May 7, 1996
LONG TERM STOCK INCENTIVE PLAN
1. Purpose. The purpose of the Graco Inc. Long Term Stock Incentive Plan (the
"Plan") is to further the growth in earnings and market appreciation of
Graco Inc. (the "Company"). The Plan provides substantial contributions to
the Company through ability, performance, industry and invention. The
Company intends that the Plan will thereby facilitate securing, retaining
and motivating officers and key employees of high caliber and good
potential.
2. Administration. The Plan shall be administered by a committee (the
"Committee") selected by the Board of Directors of the Company (the
"Board"). The Committee shall consist of three or more members who (a) need
not be members of the Board of Directors or officers of the Company, (b)
who shall be appointed by the Board and (c) who shall be "disinterested
persons" within the meaning of Rule 16b-3 under the Securities Act of 1934
(the "Act"). No member of the Committee shall be eligible or receive awards
under the Plan while serving on the Committee, and no member of the
Committee shall have been eligible to receive awards for one year prior to
serving on the Committee.
The Committee shall have full and final authority in its discretion to
interpret the provisions of the Plan and to decide all questions of fact
arising in its application; to determine the employees to whom awards shall
be made under the Plan; to determine the type of award to be made and the
amount, size, terms and conditions of each such award; to determine and
establish additional terms and conditions not consistent with the Plan and
for any agreements entered into with participants in connection with the
Plan; to determine the time when awards will be granted and when rights may
be exercised, which may be after termination of employment; and to make all
other determinations necessary or advisable for the administration of the
Plan.
The Committee shall select one of its members as its Chairman and shall
hold its meetings at such times and places as it may determine. A majority
of its members shall constitute a quorum. All determinations of the
Committee shall be made by not less than a majority of its members. Any
decision or determination reduced to writing and signed by all of the
members of the Committee shall be fully effective as if it had been made by
a majority vote at a meeting duly called and held. The granting of a stock
option or restricted stock award pursuant to the Plan shall be effective
only if a written agreement shall have been duly executed and delivered by
and on behalf of the Company and, in the case of a restricted stock award,
by the employee to whom such right is granted. The Committee may appoint a
Secretary and may make such rules and regulations for the conduct of its
business as it shall deem advisable.
3. Participants. Persons eligible to participate in the Plan shall be those
officers and key employees of the Company or its subsidiaries who are in
positions in which their decisions, actions and counsel significantly
impact the performance of the Company or its subsidiaries. Directors of the
Company who are not otherwise salaried employees of the Company shall not
be eligible to receive awards under the Plan. For the purpose of awards of
incentive stock options (as hereinafter defined) made under the Plan, the
term "subsidiary" shall have the meaning given to it by Section 424 of the
Internal Revenue Code of 1986, as amended (the "Code"). For the purpose of
all other awards made under the Plan, the term "subsidiary" shall have the
meaning given to it by Rule 405 promulgated under the Securities Act of
1933, as amended. References to "the Company" in this Plan or in any option
or other award granted pursuant to the Plan shall be deemed references to a
subsidiary if appropriate.
4. Awards under the Plan. Awards by the Committee under the Plan may be in the
form of stock options intended to qualify as "incentive stock options"
under the provisions of Section 422 of the Code, stock options which do not
qualify for special tax treatment under Section 422, restricted stock and
other stock awards pursuant to such bonus and incentive plans as the
Committee may deem appropriate.
5. Shares Subject to Plan. The shares that may be issued under the Plan shall
not exceed in the aggregate 3,475,000 common shares, $1.00 par value, of
the Company. Except as otherwise provided herein, any shares subject to an
option or right or other awards which for any reason expires or terminates
without issuance or final vesting of such shares shall again be available
under the Plan. No fractional shares shall be issued under the Plan.
6. Stock Options. Stock options shall be evidenced by stock option agreements
in such form not inconsistent with the Plan as the Committee shall approve
from time to time, which agreements shall contain in substance the
following terms and conditions.
