Item 2. |
GRACO INC. AND SUBSIDIARIES |
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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Results of Operations
Net sales, net earnings and earnings per share were as follows (in
thousands except per share amounts and percentages):
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Thirteen Weeks Ended |
% |
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March 28, 2008 |
March 30, 2007 |
Change |
Net Sales |
$204,120 |
$197,495 |
3% |
Net Earnings |
35,566 |
33,735 |
5% |
Diluted Net Earnings per Common Share |
$ 0.57 |
$ 0.50 |
14% |
Foreign currency translation rates had a favorable impact on first quarter
sales and net earnings. Translated at consistent exchange rates, sales were flat compared
to 2007 and net earnings decreased 4 percent.
Results include sales of $1.5 million from GlasCraft, which was acquired
in late February 2008.
Earnings per share increased at a higher rate than net earnings due to
purchases and retirement of approximately 1.7 million shares of Company common stock.
Consolidated Results
Sales by geographic area were as follows (in thousands):
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Thirteen Weeks Ended |
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March 28, 2008 |
March 30, 2007 |
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Americas1 |
$115,833 |
$120,546 |
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Europe2 |
59,508 |
49,377 |
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Asia Pacific |
28,779 |
27,572 |
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Consolidated |
$204,120 |
$197,495 |
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1 |
North
and South America, including the U.S. |
2 |
Europe,
Africa and Middle East |
The decrease in the Americas, driven by weakness in the Contractor
business, was more than offset by the increase in Europe, where net sales were 21 percent
higher than last year. Translated at consistent exchange rates, net sales in Europe
increased 9 percent. In the Asia Pacific region, net sales were 4 percent higher than last
year, with half of the increase from favorable currency translation.
Gross profit margin, expressed as a percentage of sales, was 54.8
percent versus 53.1 percent for the same period last year. The increase was due mainly to
favorable currency translation rates. The benefits of integrating Lubriquip and
consolidating the Lubrication Equipment operations in the Companys Anoka facility
are also beginning to be reflected in the gross profit margin percentage.
Operating profit margin, expressed as a percentage of sales, was 25.6
percent for the first quarter versus 26.4 percent last year. Operating expenses in 2008
include approximately $1 million related to the rollout of the new sprayer line in the
home center channel, approximately $1 million from GlasCraft operations and a $1 million
contribution to the Companys charitable foundation. The effects of currency
translation increased operating expenses by approximately $2 million.
The $1.3 million increase in interest expense resulted from borrowings
used to purchase and retire Company shares and for the acquisition of GlasCraft.
The Companys effective tax rate for the first quarter was 30
percent, down from 35 percent for the first quarter last year. The decrease resulted from
the completion of the examination of the Companys income tax returns.
Segment Results
Certain measurements of segment operations compared to the first quarter
of last year are summarized below:
Industrial
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Thirteen Weeks Ended |
Net sales (in thousands) |
March 28, 2008 |
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March 30, 2007 |
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Americas |
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$ | 53,403 |
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$ | 50,475 |
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Europe | | |
| 39,650 |
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| 32,447 |
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Asia Pacific | | |
| 21,198 |
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| 22,143 |
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Total | | |
$ | 114,251 |
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$ | 105,065 |
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Operating earnings as a percentage of net sales | | |
| 33% |
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| 33% |
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Net sales in the Industrial segment were up 6 percent in the Americas
and 22 percent in Europe. Approximately half of the percentage increase in Europe came
from currency translation.
Contractor
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Thirteen Weeks Ended |
Net sales (in thousands) |
March 28, 2008 |
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March 30, 2007 |
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Americas |
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$ | 42,362 |
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$ | 50,580 |
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Europe | | |
| 17,962 |
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| 15,134 |
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Asia Pacific | | |
| 5,856 |
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| 4,037 |
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Total | | |
$ | 66,180 |
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$ | 69,751 |
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Operating earnings as a percentage of net sales | | |
| 21% |
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| 24% |
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In the Contractor segment, net sales increases in Europe and Asia
Pacific were not enough to offset a 16 percent decrease in the Americas, where sales were
down in both the paint store and home center channels. Operating earnings in this segment
were affected by $2.5 million related to the launch and production of new paint sprayer
units in the home center channel.
Lubrication
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Thirteen Weeks Ended |
Net sales (in thousands) |
March 28, 2008 |
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March 30, 2007 |
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Americas |
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$ | 20,068 |
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$ | 19,491 |
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Europe | | |
| 1,896 |
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| 1,796 |
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Asia Pacific | | |
| 1,725 |
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| 1,392 |
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Total | | |
$ | 23,689 |
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$ | 22,679 |
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Operating earnings as a percentage of net sales | | |
| 18% |
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| 14% |
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Most sales, and sales growth, in the Lubrication segment came from the
Americas. The improvement in operating profitability is related to the integration and
consolidation of Lubrication operations completed in 2007.
Liquidity and Capital Resources
The Company used cash and borrowings under its long-term line of credit
to purchase and retire $60 million of Company shares. Other significant uses of cash in
the first quarter of 2008 included $35 million to acquire GlasCraft and $11 million for
payment of dividends. Significant uses of cash in the first quarter of 2007 included $24
million for purchases and retirement of Company common stock, $13 million for capital
additions and $11 million for payment of dividends.
At March 28, 2008, the Company had various lines of credit totaling $295
million, of which $101 million was unused. Internally generated funds and unused financing
sources provide the Company with the financial flexibility to meet liquidity needs.
Outlook
Management is encouraged by the gains in the Companys Industrial
and Lubrication segments in North America and by the continued strength of its
international business, including the Asia Pacific region, where orders were 15 percent
higher than last year. Based on continuing weakness in the U.S. housing market, management
remains cautious about the outlook for the Contractor business in North America and will
manage the business accordingly. The Company will continue to make long-term investments
in key growth strategies including new product development, expanding distribution,
entering new markets and pursuing strategic acquisitions.
