Equity Compensation Plan Information

The following table provides information about shares that may be issued under the Company’s various stock option and purchase plans at December 27, 2002:

Change in Control and Termination Arrangements

        Each of the executive officers listed in the Summary Compensation Table, and certain other key executives of the Company, have entered into a change of control agreement with the Company (singularly “Agreement”; collectively the “Agreements”). The change of control period is defined to extend for two years from the date the Agreement is executed. Each year this period is automatically extended for one year so as to terminate two years from the annual anniversary date of the Agreement, unless the Company gives the executive notice that the Company does not wish to extend this period.

        A change of control is generally defined in the Agreements to have occurred if: (i) a person other than a trust person (as defined in the Agreement) acquires beneficial ownership of 25% or more of the Company’s outstanding common stock, except acquisitions directly from the Company, by the Company, by a Company employee benefit plan, by the executive or a group of which he is a part, or by a person with beneficial ownership of shares under the Trust Under the Will of Clarissa L. Gray which equals or exceeds a certain percentage; or (ii) members of the Incumbent Board (as defined in the Agreement) cease to be in the majority on the Board; or (iii) the shareholders approve a reorganization, merger, consolidation or statutory exchange of the Company’s outstanding common stock, or approve a sale or other disposition of all or substantially all of the assets of the Company; or (iv) the shareholders approve a complete liquidation or dissolution of the Company.

        Each Agreement provides that for two years after a change of control there will be no adverse change in the executive’s duties and responsibilities, compensation program, benefits or other circumstances, provided that nothing will restrict the right of the executive or the Company to terminate the employment of the executive. If the executive’s employment is terminated by the Company for any reason other than for good cause, death, or disability, or by the executive for “good reason” (as defined in the Agreement), within two years following a change of control, the executive will be entitled to certain benefits. These benefits include a sum equivalent to the executive’s base salary to the date of termination (to the extent not yet paid), a bonus calculated according to a formula (set forth in the Agreement) for the year in which the termination occurs, two times the executive’s annual base salary, two times the midpoint between the maximum and minimum bonus for the fiscal year in which the termination occurs, and benefit coverage for a minimum of two years following the date of termination.

        The payments to which the employee is entitled are subject to reduction in the event the payments would constitute a parachute payment within the meaning of Section 280G of the Code or any successor provision, provided that the reduction does not exceed $25,000. If the reduction would exceed $25,000, there will be no reduction and the Company will make an additional payment to the executive in the amount that will put the executive in the same after-tax position as if no excise tax under the Code had been imposed.

        In the event that the employment of Mr. Roberts is terminated involuntarily for other than gross or willful misconduct, he will be paid an amount equal to two years of his then base salary. He will also be entitled to a bonus for the year of his termination, based on the bonus program and formula then in effect for him and salary actually earned by him during that year. The Company will also reimburse him for any premiums for the Company’s health plans he elects to pay under COBRA.

        It is the practice of the Company to continue to provide base salary to executive officers whose employment is involuntarily terminated by the Company for a period of twelve months or until the officer secures other employment, whichever is the lesser period.

Retirement Arrangements

        The Company has an employee retirement plan which provides pension benefits for eligible regular, full- and part-time employees. Benefits under the Graco Employee Retirement Plan (“Retirement Plan”) consist of a fixed benefit which is designed to provide retirement income at age 65 of 43.5% of average monthly compensation, less 18% of Social Security-covered compensation (calculated in a life annuity option) for an employee with 30 years of service. Average monthly compensation is defined as the average of five consecutive highest years’ cash compensation during the last ten years of service, including base salary, Executive Bonus Plan awards, and Annual Bonus Plan awards, but excluding Executive Long Term Incentive Program awards, divided by sixty. Benefits under the 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 Retirement Plan. The Company has adopted an unfunded plan to provide benefits to retired executive officers impacted by the benefit limits, so that they will receive, in the aggregate, the benefits the executive would have been entitled to receive under the Retirement Plan had the limits imposed by the tax laws not been in effect. The maximum annual pension payable to or on behalf of the executive under the unfunded plan will be equal to the difference between $170,000 and the benefits actually payable under the Retirement Plan when the limits imposed by the tax laws are applied.

