Exhibit 10.1
GRACO INC.
2010 STOCK INCENTIVE PLAN
CHIEF EXECUTIVE OFFICER
RESTRICTED STOCK AGREEMENT
(Performance-Based)
          This Restricted Stock Agreement (“Agreement”) is made as of the ___
day of ______________, 20___, between Graco Inc., a Minnesota corporation (the
“Company”), and ____________________ (the “Employee”) pursuant to the Graco Inc.
2010 Stock Incentive Plan (the “Plan”). All capitalized terms have the meanings
set forth in the Plan, as it may be amended from time to time, unless otherwise
specifically provided. All references to specified sections pertain to sections
in this Restricted Stock Agreement, unless otherwise specifically provided.
          WHEREAS, the Management Organization and Compensation Committee (the
“Committee”) has been designated by the Board of Directors (the “Board”) to
administer the Plan and in this capacity is authorized to award to executive
officers and key employees stock-based awards, including options and restricted
stock;
          WHEREAS, the Committee has determined that the Employee is eligible to
receive an award under the Plan; and
          WHEREAS, the Committee has determined that it would be in the best
interest of the Company to make an award of restricted stock to the Employee 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.
          NOW THEREFORE, the Company makes an award of restricted stock to
Employee under the terms, conditions and restrictions set forth in this
Agreement and the Plan.

1.   Award.

  a.   The Company hereby grants to Employee, effective the date of this
Agreement (the “Date of Grant”) an award (the “Award”) of ___________ Common
Shares, $1.00 par value, of the Company (“Shares”). These Shares are subject to
the restrictions, terms and conditions set forth in this Agreement, and while
subject to the restrictions and risk of forfeiture hereunder are referred to
collectively as the “Restricted Shares,” and each Share individually as a
“Restricted Share.”

 

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Exhibit 10.1

  b.   Certificates representing the Restricted Shares and bearing the legend
specified in Section 1d shall be issued in the name of the Employee and held by
the Secretary of the Company until such Restricted Shares vest as provided
herein. The Secretary will issue a receipt to Employee evidencing the
certificates held by him/her. While the certificates representing the Restricted
Shares are held by the Company, Employee will provide to the Company assignments
separate from such certificates, in blank, signed by Employee to be held by the
Company during the Period of Restriction, as defined in Section 2a below.     c.
  Except as otherwise provided in this Agreement, Employee shall be entitled to
exercise all rights of a shareholder of the Company with respect to the
Restricted Shares, including the right to vote the Restricted Shares and the
right to receive cash dividends thereon (subject to applicable tax withholding),
subject to the provisions of Section 7.     d.   Each stock certificate
evidencing Restricted Shares shall bear the following legend:

      This Certificate and the shares of stock represented hereby are subject to
the terms and conditions (including forfeiture, restrictions against transfer
and rights of repurchase, if applicable) contained in the Restricted Stock Award
Agreement (the “Agreement”) between the registered owner of the shares and the
Company. Release from such terms and conditions shall be made only in accordance
with the provisions of the Agreement, a copy of which is on file in the office
of the Company’s secretary.

  e.   As soon as practicable following the expiration of the Period of
Restriction applicable to each Restricted Share, the Company shall cause a book
entry to be made in the records of the Company’s transfer agent to reflect the
issuance of the Share to the Employee without any restriction. The Company shall
provide notice to Employee that the applicable book entry adjustment has been
made.