SAFE HARBOR CAUTIONARY STATEMENT
A forward-looking statement is any statement made in this report and
other reports that the Company files periodically with the Securities and Exchange
Commission, or in press or earnings releases, analyst briefings and conference calls,
which reflects the Companys current thinking on market trends and the Companys
future financial performance at the time they are made. All forecasts and projections are
forward-looking statements.
The Company desires to take advantage of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 by making cautionary
statements concerning any forward-looking statements made by or on behalf of the Company.
The Company cannot give any assurance that the results forecasted in any forward-looking
statement will actually be achieved. Future results could differ materially from those
expressed, due to the impact of changes in various factors. These risk factors include,
but are not limited to: economic conditions in the United States and other major world
economies, currency fluctuations, political instability, changes in laws and regulations,
and changes in product demand. Please refer to Item 1A of, and Exhibit 99 to, the
Companys Annual Report on Form 10-K for fiscal year 2007 for a more comprehensive
discussion of these and other risk factors.
Investors should realize that factors other than those identified above
and in Item 1A and Exhibit 99 might prove important to the Companys future results.
It is not possible for management to identify each and every factor that may have an
impact on the Companys operations in the future as new factors can develop from time
to time.
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
There have been no material changes related to market risk from the
disclosures made in the Companys 2007 Annual Report on Form 10-K.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
As of the end of the fiscal quarter covered by this report, the Company
carried out an evaluation of the effectiveness of the design and operation of its
disclosure controls and procedures. This evaluation was done under the supervision and
with the participation of the Companys President and Chief Executive Officer, the
Chief Financial Officer and Treasurer, the Vice President and Controller, and the Vice
President, General Counsel and Secretary. Based upon that evaluation, they concluded that
the Companys disclosure controls and procedures are effective in gathering,
analyzing and disclosing information needed to satisfy the Companys disclosure
obligations under the Exchange Act.
Changes in internal controls
During the quarter, there was no change in the Companys internal
control over financial reporting that has materially affected or is reasonably likely to
materially affect the Companys internal control over financial reporting.
PART II |
OTHER INFORMATION |
There have been no material changes to the Companys risk factors
from those disclosed in the Companys 2007 Annual Report on Form 10-K.
Item 2. |
Unregistered
Sales of Equity Securities and Use of Proceeds |
Issuer Purchases of Equity Securities
On September 28, 2007, the Board of Directors authorized the Company to
purchase up to a total of 7,000,000 shares of its outstanding common stock, primarily
through open-market transactions. This authorization expires on September 30, 2009.
In addition to shares purchased under the Board authorizations, the
Company purchases shares of common stock held by employees who wish to tender owned shares
to satisfy the exercise price or tax withholding on option exercises.
Information on issuer purchases of equity securities follows:
Period |
(a) Total Number of Shares Purchased |
(b) Average Price Paid per Share |
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
(d) Maximum Number of Shares that May Yet
Be Purchased Under the Plans or Programs (at end of period) |
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Dec 29, 2007 - Jan 25, 2008 |
709,319 |
$34.40 |
709,319 |
5,438,214 |
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Jan 26, 2008 - Feb 22, 2008 |
169,032 |
$34.08 |
159,000 |
5,279,214 |
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Feb 23, 2008 - Mar 28, 2008 |
821,501 |
$35.03 |
819,259 |
4,459,955 |
Item 4. |
Submission
of Matters to a Vote of Security Holders |
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10.1 |
Graco Restoration Plan (2005 Statement). Third Amendment adopted March 27, 2008. |
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10.2 |
Stock
Option Agreement. Form of agreement used for award in 2008 of
non-incentive stock options to executive officers under the Graco
Inc. Amended and Restated Stock Incentive Plan (2006). Form of
agreement for award made to Chief Executive Officer in 2008. |
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31.1 |
Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a). |
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31.2 |
Certification of Chief Financial Officer and Treasurer pursuant to Rule
13a-14(a). |
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32 |
Certification of the President and Chief Executive Officer and the Chief Financial
Officer and Treasurer pursuant to Section 1350 of Title 18, U.S.C. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
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GRACO INC. |
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Date: |
April 23, 2008 |
By: |
/s/Patrick J. McHale |
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Patrick J. McHale |
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President and Chief Executive Officer |
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(Principal Executive Officer) |
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Date: |
April 23, 2008 |
By: |
/s/James A. Graner |
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James A. Graner |
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Chief Financial Officer and Treasurer |
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(Principal Financial Officer) |
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Date: |
April 23, 2008 |
By: |
/s/Caroline M. Chambers |
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Caroline M. Chambers |
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Vice President and Controller |
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(Principal Accounting Officer) |
Exhibit 10.1, 3rd Amendment to Restoration Plan
Exhibit 10.1
GRACO INC.
GRACO RESTORATION PLAN
(2005 STATEMENT)
THIRD AMENDMENT
Written Action
Of
Chief Executive Officer
WHEREAS, Graco
Inc. (Graco), a Minnesota corporation, has adopted the Graco Restoration Plan
(2005 Statement) (the Plan Statement);
WHEREAS, Section
9.1 of the Plan Statement provides that Graco may amend the Plan Statement in any respect
by action of its Board of Directors; and
WHEREAS, the
Board of Directors of Graco, by resolution adopted at its meeting held on June 14, 2007,
delegated to the Chief Executive Officer the authority to amend the Plan Statement to allow
distribution forms under the Plan Statement similar to those available under the Graco
Employee Retirement Plan (1991 Restatement) and to permit a lump sum distribution form
while retaining the existing default distribution forms.
