SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
Preliminary Proxy Statement
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Definitive Additional Materials
Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
GRACO INC.
(Name of Registrant as Specified in its Charter)
GRACO INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
X $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2).
$500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11:*
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*Set forth the amount on which the filing fee is calculated and state
how it was determined.
Check box if any part of the fee is offset as provided by Exchange Act
Rule O-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
<PAGE>
GRACO INC.
4050 Olson Memorial Highway
Golden Valley, Minnesota 55422-5332
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Dear Shareholder:
Please join us on Tuesday, May 3, 1994, at 3:30 p.m. for Graco's Annual
Meeting of Shareholders at the Lutheran Brotherhood Building, 625 Fourth
Avenue South, Minneapolis, Minnesota in the first floor auditorium.
At this meeting, shareholders will consider the following matters:
1. Election of four directors to serve for three-year terms.
2. Approval of the Graco Inc. Nonemployee Director Stock Plan.
3. Ratification of the selection of independent auditors for the current
year.
4. Transaction of such other business as may properly come before the
meeting.
Shareholders of record at the close of business on March 10, 1994 are entitled
to vote at this meeting or any adjournment thereof.
We encourage you to join us and participate in this meeting. If you are
unable to do so, a Proxy Card is enclosed for your use. When marked and
returned, it will represent an authorization to vote your shares in accordance
with your instructions.
If you do not return the Proxy Card and do not vote your shares in person at
the meeting, you will lose your right to vote on matters which are of
importance to you as a shareholder. Accordingly, if you do not plan to attend
the meeting, please execute and return the enclosed Proxy Card promptly. This
will not prevent you from voting in person should you decide to attend the
meeting.
Sincerely,
\David A. Koch \Robert M. Mattison
David A. Koch Robert M. Mattison
Chairman And Secretary
Chief Executive Officer
March 25, 1994
Golden Valley, Minnesota
YOUR VOTE IS IMPORTANT
We urge you to mark, date and sign the enclosed Proxy Card and return it in
the accompanying envelope as soon as possible. If you attend the meeting, you
may still revoke your proxy and vote in person if you wish.
<PAGE>
TABLE OF CONTENTS
Page
Election of Directors 1
Nominees and Other Directors 1
Meetings and Committees of the Board of Directors;
Nomination of Directors 4
Executive Compensation 4
Report of the Management Organization and Compensation
Committee 4
Comparative Stock Performance Graph 6
Summary Compensation Table 7
Option/SAR Grants Table (Last Fiscal Year) 8
Aggregated Option/SAR Exercises In Last Fiscal Year and
Fiscal Year-End Option/SAR Values 9
Walter E. Weyler Separation Agreement 9
Robert F. Hasse Retirement Agreement 10
Retirement Arrangements 10
Directors' Fees 11
Beneficial Ownership of Shares 11
Principal Shareholders 12
Section 16 Compliance 12
The Graco Inc. Nonemployee Director Stock Plan 12
Ratification of Appointment of Independent Auditors 13
Other Matters 13
Shareholder Proposals 13
Appendix A- Text of Nonemployee Director Stock Plan 14
A copy of the 1993 Graco Inc. Annual Report on Form 10-K, including the
Financial Statements and the Financial Statement Schedules, can be obtained
free of charge by calling (612) 623-6672 or writing:
Treasurer
Graco Inc.
P.O. Box 1441
Minneapolis, Minnesota
55440-1441
<PAGE>
GRACO INC.
4050 Olson Memorial Highway
Golden Valley, Minnesota 55422-5332
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 3, 1994
Your proxy, represented by the accompanying Proxy Card, is solicited by the
Board of Directors of Graco Inc. in connection with the Annual Meeting of the
Shareholders of the Company to be held on May 3, 1994, and any adjournments of
the meeting.
The costs of the solicitation, including the cost of preparing and mailing
the Notice of Meeting and this Proxy Statement, will be paid by the Company.
Solicitation will be primarily by mailing this Proxy Statement to all
shareholders entitled to vote at the meeting. Proxies may be solicited by
officers of the Company personally, but at no compensation in addition to
their regular compensation as officers. The Company may reimburse brokers,
banks and others holding shares in their names for third parties for the cost
of forwarding proxy material to, and obtaining proxies from, third parties.
The Proxy Statement and accompanying Proxy Card will be first mailed to
shareholders on or about March 25, 1994.
Proxies may be revoked at any time prior to being voted by giving written
notice of revocation to the Secretary of the Company. All properly executed
proxies received by management will be voted in the manner set forth in this
Proxy Statement or as otherwise specified by the shareholder giving the proxy.
Shares voted as abstentions on any matter (or a "withhold vote for" as to
directors) will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum at the meeting and as
unvoted, although present and entitled to vote, for purposes of determining
the approval of each matter as to which the shareholder has abstained. If a
broker submits a proxy which indicates that the broker does not have
discretionary authority as to certain shares to vote on one or more matters,
those shares will be counted as shares that are present and entitled to vote
for purposes of determining the presence of a quorum at the meeting, but will
not be considered as present and entitled to vote with respect to such
matters.
Only shareholders of record as of the close of business on March 10, 1994,
may vote at the meeting or at any adjournment. As of that date, there were
issued and outstanding 11,626,648 common shares of the Company, the only class
of securities of the Company entitled to vote at the meeting. Each share
registered to a shareholder of record is entitled to one vote. Cumulative
voting is not permitted.
(Proposal 1) ELECTION OF DIRECTORS
NOMINEES AND OTHER DIRECTORS
The Board of Directors of the Company consists of ten members, two of whom
are executive officers of the Company. Members of the Board of Directors
serve for three-year terms, with either one-third or two-fifths of the
directors being elected each year. Vacancies that occur during a term may be
filled by a majority vote of the directors then in office though less than a
quorum and directors so chosen shall hold office for a term expiring at the
next Annual Meeting of Shareholders.
1
<PAGE>
Effective August 8, 1993, Ronald N. Hoge resigned as a director of the
Company.
At the forthcoming Annual Meeting, four persons are to be elected to the
Company's Board of Directors, all of whom are currently directors of the
Company. The Board has nominated George Aristides, Ronald O. Baukol, Joe R.
Lee and Gerard C. Planchon for three-year terms expiring in 1997. The
nominees Ronald O. Baukol and Gerard C. Planchon have previously been elected
as directors of the Company by the shareholders.
Unless otherwise instructed not to vote for the election of directors, the
proxies will vote to elect the nominees. A director candidate must receive
the vote of a majority of the voting power of the shares present in order to
be elected.
The following information, as of March 10, 1994, is given as to the
nominees for election and as to the six directors whose terms of office will
continue after the Annual Meeting. Except as noted below, each of the
nominees and directors has held the same position or another executive
position with the same employer for the past five years.
