Exhibit 10.2
GRACO INC.
1994 CORPORATE
&
BUSINESS UNIT
ANNUAL BONUS PLAN
Effective January 1, 1994
Human Resources
GRACO INC.
CORPORATE & BUSINESS UNIT
ANNUAL BONUS PLAN
Objectives
- To create shareholder value through achievement of annual
financial objectives.
- To motivate and retain those key executives and managers who work
in positions where they can impact the Company's annual financial
objectives.
Plan Design
The Plan links the size of each individual's award to specific financial
objectives. These objectives are tailored for the Corporation and for each
Business Unit. These objectives are:
- Corporation
Corporate earnings
- Business Units
Profitability objective
Eligibility Requirements
Only those positions which carry clear managerial responsibility for directly
contributing to Graco's Corporate earnings objective and Business Unit
profitability and sales objectives are eligible to be included in this Plan.
Only those individuals in eligible positions who have demonstrated and are
maintaining a performance level that meets the supervisor's normal expectations
for that position are eligible for annual participation in this Plan as well as
the receipt of any annual Bonus Payments.
Participation
The top executive in each organizational unit may nominate managers for
participation in this Plan when the established position and individual
eligibility requirements have been met.
The Management Organization and Compensation Committee of the Graco Inc. Board
of Directors has sole authority to approve the participation of the Chief
Executive Officer in the Plan.
The Chief Executive Officer of Graco Inc. has sole authority to select and
approve all other Plan participants.
Bonus Maximum
Taken in conjunction with base salary market comparisons, bonus maximum for all
positions will be:
- Commensurate with the position's ability to impact the annual Corporate
earnings objective and Business Unit profitability and sales
objectives.
- Consistent with total compensation levels prevalent for similar
positions in the market place.
Based on these criteria, bonus maximums ranging from 10% to 80% have been
established for each individual.
Bonus Payment
The determination of a participant's annual Bonus Payment will be calculated by
adding the bonus results attained for Corporate earnings performance (expressed
in percent) to the bonus results attained for any applicable Business Unit's
contribution or margin growth performance (expressed in percent). These bonus
results are then multiplied by the participant's Maximum Bonus Percentage and
then multiplied by the participant's Base Salary for the Plan Year, to determine
the total Bonus Payment.
Example:
Annual Annual Participant's Participant's
Corporate + Business x Maximum x Annual = Bonus
Performance Unit Bonus Base
Results Performance Salary Salary
Results
(if
applicable)
% % $ $ $
Administration
The following rules have been established to insure equitable administration of
Graco's Annual Bonus Plan (the Plan):
1. The Plan will be administered by the Management Organization and
Compensation Committee of the Board of Directors. The Committee may cancel
the Plan and interpret the Plan.
2. The Management Organization and Compensation Committee shall establish the
annual corporate bonus plan financial objectives. Within the basic
framework of the Plan, the Chief Executive Officer may establish the annual
bonus plan financial objectives for individual Business Units. The CEO may
also establish deadlines for filing administrative forms and adopt other
administrative rules.
The CEO has established the Bonus Administrative Committee consisting of
the President, the Vice President, Human Resources, and the Compensation
Manager. This Committee is responsible for making approval recommendations
on all Annual Bonus Program administrative matters, such as participation
award payments, performance measures, and performance results. All
requests for adjustments or exceptions are to be formally submitted to this
Committee for review through the Compensation Manager.
3. Key executives and managers selected to participate in the Plan after its
annual effective date (January 1st) may be included on a pro-rata basis.
4. Participation in the Plan one year does not necessarily assure participa
tion in subsequent years. Eligibility requirements for both the position
and individual performance must be met continually.
5. Participation continues during any paid time off such as short term
disability (up to six months). Participation ceases with retirement,
death, or long term disability (over six months). In the event
participation ceases due to retirement, death, or long term disability, the
Participant will be eligible for a Bonus Payment, calculated using the
Maximum Bonus Percent and Base Salary up to the time of retirement, death,
or long term disability and the annual performance results for the year in
which retirement, death, or long term disability occurs.
6. A participant who transfers to a position not eligible for inclusion in the
Plan will be eligible for a pro-rata award based on the actual time
employed in the eligible position during the year. The pro-rated award
will be paid as described in Administrative Rule #11.
7. A participant who resigns or is terminated effective during the Plan Year is
ineligible for a bonus.
Participants must maintain satisfactory performance throughout the Plan
year in order to be eligible to receive a bonus award payment.
In addition, a participant whose employment termination has been requested
due to performance or otherwise for cause will be ineligible for a bonus
payment even though the participant is still employed at year-end.
8. Corporate earnings calculations will include such effects as those created
by foreign exchange gain/loss translation and income tax rate changes.
9. Corporate earnings calculations will be based on actual exchange rates, not
plan rates.
10. Acquisitions and divestitures not included in the annual business plan for
the Plan Year will be excluded from the corporate earnings calculations.
11. Significant changes in historical FASB accounting practices or income tax
rates will be included in corporate earnings calculations at the discretion
of the Management Organization and Compensation Committee of the Board of
Directors.
12. Payments will be made by March 15th of the year following each successive
Corporate and Business Unit performance year.