NOW, THEREFORE, BE IT
RESOLVED, based on the authority delegated to me, I adopt the attached Third Amendment
to the Plan Statement.
03/27/2008 |
/s/Patrick J. McHale |
Date |
Patrick J. McHale |
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Chief Executive Officer |
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Graco Inc. |
THIRD AMENDMENT
GRACO RESTORATION PLAN
(2005 Statement)
Graco Inc. (the
Principal Sponsor) has established and maintains a nonqualified deferred
compensation plan (the Plan) which, in its most recent amended and restated
form, is embodied in a document entitled GRACO RESTORATION PLAN (2005
Statement)" effective January 1, 2005 (as amended, the Plan
Statement) and is hereby amended as follows:
1.
DISTRIBUTION FORMS. Effective for distributions made on and after
July 1, 2007, Subsection 7.1.2 shall be amended (i) to re-number Subsection
7.1.2(b) as Subsection 7.1.2(d), and (ii) to add the following new
Subsections 7.1.2(b) and 7.1.2(c) that read in full as follows:
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(b) |
Election to Change the Form or Delay the Time of Distribution. A
Participant may make an election to change the form or delay the time of
distribution. If (i) a Participants form of payment prior
to electing one of the alternative forms of payment listed below is an annuity,
(ii) the Participant elects an alternative form that is an annuity (options (i),
(ii), (iii), (iv), (v), and (vi), but not (vii) the lump sum form), and
(iii) the annuity elected is actuarially equivalent applying reasonable
actuarial methods and assumptions, then the Participants benefit shall
commence on the same date the benefit would have been paid but for the election
of the alternative form. In all other cases, if a Participant elects one of
these alternative forms of payment, the election (i) shall not take effect
until the date that is twelve (12) months after the date on which the
Participant makes the election, (ii) shall delay the distribution to a date that
is at least five (5) years after the date the distribution would have been
made to the Participant absent the election, and (iii) in the case of a
distribution as of a specified time (but not upon a Participants
Separation from Service, Disability, or death), the election shall not take
effect unless the Participant makes the election at least twelve (12)
months prior to the date the distribution is to commence. An election form that
does not satisfy the advance filing requirements of the preceding sentence shall
be void and shall be disregarded. In all cases an election form shall not be
considered filed until the completed form is actually received by the Committee
or its designated agent. |
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(c) |
Alternate Forms of Distribution. Subject to satisfying the conditions in
Section 7.1.4(b), the participant may elect to receive distribution the
following forms |
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(i) |
A fifty percent (50%) survivor annuity. |
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(ii) |
A sixty-six and two-thirds percent (66-2/3%) survivor annuity (available only if
the joint annuitant is not more than twenty-four (24) years younger than the
Participant). |
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(iii) |
A seventy-five percent (75%) survivor annuity. |
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(iv) |
A one hundred percent (100%) survivor annuity (available only if the joint
annuitant is not more than ten (10) years younger than the Participant). |
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(v) |
A term certain single life annuity based on the Participants life with a
term certain period of one hundred twenty (120) months (available only if the
Participant has not attained age 92). |
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(vi) |
A term certain single life annuity based on the Participants life with a
term certain period of one hundred eighty (180) months (available only if the
Participant has not attained age 84). |
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(vii) |
A single lump sum payment. |
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The
actuarial determination of all forms in section 7.1.2 shall be based upon the terms of the
Graco Employee Retirement Plan. |
2.
SAVINGS CLAUSE. Save and except as hereinabove expressly amended, the
Restoration Plan shall continue in full force and effect.
Exhibit 10.2, Stock Option Agreements
Exhibit 10.2
GRACO INC.
AMENDED AND RESTATED STOCK INCENTIVE PLAN (2006)
EXECUTIVE OFFICER
STOCK OPTION AGREEMENT
(Non-Qualified)
THIS AGREEMENT,
made this «Day_of_Month_» day of «Month_and_Year», by and between
Graco Inc., a Minnesota corporation (the Company) and «F_Name_MI»
«L_Name» (the Employee).
