CERTIFICATION

        I, _________________________, certify that I am the
_________________________ of Graco Inc., a Minnesota corporation, and that by
action taken by the Board of Directors on February 18, 2005, the Board of
Directors adopted the Graco Deferred Compensation Plan. I further certify that
the attached document is a true and correct copy of the document.

_______________, 2005   ______________________________________________________

GRACO
DEFERRED COMPENSATION PLAN
(2005 Statement)

GRACO
DEFERRED COMPENSATION PLAN
(2005 Statement)

TABLE OF CONTENTS

Page

SECTION 1. INTRODUCTION AND DEFINITIONS 1         1.1. Preamble     1.2.
Definitions       1.2.1. Account       1.2.2. Affiliate       1.2.3. Annual
Valuation Date       1.2.4. Beneficiary       1.2.5. Board of Directors      
1.2.6. Code       1.2.7. Committee       1.2.8. Compensation       1.2.9.
Deferred Compensation Agreement       1.2.10. Disability       1.2.11. Effective
Date       1.2.12. Employer       1.2.13. ERISA       1.2.14. Graco      
1.2.15. Participant       1.2.16. Plan       1.2.17. Plan Statement      
1.2.18. Plan Year       1.2.19. Separation from Service       1.2.20. Valuation
Date       1.2.21. Vested       1.2.22. Vice President of Human Resources    
1.3. Rules of Interpretation         SECTION 2. ELIGIBILITY TO PARTICIPATION 5  
      2.1. General Eligibility Rule     2.2. Selection for Participation in the
Plan     2.3. Deferred Compensation Agreement       2.3.1. Amount of Deferrals  
    2.3.2. Initial and Annual Elections       2.3.3. Effective Date of Elections
      2.3.4. Evergreen Elections       2.3.5. Ineligible to Defer Compensation  
    2.3.6. Separation from Service         SECTION 3. CONTRIBUTIONS AND
ALLOCATION THEREOF 7         3.1. Deferred Compensation Agreement Contributions
      3.1.1. Amount       3.1.2. Allocation     3.2. Employer Contributions    
    SECTION 4. INVESTMENT AND ADJUSTMENT OF ACCOUNTS 8         4.1. Designation
of Measuring Investments     4.2. Operational Rules for Measuring Investments  
  4.3. Investment Direction of Participants       4.3.1. Rights of Participants
      4.3.2. Transmission of Investment Directions     4.4. Losses Under the
Plan         SECTION 5. VESTING 9       SECTION 6. UNFUNDED PLAN 10      
SECTION 7. DISTRIBUTIONS 11         7.1. Distribution       7.1.1. Time of
Distribution       7.1.2. Form of Distribution       7.1.3. Taxation of
Distribution       7.1.4. Death Prior to Full Distribution     7.2. Designation
of Beneficiaries       7.2.1. Right to Designate       7.2.2. Failure of
Designation       7.2.3. Disclaimers by Beneficiaries       7.2.4. Definitions  
    7.2.5. Special Rules     7.3. General Distribution Rules       7.3.1.
Distribution in Cash       7.3.2. Facility of Payment         SECTION 8.
SPENDTHRIFT PROVISION 18       SECTION 9. AMENDMENT AND TERMINATION 19        
9.1. Amendment     9.2. Discontinuance of Contributions and Termination of Plan
    9.3. Merger or Spinoff of Plans       9.3.1. In General       9.3.2.
Beneficiary Designations         SECTION 10. INDEMNIFICATION 20       SECTION
11. DETERMINATIONS — CLAIM PROCEDURES 21         11.1. Determinations     11.2.
Claim and Review Procedures       11.2.1. Initial Claim       11.2.2. Notice of
Initial Adverse Determination       11.2.3. Request for Review       11.2.4.
Claim on Review       11.2.5. Notice of Adverse Determination for Claim on
Review     11.3. Rules and Regulations       11.3.1. Adoption of Rules      
11.3.2. Specific Rules     11.4. Deadline to File Claim     11.5. Exhaustion of
Administrative Remedies     11.6. Deadline to File Legal Action     11.7.
Knowledge of Fact by Participant Imputed to Beneficiary and Others        
SECTION 12. PLAN ADMINISTRATION 26         12.1. Board of Directors     12.2.
Committee     12.3. Vice President of Human Resources     12.4. Fiduciary
Responsibility — In General       12.4.1. Limitation on Authority       12.4.2.
Dual Capacity     12.5. Administrator     12.6. Named Fiduciaries     12.7.
Service of Process     12.8. Rules and Regulations     12.9. Method of Executing
Instruments     12.10. Information Furnished by Participants     12.11. Receipt
of Documents     12.12. Powers of Attorney     12.13. Guardians and Conservators
        SECTION 13. IN GENERAL 29         13.1. Disclaimers       13.1.1. Effect
on Employment       13.1.2. Sole Source of Benefits     13.2. Applicable Laws  
    13.2.1. ERISA Status       13.2.2. Internal Revenue Code Status     13.3.
Choice of Law         SCHEDULE I- EMPLOYERS PARTICIPATING SI-1       SCHEDULE
II- COVERED SALARY GRADE LEVELS AND CLASSIFICATIONS SII-1       SCHEDULE III-
MEASURING INVESTMENTS SIII-1      

GRACO
PAY DEFERRAL PLAN
(2005 Statement)

SECTION 1

INTRODUCTION AND DEFINITIONS

1.1.     Preamble. Effective May 1, 2005, Graco Inc., a Minnesota corporation,
established this nonqualified, unfunded, deferred compensation plan under
section 409A of the Internal Revenue Code for the benefit of a select group of
management or highly compensated employees of Graco Inc. and related Employers.

1.2.     Definitions. When the following terms are used herein with initial
capital letters, they shall have the following meanings:

          1.2.1.     Account — the separate bookkeeping account established for
each Participant which represents the separate unfunded and unsecured general
obligation of the Employers established with respect to each individual who is a
Participant in the Plan to track credits and the investment return on those
credits.

          1.2.2.     Affiliate — a business entity which is not an Employer but
which is part of a “controlled group” with the Employer or under “common
control” with the Employer or which is a member of an “affiliated service group”
that includes an Employer, as those terms are defined in section 414(b), (c) and
(m) of the Code. A business entity which is a predecessor to the Employer shall
be treated as an Affiliate if the Employer maintains a plan of such predecessor
business entity or if, and to the extent that, such treatment is otherwise
required by regulations under section 414(a) of the Code. A business entity
shall also be treated as an Affiliate if, and to the extent that, such treatment
is required by regulations under section 414(o) of the Code. In addition to said
required treatment, the Vice President of Human Resources may designate as an
Affiliate any business entity which is not such a “controlled group,” “common
control,” “affiliated service group” or “predecessor” business entity but which
is otherwise affiliated with an Employer, subject to such limitations as the
Vice President of Human Resources may impose.