6.1. Option Price. The purchase price per common share deliverable upon the
exercise of an option shall not be less than 100% of the fair market
value of the stock on the day the option is granted, as determined by
the Committee.
6.2. Exercise of Option. Each stock option agreement shall state the period
or periods of time within which the option may be exercised by the
participant, in whole or in part, which shall be such period or
periods of time as may be determined by the Committee, provided that
the option period shall not end later than ten years after the date of
the grant of the option.
6.3. Payment of Shares. An optionee electing to exercise an option shall
give written notice to the Company of such election and of the number
of shares subject to such exercise. The full purchase price of such
shares shall be tendered with such notice of exercise or, at the
discretion of the Committee, pursuant to any arrangements satisfactory
to the Committee which provide that the Company will be paid at the
time the shares are delivered to the optionee or his designee. Payment
shall be made either in cash (including check, bank draft or money
order) or, at the discretion of the Committee, (i) by delivering the
Company's common shares already owned by the optionee having a fair
market value equal to the full purchase price of the shares, or (ii) a
combination of cash and such shares.
6.4. Special Rule for Incentive Stock Options. The aggregate fair market
value (determined as of the time the option is granted) of the common
shares with respect to which all incentive stock options granted after
January 1, 1987 are exercisable for the first time by any individual
during any calendar year (under all option plans of the Company and
its parent and subsidiary corporations) shall not exceed $100,000.
7. Restricted Stock Awards. Restricted stock awards shall be evidenced by
restricted stock agreements in such form not inconsistent with the Plan as
the Committee shall approve from time to time, which agreements shall
contain in substance the following terms and conditions.
7.1. Restriction Period. Shares awarded pursuant to restricted stock awards
shall be subject to such conditions, terms and restrictions (including
continued employment, achievement of performance targets, forfeiture
and transfer) and for such period or periods as shall be determined by
the Committee. The Committee shall have the power, in its discretion,
to permit an acceleration of the expiration of the applicable
restriction period with respect to any part of all of the shares
awarded to a participant.
7.2. Restrictions Upon Transfer. The common shares subject to an award, may
not be sold, assigned, transferred, exchanged, pledged, hypothecated,
or otherwise encumbered, except as herein provided, during the
restriction period applicable to such shares, but a participant shall
have all the other rights of a stockholder, including the right to
receive cash dividends and the right to vote such shares, until such
time as the restrictions have lapsed or the shares have been
forfeited.
7.3. Certificates. Each certificate issued in respect of common shares
awarded to a participant shall be deposited with the Company, or its
designee, and shall bear an appropriate legend noting the existence of
restrictions upon the transfer of such Common Stock.
7.4. Lapse of Restrictions. The agreement governing the awards shall
specify the conditions and terms upon which any restrictions upon
shares awarded under the Plan shall lapse, as determined by the
Committee. Upon lapse of such restrictions, common shares free of any
restrictive legend, other than as may be required under Section 9
hereof, shall be issued and delivered to the participant of his legal
representative.
8. Fair Market Value. The fair market value of the Company's common shares for
purposes of the Plan shall be the last sale price of the common shares as
reported on the New York Stock Exchange on the business day as of which the
fair market value is being determined or if no sale occurred on that date,
the last sale on the most recent date for which a sale is reported. If the
Company's common shares are not then traded on the New York Stock Exchange,
the Committee may determine fair market value in some other reasonable way.
