GRACO EXECUTIVE
LONG TERM INCENTIVE AGREEMENT
(Restricted Stock Award)
This Agreement is made as of the 25th day of June, 2001, between Graco
Inc., a Minnesota corporation (the "Company"), and David A. Roberts ("Mr.
Roberts") pursuant to the Graco Inc. Stock Incentive Plan (the "Plan").
Unless otherwise defined herein, terms used herein shall have the meanings
assigned to them under the Plan.
WITNESSETH:
WHEREAS, upon the commencement of his employment with the Company as
President and Chief Executive Officer, the Board of Directors believes that it
is appropriate to make an award of restricted Common Shares to Mr. Roberts; and
WHEREAS, the Plan contemplates that a restricted stock award should be
evidenced by a written agreement, executed by the Company and Mr. Roberts
containing such restrictions, terms and conditions as may be required by the
Plan and the Committee;
NOW THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, Mr. Roberts and the Company hereby agree as follows:
1. Award.
------
The Company, effective as of the date of this Agreement, hereby grants to
Mr. Roberts an award (the "Award") of 3000 Common Shares, $1.00 par value,
of the Company ("Common Shares") subject to the restrictions, terms and
conditions set forth below and in the Plan.
2. Vesting of Stock.
-----------------
(a) The Common Shares awarded by this Agreement shall vest in Mr.
Roberts as of the third anniversary of the date of this Agreement,
except as otherwise provided herein.
(b) In the event of a "Change of Control", the Award shall
immediately vest in full. A "Change of Control" means:
(i) acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of
1934), (a "Person"), of beneficial ownership (within the
meaning of Rule 13d-3 under the 1934 Act) which results in the
beneficial ownership by such Person of 25% 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 the following acquisitions will not
result in a Change of Control:
(1) an acquisition directly from the Company,
(2) an acquisition by the Company,
(3) an acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the
Company or any corporation controlled by the
Company,
(4) an acquisition by any Person who is deemed to have
beneficial ownership of the Company common stock
or other Company voting securities owned
immediately after said acquisition by the Trust
Under the Will of Clarissa L. Gray ("Trust
Person"), provided that such acquisition does not
result in the beneficial ownership by such Person
of 32% or more of either the Outstanding Company
Common Stock or the Outstanding Company Voting
Securities, and provided further that for purposes
of this Section 2, a Trust Person shall not be
deemed to have beneficial ownership of the Company
common stock or other Company voting securities
owned by The Graco Foundation or any employee
benefit plan of the Company, including without
limitation the Graco Employee Retirement Plan and
the Graco Employee Stock Ownership Plan,
(5) an acquisition by Mr. Roberts or any group that
includes Mr. Roberts, or
(6) an acquisition by any corporation pursuant to a
transaction that complies with clauses (A), (B)
and (C) of Section 2 (a)(iii) below; and
provided, further, that if any Person's beneficial ownership
of the Outstanding Company Common Stock or Outstanding Company
Voting Securities is 25% or more as a result of a transaction
described in clause (1) or (2) above, and such Person
subsequently acquires beneficial ownership of additional
Outstanding Company Common Stock or Outstanding Company Voting
Securities as a result of a transaction other than that
described in clause (1) or (2) above, such subsequent
acquisition will be treated as an acquisition that causes such
Person to own 25% or more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities and be deemed a
Change of Control; and provided further, that in the event any
acquisition or other transaction occurs which results in the
beneficial ownership of 32% or more of either the Outstanding
Company Common Stock or the Outstanding Company Voting
Securities by any Trust Person, the Incumbent Board may by
majority vote increase the threshold beneficial ownership
percentage to a percentage above 32% for any Trust Person; or
(ii) Individuals who, as of the date hereof, constitute the Board
of Directors of the Company (the "Incumbent Board") cease for
any reason to constitute at least a majority of said Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board will be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
membership on the Board 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; or
(iii) The commencement or announcement of an intention to make a
tender offer or exchange offer, the consummation of which
would result in the beneficial ownership by a Person of 25% or
more of the Outstanding Company Common Stock or Outstanding
Company Voting Securities; or
(iv) The approval by the shareholders of the Company of a
reorganization, merger, consolidation or statutory exchange of
Outstanding Company Common Stock or Outstanding Company Voting
Securities or sale or other disposition of all or
substantially all of the assets of the Company ("Business
Combination") or, if consummation of such Business Combination
is subject, at the time of such approval by stockholders, to
the consent of any government or governmental agency, the
obtaining of such consent (either explicitly or implicitly by
consummation); excluding, however, such a Business Combination
pursuant to which
A. all or substantially all of the individuals and
entities who were the beneficial owners of the
Outstanding Company Common Stock or Outstanding
Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or
indirectly, more than 80% of, respectively, the then
outstanding shares of common stock and the combined
voting power of the then outstanding voting
securities entitled to vote generally in the election
of directors, as the case may be, of the corporation
resulting from such Business Combination (including,
without limitation, a corporation 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
or Outstanding Company Voting Securities,
B. no Person [excluding any employee benefit plan (or
related trust) of the Company or such corporation
resulting from such Business Combination]
beneficially owns, directly or indirectly, 25% or
more of 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 of the corporation 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
(v) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(vi) A Change of Control shall not be deemed to have occurred
with respect to Mr. Roberts if:
(A) the acquisition of the 25% or greater interest
referred to in Section 2(b)(i) is by a group, acting
in concert, that includes Mr. Roberts; or
(B) if at least 25% of the then outstanding common stock
or combined voting power of the then outstanding
company voting securities (or voting equity
interests) of the surviving corporation or of any
corporation (or other entity) acquiring all or
substantially all of the assets of the Company shall
be beneficially owned, directly or indirectly,
immediately after a reorganization, merger,
consolidation, statutory share exchange, disposition
of assets, liquidation or dissolution referred to in
subsections (v) and (vi) of this Section 2(b) by a
group, acting in concert, that includes Mr. Roberts.