          1.2.3.     Annual Valuation Date — each December 31.

          1.2.4.     Beneficiary — a person designated by a Participant (or
automatically by operation of this Plan Statement) to receive all or a part of
the Participant’s Account in the event of the Participant’s death prior to full
distribution thereof. A person so designated shall not be considered a
Beneficiary until the death of the Participant.

          1.2.5.     Board of Directors — the board of directors of Graco or of
its successor. “Board of Directors” also shall mean and refer to any properly
authorized committee of the directors.

          1.2.6.     Code — the Internal Revenue Code of 1986, including
applicable regulations for the specified section of the Code. Any reference in
this Plan Statement to a section of the Code, including the applicable
regulation, shall be considered also to mean and refer to any subsequent
amendment or replacement of that section or regulation.

          1.2.7.     Committee — the Compensation Committee of the Board of
Directors.

          1.2.8.     Compensation — a Participant’s Compensation shall consist
of the following:

  (a)

Advance Sales Incentive Awards — the sales incentive awards, if any, paid during
the calendar year.

  (b)

Annual Bonus Awards — the annual bonus amount, if any, determined by the
Employer and paid to the employee before March 15th of the following Plan Year.

  (c)

Base Salary — the standard amount paid to an employee as salary at regular
payroll intervals during a Plan Year by the Employer (which shall exclude any
Advance Sales Incentive Awards, Year-End Sales Incentive Awards, or Annual Bonus
Awards) prior to the employee’s date of Separation from Service.

  (d)

Year-End Sales Incentive Awards — the sales incentive awards, if any, paid
before March 15th of the following Plan Year after all proper adjustments have
been made for Advance Sales Incentive Awards paid during the Plan Year.

Items described in (a), (b), (c) or (d). above shall not be considered
Compensation until they are earned by the Participant.

         1.2.9.      Deferred Compensation Agreement — the written agreement
made by a Participant pursuant to which the Participant agrees to accept a
reduction in Compensation and the Employer agrees to credit the amount of such
reduction to the Participant’s Account.

         1.2.10.    Disabled or Disability — an impairment which renders a
Participant unable to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or can be expected to last for a continuous period of not
less than twelve (12) months. A Disability must be evidenced by (i) a
certification by a doctor of medicine, or (ii) the official written
determination that the individual will be eligible for disability benefits under
the federal Social Security Act.

         1.2.11.    Effective Date — May 1, 2005.

         1.2.12.    Employer — each of the following employers:

  (a)

Graco,

  (b)

Any employer affiliated with Graco that adopts the Plan with the consent of
Graco and subject to such limitations (not inconsistent with federal law) as
Graco may impose with respect to the extent that service with such employer
prior to such adoption will be included in determining an employee’s initial
eligibility to enroll as a Participant in the Plan, and

  (c)

Any successor thereof that adopts the Plan.

The name of each Employer, the effective date of its adoption of the Plan, and a
specification of whether an employee’s pre-adoption service with such Employer
will be included in determining the Participant’s initial eligibility to enroll
as a Participant in the Plan shall be set forth in Schedule I to this Plan
Statement.

         1.2.13.    ERISA — the Employee Retirement Income Security Act of 1974,
including applicable regulations for the specified section of ERISA. Any
reference in this Plan Statement to a section of ERISA, including the applicable
regulation, shall be considered also to mean and refer to any subsequent
amendment or replacement of that section or regulation.

         1.2.14.     Graco — Graco Inc., a Minnesota corporation, and any
successor thereof.

         1.2.15.   Participant — an employee of the Employer who is selected for
participation in the Plan. An employee who has become a Participant shall
continue as a Participant in the Plan until the date of the Participant’s death
or, if earlier, the date upon which the Participant has received a distribution
of the Participant’s entire Account under the Plan.

         1.2.16.    Plan — the nonqualified, unfunded, deferred compensation
plan of the Employer established for the benefit of employees eligible to
participate therein, as first set forth in this Plan Statement. (As used herein,
“Plan” refers to the legal entity established by the Employer and not to the
documents pursuant to which the Plan is maintained. Those documents are referred
to herein as the “Plan Statement.”) The Plan shall be referred to as the “Graco
Deferred Compensation Plan.”

         1.2.17.    Plan Statement — this document entitled “Graco Deferred
Compensation Plan (2005 Statement),” as the same may be amended from time to
time.

         1.2.18.    Plan Year — the twelve (12) consecutive month period ending
on any Annual Valuation Date.

         1.2.19.    Separation from Service — a separation from service for the
purposes of section 409A of the Code.

         1.2.20.    Valuation Date — any day that the U.S. securities markets
are open and conducting business.

         1.2.21.    Vested — nonforfeitable.

         1.2.22.    Vice President of Human Resources — the individual who is
the Vice President of Human Resources of Graco or such person as designated by
the Chief Executive Officer of Graco.

1.3.    Rules of Interpretation. An individual shall be considered to have
attained a given age on the individual’s birthday for that age (and not on the
day before). The birthday of any individual born on a February 29 shall be
deemed to be February 28 in any year that is not a leap year. Whenever
appropriate, words used herein in the singular may be read in the plural, or
words used herein in the plural may be read in the singular; the masculine may
include the feminine; and the words “hereof,” “herein” or “hereunder” or other
similar compounds of the word “here”shall mean and refer to the entire Plan
Statement and not to any particular paragraph or section of this Plan Statement
unless the context clearly indicates to the contrary. The titles given to the
various sections of this Plan Statement are inserted for convenience of
reference only and are not part of this Plan Statement, and they shall not be
considered in determining the purpose, meaning or intent of any a provision
hereof. Any reference in this Plan Statement to a statute or regulation shall be
considered also to mean and refer to any subsequent amendment or replacement of
that statute or regulation. This Plan Statement has been executed and shall,
except to the extent that federal law is controlling, be construed and enforced
in accordance with the laws of the State of Minnesota. Notwithstanding any other
provision of this Plan Statement or any election or designation made under the
Plan, any individual who feloniously and intentionally kills a Participant or
Beneficiary shall be deemed for all purposes of the Plan and all elections and
designations made under the Plan to have died before such Participant or
Beneficiary. For purposes of this section, an individual will be found to have
feloniously and intentionally killed a Participant or Beneficiary, only if a
final judgment of conviction of felonious and intentional killing of such
Participant or Beneficiary has been entered against such individual by the trial
court. Notwithstanding anything to the contrary, the Vice President of Human
Resources may deny any request for a distribution pending a determination under
this section.

