Exhibit 10.3
                             STOCK OPTION AGREEMENT
                                    (NON-ISO)


     THIS AGREEMENT,  made this 24th day of February, 2000, by and between Graco
Inc., a Minnesota corporation (the "Company") and David Lowe, (the "Employee").

     WITNESSETH THAT:

     WHEREAS, the Company pursuant to it's Long-Term Incentive Stock Plan wishes
to grant this stock option to Employee;

     NOW THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto hereby agree as follows:

     1.   Grant of Option
          ---------------

          The  Company   hereby  grants  to  Employee,   the  right  and  option
          (hereinafter  called the  "option")  to purchase all or any part of an
          aggregate of 7,500  shares of Common  Stock of the Company,  par value
          $1.00 per share,  at the price of $30.6875  per share on the terms and
          conditions set forth herein.

     2.   Duration and Exercisability
          ---------------------------

          A.   This option may not be exercised by Employee until the expiration
               of three(3)  years from the date of grant,  and this option shall
               in all events  terminate  ten (10) years after the date of grant.
               During the two (2) years  from the date of grant of this  option,
               no  portion  of this  option may be  exercised.  Thereafter  this
               entire option shall become exercisable as follows:

                                                 Total Portion of Option
                              Date                 Which is Exercisable
                              ----               -----------------------

                  One Year after Date of Grant               0%
                  Two Years after Date of Grant              0%
                  Three Years after Date of Grant          100%

               In the event that  Employee does not purchase in any one year the
               full  number of shares of Common  Stock of the  Company  to which
               he/she is entitled under this option,  he/she may, subject to the
               terms and conditions of Section 3 hereof, purchase such shares of
               Common  Stock  in any  subsequent  year  during  the term of this
               option.

          B.   During  the  lifetime  of  the  Employee,  the  option  shall  be
               exercisable  only by  him/her  and  shall  not be  assignable  or
               transferable  by  him/her  otherwise  than by will or the laws of
               descent and distribution.

     3.   Effect of Termination of Employment
          -----------------------------------

          A.   In the event that  Employee  shall  cease to be  employed  by the
               Company or its  subsidiaries  for any reason  other than  his/her
               gross and willful  misconduct,  death,  retirement (as defined in
               Section 3. D. below),  or disability (as defined in Section 3. D.
               below),  Employee  shall have the right to exercise the option at
               any time within one month after such termination of employment to
               the extent of the full  number of shares  he/she was  entitled to
               purchase under the option on the date of termination,  subject to
               the  condition  that no  option  shall be  exercisable  after the
               expiration of the term of the option.

          B.   In the event that  Employee  shall  cease to be  employed  by the
               Company  or its  subsidiaries  by  reason  of  his/her  gross and
               willful  misconduct  during  the  course of  his/her  employment,
               including  but not limited to wrongful  appropriation  of Company
               funds  or  the  commission  of a  felony,  the  option  shall  be
               terminated as of the date of the misconduct.

          C.   If the Employee shall die while in the employ of the Company or a
               subsidiary  or within one month after  termination  of employment
               for any reason other than gross and willful  misconduct and shall
               not have fully exercised the option,  all remaining  shares shall
               become  immediately  exercisable and such option may be exercised
               at any time  within  twelve  months  after  his/her  death by the
               executors or  administrators  of the Employee or by any person or
               persons  to  whom  the  option  is  transferred  by  will  or the
               applicable laws of descent and  distribution,  and subject to the
               condition  that  no  option  shall  be   exercisable   after  the
               expiration of the term of the option.

          D.   If the Employee's  termination of employment is due to retirement
               (either  after  attaining  age 55 with 10  years of  service,  or
               attaining age 65), or due to disability within the meaning of the
               provisions of the Graco Long-Term  Disability Plan subject to the
               conditions  that  no  option  shall  be  exercisable   after  the
               expiration of the terms of the option, all remaining shares shall
               become immediately exercisable and the option may be exercised by
               the  Employee  at any time within  three years of the  Employee's
               retirement,  subject  to the  condition  that no option  shall be
               exercisable  after the  expiration of the term of the option.  In
               the  event of the death of the  Employee  within  the  three-year
               period after retirement,  the option may be exercised at any time
               within  twelve  months after  his/her  death by the  executors or
               administrators  of the  Employee  or by any  person or persons to
               whom the option is transferred by will or the applicable  laws of
               descent  and  distribution,  to the extent of the full  number of
               shares  he/she was  entitled to purchase  under the option on the
               date of death,  and subject to the condition that no option shall
               be exercisable after the expiration of the term of the option.