        The following table shows the estimated aggregate annual benefits payable under the Retirement Plan and the unfunded plan for the earnings and years of service specified. The years of benefit service for the Chief Executive Officer and the executive officers listed in the Summary Compensation Table are: Mr. Roberts, 1 year; Mr. Johnson, 27 years; Mr. Rescorla, 14 years; Mr. McHale, 13 years; and Mr. Graner 29 years. A maximum of 30 years had previously been counted in the pension benefit calculation. For 1998 and subsequent years, the 30 year maximum has been eliminated.

        Prior to December 31, 1996, the Company entered into deferred compensation agreements with selected executive officers, including certain named executives in the Summary Compensation Table. These agreements provide for the payment per year of $10,000 in deferred compensation to the officer for ten years after retirement, or to a beneficiary in the event of death prior to the expiration of the ten year period. These agreements also include provisions for non-competition and the payment of $5,000 per year in the event the officer becomes disabled prior to age 65. The $5,000 per year disability payments cease upon the attainment of age 65. A deferred compensation agreement remains in effect for Mr. Graner.

Directors’ Fees

        During 2002, the Company paid each director, except directors who were also employees of the Company, an annual retainer of $20,000, plus a meeting fee of $1,000 for each Board meeting and $1,000 for each committee meeting attended. The annual retainer for the Chairman of the Board was $60,000. On February 21, 2003, the Board approved an increase in the annual retainer to $24,000 per year, an additional retainer of $5,000 for the chairs of the Governance Committee and the Management Organization and Compensation Committee, and an additional retainer of $7,500 for the chair of the Audit Committee. These changes will be effective as of May 6, 2003.

        On February 23, 2001, the Board terminated the retirement benefit for nonemployee directors, which provided that upon cessation of service, nonemployee 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. Retirement payments will be made in accordance with the retirement benefit to Mr. Baukol, Mr. Mitau, Ms. Morfitt and Mr. Van Dyke upon their respective retirements.

        In 1994, shareholders approved a Nonemployee Director Stock Plan. Under this Plan, a nonemployee director may elect to receive all or part of the director’s annual retainer in the form of shares of the Company’s common stock instead of cash. In September 1997, the Plan was amended to create a deferred stock account alternative for the deferral of the annual retainer. This alternative provides for the crediting of shares of common stock to a deferred stock account held by a trustee in the name of the nonemployee director. Dividends paid on the common stock, held in the deferred accounts, will be credited to the accounts at the time of payment. In 1999 the Plan was amended to allow nonemployee directors to defer all or part of the meeting fees as well as the annual retainer. Participating directors may elect to receive payment from their deferred stock account in a lump sum or installments. Payments, whether in a lump sum or by installments, shall be made in shares of common stock, plus cash in lieu of any fractional share. Eight directors have elected to defer all or part of their annual retainer and/or meeting fees into the deferred stock accounts established under this Plan.

        Under the Graco Inc. Stock Incentive Plan, nonemployee directors receive an initial option grant of 3,000 shares upon first appointment or election and an annual option grant of 2,500 shares on the date of the Company’s Annual Shareholders’ Meeting. Options granted under the Plan are non-statutory, have a ten-year duration and become exercisable in equal installments over four years, beginning with the first anniversary date of the grant. The option exercise price is the fair market value on the date of grant.

Certain Business Relationships

          Mr. Mitau, who has been a director of Graco since 1990 and Chairman of the Board of the Company since May 2002, is Executive Vice President and General Counsel of U.S. Bancorp, a bank holding company. U.S. Bank National Association and the Company have entered into a $30 million credit agreement expiring on December 26, 2003. There is no amount outstanding to U.S. Bank under this credit agreement. U.S. Bank also provides the Company with banking services such as cash management, payroll accounts, foreign currency exchange, wire transfers and letters of credit. U.S. Bank is also a trustee of the Graco Employee Retirement Plan.

