[LOGO]
GRACO INC.
4050 Olson Memorial Highway
Golden Valley, Minnesota 55422-2332
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Dear Shareholder:
Please join us on Tuesday, May 2, 2000, at 1:00 p.m. for Graco's Annual
Meeting of Shareholders at the Russell J. Gray Technical Center, which is
located at the intersection of Ramsey Street and 11th Avenue N.E., Minneapolis,
Minnesota.
At this meeting, shareholders will consider the following matters:
1. Election of four directors to serve for three-year terms.
2. Adoption of an amendment to the Company's Restated Articles of
Incorporation.
3. Ratification of the selection of independent auditors for the current
year.
4. Transaction of such other business as may properly come before the
meeting.
Shareholders of record at the close of business on March 3, 2000, are
entitled to vote at this meeting or any adjournment.
We encourage you to join us and participate in the meeting. If you are
unable to do so, you may either call our new toll-free telephone vote number, or
mark and return the enclosed Proxy Card. Have your Proxy Card in front of you
when you make your call as it contains important information which is required
to access the system.
If you do not call us, return your Proxy Card or vote your shares in person
at the meeting, you will lose your right to vote on matters that are important
to you as a shareholder. Accordingly, if you do not plan to attend the meeting,
please call 1-800-240-6326 and vote your shares or execute and return the
enclosed Proxy Card. This will not prevent you from voting in person if you
decide to attend the meeting.
Sincerely,
/s/George Aristides /s/Robert M. Mattison
George Aristides Robert M. Mattison
Chief Executive Officer Secretary
March 30, 2000
Golden Valley, Minnesota
YOUR VOTE IS IMPORTANT
We urge you to call our transfer agent any time toll-free at
1-800-240-6326 and vote your shares. Have your Proxy Card in front of you
when you make your call as it contains important information, including a
unique shareholder control number that is required to access the system.
Follow the prompts in the automated menu. If you do not wish to take
advantage of the telephone voting, please mark, date and sign the Proxy
Card and return it in the accompanying envelope as soon as possible. If
you attend the meeting, you may still revoke your proxy and vote in person
if you wish.
<PAGE>
TABLE OF CONTENTS
Page
Election of Directors........................................... 2
Nominees and Other Directors.................................. 2
Meetings and Committees of the Board of Directors............. 4
Nomination of Directors....................................... 4
Executive Compensation........................................ 5
Report of the Management Organization
and Compensation Committee............................. 5
Comparative Stock Performance Graph........................ 7
Summary Compensation Table................................. 8
Option Grants Table (Last Fiscal Year)..................... 9
Aggregated Option Exercises In Last Fiscal Year and
Fiscal Year-End Option Values.......................... 9
Change in Control and Termination Arrangements............. 10
Retirement Arrangements.................................... 10
Directors' Fees............................................ 11
Certain Business Relationships............................. 11
Beneficial Ownership of Shares................................ 11
Principal Shareholders..................................... 12
Section 16 Reporting Compliance............................ 13
Adoption of an Amendment to the Restated
Articles of Incorporation..................................... 14
Ratification of Appointment of Independent Public Auditors...... 15
Other Matters................................................... 15
Shareholder Proposals........................................... 15
A copy of the 1999 Graco Inc. Annual Report on Form 10-K, including the
Financial Statements and the Financial Statement Schedule, can be obtained
free of charge by calling (612) 623-6659, requesting a copy from our web
site at www.graco.com, or writing:
Treasurer
Graco Inc.
P.O. Box 1441
Minneapolis, Minnesota
55440-1441
NOTE: New telephone voting number available - call 1-800-240-6326
<PAGE>
[LOGO]
GRACO INC.
4050 Olson Memorial Highway
Golden Valley, Minnesota 55422-2332
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 2, 2000
Your proxy, represented by the accompanying Proxy Card, is solicited by the
Board of Directors of Graco Inc. ("Graco" or the "Company") in connection with
the Annual Meeting of the Shareholders of the Company to be held on May 2, 2000,
and any adjournments of that meeting.
The costs of the solicitation, including the cost of preparing and mailing
the Notice of Meeting and this Proxy Statement, will be paid by the Company.
Solicitation will be primarily by mailing this Proxy Statement to all
shareholders entitled to vote at the meeting. Proxies may be solicited by
officers of the Company personally, but at no compensation in addition to their
regular compensation as officers. The Company may reimburse brokers, banks and
others holding shares in their names for third parties, for the cost of
forwarding proxy material to, and obtaining proxies from, third parties. The
Proxy Statement and accompanying Proxy Card will be first mailed to shareholders
on or about March 30, 2000.