Nominees for election at this meeting to terms
expiring in 1997:
George Aristides
Mr. Aristides, 58, President and Chief Operating
Officer, Graco Inc., since June 24, 1993. Formerly
Executive Vice President since March 1993 and Vice
President, Manufacturing Operations and Controller
[PHOTO] since 1985. Director of Graco since June 1993.
Ronald O. Baukol
Mr. Baukol, 56, Vice President, Asia Pacific, Canada
and Latin America, 3M, a diversified manufacturer of
industrial, commercial, consumer and health care
[PHOTO] products. Director of Graco since May 1989.
Joe R. Lee
Mr. Lee, 53, Vice Chairman, General Mills, Inc., a
diversified marketer of packaged food products and
operator of restaurants. Director of Graco since
[PHOTO] February 1994.
Gerard C. Planchon
Mr. Planchon, 62, Retired. Prior to June 1992,
Executive Vice President, Global Business, Medtronic,
Inc., a developer and manufacturer of biomedical
[PHOTO] devices. Director of Graco since May 1991.
2
<PAGE>
Directors whose terms continue until 1995:
John W. Lacey
Mr. Lacey, 63, Management Consultant. Prior to 1987,
Executive Vice President, Control Data Corporation, a
computer manufacturer and provider of data processing
services. Director of Graco since 1973 and Director
[PHOTO] of Instron Corporation.
Dale R. Olseth
Mr. Olseth, 63, President and Chief Executive Officer
of BSI Corporation, a biotechnical company
specializing in the modification of material surfaces.
Director of Graco since 1972 and Director of The Toro
[PHOTO] Company.
Curtis B. Thompson
Mr. Thompson, 64, Retired. Prior to March 1990, Senior
Vice President, Industrial Automation and Control,
Honeywell Inc., a manufacturer of control systems.
[PHOTO] Director of Graco since 1981.
Directors whose terms continue until 1996:
David A. Koch
Mr. Koch, 63, Chairman and Chief Executive Officer,
Graco Inc., has been a director since 1962. Director
[PHOTO] of The NWNL Companies, Inc.
Richard D. McFarland
Mr. McFarland, 64, Chairman, Inter-Regional Financial
Group, Inc., a diversified financial services company.
Dain Bosworth Incorporated, a subsidiary of Inter-
Regional Financial Group, Inc., has performed
investment banking services for Graco in the past and
this relationship is expected to continue. Director
[PHOTO] of Graco since 1969.
Lee R. Mitau
Mr. Mitau, 45, Attorney, Partner of Dorsey & Whitney.
Dorsey & Whitney has in the past provided, and
continues to provide, legal services to Graco.
[PHOTO] Director of Graco since May 1990.
3
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS; NOMINATION OF DIRECTORS
The Company has an Audit Committee, a Management Organization and
Compensation Committee, a Quality and Technology Committee, and a Board
Structure and Policy Committee.
The Audit Committee was created by the Board of Directors to review
accounting and control procedures of the Company. The Committee currently
consists of four independent, nonemployee members of the Board of Directors,
who are Messrs. Lacey, Mitau, Olseth, and Planchon. Three meetings of this
Committee were held during 1993.
The Management Organization and Compensation Committee currently consists
of four independent nonemployee members of the Board of Directors, who are
Messrs. Baukol, Lacey, McFarland and Thompson. This Committee reviews the
compensation of the executive officers, makes recommendations on such
compensation to the Board of Directors, and administers the Company's stock
option and incentive plans. Two meetings of this Committee were held in 1993.
The Quality and Technology Committee reviews and evaluates the Company's
technology and quality programs, policies, and practices. Current members of
this Committee are Messrs. Aristides, Baukol, Koch, Planchon and Thompson.
Two meetings of this Committee were held in 1993.
The Board Structure and Policy Committee evaluates policies related to
Board membership and procedure, reviews and makes recommendations on fees and
benefits for directors, and recommends nominees for the position of director
to the Board of Directors. Current members of this Committee are Messrs.
Aristides, Koch, Mitau, and Olseth. Two meetings of this Committee were held
in 1993. The Committee will consider shareholders' recommendations for
nomination of directors. Any recommendations should be made in writing and
addressed to the Committee in care of the Secretary of the Company at the
Company's corporate headquarters.
In addition, shareholders may nominate candidates for election to the Board
of Directors. The By-laws provide that timely notice must be received by the
Secretary of the Company at the Company's corporate headquarters not less than
60 days prior to the date of the Annual Meeting of Shareholders. The
nominations must set forth (i) the name, age, business address and residential
address and the principal occupation or employment of each nominee proposed in
such notice, (ii) the name and address of the shareholder giving the notice as
it appears in the Company's stock register, (iii) the number of shares of
capital stock of the Company which are beneficially owned by each such nominee
and by such shareholder and (iv) such other information concerning each such
nominee as would be required, under the rules of the Securities and Exchange
Commission, in a proxy statement soliciting proxies for the election of such
nominee. Such notice must also include a signed consent of each such nominee
to serve as a director of the Company, if elected.
During 1993, the Board of Directors met six times. Attendance of the
Company's directors at all Board and Committee meetings during 1993 averaged
97 percent. During 1993, each director attended at least 75 percent of the
aggregate of the number of meetings of the Board and of all committees of the
Board on which he served.
EXECUTIVE COMPENSATION
Report of the Management Organization and Compensation Committee
Overview
The Management Organization and Compensation Committee of the Board of
Directors (hereafter called "the Committee") is responsible for developing the
Company's philosophy on executive compensation. Consistent with this
philosophy, the Committee develops compensation programs for the Chief
Executive Officer and each of the other executive officers of the Company.
Compensation programs which provide for grants or awards of Company stock are
approved by the Board of Directors and the shareholders of the Company. On an
annual basis, the Committee determines the compensation to be paid to the
Chief Executive Officer and other executive officers, based on the provisions
of the compensation plans. The Committee is composed of four independent
nonemployee directors.
4
<PAGE>
Executive Compensation Philosophy and Program
It is the Company's philosophy to set its executive compensation structure
at levels which are competitive with those of durable goods manufacturers of
comparable size. These levels are determined by consulting a variety of
independent third party executive compensation surveys. Executive
compensation will then be delivered through:
o base salaries which recognize the experience and performance of individual
executives;
o aggressive, performance-driven incentives which:
- enhance shareholder value,
- balance annual and long term corporate objectives, and
- provide meaningful amounts of company stock; and
o competitive benefits.
The specific components of the executive compensation program are described
below:
Base salary ranges are established by the Committee, using salary and trend
data for the fiftieth percentile of comparably-sized durable goods
manufacturers, as published in a variety of independent third party executive
compensation surveys. The actual base salary of each officer, within the
range, is determined by the executive's performance, which is evaluated
annually by the Chief Executive Officer and the President and reviewed and
approved by the Committee. Both financial and management factors are
considered in the evaluation.