BENEFICIAL OWNERSHIP OF SHARES

        The following information, furnished as of March 6, 2003, indicates beneficial ownership of the common shares of the Company by each director, each nominee for election as director, the named executive officers and by all directors and executive officers as a group. Except as otherwise indicated, the persons listed have sole voting and investment power.

Principal Shareholders

        The following table identifies each person or group known to the Company to beneficially own as of March 6, 2003, more than 5 percent of the outstanding common shares of the Company, the only class of security entitled to vote at the Annual Meeting.

Section 16(a) Beneficial Ownership Reporting Compliance

        The Company’s executive officers, directors, and 10 percent shareholders are required under the Securities Exchange Act of 1934 and regulations promulgated thereunder to file initial reports of ownership of the Company’s securities and reports of changes in that 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 2002, except for one inadvertent late filing by Mr. George Aristides, who sold 6,343 shares in February 2002, and whose wife sold 49,597 shares in February 2002.

PROPOSAL 2

PROPOSAL TO APPROVE THE GRACO INC. EXECUTIVE OFFICER ANNUAL INCENTIVE BONUS PLAN

        The Company seeks shareholder approval of the Graco Inc. Executive Officer Annual Incentive Bonus Plan (the “Plan”). This Plan is identical to the Executive Officer Annual Incentive Bonus Plan adopted by the shareholders at the Annual Meeting of Shareholders on May 4, 1999, which will expire on December 31, 2003. This proposed Plan will, if approved, be effective January 1, 2004 and expire on December 31, 2007. The Plan will be administered by the Management Organization and Compensation Committee of the Board (the “Committee”). The Plan is intended to qualify compensation paid thereunder as “qualified performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Section 162(m) of the Code generally limits to $1 million the Company’s federal income tax deductions for compensation paid to named executive officers that is not performance-based compensation within the meaning of that section. Shareholder approval of the Plan is necessary in order for the Company to deduct any excess amount of compensation.

        The Committee is composed solely of non-employee directors who are outside directors within the meaning of Section 162(m) of the Code. Participants in the Plan are the Chief Executive Officer and any other executive officer of the Company designated by the Committee within the first 90 days of the fiscal year.

        Participants shall be eligible for the payment of a bonus if certain performance targets are achieved. The performance targets are financial growth targets established by the Committee at the beginning of each fiscal year and must be directly tied to one or more financial measures, including, among other things, net earnings and net revenues. No payment may be made if the performance targets are not achieved. No adjustment of the award to any participant is permitted, but certain changes in status, such as death, retirement or disability, will cause the bonus payment to be pro-rated and resignation or termination prior to the end of the fiscal year will eliminate the bonus entirely. There is a $1million individual award limit in any fiscal year.

        The Committee may amend the Plan prospectively and may terminate or curtail the benefits of the Plan.

        The above description summarizes the principal features of the Plan, but is qualified in its entirety by reference to the text of the Plan which is set forth as Annex A to this Proxy Statement.

        Awards under the Plan will be based upon performance targets established with respect to each fiscal year. Accordingly, the amount of awards to be paid in the future to any participant cannot be determined at this time since the performance period has not yet been completed. Actual awards will depend upon actual performance measured against the attainment of the pre-established performance targets.

        If the shareholders fail to approve the Plan at the Annual Meeting, the compensation awarded under the Plan will not qualify as “performance-based” for purposes of the deductibility limits of Section 162(m) of the Code.

        Other Bonus Plans. The Company has other plans pursuant to which bonuses may be awarded to the employees eligible to participate in the above-described Plan, if they are not designated as participants in this Plan.

        Federal Income Tax Consequences. The Company will generally be entitled to a deduction equal to the amount of ordinary income realized by the participant upon payment of a bonus. The amount of bonus received by a participant under the Plan will be included in the income of the participant at the time of payment and will be subject to tax at ordinary income rates.