WITNESSETH THAT:
WHEREAS, the
Company pursuant to the Graco Inc. Amended and Restated Stock Incentive Plan (2006) (the
Plan) wishes to grant this stock option to Employee;
NOW THEREFORE, in
consideration of the premises and of the mutual covenants contained in this Agreement, the
parties agree as follows:
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The
Company grants to Employee, the right and option (the Option) to purchase all
or any part of an aggregate of «Words» («Number») shares of Common
Stock of the Company, par value USD 1.00 per share, at the price of USD
«Price» per share on the terms and conditions set forth in this Agreement. The
date of grant of the Option is «Date» (the Date of Grant). |
2. |
Duration
and Exercisability |
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A. |
No portion of this Option may be exercised by Employee until the first
anniversary of the Date of Grant and then only in accordance with the Vesting
Schedule set forth below. In no event shall this Option or any portion of this
Option be exercisable following the tenth anniversary of the Date of Grant. |
Vesting Date |
Portion of Option Exercisable |
First Anniversary of Date of Grant |
25% |
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Second Anniversary of Date of Grant |
50% |
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Third Anniversary of Date of Grant |
75% |
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Fourth Anniversary of Date of Grant |
100% |
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If
Employee does not purchase in any one year the full number of shares of Common Stock of
the Company to which he/she is entitled under this Option, he/she may, subject to the
terms and conditions of Section 3, purchase such shares of Common Stock in any subsequent
year during the term of this Option. This Option shall expire as of the close of trading
at the national securities exchange on which the Common Stock is traded
(Exchange) on the tenth anniversary of the Date of Grant or if the Exchange is
closed on the anniversary date or the Common Stock of the Company is not trading on said
anniversary date, such earlier business day on which the Common Stock is trading on the
Exchange. |
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B. |
During the lifetime of Employee, the Option shall be exercisable only by him/her
and shall not be assignable or transferable by him/her otherwise than by will or
the laws of descent and distribution. |
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C. |
Under no circumstances may the Option or any portion of the Option granted by
this Agreement be exercised after the term of the Option expires. |
3. |
Effect
of Termination of Employment |
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A. |
If Employees employment terminates for any reason other than
Employees gross and willful misconduct, death, retirement (as defined in
Section 3D), or disability (as defined in Section 3D), Employee shall have the
right to exercise that portion of the Option exercisable upon the date of
termination of employment at any time within the period beginning on the day
after termination of employment and ending at the close of trading on the
Exchange thirty (30) days later. |
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B. |
If Employees employment terminates by reason of Employees 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, the unexercised portion of the
Option shall terminate as of the time of the misconduct. If the Company
determines subsequent to the termination of Employees employment for
whatever reason, that Employee engaged in conduct during employment that would
constitute gross and willful misconduct justifying termination, the Option shall
terminate as of the time of such misconduct. Furthermore, if the Option is
exercised in whole or in part and the Company thereafter determines that
Employee engaged in gross and willful misconduct during employment which would
have justified termination at any time prior to the date of such exercise, the
Option shall be deemed to have terminated as of the time of the misconduct and
the Company may elect to rescind the Option exercise. |
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C. |
If Employee shall die while employed by the Company or an affiliate and shall
not have fully exercised the Option, all shares remaining under the Option shall
become immediately exercisable. If Employee shall die within thirty (30) days
after a termination of employment which meets the criteria of Section 3A above,
only those shares vested as of the date of termination shall be exercisable. The
executor or administrator of Employees estate, or any person(s) to whom
the Option was transferred by will or the applicable laws of distribution and
descent may exercise such exercisable shares at any time during a period
beginning on the day after the date of Employees death and ending at the
close of trading on the Exchange on the anniversary of death one (1) year later. |
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D. |
If Employees termination of employment is due to retirement or disability,
all shares remaining under the Option shall become immediately exercisable.
Employee shall be deemed to have retired if the termination of employment occurs
for reasons other than the Employees gross and willful misconduct, death,
or disability after Employee (i) has attained age 55 and 10 years of service
with the Company or an affiliate, or (ii) has attained age 65. 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 Companys long term disability program. Employee may exercise the
shares remaining unexercised at any time during a period beginning on the day
after the date of Employees termination of employment and ending at the
close of trading on the Exchange on the tenth anniversary of the Date of Grant.
If Employee should die during the period between the date of Employees
retirement or disability and the expiration of the Option, the executor(s) or
administrator(s) of the Employees estate, or any person(s) to whom the
Option was transferred by will or the applicable laws of distribution and
descent may exercise the unexercised portion of the Option at any time during a
period beginning the day after the date of Employees death and ending at
the close of trading on the Exchange on the anniversary of death one (1) year
later, provided, however, in no event shall the Option be exercisable following
the tenth anniversary of the Date of Grant. |
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E. |
Notwithstanding anything to the contrary contained in this Section 3, if the
Employees employment is terminated by retirement (as defined in Section
3D) and Employee has not given the Company written notice to his/her immediate
supervisor and the Chief Executive Officer, of Employees intention to
retire not less than six (6) months prior to the date of his/her retirement,
then in such event, for purposes of this Agreement only, said termination of
employment shall be deemed to be not a retirement but a termination subject to
the provisions of Section 3A, provided, however, that in the event that
the Chief Executive Officer determines that said termination of employment
without six (6) months prior written notice is in the best interests of the
Company, such termination shall be deemed to be a retirement and shall be
subject to Section 3D. |
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F. |
If the Option is exercised by the executors, administrators, legatees, or
distributees of the estate of a deceased optionee, the Company shall be under no
obligation to issue stock hereunder unless and until the Company is satisfied
that the person(s) exercising the Option is the duly appointed legal
representative of the deceased optionees estate or the proper legatee or
distributee thereof. |
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G. |
For purposes of this Section 3, if the last day of the relevant period is a day
upon which the Exchange is not open for trading or the Common Stock is not
trading on that day, the relevant period will expire at the close of trading on
such earlier business day on which the Exchange is open and the Common Stock is
trading. |
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A. |
Employee or other proper party may exercise the Option only by delivering within
the term of the Option written notice to the Company at its principal office in
Minneapolis, Minnesota, stating the number of shares as to which the Option is
being exercised and, except as provided in Sections 4B(2) and 4C, accompanied by
payment-in-full of the Option price for all shares designated in the notice. |
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B. |
The
Employee may, at Employees election, pay the Option price as follows: |
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(1) |
by
cash or check (bank check, certified check, or personal check) |
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(2) |
by
delivering to the Company for cancellation, shares of Common Stock of the
Company which have been held by the Employee for not less than six (6) months