The Annual Bonus Plan, available in 1993 to 12 executive officers and 57
other management employees, is structured to encourage growth in earnings by
the Company. The plan determines individual awards for executive officers by
measuring Company performance compared to corporate net earnings growth
targets established by the Committee in the first quarter of each year. Net
earnings targets are always set to exceed prior year earnings results. The
Annual Bonus Plan provides a target opportunity of 40 percent of pay for the
Chief Executive Officer, 35 percent of pay for the President and 30 percent of
pay for each Vice President. Maximum awards are double the target percentages
of pay. Due principally to difficult economic conditions in Japan and Europe,
earnings growth performance targets were not attained in 1993. As a result,
no awards were made to executive officers under the 1993 Annual Bonus Plan.
Under the Chairman's Award Program, the Chief Executive Officer is also able
to grant a total of $100,000 in individual discretionary awards to recognize
significant contributions by selected executive officers and other management
employees.
The Executive Long Term Incentive Program, available only to officers of
the Company, was a three-year program, running from fiscal year 1991 through
1993. The program measured return on assets and net sales growth against
targets established by the Committee in the first quarter of 1991. Awards
under the program were in restricted stock, with a possible cash payment. The
1991 restricted stock awards vested in equal annual installments over a period
of six years, except that the unvested balance had the potential to vest at
the end of three years, if return on assets and net sales growth targets were
achieved. Return on assets and net sales growth targets for 1991-1993 were
not met, due principally to poor performance by two subsidiaries which have
now been divested, and to difficult economic conditions in Japan and Europe.
As a result, the balance of the 1991 restricted stock grant did not vest at
the end of 1993, and the remaining restricted shares will vest over the next
three years. No cash payment was made under the program.
Following the conclusion of the 1991-1993 Executive Long Term Incentive
Program, the Committee has determined that long-term programs for future years
should align interests of executive officers more closely with those of all
Graco shareholders, by providing both the risks and rewards of stock
ownership. As a result, the new long term incentive program for 1994 and
following years will consist of stock options, granted to all executive
officers on a regular basis. The value of the remaining shares to be vested
under the 1991-1993 program will be considered in determining 1994-1996 awards
under the new program. Details of the stock option program for all executive
officers will be included in the Committee's report for 1994. Stock options
were granted to selected officers in 1993, in an amount determined by the
Chief Executive Officer and the Committee, to recognize significant changes in
their responsibilities within the Company.
Executive officers are eligible to participate in the employee benefit
programs available to all Graco employees.
5
<PAGE>
Compensation of the Chief Executive Officer
On an annual basis, the Committee is responsible for reviewing the
individual performance of the Chief Executive Officer, David A. Koch, and
determining appropriate adjustments in base pay and award opportunities under
the Annual Bonus Plan and Executive Long Term Incentive Program.
In reviewing Mr. Koch's performance, the Committee considered a number of
positive changes within the Company during the past year, including (a)
appointment of a new President and changes in roles of other executive
officers, (b) completion of the Graco 2000 strategic plan, (c) increased focus
on growing the Company's core businesses on a worldwide basis, (d) renewed
commitment to product development, (e) establishment of cellular
manufacturing, (f) the Company's ongoing business process improvements and
registration under ISO 9000, and (g) the recent dividend actions benefiting
shareholders. It is the Committee's belief that these changes position the
Company to take advantage of continued resurgence in domestic markets and
ongoing growth of foreign markets. The Committee and the Board of Directors
are supportive of these changes and Mr. Koch's overall strategic direction and
management of the business.
Given the current worldwide economic factors facing durable goods
manufacturers, the Committee believes that the Company's earnings performance
over the past several years has been reasonable. Graco's stock performance
significantly exceeded the S&P 500 and the Dow Jones Factory Index during the
past year. (See Five Year Comparative Stock Performance Graph below.) The
Committee believes that the stock market has recognized Graco's ability to
generate cash and has an expectation that the Company's performance will
improve as the world's economies recover.
Mr. Koch's salary remained at $315,000 for each year from 1990-1993. In
recognition of the factors noted above and his performance during the 1990-
1993 period, the Committee increased his salary to $350,000 per year,
effective January 1, 1994.
The Members of the Committee
Mr. Ronald O. Baukol Mr. John W. Lacey
Mr. Richard D. McFarland Mr. Curtis B. Thompson
Comparative Stock Performance Graph
The graph below compares the cumulative total shareholder return on the
common stock of the Company for the last five fiscal years with the cumulative
total return of the S&P 500 Index and of the Dow Jones Factory Equipment Index
over the same period (assuming the value of investment in Graco common stock
and each index was 100 on December 30, 1988, and all dividends were
reinvested).
[GRAPH-Table Below Lists Data Points Included in Graph]
<TABLE>
Five Year Cumulative Total Shareholder Returns
<CAPTION>
Dow Jones
Year Graco Inc. S&P 500 Factory Equipment
<C> <C> <C> <C>
1988 100 100 100
1989 96 132 110
1990 126 127 95
1991 145 162 113
1992 139 180 123
1993 219 195 148
Fiscal Year Ended Last Friday in December
</TABLE>
6
<PAGE>
Summary Compensation Table
The following table shows both annual and long-term compensation awarded to
or earned by the Chief Executive Officer and by the four most highly
compensated executive officers of the Company whose total annual salary and
bonus for 1993 exceeded $100,000. In addition, the table includes information
on Walter E. Weyler and Robert F. Hasse, two former executive officers, who
left the Company during 1993, but whose total annual salary and bonus during
1993 exceeded $100,000 and therefore would have placed them in the group of
the four most highly compensated executive officers.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted Securities All Other
Annual Stock Underlying LTIP Compen-
Name and Salary Bonus Compen- Award(s) Options/ Payouts sation
Principal Position Year ($)<F1><F2> ($)<F1><F3> sation($) ($)<F4><F5> SARs (#)<F5> ($)<F4> ($)<F6>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
David A. Koch 1993 $323,866 0 0 0 0 0 $3,876
Chairman and Chief 1992 323,866 $91,539 0 0 0 0 2,195
Executive Officer 1991 323,866 0 0 $782,615 0 0 1,191
George Aristides 1993 251,800 25,000 0 0 45,000 0 1,928
President and Chief 1992 226,800 69,039 0 0 0 0 1,780
Operating Officer 1991 209,808 10,000 0 323,015 0 0 989
Roger L. King 1993 165,696 15,000 0 0 22,500 0 3,796
Sr. Vice Presiden 1992 158,696 44,436 0 0 0 0 1,780
and General Manager 1991 150,696 10,000 0 232,916 0 0 2,448
International
Operations
Barry A. Calhoon 1993 171,800 0 $33,010<F7> 0 0 0 3,127
Sr. Vice President 1992 165,873 34,872 0 0 0 0 2,136
and General Manager, 1991 149,988 0 0 200,327 0 0 1,771
Industrial Automotive
Equipment Division
Roy Richardson 1993 157,808 15,000 0 0 0 0 2,484
Vice President 1992 152,808 42,693 0 0 0 0 1,780
Quality Management 1991 147,556 0 0 225,248 0 0 989
Systems
Walter E. Weyler<F8> 1993 266,238 0 0 0 0 0 4,926
Former President and 1992 256,152 64,840 0 0 0 0 4,689
Chief Operating 1991 256,152 120,250 0 554,333 0 0 2,662
Officer
Robert F. Hasse 1993 228,416 25,000 0 56,750<F9> 0 0 307,118
Retired Executive 1992 308,577<F9> 0<F9> 0 0 0 0 4,460
Vice President 1991 198,500 30,000 0 0<F9> 0 0 989
<FN>
<F1>
(1) Deferred compensation is included in Salary and Bonus in the year earned.