          E.   Notwithstanding  anything  to  the  contrary  contained  in  this
               Section  3,  if  the  Employee   chooses  to  terminate   his/her
               employment by retirement  (as defined in Section 3. D. above) and
               has not given the Company written notice,  by  correspondence  to
               his/her immediate  supervisor and the Chief Executive Officer, of
               said  intention  to retire not less than six (6) months  prior to
               the date of his/her  retirement,  then in such event for purposes
               of this Agreement said  termination of employment shall be deemed
               to  be  not  a  retirement  but  a  termination  subject  to  the
               provisions of Section 3. A. above, provided, however, that in the
               event  that  the  Chief  Executive   Officer,   in  his/her  sole
               discretion  and  judgement,   determines   that   termination  of
               employment by  retirement of the Employee  without six (6) months
               prior  written  notice is in the best  interests  of the Company,
               then such retirement shall be subject to Section 3. D. above.

     4.   Manner of Exercise
          ------------------

          A.   The option can be  exercised  only by  Employee  or other  proper
               party within the option period  delivering  written notice to the
               Company  at  its  principal  office  in  Minneapolis,  Minnesota,
               stating  the  number of  shares  as to which the  option is being
               exercised and,  except as provided in Section 4. C.,  accompanied
               by  payment-in-full of the option price for all shares designated
               in the notice.

          B.   The Employee  may, at Employee's  election,  pay the option price
               either by check (bank check,  certified check, or personal check)
               or by delivering to the Company for cancellation shares of Common
               Stock of the Company with a fair market value equal to the option
               price. For these purposes, the fair market value of the Company's
               Common  Stock shall be the closing  price of the Common  Stock on
               the date of exercise on the New York Stock  Exchange (the "NYSE")
               or on the principal  national  securities  exchange on which such
               shares are traded if the shares are not then  traded on the NYSE.
               If there is not a  quotation  available  for such  day,  then the
               closing  price  on  the  next  preceding  day  for  which  such a
               quotation  exists shall be determinative of fair market value. If
               the shares are not then  traded on an  exchange,  the fair market
               value shall be the average of the closing bid and asked prices of
               the Common  Stock as  reported  by the  National  Association  of
               Securities  Dealers  Automated  Quotation  System.  If the Common
               Stock is not then  traded on NASDAQ or on an  exchange,  then the
               fair  market  value  shall be  determined  in such  manner as the
               Company shall deem reasonable.

          C.   The Employee may, with the consent of the Company, pay the option
               price by arranging for the  immediate  sale of some or all of the
               shares issued upon exercise of the option by a securities  dealer
               and the  payment to the Company by the  securities  dealer of the
               option exercise price.


     5.   Payment of Withholding Taxes
          ----------------------------

          Upon exercise of any portion of this option, Employee shall pay to the
          Company an amount  sufficient to satisfy any federal,  state, or local
          withholding tax  requirements  which arise as a result of the exercise
          of the option or provide the Company with satisfactory indemnification
          for such payment.

     6.   Change of Control
          -----------------

          A.   Notwithstanding  Section  2(a)  hereof,  the entire  option shall
               become  immediately and fully  exercisable on the day following a
               "Change of Control"  and shall  remain  fully  exercisable  until
               either  exercised or expiring by its terms. A "Change of Control"
               means:

               (1)  Acquisition by any individual,  entity, or group (within the
                    meaning of Section  13(d)(3) or 14(d)(2) of the Exchange Act
                    of 1934), (a "Person"),  of beneficial ownership (within the
                    meaning of Rule 13d-3  under the 1934 Act) which  results in
                    the  beneficial  ownership  by such Person of 25% or more of
                    either

                    (a)  The then  outstanding  shares  of  Common  Stock of the
                         Company (the "Outstanding Company Common Stock") or

                    (b)  The  combined  voting  power  of the  then  outstanding
                         voting  securities  of the  Company  entitled  to  vote
                         generally   in   the   election   of   directors   (the
                         "Outstanding   Company  Voting   Securities");provided,
                         however,  that  the  following  acquisitions  will  not
                         result in a Change of Control:

                              (i)   an acquisition directly from the Company,
                              (ii)  an acquisition by the Company,
                              (iii) an acquisition  by an employee  benefit plan
                                    (or related trust) sponsored  or  maintained
                                    by the Company or any corporation controlled
                                    by the Company,
                              (iv)  an acquisition by any  Person who is  deemed
                                    to have beneficial ownership of the  Company
                                    common   stock  or  other   Company   voting
                                    securities owned by the Trust Under the Will
                                    of   Clarissa  L.   Gray  ("Trust  Person"),
                                    provided  that  such  acquisition  does  not
                                    result in the  beneficial ownership  by such
                                    Person  of 32%  or more of either  the  Out-
                                    standing   Company   Common   Stock  or  the
                                    Outstanding Company  Voting Securities,  and
                                    provided further that for  purposes  of this
                                    Section  6,   a  Trust Person  shall  not be
                                    deemed to have  beneficial ownership of  the
                                    Company common stock or other Company voting
                                    securities owned by The  Graco Foundation or
                                    any employee benefit plan  of  the  Company,
                                    including,  without  limitations,  the Graco
                                    Employee  Retirement  Plan  and  the   Graco
                                    Employee Stock Ownership Plan,
                              (v)   An acquisition by the Employee or any  group
                                    that includes the Employee, or
                              (vi)  An acquisition  by any  corporation pursuant
                                    to a transaction that complies  with clauses
                                    (a),  (b), and  (c) of subsection (4) below;
                                    and provided, further, that if any  Person's
                                    beneficial   ownership  of  the  Outstanding
                                    Company Common  Stock or Outstanding Company
                                    Voting   Securities   is  25% or  more  as a
                                    result of a transaction  described in clause
                                    (i)   or   (ii)   above,  and   such  Person
                                    subsequently  acquires beneficial  ownership
                                    of additional   Outstanding  Company  Common
                                    Stock   or   Outstanding   Company    Voting
                                    Securities  as  a  result  of a  transaction
                                    other than that  described in clause  (i) or
                                    (ii) above, such subsequent acquisition will
                                    be treated  as an  acquisition  that  causes
                                    such Person to own 25% or more  of  the Out-
                                    standing Company Common Stock or Outstanding
                                    Company  Voting  Securities and  be deemed a
                                    Change  of Control;  and  provided  further,
                                    that  in the event  any acquisition or other
                                    transaction  occurs  which  results  in  the
                                    beneficial  ownership  of  32%  or  more  of
                                    either the Outstanding Company Common  Stock
                                    or the Outstanding Company Voting Securities
                                    by any Trust Person, the Incumbent Board may
                                    by  majority  vote  increase  the  threshold
                                    beneficial   ownership   percentage   to   a
                                    percentage  above 32%  for any Trust Person;
                                    or

               (2)  Individuals who, as of the date hereof, constitute the Board
                    of Directors of the Company (the  "Incumbent  Board")  cease
                    for any reason to  constitute  at least a  majority  of said
                    Board;  provided,  however,  that any individual  becoming a
                    director  subsequent to the date hereof whose  election,  or
                    nomination for election by the Company's  shareholders,  was
                    approved by a vote of at least a majority  of the  directors
                    then  comprising  the Incumbent  Board will be considered as
                    though such individual were a member of the Incumbent Board,
                    but excluding,  for this purpose,  any such individual whose
                    initial  membership  on the  Board  occurs as a result of an
                    actual or  threatened  election  contest with respect to the
                    election  or  removal  of   directors  or  other  actual  or
                    threatened  solicitation  of  proxies or  consents  by or on
                    behalf of a Person other than the Board; or

               (3)  The  commencement  or announcement of an intention to make a
                    tender offer or exchange  offer,  the  consummation of which
                    would result in the beneficial  ownership by a Person of 25%
                    or  more  of  the   Outstanding   Company  Common  Stock  or
                    Outstanding Company Voting Securities; or

               (4)  The  approval  by  the  shareholders  of  the  Company  of a
                    reorganization, merger, consolidation, or statutory exchange
                    of Outstanding  Company Common Stock or Outstanding  Company
                    Voting  Securities  or sale or other  disposition  of all or
                    substantially  all of the assets of the  Company  ("Business
                    Combination")   or,  if   consummation   of  such   Business
                    Combination  is  subject,  at the time of such  approval  by
                    stockholders,   to  the   consent  of  any   government   or
                    governmental  agency,  the obtaining of such consent (either
                    explicitly  or  implicitly   by   consummation)   excluding,
                    however, such a Business combination pursuant to which