9. General Restrictions. Each award under the Plan shall be subject to the
requirement that, if at anytime the Committee shall determine that (a) the
listing, registration or qualification of the common shares subject or
related thereto upon any securities exchange or under any state or federal
law, or (b) the consent or approval of any government regulatory body, or
(c) an agreement by the recipient of an award with respect to the
disposition of common shares, is necessary or desirable in connection with,
the granting of such award or the issue or purchase of common shares
thereunder, such award may not be consummated in whole or in part unless
such listing, registration, qualification, consent, approval or agreement
shall have been effected or obtained free of any conditions not acceptable
to the Committee. A participant shall agree, as a condition of receiving
any award under the Plan, to execute any documents, make any
representations, agree to restrictions on stock transferability and take
any actions which in the opinion of legal counsel to the Company is
required by any applicable law, ruling or regulation.
10. Rights of a Shareholder. The recipient of any award under the Plan, unless
otherwise provided by the Plan, shall have no rights as a shareholder with
respect thereto unless and until certificates for common shares are issued
to the recipient.
11. Right to Terminate Employment. Nothing in the Plan or in any agreement
entered into pursuant to the Plan shall confer upon any participant the
right to continue in the employment of the Company or its subsidiaries, or
affect any right which the Company or such subsidiaries may have to
terminate the employment of the participant.
12. Withholding.
12.1.Payment of Withholding Taxes. Whenever the Company proposes or is
required to issue or transfer common shares under the Plan, the
Company shall have the right to require the recipient to remit to the
Company, or provide indemnification satisfactory to the Company for,
an amount sufficient to satisfy any federal, state or local
withholding tax requirements prior to the issuance or delivery of any
certificate or certificates for such shares.
12.2.Use of Common Shares to Satisfy Tax Obligation. In order to assist an
optionee or grantee in paying all federal, state and local taxes to be
withheld or collected upon exercise of an option or the grant of a
stock award or the lapse of restrictions relating to a restricted
stock award hereunder, the Committee in its sole discretion and
subject to such rules as it may adopt, may permit the optionee or
grantee to satisfy 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.
13. Non-Assignability. No award under the Plan shall be assignable or
transferable by the participant except by will or by laws of descent and
distribution. During the life of a participant, such award shall be
exercisable only by the participant or by the participant's guardian or
legal representative.
14. Non-Uniform Determinations. The Committee's determinations under the Plan
(including, without limitation, determinations of the persons to receive
awards, the form, amount and timing of such awards, the terms and
provisions of awards and the agreements evidencing the awards, and the
establishment of values and performance targets) need not be uniform and
may be made by it selectively among persons who receive, or are eligible to
receive, awards under the Plan whether or not such persons are similarly
situated.
15. Adjustments in Shares. In the event of any change in the outstanding common
shares of the Company by reason of a stock dividend or distribution,
recapitalization, merger, consolidation, split-up, combination, exchange of
shares or otherwise, the Board shall adjust the number of shares which may
be issued under the Plan and the Board shall provide for an equitable
adjustment of any shares issuable pursuant to awards outstanding under the
Plan.
16. Adoption, Amendment and Termination.
16.1.Adoption. This Plan was originally adopted in February 1982 as the
Graco Inc. Incentive Stock Option Plan. The Plan was amended and
restated as the Graco Inc. Long Term Stock Incentive Plan by the Board
of Directors on March 4, 1988 and was further amended by the Board on
December 13, 1991, February 21, 1992, February 23, 1996 and May 7,
1996, which amendments requiring shareholder approval were approved by
the shareholders on May 5, 1992 and May 7, 1996, respectively.
16.2.Amendment. The Board may amend, suspend, or terminate the Plan at any
time, but without shareholder approval, no amendment shall materially
increase the maximum number of shares which may be issued under the
Plan (other than increases pursuant to Section 15 hereof), materially
increase the benefits accruing to participants under the Plan,
materially modify the requirements as to eligibility for
participation, or extend the term of the Plan.
16.3.Termination. Unless the Plan shall have been discontinued at an
earlier date, the Plan shall terminate on December 13, 2001. No
option, restricted stock award or stock awards may be granted after
such termination, but termination of the Plan shall not, without the
consent of the optionee or grantee, alter or impair any rights or
obligations under any award theretofore granted.