<F2>
(2) In addition to base salary, the reported figure includes amounts
attributable to (a) the imputed value of the group term life insurance benefit
for each of the named executive officers, (b) one week of pay in lieu of
vacation time for Mr. Koch due to his long tenure with the Company, a benefit
available to all Graco employees, (c) foreign service premium paid to Mr.
Calhoon during his European assignment in 1990 (d) reimbursements for
relocation expenses paid to Mr. Calhoon in 1992, and (e) the balance of
vacation due Mr. Hasse upon his August 31, 1993 retirement. See Footnote 6
and Retirement Agreement below.
<F3>
(3) Bonus includes any awards under the Annual Bonus Plan and Chairman's Award
Program described in the Management Organization and Compensation Committee
Report; a special bonus to Mr. Weyler of $120,250 in 1991; a $30,000 bonus
paid to Mr. Hasse in 1991; and special bonuses in 1993 of $25,000 each to Mr.
Aristides and Mr. Hasse and $15,000 to Mr. King, in connection with their
changes in responsibility within the Company.
7
<PAGE>
<F4>
(4) Under the Graco Executive Long Term Incentive Program, participants were
eligible to receive restricted stock awards and performance-based cash payouts
as described in the Management Organization and Compensation Committee Report.
The restricted stock award in 1991 vested over six years (one-sixth per year),
except that the unvested balance of the award had the potential to vest at the
end of three years if certain financial goals were met. Since performance
targets for 1991-1993 were not met, the balance of the 1991 restricted stock
grant did not vest at the end of 1993 and no cash awards were made under the
program. The remaining restricted shares will vest over the next three years.
The amount reported in the table represents the market value on the date of
grant. As of December 31, 1993, the market value and number of the unvested
restricted share holdings were: Mr. Koch, $712,805 (29,394 shares); Mr.
Aristides, $294,201 (12,132 shares); Mr. King, $212,139 (8,748 shares); Mr.
Calhoon, $182,457 (7,524 shares); and Mr. Richardson, $205,155 (8,460 shares).
Quarterly dividends are paid on the restricted shares. The $2.70 one-time
special dividend payable on March 21, 1994 to shareholders of record on March
7, 1994, will be held in custody by the Company with a portion of the dividend
released to each executive as, and if, the corresponding shares vest over the
next three years. Interest will be credited on the dividends at 4 percent per
year, which is the treasury bill rate for the average length of time before
shares and dividends are released to the executives. Interest will be
calculated on a compound basis.
<F5>
(5) On December 17, 1993, the Board of Directors approved a three-for-two
stock split, effected in the form of a stock dividend, payable February 2,
1994, to shareholders of record on January 5, 1994. The number of restricted
shares and options, as well as the exercise price for options, has been
restated in this table and all subsequent tables to reflect the split.
<F6>
(6) The compensation reported includes the Company contributions under the
Employee Investment Plan (excluding employee contributions), plus Company
contributions under the Employee Stock Ownership Plan. For 1993, the Company
contributions accrued under the Employee Investment Plan were as follows:
$3,447 for Mr. Koch; $4,497 for Mr. Weyler; $4,273 for Mr. Hasse; $1,499 for
Mr. Aristides; $3,367 for Mr. King; $2,698 for Mr. Calhoon; and $2,055 for Mr.
Richardson. In 1993, Company contributions under the Employee Stock Ownership
Plan had a fair market value of $429 for each eligible executive officer.
The compensation reported for Mr. Hasse also includes payments made during
1993 pursuant to his Retirement Agreement, including a lump sum severance
payment of $294,614, retirement supplement payments totaling $7,564, and
retiree medical premium payments of $238.
<F7>
(7) This figure represents a tax equalization payment, attributable to a prior
international assignment of Mr. Calhoon.
<F8>
(8) Mr. Weyler resigned from his position as President and Chief Operating
Officer and from the Board of Directors on January 15, 1993. See discussion
of Mr. Weyler's Separation Agreement below.
<F9>
(9) In February 1992, at the request of Mr. Hasse, the Company entered into an
agreement with him under which the restricted shares awarded to him in 1991,
with a value of $298,094, were canceled and he withdrew from the Annual Bonus
Plan, in exchange for an alternative cash compensation arrangement. The
salary and bonus for Mr. Hasse in 1992 reflect this revised arrangement. In
March 1993, Mr. Hasse, in connection with a change in responsibility, again
became a participant in the Annual Bonus Plan and was given a restricted stock
grant of 3,000 shares. Mr. Hasse retired from the Company effective August
31, 1993, having served as an executive officer through June 24, 1993. See
discussion of Mr. Hasse's Retirement Agreement below.
</TABLE>
Option/SAR Grants Table (Last Fiscal Year)
The following table shows the stock options granted to Mr. Aristides and
Mr. King during 1993, their exercise price and their grant date present value.
No other executive officer listed in the Summary Compensation Table received
option grants during 1993.
<TABLE>
<CAPTION>
Individual Grants Grant Date Value<F3>
(a) (b) (c) (d) (e) (f)
Number of % of Total
Securities Options/SARs Exercise Grant
Underlying Granted to or Base Date
Options/SARs Employees in Price Expiration Present
Name Granted (#) Fiscal Year ($/Sh) Date Value ($)
<S> <C> <C> <C> <C> <C>
George Aristides 15,000<F1> 18.9% $17.00 02/24/03 $ 75,951
30,000<F2> 37.7% $18.92 05/03/03 181,395
Roger L. King 7,500<F1> 9.4% $17.00 02/24/03 37,976
15,000<F2> 18.9% $18.92 05/03/03 90,698
8
<PAGE>
<FN>
<F1>
(1) Incentive stock options with accompanying stock appreciation rights were
granted to Mr. Aristides and Mr. King on February 25, 1993, in the amounts
shown on the table. The options have a ten-year duration and may be exercised
as follows: one-third of shares immediately, one-third after one year, one-
third after two years.
