GRACO EXECUTIVE
LONG TERM INCENTIVE AGREEMENT
(Restricted Stock Award)
This Agreement is made as of the 6th day of May, 1997, between Graco Inc.,
a Minnesota corporation (the "Company"), and George Aristides ("Mr. Aristides")
pursuant to the Graco Inc. Long Term Stock Incentive Plan (the "Plan"). Unless
otherwise defined herein, terms used herein shall have the meanings assigned to
them under the Plan.
WITNESSETH:
WHEREAS, in view of the key role Mr. Aristides has played in the success of
the Company, and the desire of the Board of Directors that he continue to serve
as Chief Executive Officer, the Management Organization and Compensation
Committee (the "Committee") now believes that it is appropriate to make an award
of restricted Common Shares to Mr. Aristides; and
WHEREAS, the Plan contemplates that a restricted stock award should be
evidenced by a written agreement, executed by the Company and Mr. Aristides
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. Aristides and the Company hereby agree as follows:
1. Award.
The Company, effective as of the date of this Agreement, hereby grants to
Mr. Aristides an award (the "Award") of 45,000 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.
Aristides as follows: 10,000 shares on March 31, 1998; 15,000 shares
on March 31, 1999; and 20,000 shares on March 31, 2000. If Mr.
Aristides remains continuously employed by the Company until each of
the vesting dates set forth above, then the Common Shares designated
to vest on such vesting date shall so vest.
(b) In the event of a "Change of Control", any unvested portion of the
Award shall vest. 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. Aristides or any group that
includes Mr. Aristides, 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. Aristides 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. Aristides; 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 (iv) and (v) of
this Section 2(b) by a group, acting in concert, that
includes Mr. Aristides.
(c) Any unvested portion of the Award shall vest in the event that the
employment of Mr. Aristides is terminated:
(i) by the Board of Directors other than "for cause" (as defined in
Section 3(b) below);
(ii) as a result of the mutual agreement of Mr. Aristides and the
Board of Directors that the continuation of such employment is
not appropriate; or
(iii)by Mr. Aristides if the Board takes action to prevent the
implementation, or fails to take action to enable the
implementation, of an initiative, action or strategy that Mr.
Aristides believes is necessary or appropriate for the Company to
fulfill its mission or achieve its vision.
(d) Until a Common Share vests, Mr. Aristides 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. Aristides ceases to be an employee by reason of disability (as
determined under the Company's Long Term Disability Plan) or death
prior to the last vesting date, then Mr. Aristides or his estate shall
be entitled to receive the remaining then unvested portion of the
Award. No transfer, by will or by the laws of descent and
distribution, of the Common Shares which vest by reason of Mr.
Aristides' death shall be effective to bind the Company unless the
Committee shall have been furnished with (i) written notice thereof
and a copy of the will and/or such other evidence as the Committee may
deem necessary to establish the validity of the transfer and (ii) an
agreement by the transferee to comply with the terms and conditions of
this Agreement that were or would have been applicable to Mr.
Aristides.
(b) If Mr. Aristides ceases to be employee of the Company prior to the
last vesting date because of his voluntary resignation or retirement
(other than as set forth in Section 2(c)(iii) above), termination for
cause (as defined below), or otherwise other than by reason of
disability or death, Mr. Aristides' rights to any unvested portion of
this Award shall be immediately and irrevocably forfeited. As used in
this Agreement, the term "for cause" shall mean as a result of gross
or willful misconduct, a knowing breach of fiduciary duty, or
conviction of a felony involving moral turpitude.
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. Aristides 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., 4050 Olson Memorial Highway, Golden Valley, 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. Aristides evidencing the certificates held which are registered
in the name of Mr. Aristides.
(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.
Aristides (or Mr. Aristides' legal representatives, beneficiaries or
heirs).
(d) Mr. Aristides 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. Aristides.
Mr. Aristides acknowledges that: (a) this Agreement is not a contract of
employment and the terms of Mr. Aristides' 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. Aristides for continuation of employment or interfere with
or limit the right of the Company to terminate Mr. Aristides' 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. Aristides with respect to the Award made by this Agreement
without the written consent of Mr. Aristides unless such amendment,
termination or suspension is required by applicable law; (e) and Mr.
Aristides 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. Aristides make such agreements
and representations as the Committee, in its sole discretion, deems
necessary or desirable.
7. Withholding Taxes.
Mr. Aristides 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. Aristides 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 fro 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 Committee, in
its sole discretion and subject to such rules as it may adopt, may allow
Mr. Aristides to 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 by the Committee. 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. Aristides 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. Aristides would have received with
respect to the Common Shares had Mr. Aristides owned the Common Shares
free and clear of the restriction of the Plan. Unless the Committee
otherwise determines, Mr. Aristides' 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.
Aristides 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. Aristides:
Mr. George Aristides
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. Aristides have caused this
Agreement to be executed and delivered, all as of the day and year first above
written.
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George Aristides
GRACO INC.
By
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David A. Koch
Chairman