(c) Until a Common Share vests, Mr. Roberts acknowledges that he may
not, and agrees that he shall not, transfer his rights to such
Common Share. Until a Common Share vests, no attempt to transfer
such Common Share, whether voluntary or involuntary, by operation of
law or otherwise, shall vest the transferee with any interest or
right in or with respect to such Common Share.
3. Termination.
------------
(a) If Mr. Roberts (i) is terminated by the Company for any reason
other than gross and willful misconduct, (ii) quits or resigns
because his compensation or benefits are reduced (other than
reductions in benefits resulting from changes in Graco's employee
benefit programs affecting officers generally), his
responsibilities, duties or position are diminished or (iii) dies
or becomes disabled (as determined under the Company's Long Term
Disability Plan) before the vesting date under Section 2(a), then
Mr. Roberts or his estate shall be entitled to receive the
remaining unvested portion of the Award.
(b) If Mr. Roberts terminates employment with the Company for any
other reason, including a termination by the Company for gross and
willful misconduct, his rights to any unvested portion of this Award
shall be immediately and irrevocably forfeited. For purposes of this
Agreement, 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 Mr.
Roberts contrary to the direction of the Board with respect to any
initiative, strategy or action of the Company, which action or
inaction Mr. Roberts believes is in the best interest of the
Company.
4. Issuance and Custody of Certificate.
------------------------------------
(a) The Company shall cause to be issued one or more stock certificates,
registered in the name of Mr. Roberts evidencing the restricted
Common Shares awarded pursuant to Section 1. Each such certificate
shall bear the following legend:
The shares of stock represented by this certificate are
subject to forfeiture and the transferability of this
certificate and the shares of stock represented hereby are
subject to the restrictions, terms and conditions (including
restrictions against transfer) contained in the Graco Inc.
Stock Incentive Plan and an Agreement entered into between the
registered owner of such shares and Graco Inc. A copy of the
Plan and Agreement is on file in the office of the Secretary
of Graco Inc., 88-11th Avenue NE, Minneapolis, Minnesota.
(b) Each certificate issued pursuant to Section 4(a), together with the
stock powers relating to such Common Shares, shall be deposited by
the Company with the Secretary of the Company or a custodian
designated by such Secretary. The Secretary or such custodian shall
issue a receipt to Mr. Roberts evidencing the certificates held
which are registered in the name of Mr. Roberts.
(c) Promptly after any Common Shares vest pursuant to Section 3 of this
Agreement, the Company shall cause to be issued certificates
evidencing such Common Shares, free of the legend provided in
Section 4(a) and shall cause such certificates to be delivered to
Mr. Roberts (or Mr. Roberts' legal representatives, beneficiaries or
heirs).
(d) Mr. Roberts shall not be deemed for any purpose to be, or have
rights as, a shareholder of the Company by virtue of the Award,
until a stock certificate is issued therefor pursuant to Section
4(a).
5. Agreements of Mr. Roberts.
--------------------------
Mr. Roberts acknowledges that: (a) this Agreement is not a contract of
employment and the terms of Mr. Roberts' employment shall not be affected
in any way by this Agreement except as specifically provided in the
Agreement; (b) the Award made by this Agreement shall not confer any legal
rights upon Mr. Roberts for continuation of employment or interfere with
or limit the right of the Company to terminate Mr. Roberts' employment at
any time; (c) the Board may amend, suspend or terminate the Plan or any
part thereof at any time provided that no amendment, suspension or
termination shall be made or effected which would adversely affect any
right of Mr. Roberts with respect to the Award made by this Agreement
without the written consent of Mr. Roberts unless such amendment,
termination or suspension is required by applicable law; (e) and Mr.
Roberts shall not make an election pursuant to Section 83(b) of the
Internal Revenue Code of 1986, with respect to the Award.