<F2>
(2) Non-incentive stock options with accompanying stock appreciation rights
were granted to Mr. Aristides and Mr. King on May 4, 1993, in the amounts
shown on the table. The options have a ten-year duration and may be exercised
as follows: one-third of shares immediately, one-third after one year, one-
third after two years.
<F3>
(3) The Black-Scholes option pricing model has been used to determine the
present value of the grants. Annual volatility was calculated using monthly
returns for 36 months prior to the grant date, the interest rate was set using
U.S. Treasury securities of similar duration to the option period as of the
grant date, and dividend yield was established as the yield on the grant date.
A 10 percent discount for nontransferability and a 3 percent discount to
reflect possibility of forfeiture over a two-year period were applied. For
grants expiring on February 24, 2003, the assumptions used in the model were
annual volatility of 30 percent, interest rate of 6.1 percent, dividend yield
of 3.0 percent, and time to exercise of 10 years. For grants expiring on May
3, 2003, the assumptions used in the model were volatility of 30 percent,
interest rate of 5.9 percent, dividend yield of 2.5 percent and time to
exercise of 10 years.
</TABLE>
Aggregated Option/SAR Exercises In Last Fiscal Year And Fiscal Year-End
Option/SAR Values
The following table shows options exercised during 1993 by Mr. Weyler, as
well as the number and value of outstanding options at the end of the year for
Mr. Aristides and Mr. King. No other executive officer listed in the Summary
Compensation Table had outstanding options as of December 31, 1993.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)<F2>
Shares Value
Acquired On Realized Exercisable/ Exercisable/
Name Exercise (#) ($)<F1> Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Walter E. Weyler 15,477 $67,230 0/0 $0
George Aristides 0 $0 15,000/30,000 $89,550/$179,100
Roger L. King 0 $0 7,500/15,000 $44,775/$89,550
<FN>
<F1>
(1) "Value realized" is the difference between the closing price of Graco's
common stock on the day of exercise and the option price of the options
multiplied by the number of shares received.
<F2>
(2) "Value at fiscal year-end" is the difference between the closing price of
Graco's common stock on December 31, 1993, and the option price multiplied by
the number of shares subject to option.
</TABLE>
Walter E. Weyler Separation Agreement
On January 15, 1993, Mr. Weyler resigned from his positions as President
and Chief Operating Officer and as a Director of the Company. In connection
with his resignation, the Company entered into a Separation Agreement with Mr.
Weyler. This agreement provided that Mr. Weyler would remain an employee of
the Company, entitled to participate in employee benefit plans, until February
28, 1994, or until he secured new employment, whichever happened sooner.
Following termination of his employment, Mr. Weyler will receive his current
base salary of $22,083 per month through February 28, 1995, payable in a lump
sum equivalent.
In early 1993, Mr. Weyler received payments due for 1992 under the Annual
Bonus Plan and one-sixth of the restricted shares (5,205) awarded to him under
the Executive Long Term Incentive Program in 1991. He did not
participate in the 1993 Annual Bonus Plan and the balance of his restricted
shares (20,820) reverted to the Company.
9
<PAGE>
Under the terms of the Separation Agreement, Mr. Weyler also received
outplacement consulting services and payment of $30,000 in unreimbursed
expenses incurred in his search for new employment. He will also receive
payment for unreimbursed household moving expenses in the event of his
relocation within the United States. This Separation Agreement superseded all
prior agreements between Mr. Weyler and the Company.
Robert F. Hasse Retirement Agreement
Mr. Hasse retired from the Company effective August 31, 1993, having served
as an executive officer through June 24, 1993. The Company entered into a
Retirement Agreement with Mr. Hasse. In exchange for Mr. Hasse's agreement to
refrain from competition with the Company until March 31, 1995, the Company
agreed to provide a lump sum payment of $294,614 upon his retirement, a
supplemental retirement benefit of $1,891 per month payable for Mr. Hasse's
lifetime, and retiree medical coverage without cost for a period of two years.
Based on the retirement provision of the Executive Long Term Incentive
Program, on March 1, 1994, Mr. Hasse received 2,000 of his 3,000 restricted
shares, which was a prorated portion of the shares based on the number of
months he was employed by the Company in 1993. The remaining 1,000 shares
reverted to the Company. Although Mr. Hasse was also entitled to a prorated
award under the provisions of the 1993 Annual Bonus Plan, he will receive no
payment since threshold objectives of the Plan were not attained.
Retirement Arrangements
The Company has an Employee Retirement Plan which provides pension benefits
for eligible regular, full- and part-time employees. Benefits under the
Retirement Plan consist of a fixed benefit which is designed to provide
retirement income at age 65 of 43.5 percent of average monthly compensation,
less 18 percent of Social Security-covered compensation (calculated in a life
annuity option) for an employee with 30 or more years of service. Average
monthly compensation is defined as the average of the five consecutive highest
years' salary during the last ten years of service, including base salary and
Annual Bonus Plan awards, but excluding Executive Long Term Incentive Program
awards. Benefits under the Employee Retirement Plan vest upon five years of
benefit service.
Federal tax laws limit the annual benefits that may be paid from a tax-
qualified plan such as the Employee Retirement Plan. The Company has adopted
an unfunded plan to restore benefits to executive officer retirees impacted by
the benefit limits, so that they will receive, in aggregate, the benefits they
would have been entitled to receive under the Employee Retirement Plan had the
limits imposed by the tax laws not been in effect.
The following table shows the estimated aggregate annual benefits payable
under the Employee Retirement Plan and the restoration plan for the specified
earnings and years of service. The years of benefit service for the Chief
Executive Officer and the executive officers listed in the Summary
Compensation Table are: Mr. Koch, 37 yrs.; Mr. Weyler, 7 yrs.; Mr. Hasse, 32
yrs.; Mr. Aristides, 20 yrs.; Mr. King, 23 yrs.; Mr. Calhoon, 23 yrs.; and Mr.
Richardson, 11 yrs. A maximum of 30 years is counted in the pension benefit
calculation.
<TABLE>
<CAPTION>
Final Average 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
Compensation Service Service Service Service Service Service
<C> <C> <C> <C> <C> <C> <C>
$200,000 $14,095 $27,867 $ 41,686 $ 55,504 $ 69,323 $ 82,911
300,000 21,466 42,488 63,557 84,625 105,694 126,411
400,000 28,837 57,109 85,428 113,746 142,065 169,911
500,000 36,208 71,730 107,298 142,867 178,435 213,411
600,000 43,579 86,351 129,169 171,988 214,806 256,911
</TABLE>
From time to time, the Company has entered into deferred compensation
agreements with its executive officers, including those named in the Summary
Compensation Table. The agreements provide for the payment per year of
$10,000 deferred compensation to each executive officer for ten years after
retirement, or, in the event of death prior to the expiration of the ten year
period, to a beneficiary. These agreements also include provisions for non-
competition and the payment of $5,000 per annum in the event the officer
becomes disabled prior to age 65. The $5,000 per annum payments will cease
upon the attainment of age 65.