with a fair market value equal to the Option price. |
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For
purposes of Section 4B(2), the fair market value of the Companys Common Stock shall
be the closing price of the Common Stock on the day immediately preceding the date of
exercise on the Exchange. If there is not a quotation available for such day, then the
closing price on the next preceding day for which such a quotation exists shall be
determinative of fair market value. If the shares are not then traded on an exchange, the
fair market value shall be the average of the closing bid and asked prices of the Common
Stock as reported by the National Association of Securities Dealers Automated Quotation
System. If the Common Stock is not then traded on NASDAQ or on an exchange, then the fair
market value shall be determined in such manner as the Company shall deem reasonable. |
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C. |
The Employee may, with the consent of the Company, pay the Option price by
delivering to the Company a properly executed exercise notice, together with
irrevocable instructions to a broker to promptly deliver to the Company from
sale or loan proceeds the amount required to pay the exercise price. |
5. |
Payment
of Withholding Taxes |
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Upon
exercise of any portion of this Option, Employee shall pay to the Company an amount
sufficient to satisfy any federal, state, or local withholding tax requirements which
arise as a result of the exercise of the Option or provide the Company with satisfactory
indemnification for such payment. Employee may pay such amount by delivering to the
Company for cancellation shares of Common Stock of the Company with a fair market value
equal to the minimum amount of such withholding tax requirement by (i) electing to have
the Company withhold shares otherwise to be delivered with a fair market value equal to
the minimum statutory amount of such taxes required to be withheld by the Company, or (ii)
electing to surrender to the Company previously owned shares with a fair market value
equal to the amount of such minimum tax obligation. |
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A. |
Notwithstanding Section 2A hereof, the entire Option shall become immediately
and fully exercisable upon a Change of Control and shall remain
fully exercisable until either exercised or expiring by its terms. A
Change of Control means: |
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(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 13d-3 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 |
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(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 6A(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 Companys 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 |
|
(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 Companys assets either directly or indirectly) in
substantially the same proportions (as compared to the other holders of
the Companys 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 Companys
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 |
|
(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. |
7. |
Adjustments;
Fundamental Change |
|
A. |
If there shall be any change in the number or character of the Common Stock of
the Company through merger, consolidation, reorganization, recapitalization,
dividend in the form of stock (of whatever amount), stock split or other change
in the corporate structure of the Company, and all or any portion of the Option
shall then be unexercised and not yet expired, appropriate adjustments in the
outstanding Option shall be made by the Company, in order to prevent dilution or
enlargement of Employees Option rights. Such adjustments shall include,
where appropriate, changes in the number of shares of Common Stock and the price
per share subject to the outstanding Option. |
|
B. |
In the event of a proposed (i) dissolution or liquidation of the Company, (ii) a
sale of substantially all of the assets of the Company, (iii) a merger or
consolidation of the Company with or into any other corporation, regardless of
whether the Company is the surviving corporation, or (iv) a statutory share
exchange involving the capital stock of the Company (each, a Fundamental
Change), the Management Organization and Compensation Committee (the
Committee) may, but shall not be obligated to: |
|
(1) |
with
respect to a Fundamental Change that involves a merger, consolidation or
statutory share exchange, make appropriate provision for the protection of the
Option by the substitution of options and appropriate voting common stock of
the corporation surviving any such merger or consolidation or, if appropriate,
the parent corporation (as defined in Section 424(e) of the
Internal Revenue Code of 1986, as amended from time to time, and any
regulations promulgated thereunder, or any successor provision) of the Company
or such surviving corporation, in lieu of the Option and shares of Common Stock
of the Company, or |
|
(2) |
with
respect to any Fundamental Change, including, without limitation, a merger,
consolidation or statutory share exchange, declare, prior to the occurrence of
the Fundamental Change, and provide written notice to the holder of the Option
of the declaration, that the Option, whether or not then exercisable, shall be
canceled at the time of, or immediately prior to the occurrence of, the
Fundamental Change in exchange for payment to the holder of the Option, within
20 days after the Fundamental Change, of cash (or, if the Committee so elects
in lieu of solely cash, of such form(s) of consideration, including cash and/or
property, singly or in such combination as the Committee shall determine, that
the holder of the Option would have received as a result of the Fundamental
Change if the holder of the Option had exercised the Option immediately prior
to the Fundamental Change) equal to, for each share of Common Stock covered by
the canceled Option, the amount, if any, by which the Fair Market Value (as
defined in this Section 7B) per share of Common Stock exceeds the exercise
price per share of Common Stock covered by the Option. At the time of the
declaration provided for in the immediately preceding sentence, the Option
shall immediately become exercisable in full and the holder of the Option shall
have the right, during the period preceding the time of cancellation of the
Option, to exercise the Option as to all or any part of the shares of Common
Stock covered thereby in whole or in part, as the case may be. In the event of
a declaration pursuant to this Section 7B, the Option, to the extent that it
shall not have been exercised prior to the Fundamental Change, shall be
canceled at the time of, or immediately prior to, the Fundamental Change, as
provided in the declaration. Notwithstanding the foregoing, the holder of the
Option shall not be entitled to the payment provided for in this Section 7B if
such Option shall have expired or been forfeited. For purposes of this Section
7B only, Fair Market Value per share of Common Stock means the fair
market value, as determined in good faith by the Committee, of the
consideration to be received per share of Common Stock by the shareholders of
the Company upon the occurrence of the Fundamental Change, notwithstanding
anything to the contrary provided in this Agreement. |
|
A. |
This Option 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 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. |
|
C. |
Neither Employee, the Employees legal representative, nor the executor(s)
or administrator(s) of the Employees estate, or any person(s) to whom the
Option was transferred by will or the applicable laws of distribution and
descent shall be, or have any of the rights or privileges of, a shareholder of
the Company in respect of any shares of Common Stock receivable upon the
exercise of this Option, in whole or in part, unless and until such shares shall
have been issued upon exercise of this Option. |
|
D. |
This option has been granted to Employee as a purely discretionary benefit and
shall not form part of Employees salary or entitle Employee to receive
similar option grants in the future. Benefits received under the Plan shall not
be used in calculating severance payments, if any. |
|
E. |
The Company shall at all times during the term of the Option reserve and keep
available such number of shares as will be sufficient to satisfy the
requirements of this Agreement. |
|
F. |
The internal law, and not the law of conflicts, of the State of Minnesota, USA,
shall govern all questions concerning the validity, construction and effect of
this Agreement, the Plan and any rules and regulations relating to the Plan or
this Option |
|
G. |
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 Option. Employee also consents to the storage
and processing of such data by such persons for this purpose. |
IN WITNESS
WHEREOF, the parties have caused this Agreement to be executed on the day and year
first above written.
|
GRACO INC. |
|
|
|
|
|
|
|
By |
|
«CEO_Name» |
|
President and Chief Executive Officer |
|
|
|
EMPLOYEE |
|
|
|
|
|
|
|
|
|
«F_Name_MI» «L_Name» |
GRACO INC.