2.   Vesting.

  a.   Subject to the forfeiture provisions of Sections 3 and 4 of this
Agreement, any restrictions on the Restricted Shares shall lapse and the
Restricted Shares shall vest in accordance with the Vesting

 

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Exhibit 10.1

      Schedule and Conditions below. The period from the Date of Grant until the
vesting of each Share shall be known as the Period of Restriction.
Notwithstanding this Section 2, any restrictions on the Restricted Shares shall
lapse and all Restricted Shares granted herein shall vest immediately upon the
occurrence of a Change in Control of the Company, as defined in Appendix A to
this Agreement.     b.   Vesting Schedule and Conditions:

              Vesting Date and Performance     Portion of Award Vested    
Conditions                                  

  c.   All restrictions set forth in this Agreement shall apply to each
Restricted Share and to any other securities distributed with respect to that
Restricted Share. Unless otherwise permitted by the Committee in accordance with
the terms of the Plan, the Restricted Shares may not be assigned or transferred
other than by will or the laws of descent and distribution and shall not be
subject to pledge, hypothecation, execution, attachment or similar process. Each
Restricted Share will remain restricted and subject to forfeiture to the
Company, unless and until the Restricted Share has vested in Employee in
accordance with all of the terms and conditions of this Agreement.

3.   Effect of Termination of Employment.

  a.   If Employee’s employment terminates for any reason other than Employee’s
gross and willful misconduct (as defined in Section 3b), death, or disability
(as defined in Section 3d), then, subject to Section 3c, any Restricted Shares
remaining unvested shall be forfeited.     b.   If Employee’s employment
terminates by reason of Employee’s gross and willful misconduct during
employment, including, but not limited to, wrongful appropriation of Company
funds, serious violations of Company policy, breach of fiduciary duty or the
conviction of a felony, all Restricted Shares remaining unvested as of the time
of the misconduct shall be forfeited. If between the time of the misconduct and
such termination the Company’s transfer agent has made a book entry reflecting
the issuance without restriction of any Restricted Shares that are to be
forfeited pursuant to this Section 3b, Employee shall either pay the Company in
cash an amount equal to the Fair Market Value of such Restricted

 

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Exhibit 10.1

      Shares as of the time of the misconduct or cause such Shares to be
reconveyed to the Company.     c.   If Employee shall die while employed by the
Company or an Affiliate, a pro-rated portion of the unvested Restricted Shares
will vest immediately. The pro-rated portion shall be calculated by determining
the number of full or partial months in the Period of Restriction prior to the
Employee’s death, divided by 36.     d.   If Employee’s termination of
employment is due to disability, a pro-rated portion of the unvested Restricted
Shares will vest immediately. The pro-rated portion shall be calculated by
determining the number of full or partial months in the Restricted Period prior
to the Employee’s termination of employment due to disability, divided by 36.
Employee shall be deemed to be disabled if the termination of employment occurs
because Employee is unable to work due to an impairment which would qualify as a
disability under the Company’s long term disability program.

4.   Forfeiture.

  a.   If Employee attempts to pledge, encumber, assign, transfer or otherwise
dispose of any of the Restricted Shares, or the Restricted Shares become subject
to attachment or similar involuntary process in violation of this Agreement, any
Restricted Shares that have not previously vested shall be forfeited by Employee
to the Company.     b.   If the Restricted Shares do not vest in accordance with
Section 2, the employment of Employee terminates under one or more of the
circumstances described in Section 3, or if any of the events described in
Section 4a occurs and forfeiture results as provided in such sections, the
forfeiture shall have the following effects:

  i.   Upon forfeiture, Employee shall have no right, title or interest
whatsoever in the Restricted Shares that have been forfeited.     ii.   If the
Company does not have custody of all certificates representing the Restricted
Shares so forfeited, Employee shall immediately return the certificates
representing such Restricted Shares to the Company.     iii.   To the extent not
already provided as set forth in Section 1b, Employee shall provide Company with
an assignment applicable to certificates representing the Restricted Shares,

 

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Exhibit 10.1

      and the Company will cancel the certificates representing the Restricted
Shares so forfeited.

5.   No Rights To Employment.

    This Agreement shall not create an employment relationship between Employee
and the Company and shall not confer on Employee any right with respect to
continuance of employment by the Company or any of its affiliates or
subsidiaries, nor will it interfere in any way with the right of the Company to
terminate such employment at any time.

