GRACO INC.
1995 CORPORATE
&
BUSINESS UNIT
ANNUAL BONUS PLAN
Effective January 1, 1995
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 Maxiumum X Annual = Bonus
| Performance Unit Performance | Bonus Base
| Results Results | Salary Salary
| (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 participation 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.