PROPOSAL 3

PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT PUBLIC AUDITORS

        Deloitte & Touche LLP (“Deloitte”) has acted as independent auditors for the Company since 1962. The Audit Committee of the Board, which has selected Deloitte as independent auditors for fiscal year 2003, recommends ratification of the selection by the shareholders. If the shareholders do not ratify the selection of Deloitte, the selection of the independent auditors will be reconsidered by the Audit Committee. A representative of Deloitte will be present at the meeting and will have the opportunity to make a statement if so desired and be available to respond to any shareholder questions.

OTHER MATTERS

        The Board is not aware of any matter, other than those 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 a request from any shareholder that a matter be submitted to a vote at the 2003 Annual Meeting. Any shareholders wishing to have a matter considered for inclusion in the proxy statement for the Annual Meeting in the year 2004 must submit such proposal in writing to the Secretary of the Company at the address shown on page 1 of this statement no later than November 28, 2003.

        Any shareholder proposal for the Annual Meeting in year 2004 not included in the Proxy Statement must be submitted by written notice to the Secretary of the Company by February 6, 2004 to be considered. The persons named as proxies intend to exercise their discretionary authority to vote as they deem in the best interests of the Company on any such shareholder proposal.

        YOU ARE RESPECTFULLY REQUESTED TO EXERCISE YOUR RIGHT TO VOTE. YOU MAY DO SO BY CALLING OUR TOLL-FREE TELEPHONE VOTING NUMBER (1-800-240-6326) AND FOLLOWING THE VOICE INSTRUCTIONS OR BY COMPLETEING AND SIGNING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE ENVELOPE ENCLOSED FOR YOUR CONVENIENCE. In the event that you attend the meeting, you may revoke your proxy (either given by telephone or by mail) and vote your shares in person if you wish.

For the Board of Directors

\Robert M. Mattison
Robert M. Mattison
Secretary

Dated: March 27, 2003

NOTE: Vote by telephone – call 1-800-240-6326

© 2003 Graco Inc. 3/02 6.5M Printed in U.S.A.

ANNEX A

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:

1.1     Base Salary — a specific dollar amount for each Participant as identified in Schedule A

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.”

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.

1.4     Company — Graco Inc., a Minnesota corporation, and any of its affiliates that adopt the Plan.

1.5     Eligible Employee — the chief executive officer and any executive officer of the Company designated by the Compensation Committee.

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.

1.7     Performance Period — the Company's fiscal year.

1.8     Plan — this Executive Officer Annual Incentive Bonus Plan.

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.

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.

2.     Administration.

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:

(a)     designate the Participants in the Plan for that Performance Period;

(b)     indicate the Base Pay of each Participant for the Performance Period by amending Schedule A in writing;

(c)     establish Targeted Bonus Percentages for the Performance Period by amending Schedule B in writing;

(d)     establish Company Performance Target(s)s for the Performance Period by amending Schedule C in writing.

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.

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.

3.     Bonus Payment

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.

3.2     Formula — Subject to other provisions of this Plan, each Participant shall receive a bonus payment for each Performance Period calculated as follows:

(a)     Each of the Company Performance Targets shall be assigned a weight expressed as a percent of the Participant’s Maximum Targeted Bonus Percentage.

(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.

(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.

(d)     The amount obtained by performing the calculation described in subparagraph 3.2(c) shall be multiplied by the Participant’s Base Salary.

3.3     Limitations

(a)     No payment if Company Performance Targets not achieved — In no event shall any Participant receive a bonus payment hereunder if the Company Performance Targets and all other factors on which the bonus payment is based are not achieved during the Performance Period.

(b)     No payment in excess of preestablished amount — No Participant shall receive a payment under the Plan for any Performance Period in excess of One Million Dollars ($1,000,000).