10
<PAGE>
Directors' Fees
During 1993, the Company paid each director, except directors who also
served as officers, an annual retainer of $12,000, plus a meeting fee of $700
for each Board and $500 for each committee meeting attended. Upon cessation
of service, non-employee directors who have served for five full years will
receive quarterly payments for five years at a rate equal to the director's
annual retainer in effect on the director's last day of service on the Board.
Subject to shareholder approval of Proposal 2 in this Proxy Statement, the
Board of Directors has adopted a Nonemployee Director Stock Plan. This plan
provides that a nonemployee director may elect to receive all or part of his
annual retainer in the form of shares of the Company's common stock. This
proposal is more fully described on pages 12 and 13 of this Proxy Statement,
and reference is made to the full text of this plan as set forth in Appendix A
of this Proxy Statement.
BENEFICIAL OWNERSHIP OF SHARES
The following information, furnished as of March 10, 1994, indicates
beneficial ownership of the common shares of the Company by each director,
each nominee for election as director, the executive officers listed in the
Summary Compensation Table who are still executive officers on that date, and
by all directors and executive officers as a group. Except as otherwise
indicated, the persons listed have sole voting and investment power.
<TABLE>
<CAPTION>
Percent of
Amount and Nature of Common Stock
Name of Beneficial Owner Beneficial Ownership<F1><F2> Outstanding*
<S> <C> <C>
D. A. Koch<F2><F3><F4> 3,222,689 27.7%
G. Aristides<F2> 89,317
R. O. Baukol<F4> 1,500
B. A. Calhoon 32,526
R. L. King 39,046
J.W. Lacey<F2> 1,148
J. R. Lee 1,000
R. D. McFarland<F2><F4> 39,768
L. R. Mitau<F4> 150
D. R. Olseth 4,500
G. C. Planchon 150
R. Richardson 32,548
C. B. Thompson<F2> 1,348
All directors and
executive officers as a
group (18 persons)<F3><F4><F5> 3,522,513 30.3%
* Less than one 1 percent, if no percentage is given.
<FN>
<F1>
(1) All share data has been restated for the three-for-two stock split paid
February 2, 1994.
<F2>
(2) Includes the following shares owned by spouses of directors and named
executive officers as to which the director or executive officer may be deemed
to share voting and investment power: Mr. Aristides, 20,932; Mr. Koch,
29,996; Mr. Lacey, 574 shares; Mr. McFarland, 10,264 shares; and Mr. Thompson,
843 shares.
<F3>
(3) Includes 3,019,397 shares held by the Clarissa L. Gray Trust, of which Mr.
Koch's wife, Barbara Gray Koch, and their children are the beneficiaries and
as to which Mr. Koch shares voting and investment power as trustee. See
"Principal Shareholders."
<F4>
(4) Excludes the following shares as to which beneficial ownership is
disclaimed: (i) 301,237 shares owned by the Company's Employee Retirement Plan
and 119,821 unallocated shares held by the Company's Employee Stock Ownership
Plan, as to which Messrs. Koch, McFarland, Lee and Mitau and certain executive
officers of the Company share voting and investment power as members of the
Company's Investment Committee; (ii) 16,130 shares held by the Graco
Foundation and (iii) 155,000 shares held by the Greycoach Foundation as to
which Mr. Koch shares voting and investment power as a director.
<F5>
(5) If the shares referred to in note 4 above, as to which one or more
directors and designated executive officers share voting power, were included,
the number of shares beneficially owned by all directors and executive
officers would be 4,114,701 shares, or 35.4 percent of the outstanding shares.
</TABLE>
The Company also has 14,835 preferred shares outstanding of which 3,793
shares (25.5 percent of the class) are held by Mrs. Koch and by a trust for
which Mr. Koch serves as trustee.
11
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table identifies each person or group known to the Company to
beneficially own more than 5 percent of the outstanding common shares of the
Company, the only class of security entitled to vote at the Annual Meeting:
<TABLE>
<CAPTION>
Beneficial Percent
Ownership<F1> of Class
<S> <C> <C>
Trust under the Will of Clarissa L. Gray,
and David A. Koch<F2> 3,222,689 shares 27.7%
State of Wisconsin Investment Board<F3> 904,950 shares 7.94%
Mitchell Hutchins Institutional Investors Inc.<F4> 769,200 shares 6.74%
<FN>
<F1>
(1) All share data has been restated for the three-for-two stock split paid
February 2, 1994.
<F2>
(2) Includes 3,019,397 shares owned by the Clarissa L. Gray Trust. Mr. Koch
is one of the trustees of the Trust and the beneficiaries of the Trust are
Mrs. Koch and their children. The other trustees are Maynard B. Hasselquist,
a former director of the Company, and First Bank, N.A., Minneapolis,
Minnesota. The Trustees have sole voting and disposition power. Also
includes 203,292 shares owned by David A. Koch or Mrs. Koch.
<F3>
(3) Ownership information is as of December 31, 1993. A Schedule 13G filed
by this independent agency of the State of Wisconsin indicates that the agency
has sole voting and disposition power.
<F4>
(4) Ownership information is as of December 31, 1993. A Schedule 13G filed
by Mitchell Hutchins, an investment advisor, indicates that the investment
advisor has shared power to vote and direct the disposition of the shares.
</TABLE>
SECTION 16 COMPLIANCE
The Company's executive officers, directors and 10 percent stockholders are
required under the Securities Exchange Act of 1934 and regulations promulgated
thereunder to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission. Copies of these
reports must also be provided to the Company.
Based upon its review of the reports and any amendments made thereto
furnished to the Company, or written representations that no reports were
required, the Company believes that all reports were filed on a timely basis
by reporting persons during and with respect to 1993, except for inadvertent
late filings by the following persons: initial reports by James A. Graner and
John A. Pepin; and a change of ownership report by George Aristides, who made
one sale of stock; and a change of ownership report by Roy Richardson with
respect to two sales of stock made in 1992, of which he was deemed the
beneficial owner. All of the foregoing persons, with the exception of John
A. Pepin, are executive officers of the Company.
(Proposal 2) PROPOSAL TO APPROVE THE GRACO INC. NONEMPLOYEE DIRECTOR
STOCK PLAN
At the Annual Meeting, the shareholders will consider and vote upon a
proposal, recommended by the Board of Directors, to approve the Graco Inc.
Nonemployee Director Stock Plan. The plan was approved by the Board on
February 25, 1994. Subject to shareholder approval of the plan, all or part
of the nonemployee directors' annual retainer may be paid in the form of
common stock of the Company. Commencing January 1, 1994, the Board has set
the annual retainer at $15,000. Each nonemployee director may elect to
receive 25 percent or more of the annual retainer in the form of common stock
instead of cash. The terms of the plan are summarized below, and the full
text of the plan is set forth in Appendix A to this Proxy Statement.