AMENDED AND RESTATED STOCK INCENTIVE PLAN (2006)
CHIEF EXECUTIVE OFFICER
STOCK OPTION AGREEMENT
(Non-Qualified)
THIS AGREEMENT,
made this XXth day of February, 2008, by and between Graco Inc., a Minnesota corporation
(the Company) and <<NAME>> (<<SNAME>> or
the Employee).
WITNESSETH THAT:
WHEREAS, the
Company pursuant to the Graco Inc. Amended and Restated Stock Incentive Plan (2006) (the
Plan) wishes to grant this stock option to Employee;
NOW THEREFORE, in
consideration of the premises and of the mutual covenants contained in this Agreement, the
parties agree as follows:
|
The
Company grants to Employee, the right and option (the Option) to purchase all
or any part of an aggregate of «Words» («Number») shares of Common
Stock of the Company, par value USD 1.00 per share, at the price of USD
«Price» per share on the terms and conditions set forth in this Agreement. The
date of grant of the Option is <<DATE>> (the Date of Grant). |
2. |
Duration
and Exercisability |
|
A. |
No portion of this Option may be exercised by Employee until the first
anniversary of the Date of Grant and then only in accordance with the Vesting
Schedule set forth below. In no event shall this Option or any portion of this
Option be exercisable following the tenth anniversary of the Date of Grant. |
Vesting Date |
Portion of Option Exercisable |
First Anniversary of Date of Grant |
25% |
|
|
Second Anniversary of Date of Grant |
50% |
|
|
Third Anniversary of Date of Grant |
75% |
|
|
Fourth Anniversary of Date of Grant |
100% |
|
If
Employee does not purchase in any one year the full number of shares of Common Stock of
the Company to which he/she is entitled under this Option, he/she may, subject to the
terms and conditions of Section 3, purchase such shares of Common Stock in any subsequent
year during the term of this Option. This Option shall expire as of the close of trading
at the national securities exchange on which the Common Stock is traded
(Exchange) on the tenth anniversary of the Date of Grant or if the Exchange is
closed on the anniversary date or the Common Stock of the Company is not trading on said
anniversary date, such earlier business day on which the Common Stock is trading on the
Exchange. |
|
B. |
During the lifetime of Employee, the Option shall be exercisable only by him/her
and shall not be assignable or transferable by him/her otherwise than by will or
the laws of descent and distribution. |
|
C. |
Under no circumstances may the Option or any portion of the Option granted by
this Agreement be exercised after the term of the Option expires. |
3. |
Effect
of Termination of Employment |
|
A. |
If Employees employment terminates for any reason other than
Employees gross and willful misconduct, death, retirement (as defined in
Section 3D), or disability (as defined in Section 3D), Employee shall have the
right to exercise that portion of the Option exercisable upon the date of
termination of employment at any time within the period beginning on the day
after termination of employment and ending at the close of trading on the
Exchange thirty (30) days later. |
|
B. |
If Employees employment terminates by reason of Employees 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, the unexercised portion of the
Option shall terminate as of the time of the misconduct. If the Company
determines subsequent to the termination of Employees employment for
whatever reason, that Employee engaged in conduct during employment that would
constitute gross and willful misconduct justifying termination, the Option shall
terminate as of the time of such misconduct. Furthermore, if the Option is
exercised in whole or in part and the Company thereafter determines that
Employee engaged in gross and willful misconduct during employment which would
have justified termination at any time prior to the date of such exercise, the
Option shall be deemed to have terminated as of the time of the misconduct and
the Company may elect to rescind the Option exercise. Gross and willful
misconduct shall not include any action or inaction by <<SNAME>>
contrary to the direction of the Board with respect to any initiative, strategy
or action of the Company, which action or inaction <<SNAME>>
believes is in the best interest of the Company. |
|
C. |
If Employee shall die while employed by the Company or an affiliate and shall
not have fully exercised the Option, all shares remaining under the Option shall
become immediately exercisable. If Employee shall die within thirty (30) days
after a termination of employment which meets the criteria of Section 3A above,
only those shares vested as of the date of termination shall be exercisable. The
executor or administrator of Employees estate, or any person(s) to whom
the Option was transferred by will or the applicable laws of distribution and
descent may exercise such exercisable shares at any time during a period
beginning on the day after the date of Employees death and ending at the
close of trading on the Exchange on the anniversary of death one (1) year later. |
|
D. |
If Employees termination of employment is due to retirement or disability,
all shares remaining under the Option shall become immediately exercisable.
Employee shall be deemed to have retired if the termination of employment occurs
for reasons other than the Employees gross and willful misconduct, death,
or disability after Employee (i) has attained age 55 and 10 years of service
with the Company or an affiliate, or (ii) has attained age 65. 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 Companys long term disability program. Employee may exercise the
shares remaining unexercised at any time during a period beginning on the day
after the date of Employees termination of employment and ending at the
close of trading on the Exchange on the tenth anniversary of the Date of Grant.