SECTION 2

ELIGIBILITY TO PARTICIPATION

2.1.    General Eligibility Rule. An employee of an Employer who satisfies the
following three conditions:

  (a)

is in one of the following classifications:

  (i)

the Chief Executive Officer, a Vice President or other executive officer of
Graco,

  (ii)

a position, salary schedule, grade or other classification as set forth in
Schedule II to this Plan Statement, or

  (iii)

such other position, salary schedule, grade or other classification as
determined by the Vice President of Human Resources and specified by amendment
in Schedule II,

  (b)

is employed by an Employer on or before November 1 of the Plan Year preceding
the Plan Year in which the individual would commence to participate in the Plan
(if selected for participation), and

  (c)

is selected for participation (as described in Section 2.2),

shall be eligible to become a Participant. An employee shall become a
Participant as of the January 1 next following the acceptance and approval of
such individual’s properly completed Deferred Compensation Agreement by the Vice
President of Human Resources.

2.2.     Selection for Participation in the Plan. Only employees who are
selected for participation in the Plan by the Vice President of Human Resources
shall be eligible to become a participant in the Plan. The Vice President of
Human Resources shall not select any employee for participation unless the Vice
President of Human Resources determines that such employee is a member of a
select group of management or highly compensated employees (as that expression
is used in ERISA).

2.3.     Deferred Compensation Agreement.

          2.3.1.     Amount of Deferrals. Subject to the following rules and any
rules adopted by the Vice President of Human Resources, a Participant by
entering into a Deferred Compensation Agreement may make elective contributions
through a pay reduction equal to but not less than (i) one percent (1%) nor more
than fifty percent (50%) (in whole percentages) of the portion of the
Participant’s Base Salary and Advance Sales Incentives, and (ii) one percent
(1%) nor more than one hundred percent (100%) (in whole percentages) of the
portion of the Participant’s Annual Bonus Awards and Year-End Sales Incentive
Awards. The Vice President of Human Resources may, from time to time under
rules, change the minimum and maximum allowable elective contributions, although
such changes shall not take effect until the following Plan Year. Salary
deferrals will begin as soon as administratively practicable following the
January 1 on which the Employee becomes a Participant. The Deferred Compensation
Agreement shall remain in effect for the remainder of the Plan Year (unless
terminated upon a Participant’s death or Separation from Service).

          2.3.2.     Initial and Annual Elections. Employees selected to
participate and Participants may enter into a Deferred Compensation Agreement to
defer compensation, or increase or decrease the amount of deferred compensation,
during the period beginning on November 1 and ending on December 31 of each year
for the subsequent Plan Year.

          2.3.3.     Effective Date of Elections. The Participant’s Deferred
Compensation Agreement will be effective as of the January 1 following the date
of the Participant’s election.

          2.3.4.     Evergreen Elections. The Participant’s Deferred
Compensation Agreement shall remain in effect until the Participant timely
completes a new Deferred Compensation Agreement during a subsequent period
described in Section 2.3.2 (unless terminated as provided in Section 2.3.5 or
Section 2.3.6).

          2.3.5.     Ineligible to Defer Compensation. The Deferred Compensation
Agreement of a Participant who is determined to be no longer eligible to defer
compensation shall terminate as of the last day of the Plan Year in which the
Employer makes the determination that the Participant is longer eligible to
defer compensation.

          2.3.6.     Separation from Service. The Deferred Compensation
Agreement of a Participant shall be terminated automatically as of the date of
the Participant’s Separation from Service.

SECTION 3

CONTRIBUTIONS AND ALLOCATION THEREOF

3.1.   Deferred Compensation Agreement Contributions.

        3.1.1.    Amount. The Employer shall cause to be credited to the Account
of each Participant the amount, if any, of such Participant’s elective deferrals
under the Deferred Compensation Agreement.

        3.1.2.    Allocation. The portion of the contribution made with respect
to each Participant shall be allocated to that Participant’s Account for the
Plan Year with respect to which it is made and, for the purposes of this
section, shall be credited as soon as practicable after it is deducted from the
Participant’s Compensation.

3.2.   Employer Contributions. An Employer may, in its sole discretion, make
employer discretionary contributions to a Participant’s Account.

SECTION 4

INVESTMENT AND ADJUSTMENT OF ACCOUNTS

4.1.     Designation of Measuring Investments. Measuring investments are
specified solely as a device for computing the amount of benefits to be paid by
the Employer under the Plan, and the Employer is not required to purchase such
investments. The measuring investments are listed in Schedule III to this Plan
Statement.

4.2.     Operational Rules for Measuring Investments. The Vice President of
Human Resources shall adopt rules specifying the circumstances under which a
particular measuring investment may be elected, or shall be automatically
utilized, the minimum or maximum amount or percentage of an Account which may be
allocated to a measuring investment, the procedures for making or changing
measuring investment elections, the extent (if any) to which Beneficiaries of
deceased Participants may make measuring investment elections and the effect of
a Participant’s or Beneficiary’s failure to make an effective measuring
investment election with respect to all or any portion of an Account.

4.3.     Investment Direction of Participants.

          4.3.1.     Rights of Participants. A Participant shall direct the Vice
President of Human Resources as to the measuring investments which shall be the
standard by which the value of the Participant’s Account shall be measured.

          4.3.2.     Transmission of Investment Directions. Through a voice
response system (or other written or electronic means) approved by the Vice
President of Human Resources, each Participant shall designate the measuring
investments that shall be used to determine the value of such Participant’s
Account (until changed as provided herein): (i) one or more measuring
investments for the current Account balance, and (ii) one or more measuring
investments for amounts that are credited to the Account in the future.

4.4.     Losses Under the Plan. The cash value of the Participant’s Account
shall depend on the investment return experience of the Participant’s elected
measuring investments. No officer, director or employee of the Employer shall be
accountable or liable for any investment losses to a Participant’s Account
incurred by virtue of implementing the directions of the Participant with
respect to the measuring investments of the Account or due to any reasonable
administrative delay in implementing such directions.

SECTION 5

VESTING

A Participant shall be fully vested in the funds credited to the Participant’s
Account at all times.

SECTION 6

UNFUNDED PLAN

The obligations to make payments under the Plan constitute only the unsecured
(but legally enforceable) promises of the Participant’s Employer and Graco to
make such payments. No Participant shall have any lien, prior claim or other
security interest in any property of the Employer and Affiliates. The Employer
shall have no obligation to establish or maintain any fund, trust or account
(other than a bookkeeping account) for the purpose of funding or paying the
benefits promised under the Plan. If such a fund, trust or account is
established, the property therein that is allocable to the Employer shall remain
the sole and exclusive property of the Employer.