The Board of Directors wishes to foster increased ownership of the
Company's stock by its directors and to align their interest in the long-term
success of the Company more closely with that of other shareholders. The
Board of Directors believes that this plan will serve these purposes.
SUMMARY OF PLAN
In furtherance of its policy of encouraging stock ownership by directors,
the Plan allows directors to elect to take 25 percent or more of their
retainer in the form of shares of common stock of the Company in lieu of cash.
The value used to convert dollar amounts to shares for issuance under the plan
will be the closing price of the Company's shares on the New York Stock
Exchange (NYSE) - Composite Transactions on the last business day of the
fiscal quarter for which such shares are issued. The maximum number of shares
that will be available for issuance under the plan will be 100,000.
12
<PAGE>
Section 16 of the Securities Exchange Act of 1934 ("Act") governs short-
swing profits by corporate insiders, including directors, and generally
requires that any profit obtained by such insider from a combination of any
purchase and any sale within six months of each other must be paid to the
Company. Under rules issued by the Securities and Exchange Commission
("SEC"), certain transactions pursuant to plans approved by shareholders are
exempt from this short-swing profit recovery. It is intended that the
issuance of shares under the plan will be exempt transactions under these SEC
rules. Directors' fees have customarily been paid in arrears at the end of
each fiscal quarter. However, in order to bring the issuance transaction
within the exemption, a director's election to receive shares of stock in lieu
of cash will not become effective until the commencement of the first fiscal
quarter which is at least six months from the date of the election. The Board
retains the right to amend or terminate the plan, subject to shareholder
approval, if required by the SEC or the NYSE. Furthermore, the plan provides
that it may not be amended more often than once every six months, other than
to conform it to changes in the Internal Revenue Code (IRC), the Employee
Retirement Income Security Act of 1974 (ERISA) or the rules thereunder. The
plan expressly states an intention to comply with SEC regulations and rulings
which qualify the issuance of shares under the plan for exemption from the
Section 16 short-swing profit recovery rule of the Act.
SHAREHOLDER APPROVAL OF PLAN
The affirmative vote of a majority of the shares present or represented
and entitled to vote at the Annual Meeting is required to approve the plan.
The Board of Directors recommends that shareholders vote FOR approval of the
plan. Proxies solicited by the Board of Directors will be so voted, unless
shareholders specify otherwise on their proxies. In the event this Proposal 2
does not receive the required affirmative vote, the plan will not be put into
effect.
(Proposal 3) PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT PUBLIC
AUDITORS
Deloitte & Touche has acted as independent auditors for the Company since
1962. The Board of Directors recommends ratification of the selection of
Deloitte & Touche as independent auditors for the current year. If the
shareholders do not ratify the selection of Deloitte & Touche, the selection
of the independent auditors will be reconsidered by the Board of Directors. A
representative of Deloitte & Touche will be present at the meeting and will
have the opportunity to make a statement if so desired. Such representative
will also be available at the meeting to respond to any shareholder questions.
(Proposal 4) OTHER MATTERS
The Board of Directors is not aware of any matter, other than stated above,
which will or may properly be presented for action at the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of proxy to vote the shares represented by
such proxies in accordance with their best judgment.
SHAREHOLDER PROPOSALS
The Company did not receive any request from shareholders relating to
matters to be submitted for a vote at the 1994 Annual Meeting. Any
shareholder wishing to have any matter considered for submission at the next
Annual Meeting must request such submission in writing, directed to the
Secretary of the Company at the address shown on page 1 of this statement, not
later than December 1, 1994.
YOU ARE RESPECTFULLY REQUESTED TO EXERCISE YOUR RIGHT TO VOTE BY FILLING IN
AND SIGNING THE ENCLOSED PROXY CARD AND RETURNING IT PROMPTLY IN THE ENVELOPE
ENCLOSED FOR YOUR CONVENIENCE. In the event that you later may be able to
attend the meeting, you may revoke your proxy and vote your shares in person.
For the Board of Directors
\Robert M. Mattison
Robert M. Mattison
Secretary
Dated: March 25, 1994
13
<PAGE>
Appendix A
GRACO INC.
NONEMPLOYEE DIRECTOR STOCK PLAN
("PLAN")
1. Purpose of the Plan. The purpose of the Graco Inc. Nonemployee Director
Stock Plan (the "Plan") is to provide an opportunity for nonemployee members
of the Board of Directors (the "Board") of Graco Inc. ("Graco" or the
"Company") to increase their ownership of Graco Common Stock ("Common Stock")
and thereby align their interest in the long-term success of the Company with
that of the other shareholders.
2. Eligibility. Directors of the Company who are not also officers or
other employees of the Company or its subsidiaries are eligible to participate
in this Plan ("Eligible Directors").
3. Administration. This Plan will be administered by the Secretary of the
Company (the "Administrator"). Since the issuance of shares of Common Stock
pursuant to this Plan is based on elections made by Eligible Directors, the
Administrator's duties under this Plan will be limited to matters of
interpretation and administrative oversight. All questions of interpretation
of this Plan will be determined by the Administrator, and each determination,
interpretation or other action that the Administrator makes or takes pursuant
to the provisions of this Plan will be conclusive and binding for all purposes
and on all persons. The Administrator will not be liable for any action or
determination made in good faith with respect to this Plan.
4. Election to Receive Stock and Stock Issuance.
4.1. Election to Receive Stock in Lieu of Cash. On forms provided by
the Company, each Eligible Director may irrevocably elect ("Stock Election")
to receive, in lieu of cash, shares of Common Stock having a Fair Market
Value, as defined in Section 4.3, equal to 25%, 50%, 75% or 100% of the
annual cash retainer (the 'Retainer") payable to that director for services
rendered as a director ("Participating Director"). A Stock Election shall
apply only to the Retainer and not to any fees payable for attendance at Board
or Committee meetings. Eligible Directors are customarily paid the Retainer
in quarterly installments in arrears at the end of each fiscal quarter. Any
Stock Election must be received by the Company at least six months in advance
of the commencement of the first fiscal quarter with respect to which such
election is made. Any Stock Election may only be amended or revoked ("Amended
Stock Election") in accordance with the procedure set forth in Section 4.4.
4.2. Issuance of Stock in Lieu of Cash. Shares of Graco Common Stock
having a Fair Market Value equal to the amount of the Retainer so elected
shall be issued to each Participating Director when each quarterly installment
of the Retainer is customarily paid. The Company shall not issue fractional
shares. Whenever, under the terms of this Plan, a fractional share would be
required to be issued, an amount in lieu thereof shall be paid in cash for
such fractional share based upon the same Fair Market Value as was utilized to
determine the number of Shares to be issued on the relevant issue date. In
the event that a Participating Director elects to receive less than 100% of
each quarterly installment of the Retainer in shares of Common Stock, he shall
receive the balance of the quarterly installment in cash.