If Employee should die during the period between the date of Employees
retirement or disability and the expiration of the Option, the executor(s) or
administrator(s) of the Employees estate, or any person(s) to whom the
Option was transferred by will or the applicable laws of distribution and
descent may exercise the unexercised portion of the Option at any time during a
period beginning the day after the date of Employees death and ending at
the close of trading on the Exchange on the anniversary of death one (1) year
later, provided, however, in no event shall the Option be exercisable following
the tenth anniversary of the Date of Grant. Notwithstanding anything to the
contrary contained in Section 3, if the Employees employment is terminated
by retirement (as defined in this Section 3D) and Employee has not given written
notice to the Chair of the Management Organization and Compensation Committee of
the Board of Directors (the Committee), of Employees intention
to retire not less than six (6) months prior to the date of his retirement, then
in such event, for purposes of this Agreement only, said termination of
employment shall be deemed to be not a retirement but a termination subject to
the provisions of Section 3A, provided, however, that in the event that
the Committee determines that said termination of employment without six (6)
months prior written notice is in the best interests of the Company, such
termination shall be deemed to be a retirement and shall be subject to this
Section 3D. |
|
E. |
If the Option is exercised by the executors, administrators, legatees, or
distributees of the estate of a deceased optionee, the Company shall be under no
obligation to issue stock hereunder unless and until the Company is satisfied
that the person(s) exercising the Option is the duly appointed legal
representative of the deceased optionees estate or the proper legatee or
distributee thereof. |
|
F. |
For purposes of this Section 3, if the last day of the relevant period is a day
upon which the Exchange is not open for trading or the Common Stock is not
trading on that day, the relevant period will expire at the close of trading on
such earlier business day on which the Exchange is open and the Common Stock is
trading. |
|
A. |
Employee or other proper party may exercise the Option only by delivering within
the term of the Option written notice to the Company at its principal office in
Minneapolis, Minnesota, stating the number of shares as to which the Option is
being exercised and, except as provided in Sections 4B(2) and 4C, accompanied by
payment-in-full of the Option price for all shares designated in the notice. |
|
B. |
The
Employee may, at Employees election, pay the Option price as follows: |
|
(1) |
by cash or check (bank check, certified check, or personal check) |
|
(2) |
by delivering to the Company for cancellation, shares of Common Stock of the
Company which have been held by the Employee for not less than six (6) months
with a fair market value equal to the Option price. |
|
For
purposes of Section 4B(2), the fair market value of the Companys Common Stock shall
be the closing price of the Common Stock on the day immediately preceding the date of
exercise on the Exchange. If there is not a quotation available for such day, then the
closing price on the next preceding day for which such a quotation exists shall be
determinative of fair market value. If the shares are not then traded on an exchange, the
fair market value shall be the average of the closing bid and asked prices of the Common
Stock as reported by the National Association of Securities Dealers Automated Quotation
System. If the Common Stock is not then traded on NASDAQ or on an exchange, then the fair
market value shall be determined in such manner as the Company shall deem reasonable. |
|
C. |
The Employee may, with the consent of the Company, pay the Option price by
delivering to the Company a properly executed exercise notice, together with
irrevocable instructions to a broker to promptly deliver to the Company from
sale or loan proceeds the amount required to pay the exercise price. |
5. |
Payment
of Withholding Taxes |
|
Upon
exercise of any portion of this Option, Employee shall pay to the Company an amount
sufficient to satisfy any federal, state, or local withholding tax requirements which
arise as a result of the exercise of the Option or provide the Company with satisfactory
indemnification for such payment. Employee may pay such amount by delivering to the
Company for cancellation shares of Common Stock of the Company with a fair market value
equal to the minimum amount of such withholding tax requirement by (i) electing to have
the Company withhold shares otherwise to be delivered with a fair market value equal to
the minimum statutory amount of such taxes required to be withheld by the Company, or (ii)
electing to surrender to the Company previously owned shares with a fair market value
equal to the amount of such minimum tax obligation. |
|
A. |
Notwithstanding Section 2A hereof, the entire Option shall become immediately
and fully exercisable upon a Change of Control and shall remain
fully exercisable until either exercised or expiring by its terms. 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 13d-3 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 6A(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 Companys 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 |
|
(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 Companys assets either directly or indirectly) in
substantially the same proportions (as compared to the other holders of
the Companys 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 Companys
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 |
|
(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. |
7. |
Adjustments;
Fundamental Change |
|
A. |
If there shall be any change in the number or character of the Common Stock of
the Company through merger, consolidation, reorganization, recapitalization,
dividend in the form of stock (of whatever amount), stock split or other change
in the corporate structure of the Company, and all or any portion of the Option
shall then be unexercised and not yet expired, appropriate adjustments in the
outstanding Option shall be made by the Company, in order to prevent dilution or
enlargement of Employees Option rights. Such adjustments shall include,
where appropriate, changes in the number of shares of Common Stock and the price
per share subject to the outstanding Option. |
|
B. |
In the event of a proposed (i) dissolution or liquidation of the Company, (ii) a
sale of substantially all of the assets of the Company, (iii) a merger or
consolidation of the Company with or into any other corporation, regardless of
whether the Company is the surviving corporation, or (iv) a statutory share
exchange involving the capital stock of the Company (each, a Fundamental
Change), the Management Organization and Compensation Committee (the
Committee) may, but shall not be obligated to: |
|
(1) |
with
respect to a Fundamental Change that involves a merger, consolidation or
statutory share exchange, make appropriate provision for the protection of the
Option by the substitution of options and appropriate voting common stock of
the corporation surviving any such merger or consolidation or, if appropriate,
the parent corporation (as defined in Section 424(e) of the
Internal Revenue Code of 1986, as amended from time to time, and any
regulations promulgated thereunder, or any successor provision) of the Company
or such surviving corporation, in lieu of the Option and shares of Common Stock
of the Company, or |
|
(2) |
with
respect to any Fundamental Change, including, without limitation, a merger,
consolidation or statutory share exchange, declare, prior to the occurrence of
the Fundamental Change, and provide written notice to the holder of the Option
of the declaration, that the Option, whether or not then exercisable, shall be
canceled at the time of, or immediately prior to the occurrence of, the
Fundamental Change in exchange for payment to the holder of the Option, within
20 days after the Fundamental Change, of cash (or, if the Committee so elects
in lieu of solely cash, of such form(s) of consideration, including cash and/or
property, singly or in such combination as the Committee shall determine, that
the holder of the Option would have received as a result of the Fundamental