6. Legal Compliance Restrictions.
------------------------------
The Company shall not be obligated to issue or deliver any certificates
evidencing Common Shares awarded by this Agreement unless and until the
Company is advised by its counsel that the issuance and delivery of such
certificates are in compliance with all applicable laws, regulations of
governmental authorities and the requirements of the New York Stock
Exchange or any other exchange upon which Common Shares are traded.
The Company shall not be obligated to register any securities pursuant to
the Securities Act of 1933 (as now in effect or as hereinafter amended) or
to take any other affirmative action in order to cause the issuance and
delivery of such certificates to comply with any such law, regulation or
requirement. The Committee may require, as a condition of the issuance and
delivery of such certificates and in order to ensure compliance with such
laws, regulations and requirements, that Mr. Roberts make such agreements
and representations as the Committee, in its sole discretion, deems
necessary or desirable.
7. Withholding Taxes.
------------------
Mr. Roberts agrees to pay or make arrangements for the payment to the
Company of the amount of any taxes that the Company is required by law to
withhold with respect to the Award made by this Agreement. Such payment
shall be due on the date the Company is required to withhold such taxes.
In the event that such payment is not made when due, the Company shall
have the right (a) to retain, or sell within 10 days notice or such longer
notice as may be required by applicable law, a sufficient number of the
Common Shares subject to any Award made to Mr. Roberts in order to cover
all or part of the amount required to be withheld; (b) to deduct, to the
extent permitted by law, from any payment of any kind otherwise due to
such person from the Company all or a part of the amount required to be
withheld or (c) to pursue any other remedy at law or in equity. Mr.
Roberts may satisfy any such tax obligation, in whole or in part, by (i)
electing to have the Company withhold Common Shares otherwise to be
delivered with a fair market value equal to the amount of such tax
obligation, or (ii) electing to surrender to the Company previously owned
Common Shares with a fair market value equal to the amount of such tax
obligation. The election must be made on or before the date that the
amount of tax to be withheld is determined.
8. Stock Splits, Recapitalizations, Acquisitions, etc.
---------------------------------------------------
(a) In the event of any change in the number of outstanding Common
Shares by reason of any stock dividend or split,
recapitalization, merger, consolidation, combination or exchange
of shares or similar corporate change, the number and kind of
shares subject to this Award shall be appropriately adjusted. If
changes in capitalization of the Company other than those
referred to above shall occur, the Committee may, but need not,
make such adjustments in the number and kind of shares available
under this Award as the Committee may deem appropriate.
To the extent permitted by applicable law, the Award of a Common
Share shall be adjusted so that Mr. Roberts shall have the right to
receive under the Award and subject to the Plan securities and other
property (except regular quarterly cash dividends) with respect to
the Award as a result of any stock dividend or split, special cash
dividend, recapitalization, merger, consolidation, combination of
shares or exchange of shares or similar corporate change or
otherwise substantially similar to that Mr. Roberts would have
received with respect to the Common Shares had Mr. Roberts owned the
Common Shares free and clear of the restrictions under this
Agreement. Unless the Committee otherwise determines, Mr. Roberts'
right in respect of such securities and other property shall not
vest until such Common Share would have vested and no such
securities or other property shall be issued or delivered until such
Common Share would be issued or delivered.
(b) Unless the Committee otherwise determines, any securities and
other property (except regular quarterly cash dividends) received
by Mr. Roberts as a result of a corporate change described in
Section 8(a) or otherwise with respect to a Common Share prior to
the date such Common Share vests shall be promptly deposited with
the Secretary or the custodian designated by the Secretary to be
held in custody in accordance with Section 4(b) as though such
securities and other property were part of such Common Share.
9. Notices.
--------
Any notice which either party hereto or the Committee may be required or
permitted to give to the other with respect to the Plan or this Agreement
shall be in writing, and may be delivered personally or by mail, postage
prepaid, addressed as follows:
(a) if to the Company:
Graco Inc.
P.O. Box 1441
Minneapolis, MN 55440-1441
Attention: Vice President, Human Resources
(b) if to the Committee:
Management Organization and Compensation Committee
c/o Vice President, Human Resources
Graco Inc.
P.O. Box 1441
Minneapolis, MN 55440-1441
(c) if to Mr. Roberts:
Mr. David A. Roberts
Chief Executive Officer
Graco Inc.
P.O. Box 1441
Minneapolis, MN 55440-1441
or to such other address as the person to whom the notice is directed
shall have designated in writing to others.
10. Minnesota Law.
--------------
This Agreement is made and accepted in the State of Minnesota. The laws of
the state of Minnesota shall control the interpretation and performance of
the terms of the Plan and of this Agreement.
11. Binding Effect.
---------------
This Agreement shall be binding upon, and shall inure to the benefit of,
the respective successors, assigns, heirs, executors, administrators and
guardians of the parties hereto.
IN WITNESS WHEREOF, the Company and Mr. Roberts have caused this Agreement
to be executed and delivered, all as of the day and year first above written.
/s/David A. Roberts
-----------------------------
David A. Roberts
GRACO INC.
By /s/George Aristides
--------------------------
George Aristides
Chairman