SECTION 7

DISTRIBUTIONS

7.1.    Distribution.

          7.1.1.    Time of Distribution.

  (a)

Election for Distribution as of a Specified Time. The Participant may elect the
year in which distribution of the Participant’s Account is to commence. If the
Participant elects to commence distribution as of a specified year, distribution
shall commence as soon as administratively possible after January 1 of the year
elected by the Participant.

  (b)

Effective Date of Elections. The Participant’s election will be effective as of
the January 1 following the date of the Participant’s election and shall apply
to contributions to the Participant’s Account made after that date. If the
Participant subsequently makes a new election, the new election will be
effective as of the January 1 following the date of the Participant’s new
election and shall apply to contributions to the Participant’s Account made
after that date. Prior contributions to the Participant’s Account shall be
subject to the Participant’s election in effect at the time a contribution is
made (unless the Participant elects to delay the time of distribution as
provided below). The Participant may make an initial election as to the time of
distribution for subsequent contributions at the time the Participant is
selected to participate in the Plan.

  (c)

Election to Delay the Time of Distribution. The Participant may make a one-time
election to change the time of distribution. The election shall delay the
distribution to a date that is at least five (5) years after the date the
distribution would have been made to the Participant absent the election. The
election shall not take effect until the date that is twelve (12) months after
the date on which the Participant makes the election. In addition, in the case
of a distribution as of a specified time (but not upon a Participant’s
Separation from Service, Disability, or death), the election shall not take
effect unless the Participant makes the election at least twelve (12) months
prior to the date the distribution is to commence. If the Participant also
desires to change the form of distribution, that election must be made at the
time the Participant elects to change the time of distribution.

  (d)

Default Time of Distribution. Unless the Participant elects otherwise, a
Participant’s Account (reduced by the amount of any applicable payroll,
withholding and other taxes) shall be distributed as soon as administratively
possible after the January 1 following the date of the earlier of the
Participant’s Separation from Service, Disability, or death.

  (e)

Delay in Distribution to Key Employees. Notwithstanding the foregoing, in the
case of a distribution to a Participant who is a key employee where the timing
of the distribution is based on the key employee’s Separation from Service, the
date of distribution to the key employee shall be the first day of the month
following the date that is six (6) months after the date of the key employee’s
Separation from Service (or, if earlier, the date of the Participant’s death). A
key employee shall be a key employee as defined in section 416(i) of the Code
without regard to paragraph 5 of section 416(i) of the Code. All distributions
under this Plan shall comply with the requirements of section 409A(a)(2)(B)(i)
of the Code.

          7.1.2.     Form of Distribution.

  (a)

Election of Form of Distribution. The Participant may elect the form of
distribution for the Participant’s Account.

  (i)

Lump Sum. The Participant may elect distribution to be made in a single lump sum
payment in cash.

  (ii)

Installments. A Participant may elect distribution to be made in a series of
cash installment payments payable annually over a period of five (5), ten (10),
or fifteen (15) years. The amount of an installment payment to a Participant
shall be substantially equal to the amount in the Participant’s Account on
January 1 of the Plan Year in which the installment payment is to be paid
divided by the remaining number of installment payments payable to the
Participant. The final payment to the Participant shall equal the amount in the
Participant’s Account as of the payment date.

  (b)

Effective Date of Elections. The Participant’s election will be effective as of
the January 1 following the date of the Participant’s election and shall apply
to contributions to the Participant’s Account made after that date. If the
Participant subsequently makes a new election, the new election will be
effective as of the January 1 following the date of the Participant’s new
election and shall apply to contributions to the Participant’s Account made
after that date. Prior contributions to the Participant’s Account shall be
subject to the Participant’s election in effect at the time a contribution is
made (unless the Participant elects to delay the time of distribution as
provided below). The Participant may make an initial election as to the form of
distribution for subsequent contributions at the time the Participant is
selected to participate in the Plan.

  (c)

Election to Change the Form of Distribution. The Participant may make a one-time
election to change the form of distribution. The election shall delay the
distribution to a date that is at least five (5) years after the date the
distribution would have been made to the Participant absent the election. The
election shall not take effect until the date that is twelve (12) months after
the date on which the Participant makes the election. In addition, in the case
of a distribution as of a specified time (but not upon a Participant’s
Separation from Service, Disability, or death), the election shall not take
effect unless the Participant makes the election at least twelve (12) months
prior to the date the distribution is to commence. If the Participant also
desires to change the time of distribution, that election must be made at the
time the Participant elects to change the form of distribution.

  (d)

Default Form of Distribution. Unless the Participant elects otherwise, the
Participant’s Account shall be distributed in a single lump sum payment in cash.

           7.1.3.    Taxation of Distribution. The Participant’s Account shall
be subject to Federal income and employment taxes at the time of payment or such
earlier date as provided under the Code. The Participant’s Account shall also be
subject to applicable state taxes.

            7.1.4.    Death Prior to Full Distribution. If the Participant dies
before distribution of the Participant’s Account has been commenced or
completed, the remainder of the undistributed Account shall be distributed to
the Participant’s Beneficiary at the time or times elected by the Participant
and in the form or forms elected by the Participant. The Beneficiary shall not
have the right to elect to change the time or form of distribution.

7.2.     Designation of Beneficiaries.

          7.2.1.    Right To Designate. Each Participant may designate, upon
forms to be furnished by and filed in accordance with procedures established by
the Vice President of Human Resources, one or more primary Beneficiaries or
alternative Beneficiaries to receive all or a specified part of the
Participant’s Account in the event of the Participant’s death. The Participant
may change or revoke any such designation from time to time without notice to or
consent from any Beneficiary or spouse. No such designation, change or
revocation shall be effective unless signed by the Participant and received by
the Vice President of Human Resources during the Participant’s lifetime. The
Vice President of Human Resources may establish rules for the use of electronic
signatures. Until such rules are established, electronic signatures shall not be
effective.

          7.2.2.    Failure of Designation. If a Participant:

  (a)

fails to designate a Beneficiary,

  (b)

designates a Beneficiary and thereafter revokes such designation without naming
another Beneficiary, or

  (c)

designates one or more Beneficiaries and all such Beneficiaries so designated
fail to survive the Participant,

such Participant’s Account, or the part thereof as to which such Participant’s
designation fails, as the case may be, shall be payable to the first class of
the following classes of automatic Beneficiaries with a member surviving the
Participant and (except in the case of the Participant’s surviving issue) in
equal shares if there is more than one member in such class surviving the
Participant:

  Participant’s surviving spouse   Participant’s surviving issue per stirpes and
not per capita   Participant’s surviving parents   Participant’s surviving
brothers and sisters   Representative of Participant’s estate.

