Stock Option and Award Plan. The Company has a stock incentive plan under which it grants stock options and share awards to directors, officers and other employees. Option price is the market price on the date of grant. Options become exercisable at such time, generally over 3 years or 4 years, and in such installments as set by the Company, and expire 10 years from the date of grant.

Restricted share awards have been made to certain key employees under the plan. The market value of restricted stock at the date of grant is charged to operations over the vesting period. Compensation cost related to restricted shares is not significant.

The Company has a stock appreciation plan that provides for payments of cash to eligible foreign employees based on the change in the market price of the Company’s common stock over a period of time. Compensation cost related to the stock appreciation plan was $3.1 million in 2021, $2.4 million in 2020 and $3.3 million in 2019.

Individual nonemployee directors of the Company may elect to receive, either currently or deferred, all or part of their retainer in the form of shares of the Company’s common stock instead of cash. Under this arrangement, the Company issued 12,070 shares in 2021, 15,243 shares in 2020 and 15,016 shares in 2019. The expense related to this arrangement is not significant.

Options on common shares granted and outstanding, as well as the weighted average exercise price, are shown below (in thousands, except exercise prices):


	Option Shares	Weighted Average Exercise Price		Options Exercisable	Weighted Average Exercise Price
Outstanding, December 29, 2018	12,270	$	24.67	7,312	$	20.17
Granted	1,781	46.36
Exercised	(1,886)	17.64
Canceled	(53)	33.13
Outstanding, December 27, 2019	12,112	28.91		8,231	23.75
Granted	1,400	55.26
Exercised	(3,238)	20.81
Canceled	(66)	41.24
Outstanding, December 25, 2020	10,208	35.02		6,553	28.02
Granted	843	72.22
Exercised	(1,309)	24.91
Canceled	(167)	55.59
Outstanding, December 31, 2021	9,575	$	39.31	7,296	$	33.75

The following table summarizes information for options outstanding and exercisable at December 31, 2021 (in thousands, except exercise prices and contractual term amounts):


	Options Outstanding				Options Exercisable
Range of Prices	Options Outstanding	Weighted Average Remaining Contractual Term in Years	Weighted Average Exercise Price		Options Exercisable	Weighted Average Exercise Price
$10 - $30	3,474	3.2	$	24.23	3,474	$	24.23
$30 - $45	2,401	5.7	36.78		2,168	35.99
$45 - $60	2,905	7.6	50.44		1,619	50.35
$60 - $75	795	9.2	72.23		35	71.92
$10 - $75	9,575	5.7	$	39.31	7,296	$	33.75

The aggregate intrinsic value of exercisable option shares was $342.0 million as of December 31, 2021, with a weighted average contractual term of 4.9 years. There were approximately 9.6 million vested share options and share options expected to vest as of December 31, 2021, with an aggregate intrinsic value of $395.6 million, a weighted average exercise price of $39.31 and a weighted average contractual term of 5.7 years.


	2021		2020		2019
Cash received	$	32,610	$	66,625	$	32,749
Aggregate intrinsic value	65,319		120,395		57,419
Tax benefit realized	13,329		25,000		12,000

Employee Stock Purchase Plan. Under the Company’s Employee Stock Purchase Plan, the purchase price of the shares is the lesser of 85 percent of the fair market value on the first day or the last day of the plan year. Under this plan, the Company issued 415,995 shares in 2021, 399,567 shares in 2020 and 397,833 shares in 2019.

Authorized Shares. In April 2019, shareholders of the Company approved the Graco Inc. 2019 Stock Incentive Plan. The Plan provides for issuance of up to 10 million shares of Graco common stock. Shares authorized for issuance under the stock option and purchase plans are shown below (in thousands):


	Total Shares Authorized	Available for Future Issuance as of December 31, 2021
Stock Incentive Plan (2019)	10,000	7,149
Employee Stock Purchase Plan (2006)	21,000	12,080
Total	31,000	19,229

Amounts available for future issuance exclude outstanding options. Options outstanding as of December 31, 2021, include options granted under three plans that were replaced by subsequent plans. No shares are available for future grants under those plans.

Share-based Compensation. The Company recognized share-based compensation cost as follows (in thousands):


	2021		2020		2019
Share-based compensation	$	24,931	$	25,153	$	26,669
Tax benefit	1,705		1,700		2,100
Share-based compensation, net of tax	$	23,226	$	23,453	$	24,569

As of December 31, 2021, there was $9.8 million of unrecognized compensation cost related to unvested options, expected to be recognized over a weighted average period of approximately 2.4 years.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions and results:


	2021			2020			2019
Expected life in years	7.5			7.5			6.8
Interest rate	0.9		%	1.4		%	2.3		%
Volatility	25.2		%	22.0		%	24.0		%
Dividend yield	1.0		%	1.3		%	1.4		%
Weighted average fair value per share	$	17.87		$	12.18		$	11.31

Expected life is estimated based on vesting terms and exercise and termination history. Interest rate is based on the U.S. Treasury rate on zero-coupon issues with a remaining term equal to the expected life of the option. Expected volatility is based on historical volatility over a period commensurate with the expected life of options.

The fair value of employees’ purchase rights under the Employee Stock Purchase Plan was estimated on the date of grant. The benefit of the 15 percent discount from the lesser of the fair market value per common share on the first day and the last day of the plan year was added to the fair value of the employees’ purchase rights determined using the Black-Scholes option-pricing model with the following assumptions and results:


	2021			2020			2019
Expected life in years	1.0			1.0			1.0
Interest rate	0.1		%	1.5		%	2.6		%
Volatility	40.1		%	21.9		%	22.7		%
Dividend yield	1.1		%	1.4		%	1.4		%
Weighted average fair value per share	$	21.50		$	11.55		$	11.36