6.   Post-Vesting Stock Ownership Requirement.

    Employee agrees to hold the net Shares acquired upon vesting of the
Restricted Shares, or, in the alternative, the Shares acquired upon vesting of
the Restricted Shares net of the number of Shares having a Fair Market Value on
the date of vesting equal to the amount of any tax liability that may arise as a
result of the vesting of the Restricted Shares, until at least one year
following his termination of employment from the Company for any reason other
than death or following a Change of Control.

7.   Tax Consequences and Withholding.

  a.   Employee acknowledges and agrees that:

  i.   Employee and not the Company shall be responsible for any tax liability
that may arise as a result of the transactions contemplated by this Agreement.  
  ii.   Employee will not make an election pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended from time to time, with respect to the
Award.     iii.   Employee will pay, or make arrangements reasonably
satisfactory to the Company to pay, any taxes that the Company is required by
law to withhold with respect to the Award. The payment will be due on the date
upon which the Company is obligated to withhold such taxes. If Employee does not
make such tax payment when due, the Company shall have the right to do one or
more of the following in order to have sufficient funds to satisfy the amount
required to be withheld:

  (a)   retain, or sell within ten (10) days of written notice to Employee or
such longer period as may be required by applicable law, a number of the Shares
sufficient to

 

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Exhibit 10.1

      cover all or part of the amount required to be withheld; or     (b)  
deduct, to the extent permitted by law, from any payment of any kind otherwise
due Employee 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.

  iv.   On or before the date upon which any tax attributable to the Award is
required to be withheld, Employee may satisfy his/her tax obligation, in whole
or in part, by electing to:

  (a)   have the Company withhold the number of Shares otherwise to be delivered
to Employee upon vesting with a then current Fair Market Value equal to the
amount of such tax obligation; or     (b)   surrender to the Company shares of
Graco common stock currently owned by Employee with a then current Fair Market
Value equal to the amount required to satisfy such tax obligation.

8.   Dividends; Adjustments       Notwithstanding the foregoing, any dividends,
whether in cash, stock or other property, declared and paid by the Company with
respect to Restricted Shares that have not yet vested in accordance with
Section 2 of this Agreement (“Accrued Dividends”) shall vest and be paid to the
Employee, without interest, only if and when such Restricted Shares vest. If
Accrued Dividends consist of shares of capital stock, certificates for such
shares will be issued and the unvested Accrued Dividends shall be held in the
same manner as certificates for Restricted Shares are issued and held under
Section 1(b) above. In the event that the Participant forfeits Restricted Shares
as provided under Section 4 hereof, the Participant shall also forfeit Accrued
Dividends, and all such unvested Accrued Dividends shall be cancelled by the
Company. The Participant shall have no further rights with respect to any
Accrued Dividends that are so forfeited. If the Accrued Dividends consist of
shares of capital stock, such Accrued Dividends will be forfeited and cancelled
in the same manner and under the same terms as forfeited Restricted Shares under
Section 4.

 

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Exhibit 10.1

9.   Notices.       Any notice that either party or the Committee may be
required or permitted to give to the others with respect to the Plan or this
Agreement shall be in writing and may be delivered personally or by mail,
postage prepaid, to the addresses set forth below or such other address as the
person to whom the notice is directed shall have designated in writing to the
others.

  (a)   To the Company:

             
By Mail
    Personal or Courier    
 
         
Graco Inc.
    Graco Inc.    
P.O. Box 1441
    88 11th Avenue N.E.    
Minneapolis, MN 55440-1441
    Minneapolis, MN 55413    
Attn: Vice President, Human
Resources and Corporate
Communications
    Attn: Vice President, Human
Resources and Corporate
Communications    

  (b)   To the Committee:

             
By Mail
    Personal or Courier    
 
         
Mgt Org & Comp Committee
    Mgt Org & Comp Committee    
c/o Vice President, Human
Resources and Corporate
Communications
    c/o Vice President, Human
Resources and Corporate
Communications    
Graco Inc.
    Graco Inc.    
P.O. Box 1441
    88 11th Avenue N.E.    
Minneapolis, MN 55440-1441
    Minneapolis, MN 55413    