(c)     Pro-ration or elimination of Bonus payment — Participation in the Plan ceases with resignation, termination, retirement, death or long-term disability. A Participant who resigns or is terminated effective during the Performance Period is ineligible for a bonus payment. A Participant who retires, dies or becomes eligible for long-term disability benefits under the Company’s long-term disability benefit plan during the Performance Period will be paid a bonus based on a calculation performed in accordance with the provisions of subparagraph 3.2, provided, however, the Participant’s Base Salary shall be pro-rated to the date of retirement, death or eligibility for long-term disability benefits.

4.     Time and Form of Payments; Taxability — Subject to any deferred compensation election pursuant to any such plans of the Company, a bonus payment shall be made to the Participant in one or more cash payments as soon as determined by the Compensation Committee after it has certified that the Company Performance Target(s) and all other factors upon which the bonus payment for the Participant is based have been achieved.

4.1     Nontransferability — Participants and beneficiaries shall not have the right to assign, encumber or otherwise anticipate the payments to be made under the Plan, and the benefits provided hereunder shall not be subject to seizure for payment of any debts or judgments against any Participant or any beneficiary.

4.2     Tax Withholding — In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes, which are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant.

5.     Amendment and Termination — The Compensation Committee may amend the Plan prospectively at any time and for any reason deemed sufficient by it without notice to any person affected by the Plan and may likewise terminate or curtail the benefits of the Plan, both with regard to persons expecting to receive benefits hereunder in the future and persons already receiving benefits at the time of such action, provided that no amendment to the Plan shall be effective which would increase the maximum amount payable to a Participant under paragraph 3.3(b), which would change the Financial Measures upon which Company Performance Targets must be based as set forth in subparagraph 1.10 of this Plan or which would modify the requirements for eligibility under subparagraph 1.5, unless the shareholders of the Company shall have approved such change in accordance with the requirements of Section 162(m).

6.     Miscellaneous

6.1     Effective Date — January 1, 2004

6.2     Term of the Plan — Unless the Plan shall have been discontinued or terminated, the Plan shall terminate on December 31, 2007. No bonus shall be granted after the termination of the Plan; provided, however, that a payment with respect to a Performance Period which begins before such termination may be made thereafter. In addition, the authority of the Compensation Committee to amend the Plan shall extend beyond the termination of the Plan.

6.3     Headings — Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.

6.4     Applicability to Successors — The Plan shall be binding upon and inure to the benefit of the Company and each Participant, the successors and assigns of the Company, and the beneficiaries, personal representatives and heirs of each Participant. If the Company becomes a party to any merger, consolidation or reorganization, this Plan shall remain in full force and effect as an obligation of the Company or its successors in interest.

6.5     Employment Rights and Other Benefit Programs — The provisions of the Plan shall not give any Participant any right to be retained in the employment of the Company. In the absence of any specific agreement to the contrary, the Plan shall not affect any right of the Company, or of any affiliate of the Company, to terminate, with or without cause, the Participant’s employment at any time. The Plan shall not replace any contract of employment, whether oral or written, between the Company and any Participant, but shall be considered a supplement thereto. The Plan is in addition to, and not in lieu of, any other employee benefit plan or program in which any Participant may be or become eligible to participate by reason of employment with the Company. Receipt of benefits hereunder shall have such effect on contributions to and benefits under such other plans or programs as the provisions of each such other plan or program may specify.

6.6     No Trust or Fund Created — The Plan shall not create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any affiliate and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company or any affiliate pursuant to the Plan, such right shall be no greater than the right of any unsecured general creditor of the Company or of any affiliate.

6.7     Governing Law — The validity, construction and effect of the Plan or any bonus payable under the Plan shall be determined in accordance with the laws of the State of Minnesota.

6.8     Severability — If any provision of the Plan is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Compensation Committee, materially altering the purpose or intent of the Plan, such provision shall be stricken as to such jurisdiction, and the remainder of the Plan shall remain in full force and effect.

6.9     Qualified Performance-Based Compensation — All of the terms and conditions of the Plan shall be interpreted in such a fashion as to qualify all compensation paid hereunder as qualified performance-based compensation within the meaning of Section 162(m) of the Code.