Change if the holder of the Option had exercised the Option immediately prior
to the Fundamental Change) equal to, for each share of Common Stock covered by
the canceled Option, the amount, if any, by which the Fair Market Value (as
defined in this Section 7B) per share of Common Stock exceeds the exercise
price per share of Common Stock covered by the Option. At the time of the
declaration provided for in the immediately preceding sentence, the Option
shall immediately become exercisable in full and the holder of the Option shall
have the right, during the period preceding the time of cancellation of the
Option, to exercise the Option as to all or any part of the shares of Common
Stock covered thereby in whole or in part, as the case may be. In the event of
a declaration pursuant to this Section 7B, the Option, to the extent that it
shall not have been exercised prior to the Fundamental Change, shall be
canceled at the time of, or immediately prior to, the Fundamental Change, as
provided in the declaration. Notwithstanding the foregoing, the holder of the
Option shall not be entitled to the payment provided for in this Section 7B if
such Option shall have expired or been forfeited. For purposes of this Section
7B only, Fair Market Value per share of Common Stock means the fair
market value, as determined in good faith by the Committee, of the
consideration to be received per share of Common Stock by the shareholders of
the Company upon the occurrence of the Fundamental Change, notwithstanding
anything to the contrary provided in this Agreement. |
|
A. |
This Option 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 Agreement shall not confer on Employee any right with respect to
continuance of employment by the Company or any of its subsidiaries, nor will it
interfere in any way with the right of the Company to terminate such employment
at any time. |
|
C. |
Neither Employee, the Employees legal representative, nor the executor(s)
or administrator(s) of the Employees estate, or any person(s) to whom the
Option was transferred by will or the applicable laws of distribution and
descent shall be, or have any of the rights or privileges of, a shareholder of
the Company in respect of any shares of Common Stock receivable upon the
exercise of this Option, in whole or in part, unless and until such shares shall
have been issued upon exercise of this Option. |
|
D. |
The Company shall at all times during the term of the Option reserve and keep
available such number of shares as will be sufficient to satisfy the
requirements of this Agreement. |
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E. |
The internal law, and not the law of conflicts of the State of Minnesota shall
govern all questions concerning the validity, construction and effect of this
Agreement, the Plan and any rules and regulations relating to the Plan or this
Option. |
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F. |
Employee hereby consents to the transfer to his 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 Option. Employee also consents to the storage
and processing of such data by such persons for this purpose. |
IN WITNESS WHEREOF, the
Company, by the Management Organization and Compensation Committee of the Board of
Directors, and the Employee have caused this Agreement to be executed and delivered, all
as of the day and year first above written.
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GRACO INC. |
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Management Organization and Compensation Committee |
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By |
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«Chair_Name» |
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Its Chairman |
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EMPLOYEE |
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By |
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«NAME» |
Exhbit 31.1, CEO Certification
Exhibit 31.1
CERTIFICATION
I, Patrick J. McHale, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Graco Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report; |
4. |
The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have: |
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a) |
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which
this report is being prepared; |
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b) |
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles; |
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c) |
Evaluated
the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and |
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d) |
Disclosed
in this report any change in the registrants internal control
over financial reporting that occurred during the registrants
most recent fiscal quarter (the registrants fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting; and |
5. |
The registrants other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrants auditors and the audit committee of the registrants
board of directors: |
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a) |
All significant
deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrants
ability to record, process, summarize and report financial information; and |
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b) |
Any fraud,
whether or not material, that involves management or other employees who have a
significant role in the registrants internal control over financial reporting. |
Date: |
April 23, 2008 |
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/s/Patrick J. McHale |
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Patrick J. McHale |
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President and Chief Executive Officer |
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Exhibit 31.2, CFO Cert.
Exhibit 31.2
CERTIFICATION
I, James A. Graner, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Graco Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report; |
4. |
The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared; |
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b) |
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles; |
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c) |
Evaluated the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and |
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d) |
Disclosed in this report any change in the registrants internal control
over financial reporting that occurred during the registrants most recent
fiscal quarter (the registrants fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrants internal control over financial
reporting; and |
5. |
The registrants other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrants auditors and the audit committee of the registrants
board of directors: |
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a) |
All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to
adversely affect the registrants ability to record, process, summarize and
report financial information; and |
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b) |
Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal control over
financial reporting. |
Date: |
April 23, 2008 |
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/s/James A. Graner |
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James A. Graner |
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Chief Financial Officer and Treasurer |
Exhibit 32, Certification Under Section 1350
Exhibit 32
CERTIFICATION UNDER SECTION 1350
Pursuant to Section 1350 of Title 18 of the United States Code, each of
the undersigned certifies that this periodic report fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information
contained in this periodic report fairly presents, in all material respects, the financial
condition and results of operations of Graco Inc.
Date: |
April 23, 2008 |
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/s/Patrick J. McHale |
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Patrick J. McHale |
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President and Chief Executive Officer |
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Date: |
April 23, 2008 |
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/s/James A. Graner |
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James A. Graner |
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Chief Financial Officer and Treasurer |