         7.2.3.    Disclaimers by Beneficiaries. A Beneficiary entitled to a
distribution of all or a portion of a deceased Participant’s Account may
disclaim his or her interest therein subject to the following requirements. To
be eligible to disclaim, a Beneficiary must not have received a distribution of
all or any portion of a Account and must have attained at least age twenty-one
(21) years at the time such disclaimer is signed and delivered. Any disclaimer
must be in writing and must be signed by the Beneficiary and acknowledged by a
notary public. The Vice President of Human Resources may establish rules for the
use of electronic signatures and acknowledgments. Until such rules are
established, electronic signatures and acknowledgments shall not be effective. A
disclaimer shall state that the Beneficiary’s entire interest in the
undistributed Account is disclaimed or shall specify what portion thereof is
disclaimed. To be effective, duplicate original signed copies of the disclaimer
must be both signed and actually delivered to the Vice President of Human
Resources after the date of the Participant’s death but not later than nine (9)
months after the date of the Participant’s death. A disclaimer shall be
irrevocable when delivered to the Vice President of Human Resources. A
disclaimer shall be considered to be delivered to the Vice President of Human
Resources only when actually received by the Vice President of Human Resources.
The Vice President of Human Resources shall be the sole judge of the content,
interpretation and validity of a purported disclaimer. Upon the filing of a
valid disclaimer, the Beneficiary shall be considered not to have survived the
Participant as to the interest disclaimed. A disclaimer by a Beneficiary shall
not be considered to be a transfer of an interest in violation of the provisions
of this Plan Statement and shall not be considered to be an assignment or
alienation of benefits in violation of federal law prohibiting the assignment or
alienation of benefits under the Plan. No other form of attempted disclaimer
shall be recognized by the Vice President of Human Resources.

         7.2.4.    Definitions. When used herein and, unless the Participant has
otherwise specified in the Participant’s Beneficiary designation, when used in a
Beneficiary designation, “issue” means all persons who are lineal descendants of
the person whose issue are referred to, subject to the following:

  (a)

a legally adopted child and the adopted child’s lineal descendants always shall
be lineal descendants of each adoptive parent (and of each adoptive parent’s
lineal ancestors);

  (b)

a legally adopted child and the adopted child’s lineal descendants never shall
be lineal descendants of any former parent whose parental rights were terminated
by the adoption (or of that former parent’s lineal ancestors); except that if,
after a child’s parent has died, the child is legally adopted by a stepparent
who is the spouse of the child’s surviving parent, the child and the child’s
lineal descendants shall remain lineal descendants of the deceased parent (and
the deceased parent’s lineal ancestors);

  (c)

if the person (or a lineal descendant of the person) whose issue are referred to
is the parent of a child (or is treated as such under applicable law) but never
received the child into that parent’s home and never openly held out the child
as that parent’s child (unless doing so was precluded solely by death), then
neither the child nor the child’s lineal descendants shall be issue of the
person.

“Child” means an issue of the first generation; “per stirpes” means in equal
shares among living children of the person whose issue are referred to and the
issue (taken collectively) of each deceased child of such person, with such
issue taking by right of representation of such deceased child; and “survive”
and “surviving” mean living after the death of the Participant.

        7.2.5. Special Rules. Unless the Participant has otherwise specified in
the Participant’s Beneficiary designation, the following rules shall apply:

  (a)

If there is not sufficient evidence that a Beneficiary was living at the time of
the death of the Participant, it shall be deemed that the Beneficiary was not
living at the time of the death of the Participant.

  (b)

The automatic Beneficiaries and the Beneficiaries designated by the Participant
shall become fixed at the time of the Participant’s death so that, if a
Beneficiary survives the Participant but dies before the receipt of all payments
due such Beneficiary hereunder, such remaining payments shall be payable to the
representative of such Beneficiary’s estate.

  (c)

If the Participant designates as a Beneficiary the person who is the
Participant’s spouse on the date of the designation, either by name or by
relationship, or both, the dissolution, annulment or other legal termination of
the marriage between the Participant and such person shall automatically revoke
such designation. (The foregoing shall not prevent the Participant from
designating a former spouse as a Beneficiary on a form signed by the Participant
and received by the Vice President of Human Resources after the date of the
legal termination of the marriage between the Participant and such former
spouse, and during the Participant’s lifetime.)

  (d)

Any designation of a nonspouse Beneficiary by name that is accompanied by a
description of relationship to the Participant shall be given effect without
regard to whether the relationship to the Participant exists either then or at
the Participant’s death.

  (e)

Any designation of a Beneficiary only by statement of relationship to the
Participant shall be effective only to designate the person or persons standing
in such relationship to the Participant at the Participant’s death.

A Beneficiary designation is permanently void if it either is signed or is filed
by a Participant who, at the time of such signing or filing, is then a minor
under the law of the state of the Participant’s legal residence. The Vice
President of Human Resources shall be the sole judge of the content,
interpretation and validity of a purported Beneficiary designation.

7.3.     General Distribution Rules.

         7.3.1.     Distribution in Cash. Distribution of a Participant’s
Account shall be made in cash.

         7.3.2.    Facility of Payment. In case of the legal disability,
including minority, of a Participant or Beneficiary entitled to receive any
distribution under the Plan, payment shall be made, if the Vice President of
Human Resources shall be advised of the existence of such condition:

  (a)

To the duly appointed guardian or conservator of such Participant or
Beneficiary, or

  (b)

To the duly appointed attorney-in-fact or other legal representative of such
Participant or Beneficiary, or

  (c)

To a person or institution entrusted with the care or maintenance of the
incompetent or disabled Participant or Beneficiary, provided, however, such
person or institution has satisfied the Vice President of Human Resources that
the payment will be used for the best interest and assist in the care of such
Participant or Beneficiary, and provided further, that no prior claim for said
payment has been made by a duly appointed guardian, conservator,
attorney-in-fact or other legal representative of such Participant or
Beneficiary as provided above.

Any payment made in accordance with the foregoing provisions of this section
shall constitute a complete discharge of any liability or obligation of the
Employer, the Vice President of Human Resources, and the Fund therefore.

SECTION 8

SPENDTHRIFT PROVISION

No Participant or Beneficiary shall have any transmissible interest in any
Account nor shall any Participant or Beneficiary have any power to anticipate,
alienate, dispose of, pledge or encumber the same, nor shall the Plan recognize
any assignment thereof, either in whole or in part, nor shall the Account be
subject to attachment, garnishment, execution following judgment or other legal
process (including without limitation any domestic relations order, whether or
not a “qualified domestic relations order” under section 414(p) of the Code and
section 206(d) of ERISA) before the Account is distributed to the Participant or
Beneficiary.