                    (a)  All  or  substantially   all  of  the  individuals  and
                         entities  who  were  the   beneficial   owners  of  the
                         Outstanding Company Common Stock or Outstanding Company
                         Voting  Securities  immediately  prior to such Business
                         Combination  beneficially  own, directly or indirectly,
                         more than 80% of,  respectively,  the then  outstanding
                         shares of common stock and the combined voting power of
                         the then outstanding voting securities entitled to vote
                         generally in the election of directors, as the case may
                         be, of the  corporation  resulting  from such  Business
                         Combination   (including,    without   limitation,    a
                         corporation  that as a result of such  transaction owns
                         the  Company  or  all  or  substantially   all  of  the
                         Company's assets either directly or through one or more
                         subsidiaries) in substantially  the same proportions as
                         their  ownership,  immediately  prior to such  Business
                         Combination of the Outstanding  Company Common Stock or
                         Outstanding Company Voting Securities,

                    (b)  No Person  [excluding  any  employee  benefit  plan (or
                         related  trust)  of the  Company  or  such  corporation
                         resulting from such Business Combination]  beneficially
                         owns,  directly or indirectly,  25% or more of the then
                         outstanding  shares of common stock of the  corporation
                         resulting   from  such  Business   Combination  or  the
                         combined  voting power of the then  outstanding  voting
                         securities  of such  corporation  except to the  extent
                         that  such  ownership  existed  prior  to the  Business
                         Combination, and

                    (c)  At least a  majority  of the  members  of the  board of
                         directors  of  the  corporation   resulting  from  such
                         Business  Combination  were  members  of the  Incumbent
                         Board  at the  time  of the  execution  of the  initial
                         Agreement, or of the action of the Board, providing for
                         such Business Combination; or

               (5)  Approval  by the  stockholders  of the Company of a complete
                    liquidation or dissolution of the Company.

          B.   A Change of  Control  shall not be deemed to have  occurred  with
               respect to an Employee if:

               (1)  The acquisition of the 25% or greater  interest  referred to
                    in  subparagraph  A.(1)  of this  Section  6 is by a  group,
                    acting in concert, that includes the Employee or

               (2)  If at least  25% of the  then  outstanding  common  stock or
                    combined voting power of the then outstanding Company voting
                    securities  (or voting  equity  interests)  of the surviving
                    corporation  or  of  any   corporation   (or  other  entity)
                    acquiring  all or  substantially  all of the  assets  of the
                    Company shall be beneficially owned, directly or indirectly,
                    immediately after a reorganization,  merger,  consolidation,
                    statutory share exchange, disposition of assets, liquidation
                    or dissolution referred to in subsections (4) or (5) of this
                    section by a group,  acting in concert,  that  includes that
                    Employee.

     7.   Adjustments
          -----------

          If there shall be any change in the number or  character of the Common
          Stock of the Company  through merger,  consolidation,  reorganization,
          recapitalization,  dividend in the form of stock (of whatever amount),
          stock split or other change in the corporate structure of the Company,
          and all or any portion of the option shall then be unexercised and not
          yet expired,  appropriate  adjustments in the outstanding option shall
          be made by the Company, in order to prevent dilution or enlargement of
          option rights.  Such  adjustments  shall include,  where  appropriate,
          changes  in the  number of  shares  of Common  Stock and the price per
          share subject to the outstanding option.

     8.   Miscellaneous
          -------------

          A.   This  option  is  issued  pursuant  to  the  Company's  Long-Term
               Incentive  Stock Plan and is subject to its terms.  A copy of the
               Plan has been  given to the  Employee.  The terms of the Plan are
               also  available  for  inspection  during  business  hours  at the
               principal offices of the Company.

          B.   This  Agreement  shall not  confer  on  Employee  any right  with
               respect to continuance of employment by the Company or any of its
               subsidiaries,  nor will it interfere in any way with the right of
               the Company to terminate  such  employment at any time.  Employee
               shall have none of the rights of a  shareholder  with  respect to
               shares  subject to this option  until such shares shall have been
               issued to him/her upon exercise of this option.

          C.   The  Company  shall at all times  during  the term of the  option
               reserve  and keep  available  such  number  of  shares as will be
               sufficient to satisfy the requirements of this Agreement.


     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed on the day and year first above written.

                                         GRACO INC.

                                         By Its Chief Executive Officer:


                                         /s/George Aristides


                                         Employee:



                                         /s/David M. Lowe