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Exhibit 10.2
EXECUTIVE OFFICER
ANNUAL INCENTIVE BONUS PLAN
1.
Definitions. When the following terms are used herein with
initial capital letters, they shall have the following
meanings:
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1.1
Base Salary — a specific dollar amount for each
Participant as identified in Schedule A.
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1.2
Compensation Committee — the Management Organization
and Compensation Committee of the Board of Directors of Graco Inc.;
it is intended that the Compensation Committee will satisfy the
requirements of Section 162(m) of the Code by being comprised of
two or more “outside directors.”
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1.3
Code — the Internal Revenue Code of 1986, as it may be
amended from time to time, and any proposed, temporary or final
Treasury Regulations promulgated thereunder.
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1.4
Company — Graco Inc., a Minnesota corporation, and any
of its affiliates that adopt the Plan.
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1.5
Eligible Employee — the chief executive officer and
any executive officer of the Company designated by the Compensation
Committee.
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1.6
Participant — an Eligible Employee designated by the
Compensation Committee, at any time ending on or before the 90th
day of each Performance Period, as subject to the Plan.
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1.7
Performance Period — the Company's fiscal
year.
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1.8
Plan — this Executive Officer Annual Incentive Bonus
Plan.
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1.9
Maximum Targeted Bonus Percentage — the maximum
potential bonus payout expressed as a percentage of
Participant’s Base Salary as identified in Schedule
B.
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1.10
Company Performance Target(s) — the financial growth
target(s) established by the Compensation Committee for a
Performance Period and reflected in the percentages identified in
Schedule C. The Company Performance Target(s) shall be directly and
specifically tied to one or more of the following financial
measures: consolidated pre-tax earnings, net revenues, net
earnings, operating income, earnings before interest and taxes,
cash flow, return on equity, return on net assets employed or
earnings per share [hereinafter “Financial Measure(s)"]for
the applicable Performance Period, all as computed in accordance
with generally accepted accounting principles as in effect from
time to time and as applied by the Company in the preparation of
its financial statements and subject to other special rules and
conditions as the Compensation Committee may establish at any time
ending on or before the 90th day of the applicable Performance
Period. Any Financial Measure may be stated in absolute terms or as
compared to another company or companies. Such Financial Measures
shall constitute the sole bases upon which the Company Performance
Targets shall be based.
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2.
Administration.
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2.1
Determinations must be made prior to each Performance Period
— At any time ending on or before the 90th day of each
Performance Period, the Compensation Committee shall:
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(a) designate
the Participants in the Plan for that Performance
Period;
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(b) indicate
the Base Pay of each Participant for the Performance Period by
amending Schedule A in writing;
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(c) establish
Targeted Bonus Percentages for the Performance Period by amending
Schedule B in writing;
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(d) establish
Company Performance Target(s)s for the Performance Period by
amending Schedule C in writing.
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2.2
Certification — Following the close of each
Performance Period and prior to payment of any bonus under the
Plan, the Compensation Committee must certify in writing that the
Company Performance Target(s) and all other factors upon which a
bonus is based have been attained.
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2.3
Shareholder Approval — The material terms of the Plan
shall be disclosed to and approved by shareholders of the Company
in accordance with Section 162(m) of the Code. No bonus shall be
paid under the Plan unless such shareholder approval has been
obtained.
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3.
Bonus Payment
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3.1
Maximum — Each Participant shall receive a bonus
payment for each Performance Period calculated in accordance with
the formula set forth in subparagraph 3.2 and in an amount not
greater than the Participant’s Maximum Targeted Bonus
Percentage multiplied by the Participant’s Base
Salary.
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3.2
Formula — Subject to other provisions of this Plan,
each Participant shall receive a bonus payment for each Performance
Period calculated as follows:
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(a) Each
of the Company Performance Targets shall be assigned a weight
expressed as a percent of the Participant’s Maximum Targeted
Bonus Percentage.
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(b) At
the conclusion of each Performance Period, the percent of the
Participant’s Maximum Targeted Bonus Percentage achieved for
each applicable Financial Measure shall be calculated.
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(c) The
percentages achieved by performing the calculation described in
subparagraph 3.2(b) shall be added together and this sum shall be
multiplied by the Participant’s Maximum Targeted Bonus
Percentage.
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(d) The
amount obtained by performing the calculation described in
subparagraph 3.2(c) shall be multiplied by the Participant’s
Base Salary.
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