The power to designate Beneficiaries to receive the Account of a Participant in
the event of death shall not permit or be construed to permit such power or
right to be exercised by the Participant so as thereby to anticipate, pledge,
mortgage or encumber the Participant’s Account or any part thereof, and any
attempt of a Participant so to exercise said power in violation of this
provision shall be of no force and effect and shall be disregarded by the
Employer and the Vice President of Human Resources.

SECTION 9

AMENDMENT AND TERMINATION

9.1.     Amendment. Graco reserves the power to amend this Plan Statement either
prospectively or retroactively or both:

  (a)

in any respect by action of its Board of Directors;

  (b)

in any respect that does not materially increase the cost of the Plan by action
of the Committee; and

  (c)

in any respect to eligibility, (i) to add or remove participating employers, and
(ii) to add or remove such position, salary schedule, grade or other
classification provided in Schedule II by action of the Vice President of Human
Resources.

The power to amend this Plan Statement may not be delegated.

9.2.     Discontinuance of Contributions and Termination of Plan. Graco also
reserves the right, by action of its Board of Directors, at any time to totally
or partially terminate the Plan, and to reduce, suspend or discontinue
contributions to the Plan.

9.3.     Merger or Spinoff of Plans.

          9.3.1.   In General. The Committee may cause all or a part of the Plan
to be merged with all or a part of any other plan. The Committee may cause all
or a part of the Plan to be spun off to another plan.

          9.3.2.   Beneficiary Designations. If assets and liabilities are
transferred from another plan to the Plan, Beneficiary designations made under
that plan shall become void with respect to deaths occurring on or after the
date as of which such transfer is made and the Beneficiary designation rules of
this Plan Statement shall apply beginning on such date.

SECTION 10

INDEMNIFICATION

Except as prohibited by applicable law, Graco shall defend, indemnify and hold
harmless from any and all liabilities, costs and expenses (including legal
fees), to the extent not covered by insurance, each officer, director or
employee of the Employer, who is a party to or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding with respect
to the Plan, whether imposed under ERISA or otherwise, wherever brought, whether
civil, criminal, administrative or investigative by reason of the fact that the
individual is or was a fiduciary or administrator of the Plan (as defined in
ERISA), or by reason of acting in any other capacity in connection with the
Plan. No such indemnification, however, shall be required or provided if such
liability arises (i) from the individual’s claim for the individual’s own
benefit, (ii) from the proven willful misconduct, fraud or the bad faith of the
individual, or (iii) from the criminal misconduct of such individual if the
individual had reason to believe the conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that the
individual’s conduct was unlawful. This indemnification shall continue as to an
individual who has ceased to be an officer, director or employee of the Employer
and shall inure to the benefit of the heirs, executors and administrators of
such an individual.

SECTION 11

DETERMINATIONS — CLAIM PROCEDURES

11.1.    Determinations. The benefits under the Plan will be paid only if the
Vice President of Human Resources and, to the extent a Participant appeals a
claim, the Committee decide in their discretion that the applicant is entitled
to them. The Vice President of Human Resources has discretionary authority to
grant or deny benefits under the Plan. The Vice President of Human Resources
shall have the sole discretion, authority and responsibility to interpret and
construe this Plan Statement and all relevant documents and information, and to
determine all factual and legal questions under the Plan, including but not
limited to the entitlement of all persons to benefits and the amounts of their
benefits. The Vice President of Human Resources shall make such determinations
as may be required from time to time in the administration of the Plan. This
discretionary authority shall include all matters arising under the Plan. An
application for a distribution shall be considered as a claim.

11.2.    Claim and Review Procedures. Until modified by the Committee, the claim
and review procedures set forth in this section shall be the mandatory claims
and review procedure for the resolution of disputes and disposition of claims
filed under the Plan to be reviewed by the Vice President of Human Resources and
the Committee.

         11.2.1.   Initial Claim. An individual may, subject to any applicable
deadline, file with the Vice President of Human Resources a written claim for
benefits under the Plan in a form and manner prescribed by the Vice President of
Human Resources.

  (a)

If the claim is denied in whole or in part, the Vice President of Human
Resources shall notify the claimant of the adverse benefit determination within
ninety (90) days after receipt of the claim.

  (b)

The ninety (90) day period for making the claim determination may be extended
for ninety (90) days if the Vice President of Human Resources determines that
special circumstances require an extension of time for determination of the
claim, provided that the Vice President of Human Resources notifies the
claimant, prior to the expiration of the initial ninety (90) day period, of the
special circumstances requiring an extension and the date by which a claim
determination is expected to be made.

        11.2.2.    Notice of Initial Adverse Determination. A notice of an
adverse determination shall set forth in a manner calculated to be understood by
the claimant:

  (a)

the specific reasons for the adverse determination;

  (b)

references to the specific provisions of this Plan Statement (or other
applicable Plan document) on which the adverse determination is based;

  (c)

a description of any additional material or information necessary to perfect the
claim and an explanation of why such material or information is necessary; and

  (d)

a description of the claims review procedure, including the time limits
applicable to such procedure, and a statement of the claimant’s right to bring a
civil action under section 502(a) of ERISA following an adverse determination on
review.

        11.2.3.    Request for Review. Within sixty (60) days after receipt of
an initial adverse benefit determination notice, the claimant may file with the
Committee a written request for a review of the adverse determination and may,
in connection therewith submit written comments, documents, records and other
information relating to the claim benefits. Any request for review of the
initial adverse determination not filed within sixty (60) days after receipt of
the initial adverse determination notice shall be untimely.

        11.2.4.    Claim on Review. If the claim, upon review, is denied in
whole or in part, the Committee shall notify the claimant of the adverse benefit
determination within sixty (60) days after receipt of such a request for review.

  (a)

The sixty (60) day period for deciding the claim on review may be extended for
sixty (60) days if the Committee determines that special circumstances require
an extension of time for determination of the claim, provided that the Committee
notifies the claimant, prior to the expiration of the initial sixty (60) day
period, of the special circumstances requiring an extension and the date by
which a claim determination is expected to be made.

  (b)

In the event that the time period is extended due to a claimant’s failure to
submit information necessary to decide a claim on review, the claimant shall
have sixty (60) days within which to provide the necessary information and the
period for making the claim determination on review shall be tolled from the
date on which the notification of the extension is sent to the claimant until
the date on which the claimant responds to the request for additional
information or, if earlier, the expiration of sixty (60) days.

  (c)

The Committee’s review of a denied claim shall take into account all comments,
documents, records, and other information submitted by the claimant relating to
the claim, without regard to whether such information was submitted or
considered in the initial benefit determination.

