GRACO EXECUTIVE
LONG TERM INCENTIVE AGREEMENT
RESTRICTED STOCK AWARD
This Agreement is made as of the 7th day of May, 2002, between Graco Inc.,
a Minnesota corporation (the "Company"), and (the "Employee")
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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, the Management Organization and Compensation Committee of the
Board of Directors (the "Committee"), in order to provide further incentive to
the Employee to continue his service to the Company and to more closely align
his interests with those of the shareholders, believes that it is appropriate to
make an award of restricted Common Shares to the Employee; and
WHEREAS, the Plan contemplates that a restricted stock award should be
evidenced by a written agreement, executed by the Company and the Employee
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, the Employee and the Company hereby agree as follows:
1. Award.
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The Company, effective as of the date of this Agreement, hereby grants to
the Employee an award (the "Award") of Common Shares, $1.00 par value,
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of the Company ("Common Shares") subject to the restrictions, terms and
conditions set forth below and in the Plan.
2. Vesting of Stock.
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(a) The Common Shares awarded by this Agreement shall vest in the Employee
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 the Employee or any group that
includes the Employee, 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
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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 The Employee_ 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 The Employee; 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 the Employee.
(c) Until the Common Shares awarded hereunder vest, the Employee
acknowledges that he may not, and agrees that he shall not, transfer
his rights to such Common Shares. Until Common Shares awarded
hereunder vest, no attempt to transfer such Common Shares, 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 Shares.
3. Termination.
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(a) If the Employee: (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 substantially diminished; (iii) retires in accordance
with Section 3(c) below; or (iv) dies or becomes disabled (as
determined under the Company's Long Term Disability Plan) before the
vesting date under Section 2(a), then upon such event the Common Stock
awarded by this Agreement shall vest.
(b) If the Employee 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.
(c) If the Employee chooses to terminate his/her employment by retirement,
which for purposes of this Agreement is defined as a voluntary
termination after attaining age 55 with 10 years of service with the
Company or after attaining age 65, the Common Stock award granted by
this Agreement shall vest only in the event that: (i) the Employee has
given written notice to the Chief Executive Officer of said intention
to retire not less than six (6) months prior to the date of his/her
proposed retirement; and (ii) the Chief Executive Officer, in his/her
sole discretion and judgement, determines that termination of
employment by retirement of the Employee is in the best interests of
the Company. If the Chief Executive Officer does not so determine, the
retirement shall be considered a termination subject to Section 3(b)
above. If the Chief Executive Officer does so determine, he/she may
allow, in his/her sole judgement and discretion, the termination by
retirement to occur prior to the end of the six (6) month notice
period.
4. Issuance and Custody of Certificate.
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(a) The Company shall cause to be issued one or more stock certificates,
registered in the name of the Employee 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. Long Term 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 Ave. N.E., Minneapolis, MN. 55413.
(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 the Employee evidencing the certificates held which are registered
in the name of the Employee.
(c) Promptly after any Common Shares vest pursuant to 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 the Employee (or he Employee's
legal representatives, beneficiaries or heirs).
(d) The Employee 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 The Employee.
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The Employee acknowledges and agrees that: (a) this Agreement is not a
contract of employment and the terms of the Employee's 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 the Employee for continuation of employment or interfere
with or limit the right of the Company to terminate he Employee's
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 the Employee with respect to the Award made by this Agreement
without the written consent of the Employee unless such amendment,
termination or suspension is required by applicable law; and (e) the
Employee 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.
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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 the Employee make such agreements
and representations as the Committee, in its sole discretion, deems
necessary or desirable.
7. Withholding Taxes.
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The Employee agrees to pay, or make arrangements reasonably satisfactory to
the Company 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 the
Employee 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. The Employee 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.
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(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 the Employee 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 the Employee would have received with
respect to the Common Shares had the Employee owned the Common Shares
free and clear of the restrictions under this Agreement. Unless the
Committee otherwise determines, the Employee's right in respect of
such securities and other property shall not vest until such Common
Shares would have vested and no such securities or other property
shall be issued or delivered until such Common Shares would be issued
or delivered.
(b) Unless the Committee otherwise determines, any securities and other
property (except regular quarterly cash dividends) received by the
Employee 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.
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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 The Employee:
Mr.
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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.
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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.
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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 the Employee have caused this Agreement
to be executed and delivered, all as of the day and year first above written.
GRACO INC. EMPLOYEE
By:
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David A. Roberts (print name)
President and Chief Executive Officer
Schedule Identifying Restricted Stock Award Agreements Executed and
Material Details in which Executed Agreements Differ from Agreement Copy Filed
Current as of June 28, 2002
DATE NAME SHARES
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May 7, 2002 Steven Bauman 1500
May 7, 2002 Dan Christian 1500
May 7, 2002 James Graner 2500
May 7, 2002 Dale Johnson 2500
May 7, 2002 D. Christian Koch 2500
May 7, 2002 David Lowe 2500
May 7, 2002 Robert Mattison 1500
May 7, 2002 Patrick McHale 2500
May 7, 2002 Charles Rescorla 2500
May 7, 2002 Mark Sheahan 2500
May 7, 2002 Fred Sutter 2500