 	
            ENCLAVES OF SPRING MAGNOLIA II LLC,
 
	
            owner and holder of said Note: 
 	
             
 	
            a Texas limited liability company
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            ORINDA CAPITAL PARTNERS, L.P.
 	
             
 	
            By:
 	
            Enclaves Group, Inc.,
 
	
            a Texas limited partnership
 	
             
 	
             
 	
            a Delaware corporation,
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
            its Managing Member
 
	
            By:
 	
            Orinda Managers, Inc.,
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
            a Texas corporation,
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
            its General Partner
 	
             
 	
             
 	
            By:
 	
            /s/ Daniel Hayes
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Daniel Hayes,
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            President and CEO
 
	
             
 	
            By:
 	
            /s/ Charles J. Wilson
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
            Charles J. Wilson,
 	
             
 	
            ENCLAVES GROUP, INC.,
 
	
             
 	
            President
 	
             
 	
             
 	
            a Delaware corporation
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
            By:
 	
            /s/ Daniel Hayes
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
            Daniel Hayes,
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
            President and CEO
 
	
             
	
            
 	
            
 	
             

																		

	
            STATE OF TEXAS
 	
            §
 
	
            
 	
            §
 

	
            COUNTY OF DALLAS
 	
            §
 

 

This instrument was acknowledged before me on January 5, 2006, by Charles J. Wilson, President of Orinda Managers, Inc., a Texas corporation on behalf thereof as the General Partner of Orinda Capital Partners, L.P., a Texas limited partnership, on behalf thereof.

 

	
             
 	
             
 	
            /s/ Elaine Strickland
 	
             

	
             
 	
             
 	
            Notary Public, State of Texas
 
	
            My Commission Expires:
 	
             
 	
             
 
	
             
 	
             
 	
            Elaine Strickland
 
	
            November 28, 2006
 	
             
 	
            Printed Name of Notary
 
					

 

	
            STATE OF NEW YORK 
 	
            §
 

	
            
 	
            §
 

	
            COUNTY OF WESTCHESTER
 	
            §
 

 

This instrument was acknowledged before me on December 30,2 005, by Daniel Hayes, President and CEO of Enclaves Group, Inc., a Delaware corporation on behalf of itself and as the Managing Member of Enclaves of Spring Magnolia II LLC, a Texas limited liability company, on behalf thereof.

 

	
             
 	
             
 	
            /s/ David Jay Parker
 	
             

	
             
 	
             
 	
            Notary Public, State of New York
 
	
            My Commission Expires:
 	
             
 	
             
 
	
             
 	
             
 	
            David Jay Parker
 
	
            February 23, 2008
 	
             
 	
            Printed Name of Notary
 
					

 

After recording, please return to:

James J. Melino

8235 Douglas Avenue

Suite 650, LB-65

Dallas, Texas 75225

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