        11.2.5.    Notice of Adverse Determination for Claim on Review. A notice
of an adverse determination for a claim on review shall set forth in a manner
calculated to be understood by the claimant:

  (a)

the specific reasons for the denial;

  (b)

references to the specific provisions of this Plan Statement (or other
applicable Plan document) on which the adverse determination is based;

  (c)

a statement that the claimant is entitled to receive, upon request and free of
charge, reasonable access to, and copies of, all documents, records, and other
information relevant to the claimant’s claim for benefits;

  (d)

a statement describing any voluntary appeal procedures offered by the Plan and
the claimant’s right to obtain information about such procedures; and

  (e)

a statement of the claimant’s right to bring an action under section 502(a) of
ERISA.

11.3.    Rules and Regulations.

        11.3.1.    Adoption of Rules. Any rule not in conflict or at variance
with the provisions hereof may be adopted by the Vice President of Human
Resources or the Committee.

        11.3.2.    Specific Rules.

  (a)

No inquiry or question shall be deemed to be a claim or a request for a review
of a denied claim unless made in accordance with the established claim
procedures. The Vice President of Human Resources or the Committee may require
that any claim for benefits and any request for a review of a denied claim be
filed on forms to be furnished by the Vice President of Human Resources or the
Committee upon request.

  (b)

All decisions on claims shall be made by the Vice President of Human Resources
and all decisions on requests for a review of denied claims shall be made by the
Committee, unless delegated by either as provided for in the Plan, in which case
references in this section shall be treated as references to the delegate of the
Vice President of Human Resources or the Committee.

  (c)

Claimants may be represented by a lawyer or other representative at their own
expense, but the Vice President of Human Resources and the Committee reserve the
right to require the claimant to furnish written authorization and establish
reasonable procedures for determining whether an individual has been authorized
to act on behalf of a claimant. A claimant’s representative shall be entitled to
copies of all notices given to the claimant.

  (d)

The decision on a claim and on a request for a review of a denied claim may be
provided to the claimant in electronic form instead of in writing.

  (e)

In connection with the review of a denied claim, the claimant or the claimant’s
representative shall be provided, upon request and free of charge, reasonable
access to, and copies of, all documents, records, and other information relevant
to the claimant’s claim for benefits.

  (f)

The time period within which a benefit determination will be made shall begin to
run at the time a claim or request for review is filed in accordance with the
claims procedures, without regard to whether all the information necessary to
make a benefit determination accompanies the filing.

  (g)

The claims and review procedures shall be administered with appropriate
safeguards so that benefit claim determinations are made in accordance with
governing plan documents and, where appropriate, the plan provisions have been
applied consistently with respect to similarly situated claimants.

  (h)

For the purpose of this section, a document, record, or other information shall
be considered “relevant” if such document, record, or other information: (i) was
relied upon in making the benefit determination; (ii) was submitted, considered,
or generated in the course of making the benefit determination, without regard
to whether such document, record, or other information was relied upon in making
the benefit determination; (iii) demonstrates compliance with the administration
processes and safeguards designed to ensure that the benefit claim determination
was made in accordance with governing plan documents and that, where
appropriate, the Plan provisions have been applied consistently with respect to
similarly situated claimants; and (iv) constitutes a statement of policy or
guidance with respect to the Plan concerning the denied treatment option or
benefit for the claimant’s diagnosis, without regard to whether such advice or
statement was relied upon in making the benefit determination.

  (i)

The Vice President of Human Resources and the Committee may, in their
discretion, rely on any applicable statute of limitation or deadline as a basis
for denial of any claim.

11.4.  Deadline to File Claim. To be considered timely under the Plan’s claim
and review procedure, a claim must be filed with the Vice President of Human
Resources within one (1) year after the claimant knew or reasonably should have
known of the principal facts upon which the claim is based. If or to the extent
that the claim relates to a failure to effect a Participant’s or Beneficiary’s
investment directions or a Participant’s election regarding contributions, a
claim must be filed with the Vice President of Human Resources within thirty
(30) days after the claimant knew or reasonably should have known of the
principal facts upon which the claim is based.

11.5.   Exhaustion of Administrative Remedies. Notwithstanding any provision in
this Plan Statement, the exhaustion of the claim and review procedure is
mandatory for resolving every claim and dispute arising under the Plan. As to
such claims and disputes:

  (a)

no legal action to recover Plan benefits or to enforce or clarify rights under
the Plan under any provision of law, whether or not statutory, may be commenced
until the claims and review procedure set forth herein have been exhausted in
the entirety; and

  (b)

in any such legal action all explicit and all implicit determinations by the
Vice President of Human Resources (including, but not limited to, determinations
as to whether the initial request for benefits or request for review was timely
filed) shall be afforded the maximum deference permitted by law.

11.6.   Deadline to File Legal Action. No legal action to recover Plan benefits
or to enforce or clarify rights under the Plan under any provision of law,
whether or not statutory, may be brought by any claimant on any matter
pertaining to the Plan unless the legal action is commenced in the proper forum
before the earlier of:

  (a)

thirty (30) months after the date the claimant knew or reasonably should have
known of the principal facts on which the claim is based, or

  (b)

six (6) months after the date the claimant has exhausted the claim and review
procedure.

If or to the extent that the claim relates to a failure to effect a
Participant’s or Beneficiary’s investment directions or a Participant’s election
regarding contributions, the thirty (30) month period shall be nineteen (19)
months.

11.7.   Knowledge of Fact by Participant Imputed to Beneficiary and Others.
Knowledge of all facts that a Participant knew or reasonably should have known
shall be imputed to every claimant who is or claims to be a Beneficiary of the
Participant or otherwise claims to derive an entitlement by reference to the
Participant for the purpose of applying the previously specified periods.

SECTION 12

PLAN ADMINISTRATION

12.1.     Board of Directors. The Board of Directors shall have the authority to
amend, freeze or terminate the Plan.

12.2.     Committee. Functions generally assigned to the Committee may be
delegated to and discharged by Graco’s officers or a committee.

12.3.     Vice President of Human Resources. Functions generally assigned to the
Vice President of Human Resources may be delegated to and discharged by
employees of Graco’s Human Resources Department. The Vice President shall not
have any authority with respect to the determination of any matter specially
affecting his or her individual interest in the Plan (as distinguished from the
interests of all Participants and Beneficiaries or a broad class of Participants
and Beneficiaries), all such authority being vested in and exercisable only by
the Committee.

12.4.     Fiduciary Responsibility — In General.

             12.4.1.    Limitation on Authority. No action taken by any
fiduciary, if authority to take such action has been delegated or redelegated to
it, shall be the responsibility of any other fiduciary except as may be required
by the provisions of ERISA. Except to the extent imposed by ERISA, no fiduciary
shall have the duty to question whether any other fiduciary is fulfilling all of
the responsibility imposed upon such other fiduciary by this Plan Statement or
by ERISA

             12.4.2.     Dual Capacity. Any person or group of persons may serve
in more than one fiduciary capacity with respect to the Plan.

