June 5, 2001
Mr. David A. Roberts
3115 Aviara Court
Naperville, IL 60564
Dear Dave:
On behalf of the Board of Directors, we are extremely pleased to extend to you
the following offer to become the President and Chief Executive Officer of Graco
Inc., as follows:
o Duties: You shall be responsible for the general active management of the
Company, and have other duties as specified in Graco's bylaws.
o Base salary: $36,000 per month. Compensation is reviewed annually by
the Management Organization and Compensation Committee of the Board,
provided that this salary shall not be reduced.
o Annual Bonus: Participation in the Annual Bonus Program, with a maximum
payment for 2001 of 90% of base salary actually paid during the year. The
payment for 2001 will be based on the Company's net sales and net earnings
against established targets, weighted 25% on net sales and 75% on net
earnings. The targets and measurements for 2002 and future years will be
established by the Management Organization and Compensation Committee.
o Stock Options: Under our Stock Incentive Plan, an initial option of 50,000
shares will be granted on the first day of your employment. These are 10 year
non-ISO options at the closing market price on the business day immediately
preceding the date of grant, with 25% vesting on the 1st, 2nd, 3rd and 4th
anniversaries. Future grants will be determined annually by the Management
Organization and Compensation Committee.
o Restricted Stock Grant: Under our Stock Incentive Plan, a grant of 3000
shares of restricted stock will be granted on the first day of your
employment. This grant is being made to compensate you for the current
incentive plan opportunity, retirement and other benefits with your current
employer that you will be foregoing in accepting this position with Graco.
The restrictions on this stock will be removed on the third anniversary of
the date of the grant, provided you are still employed by Graco at that time.
The restrictions will also be removed automatically if your employment is
involuntarily terminated for other than gross and willful misconduct or by
death or disability, all as provided in the restricted stock agreement
covering this grant. During the three-year restriction period, you will not
be able to dispose of the stock, but you will receive dividends and be able
to vote the stock.
o Severance Pay: In the event that your employment is terminated involuntarily
for other than gross and willful misconduct, you will be paid an amount equal
to two years of your then base salary. You will also be entitled to a bonus
under the bonus program in effect for the year the termination occurs, based
on the amount of your base salary earned during your employment and the bonus
percentage paid for that year. The bonus will be paid to you (or in the event
of your death, to your estate) at the time of the bonus payments for that
year. The Company will also reimburse you for any premiums you elect to pay
under COBRA. For purposes of this letter, gross and willful misconduct
includes wrongful appropriation of Company funds, serious violation of
Company policy, breach of fiduciary duty or conviction of a felony. Gross and
willful misconduct shall not include any action or inaction by you contrary
to the direction of the Board with respect to any initiative, strategy or
action of the Company, which action or inaction you believe is in the best
interest of the Company. Your employment will be deemed to be involuntarily
terminated if you resign because of a reduction of your compensation,
perquisites provided in this letter or benefits (other than reductions in
benefits resulting from changes in Graco's employee benefit programs
affecting officers generally), or your responsibilities, duties or position
are diminished.
o Key Employee Agreement: You will be extended a Key Employee Agreement, with
terms no less favorable than similar agreements now in place with other
officers of the Company. Your Key Employee Agreement will be effective on the
first day of employment. It provides for two years of base salary, expected
bonus, and benefits if you are terminated within two years after a change of
control of the Company. Also, all stock options and the restricted stock will
automatically vest upon a change of control.
o Vesting of pension benefits. We will amend the supplemental executive
retirement plan to provide that, if your employment is terminated
involuntarily for other than gross and willful misconduct between the second
and fifth anniversary of your start date, you will receive retirement
benefits under the terms of both plans as if the vesting period of those
plans was two years. This benefit would be paid entirely from the
supplemental plan, which is unfunded and a general obligation of Graco. If
you are still employed after the fifth anniversary of your start date, you
will be vested in both plans in accordance with their normal terms.
o Benefits: You will participate in Graco's comprehensive employee
benefit plans.
o Relocation: You will receive relocation assistance in accordance with Graco's
relocation policy, and will be reimbursed for reasonable commuting expenses
incurred prior to such relocation. Steve Bauman will provide additional
information on this benefit to you.
o Club dues: You will receive payment of your regular dues at the Minneapolis
Club.
o Attorneys' fees. Graco will reimburse you for the reasonable fees of your
attorneys in connection with your consideration of this offer.
o Vacation: You will receive a vacation accrual yielding three weeks per year.
As we discussed, we anticipate that you will start on or before June 25, 2001.
You will be elected to the Board of Directors at the meeting on June 26, 2001.
To accept this offer, please sign the enclosed copy of this letter and return it
to me. There are also some routine tests and checks that must be performed, and
forms to complete, that have been explained to you by Steve Bauman. He has also
provided you with a description of our benefits package.
Dave, we are delighted at the prospect of you joining Graco. We know that with
your experience and track record, you are the right person to lead the company
to even greater success in the years to come.
Yours very truly,
/s/George Aristides /s/Marti Morfitt
George Aristides Marti Morfitt
Chairman and Chief Executive Officer Chair Management Organization &
Compensation Committee
Board of Directors
Agreed and Accepted:
/s/David A. Roberts
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David A. Roberts