  (c)   To Employee:

             
By Mail
    Personal or Courier    
 
         
__________________
    __________________    
Graco Inc.
    Graco Inc.    
P.O. Box 1441
    88 11th Avenue N.E.    
Minneapolis, MN 55440-1441
    Minneapolis, MN 55413    

 

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Exhibit 10.1

10.   Governing Law.       This Agreement is entered into under the laws of the
State of Minnesota and shall be construed and interpreted under such laws
without regard to its conflict of laws provisions.   11.   Binding Effect.      
This Agreement shall be binding in all respects on the heirs, representatives,
successors and assigns of Employee.   12.   Miscellaneous.

  a.   This Award is issued pursuant to the Plan and is subject to its terms.
The terms of the Plan are available for inspection during business hours at the
principal offices of the Company.     b.   This Award has been granted to
Employee as a purely discretionary benefit and shall not form part of Employee’s
salary or entitle Employee to receive similar Awards in the future. Benefits
received under the Plan shall not be used in calculating severance payments, if
any.     c.   The authority to interpret this Agreement is vested in the
Committee, and the Committee’s conclusions with respect to any questions arising
under this Agreement are binding on the Company and the Employee.     d.  
Employee hereby consents to the transfer by his/her employer or the Company of
information relating to his/her participation in the Plan, including the
personal data set forth in this Agreement, between them or to other related
parties in the United States or elsewhere, or to any financial institution or
other third party engaged by the Company, but solely for the purpose of
administering the Plan and this Award. Employee also consents to the storage and
processing of such data by such persons for this purpose.

 

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Exhibit 10.1
          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:
_________________________   __________________________
 
_________________   ___________________
 
Chair, Management Organization    
 
and Compensation Committee    

 

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Exhibit 10.1
Appendix A
Change of Control

  A.   A “Change of Control” means:

  (1)  
an acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “1934 Act”)), (a “Person”), of beneficial ownership (within the meaning of
Rule of the 1934 Act) which, together with other acquisitions by such Person,
results in the aggregate beneficial ownership by such Person of 30% 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:

  (i)  
an acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company,
    (ii)  
an acquisition by the Employee or any group that includes the Employee, or
    (iii)  
an acquisition by any entity pursuant to a transaction that complies with
clauses (a), (b) and (c) of Section (3) below; or

  (2)  
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 by or on behalf of a Person other than the Board; or

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Exhibit 10.1

  (3)  
Consummation of a reorganization, merger or consolidation of the Company with or
into another entity or a 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”);
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 and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, a majority 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 (or
comparable equity interests), as the case may be, of the surviving or acquiring
entity resulting from such Business Combination (including, without limitation,
an entity that as a result of such transaction beneficially owns 100% of the
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities (or comparable equity securities) or all or
substantially all of the Company’s assets either directly or indirectly) in
substantially the same proportions (as compared to the other holders of the
Company’s common stock and voting securities prior to the Business Combination)
as their respective ownership, immediately prior to such Business Combination,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities,
    (b)  
no Person (excluding (i) any employee benefit plan (or related trust) sponsored
or maintained by the Company or such entity resulting from such Business
Combination or any entity controlled by the Company or the entity resulting from
such Business Combination, (ii) any entity beneficially owning 100% of the
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities (or comparable equity securities) or all or
substantially all of the Company’s assets either directly or indirectly and
(iii) the Employee and any group that includes the Employee) beneficially owns,
directly or indirectly, 30% or more of the then outstanding shares of common
stock (or comparable equity interests) of the entity resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities (or comparable equity interests) of such entity, and

 

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Exhibit 10.1

  (c)  
immediately after the Business Combination, a majority of the members of the
board of directors (or comparable governors) of the entity 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

  (4)  
approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.