12.5.     Administrator. Graco shall be the administrator for purposes of
section 3(16)(A) of ERISA.

12.6.     Named Fiduciaries. The Vice President of Human Resources and the
Committee shall be named fiduciaries.

12.7.     Service of Process. In the absence of any designation to the contrary
by Graco, the General Counsel of Graco is designated as the appropriate and
exclusive agent for the receipt of service of process directed to the Plan in
any legal proceeding, including arbitration, involving the Plan.

12.8.    Rules and Regulations. Any rule not in conflict or at variance with the
provisions hereof may be adopted by the Committee.

12.9.     Method of Executing Instruments. Information to be supplied or written
notices to be made or consents to be given by the Employer or the Committee
pursuant to any provision of this Plan Statement may be signed in the name of
the Employer by any officer or by any employee who has been authorized to make
such certification or to give such notices or consents or by any Committee
member.

12.10.    Information Furnished by Participants. Neither the Employer, the
Committee, or the Vice President of Human Resources shall be liable or
responsible for any error in the computation of the Account of a Participant
resulting from any misstatement of fact made by the Participant, directly or
indirectly, to the Employer, the Committee, or the Vice President of Human
Resources, and used by them in determining the Participant’s Account. Neither
the Employer, the Committee, or the Vice President of Human Resources shall be
obligated or required to increase the Account of such Participant which, on
discovery of the misstatement, is found to be understated as a result of such
misstatement of the Participant. However, the Account of any Participant which
is overstated by reason of any such misstatement shall be reduced to the amount
appropriate for the Participant in view of the truth.

12.11.    Receipt of Documents. If a form or document must be filed with or
received by the Employer, the Committee, or the Vice President of Human
Resources (the “appropriate entity”), it must be actually received by the
appropriate entity to be effective. The determination of whether or when a form
or document has been received by the appropriate entity shall be made by the
Vice President of Human Resources on the basis of what documents are
acknowledged by the appropriate entity to be in its actual possession without
regard to the “mailbox rule” or similar rule of evidence. The absence of a
document in the appropriate entity’s records and files shall be conclusive and
binding proof that the document was not received by the appropriate entity.

12.12.   Powers of Attorney. The Plan shall recognize a document submitted to
the Vice President of Human Resources by which a Participant or Beneficiary
appoints another person as his or her attorney in fact, under the following
rules:

  (a)

that neither Graco or the Vice President of Human Resources shall be required to
determine whether the document complies with the applicable state law regarding
powers of attorneys or attorneys in fact;

  (b)

that if the document enumerates one or more specific powers in addition to a
general power to act, the enumeration of one or more specific powers shall not
be deemed to limit the generality of the general power to act; in other words,
the general power shall continue to be in force; and

  (c)

that the document is signed by the Participant or Beneficiary and is notarized.

The Vice President of Human Resources may establish additional rules for the
acceptance of powers of attorneys for Plan purposes. The Vice President of Human
Resources may review the document as to whether it complies with the rules. If
there is a conflict between the action of a court appointed guardian or
conservator and an attorney in fact, then the authority of the court appointed
guardian or conservator shall be recognized as superior to that of an attorney
in fact.

12.13.    Guardians and Conservators. The Plan shall recognize the authority of
a court appointed guardian or conservator to act on behalf of a Participant or
Beneficiary to the extent such action is within the authority granted to the
court appointed guardian or conservator.

SECTION 13

IN GENERAL

13.1.  Disclaimers.

          13.1.1.     Effect on Employment. Neither the terms of this Plan
Statement nor the benefits hereunder nor the continuance thereof shall be a term
of the employment of any employee, and the Employer shall not be obligated to
continue the Plan. The terms of this Plan Statement shall not give any employee
the right to be retained in the employment of the Employer.

          13.1.2.     Sole Source of Benefits. Neither the Employer nor any of
its officers nor any member of its Board of Directors nor any member of the
Committee in any way guarantee Participant Accounts against loss or
depreciation, nor do they guarantee the payment of any benefit or amount which
may become due and payable hereunder to any Participant, Beneficiary, or other
person. Each Participant, Beneficiary, or other person entitled at any time to
payments hereunder shall look solely to the assets of the Participant’s Employer
and Graco for such payments. If an Account shall have been distributed to a
former Participant, Beneficiary, or any other person entitled to the receipt
thereof, such former Participant, Beneficiary, or other person, as the case may
be, shall have no further right or interest in the other assets.

13.2.    Applicable Laws.

          13.2.1.    ERISA Status. The Plan is maintained with the understanding
that the Plan is an unfunded plan maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees as provided in section 201(2), section 301(3) and
section 401(a)(1) of ERISA. Each provision shall be interpreted and administered
accordingly.

          13.2.2.     Internal Revenue Code Status. The Plan is intended to be a
nonqualified deferred compensation arrangement under section 409A of the Code.

13.3.     Choice of Law. This instrument has been executed and delivered in the
State of Minnesota and, except to the extent that federal law is controlling,
shall be construed and enforced in accordance with the laws of the State of
Minnesota.

SCHEDULE I

EMPLOYERS PARTICIPATING

Name of Employer Effective Date of
  Plan Adoption       1.  Graco Inc. 05/01/05     2.  Graco Minnesota Inc.
05/01/05     3.  Liquid Control Corp. 05/01/05     4.  Decker Industries
05/01/05     5.  Profill Corporation 05/01/05

SCHEDULE II

COVERED SALARY GRADE LEVELS AND CLASSIFICATIONS

Name of Employer Effective Date Position or   
Salary Schedule    Grade or Other
Classification           1. Graco Inc. 05/01/05 Exec, Admin & Engrg 14-26    
05/01/05 Sales 35-37     05/01/05 Information Systems 68-70     05/01/05 Legal
76-79           2. Graco Minnesota Inc. 05/01/05 Exec, Admin & Engrg 14-26      
Plant Management SF 57              3. Liquid Control Corp. 05/01/05 President  
    05/01/05 Director of Finance       05/01/05 Vice President, Sales        
   & Marketing             4. Decker Industries 05/01/05 General Manager        
    5. Profill Corp. 05/01/05 None  

SCHEDULE III

MEASURING INVESTMENTS

A.    Measuring Investments. The measuring investments shall be the same as the
investment options available under the Graco Employee Investment Plan (excluding
Graco common stock).

B.    Default Rules. If a Participant has not designated which measuring
investments shall be used to determine the value of the Participant's Account,
the value of the Participant's Account will be determined using the same default
investment option as provided under the Graco Employee Investment Plan.