4.3 Fair Market Value. For purposes of converting dollar amounts into
shares of Common Stock, the Fair Market Value of each share of Common Stock
shall be equal to the closing price of one share of the Company's Common Stock
on the New York Stock Exchange-Composite Transactions on the last business day
of the fiscal quarter for which such shares are issued.
4.4. Change in Election. Each Participating Director may irrevocably
elect in writing to change an earlier Stock Election, either to receive a
different percentage of that director's Retainer in shares of Common Stock or
to receive the entire Retainer in cash (an "Amended Stock Election"). Such
Amended Stock Election shall not become effective until the first fiscal
quarter commencing at least six months after the date of receipt of such
Amended Stock Election by the Company.
4.5 Termination of Service as a Director. If a Participating Director
leaves the Board before the conclusion of any fiscal quarter, he will be paid
the quarterly installment of the Retainer entirely in cash, notwithstanding
that a Stock Election or Amended Stock Election is on file with the Company.
The date of termination of a Participating Director's service as a director of
the Company will be deemed to be the date of termination recorded on the
personnel or other records of the Company.
14
<PAGE>
5. Shares Available for Issuance.
5.1. Maximum Number of Shares Available. The maximum number of shares
of the Company's Common Stock, par value $1.00 per share, that will be
available for issuance under this Plan will be 100,000 shares, subject to any
adjustments made in accordance with the provisions of Section 5.2. At the
election of the Administrator, the shares of Common Stock available for
issuance under this Plan may be either authorized but unissued shares or
treasury shares. If treasury shares are used, all references in the Plan to
the issuance of shares will be deemed to mean the transfer of shares from
treasury.
5.2. Adjustments to Shares. In the event of any reorganization,
merger, consolidation, recapitalization, liquidation, reclassification, stock
dividend, stock split, combination of shares, rights offering, divestiture or
extraordinary dividend, an appropriate adjustment will be made in the number
and/or kind of securities available for issuance under the Plan to prevent
either the dilution or the enlargement of the rights of the Eligible and
Participating Directors.
6. Limitation on Rights of Eligible and Participating Directors.
6.1. Service as a Director. Nothing in this Plan will interfere with
or limit in any way the right of the Company's Board or its shareholders to
remove an Eligible or Participating Director from the Board. Neither this
Plan nor any action taken pursuant to it will constitute or be evidence of any
agreement or understanding, express or implied, that the Company's Board or
its shareholders have retained or will retain an Eligible or Participating
Director for any period of time or at any particular rate of compensation.
6.2. Nonexclusivity of the Plan. Nothing contained in this Plan is
intended to effect, modify or rescind any of the Company's existing
compensation plans or programs or to create any limitations on the Board's
power or authority to modify or adopt compensation arrangements as the Board
may from time to time deem necessary or desirable.
7. Plan Amendment, Modification and Termination. The Board may suspend or
terminate this Plan at any time. The Board may amend this Plan from time to
time in such respects as the Board may deem advisable in order that this Plan
will conform to any change in applicable laws or regulations or in any other
respect that the Board may deem to be in the Company's best interests;
provided, however, that no amendments to this Plan will be effective without
approval of the Company's shareholders, if shareholder approval of the
amendment is then required pursuant to Rule 16b-3 (or any successor rule)
under the Securities Exchange Act of 1934, as amended, or the rules of the New
York Stock Exchange. In addition, the Plan may not be amended more than once
every six months other than to conform it with changes in the Internal Revenue
Code, the Employee Retirement Income Security Act of 1974, or the rules
thereunder.
8. Effective Date and Duration of the Plan. This Plan shall become
effective as of the date the Company's shareholders approve it and will
terminate on December 31, 2003, unless earlier terminated by the Company's
Board.
9. Miscellaneous.
9.1 Securities Law and Other Restrictions. Notwithstanding any other
provision of this Plan or any Stock Election or Amended Stock Election
delivered pursuant to this Plan, the Company will not be required to issue any
shares of Common Stock under this Plan and a Participating Director may not
sell, assign, transfer or otherwise dispose of shares of Common Stock issued
pursuant to this Plan, unless (a) there is in effect with respect to such
shares a registration statement under the Securities Act of 1933, as amended
(the "Securities Act") and any applicable state securities laws or an
exemption from such registration under the Securities Act and applicable state
securities laws, and (b) there has been obtained any other consent, approval
or permit from any other regulatory body that the Administrator, in his or her
sole discretion, deems necessary or advisable. The Company may condition such
issuance, sale or transfer upon the receipt of any representations or
agreements from the parties involved, and the placement of any legends on
certificates representing shares of Common Stock, as may be deemed necessary
or advisable by the Company, in order to comply with such securities law or
other restriction.
9.2. Governing Law. The validity, construction, interpretation,
administration and effect of this Plan and any rules, regulations and actions
relating to this Plan will be governed by and construed exclusively in
accordance with the laws of the State of Minnesota.
15
<PAGE>
GRACO INC.
4050 Olson
Memorial Highway
Golden Valley,
Minnesota 55422
This Proxy is Solicited by the Board of Directors for use
at the Graco Inc. Annual Meeting on Tuesday, May 3, 1994.
The shares of common stock of Graco Inc. which you are entitled
to vote on March 10, 1994, will be voted as you specify on this card.
By signing this proxy, you revoke all prior proxies and appoint David A. Koch
and Robert A. Wagner as Proxies, each with full power of substitution, to vote
your shares as specified on this card and on any other business which may
properly come before the Annual Meeting or any adjournment thereof.
Item 1. Election of Directors __ FOR ALL __ WITHHOLD FOR ALL
NOMINEES: George Aristides Ronald O. Baukol Joe R. Lee Gerard C. Planchon
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
a line through the nominee's name in the list above)
Item 2. Approval of Nonemployee __ FOR __ AGAINST __ ABSTAIN
Director Stock Plan
Item 3. Ratification of Appointment of __ FOR __ AGAINST __ ABSTAIN
Deloitte & Touche as
Independent Auditors
PLEASE SIGN AND DATE THE REVERSE SIDE BEFORE MAILING
In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting. This proxy when
properly executed will be voted in the manner directed by the undersigned. If
no choice is specified, this proxy will be voted "FOR" Items 1, 2, and 3.
Please sign exactly as your name(s) appears at left. In the case of joint
owners, each should sign. If signing as executor, trustee, guardian or in any
other representative capacity or as an officer of a corporation, please
indicate your full title.
Dated:_____________________,1994
Signature
Signature
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE>
GRAPHICS APPENDIX INDEX
Graphic Page(s)
Photographs of Directors 2-3
Comparative Stock Performance Graph 6
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