SCHEDULE A

BASE SALARY FOR PERFORMANCE PERIOD
BEGINNING ON                    AND ENDING ON                   

Name	Base Salary
	Actual paid salary for the calendar year that most closely coincides with Company fiscal year but not in excess of $1,250,000

SCHEDULE B

TARGETED BONUS PERCENTAGE FOR PERFORMANCE PERIOD
BEGINNING ON                    AND ENDING ON                   

Name	Minimum Targeted Bonus Percentage as a Percentage of Base Salary	Maximum Targeted Bonus Percentage as a Percentage of Base Salary

SCHEDULE C

COMPANY PERFORMANCE TARGETS
FOR PERFORMANCE PERIOD
BEGINNING ON                    AND ENDING ON                   

Financial Measure(s)	Company Performance Target(s) Weight	Minimum Company Performance Target(s)	Maximum Company Performance Target(s)
	%	$	$
	%	$	$

GRACO INC.

ANNUAL MEETING OF SHAREHOLDERS

Tuesday, May 6, 2003
1:00 p.m.

George Aristides Riverside Center
1150 Sibley Street N.E.
Minneapolis, Minnesota 55413

---

GRACO INC. 88 Eleventh Avenue NE Minneapolis, Minnesota 5413

proxy

---

This Proxy is Solicited by the Board of Directors for use at the Graco Inc. Annual Meeting on Tuesday, May 6, 2003.

The shares of common stock of Graco Inc. which you were entitled to vote on March 6, 2003, will be voted as you specify on this card.

By signing this proxy, you revoke all prior proxies and appoint David A. Roberts and Mark W. Sheahan as Proxies, each with full power of substitution, to vote your shares as specified on the reverse side and at their discretion on any other matter which may properly come before the Annual Meeting or any adjournment thereof.

SEE REVERSE FOR VOTING INSTRUCTIONS

TO VOTE BY TELEPHONE – TOLL FREE – 1-800-240-6326 – QUICK *** EASY *** IMMEDIATE

Your telephone vote authorizes the named Proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.

•	Have your proxy card in hand.

•	Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week, until 11:00 a.m. (CT) on May 5, 2003.

•	You will be prompted to enter your 3-digit Company Number and your 7-digit Control Number. Both numbers appear in the box in the upper right hand corner.

Option 1:     To vote as the Graco Board recommends on ALL proposals, press 1.

When asked, please confirm by pressing 1.

Option 2:     To vote on each proposal separately, press 0. (You will then hear these instructions:)

Proposal 1:	to vote FOR ALL nominees, press 1
	to vote WITHHOLD FOR ALL nominees, press 9
	to vote WITHHOLD FOR AN INDIVIDUAL NOMINEE, press 0 and listen to the instructions
Proposal 2:	to vote FOR, press 1; AGAINST press 9; ABSTAIN, press 0
Proposal 3:	to vote FOR, press 1; AGAINST press 9; ABSTAIN, press 0

When asked, please confirm your vote by pressing 1.

TO VOTE BY MAIL

If you do not vote by telephone, mark, sign and date your proxy card and return the card in the postage-paid envelope provided (Graco Inc., c/o Shareowner Services^SM, P.O. Box 64873, St. Paul, MN 55164-0873).

If you vote by telephone, there is no need to mail back your Proxy Card

---

The Board of Directors Recommends a Vote FOR Items 1, 2 and 3.

Item 1.

Election of Directors

FOR ALL

WITHHOLD FOR ALL

NOMINEES:

Robert G. Bohn

William J. Carroll

(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 the Executive Officer Annual Incentive Bonus Plan

FOR

AGAINST

ABSTAIN

Item 3.

Ratification of Appointment of Deloitte & Touche LLP as Independent Auditors

FOR

AGAINST

ABSTAIN

In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. A properly executed proxy will be voted in the manner directed by the person(s) signing below. If you make no choice, your proxy will be voted “FOR” Item 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:
	Signature
	Signature