Proxies may be revoked at any time prior to being voted by giving written
notice of revocation to the Secretary of the Company. All properly executed
proxies received by management will be voted in the manner set forth in this
Proxy Statement or as otherwise specified by the shareholder giving the proxy.
Shares voted as abstentions on any matter (or a "withhold vote for" as to
directors) will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum at the meeting and as unvoted,
although present and entitled to vote, for purposes of determining the approval
of each matter as to which the shareholder has abstained. If a broker submits a
proxy which indicates that the broker does not have discretionary authority as
to certain shares to vote on one or more matters, those shares will be counted
as shares that are present and entitled to vote for purposes of determining the
presence of a quorum at the meeting, but will not be considered as present and
entitled to vote with respect to such matters.
Only shareholders of record as of the close of business on March 3, 2000, may
vote at the meeting or at any adjournment. As of that date, there were issued
and outstanding 20,437,712 common shares of the Company, the only class of
securities entitled to vote at the meeting. Each share registered to a
shareholder of record is entitled to one vote. Cumulative voting is not
permitted.
PROPOSAL 1
ELECTION OF DIRECTORS
NOMINEES AND OTHER DIRECTORS
The number of directors of the Company is currently set at 10 members, one of
whom is an executive officer of the Company. The directors are divided into
three classes as equal in number as reasonably possible. Vacancies that occur
during a term may be filled by a majority vote of the directors then in office,
though less than a quorum, and directors so chosen hold office for a term
expiring at the next Annual Meeting of Shareholders. Board policy states that no
director may continue to serve on the Board after the last day of the month of
his/her seventieth (70th) birthday.
At the forthcoming Annual Meeting, four persons are to be elected to the
Company's Board of Directors. The Board has nominated George Aristides, Ronald
O. Baukol, Robert G. Bohn, and William J. Carroll for three-year terms expiring
in the year 2003. Two nominees, George Aristides and Ronald O. Baukol, have
previously been elected as directors of the Company by the shareholders.
Unless otherwise instructed not to vote for the election of directors,
proxies will be voted to elect the nominees. A director candidate must receive
the vote of a majority of the voting power of shares present in order to be
elected. Unless the Board reduces the number of directors, the enclosed proxy
will be voted to elect the replacement nominee designated by the Board in the
event that a nominee is unable or unwilling to serve.
The following information is given as of March 3, 2000 with respect to the
nominees for election and the six directors whose terms of office will continue
after the Annual Meeting. Except as noted below, each of the nominees and
directors has held the same position, or another executive position with the
same employer, for the past five years.
Nominees for election at this meeting to terms expiring in the year 2003:
George Aristides
Mr. Aristides, 64, is Chief Executive Officer of the Company, a position he
has held since January 3, 2000. From March 1, 1999 to December 29, 1999 he
was Vice Chairman. From 1997 to February 28, 1999 he was Chief Executive
Officer. From 1996 to 1997 he was President and Chief Executive Officer; from
1993 to 1996, he was President and Chief Operating Officer; from March to
June 1993, he was Executive Vice President; and from 1985 to March 1993, he
was Vice President, Manufacturing Operations and Controller. Mr. Aristides
has been a director of Graco since 1993.
Ronald O. Baukol
Mr. Baukol, 62, is Executive Vice President, International Operations,
Minnesota Mining and Manufacturing Company ("3M"), a diversified
manufacturer of industrial, commercial, consumer and health care products.
Mr. Baukol has been a director of Graco since 1989 and is a director of 3M
and The Toro Company.
Robert G. Bohn
Mr. Bohn, 46, is Chairman, President and Chief Executive Officer, Oshkosh
Truck Corporation, Oshkosh, Wisconsin, a designer, manufacturer and marketer
of a broad range of specialty commercial, fire and emergency apparatus and
military trucks. Mr. Bohn has been a director of Graco since June 1999.
William J. Carroll
Mr. Carroll, 55, is President-Automotive Systems Group, Dana Corporation,
Toledo, Ohio, which is engaged in the engineering, manufacturing and
distribution of components and systems for worldwide vehicular and industrial
manufacturers. Mr. Carroll has been a director of Graco since June 1999.
Directors whose terms continue until 2001:
Dale R. Olseth
Mr. Olseth, 69, is Chairman and Chief Executive Officer, SurModics, Inc.
(formerly BSI Corporation), a biotechnical company specializing in the
modification of material surfaces. Mr. Olseth has been a director of Graco
since 1972 and is a director of The Toro Company. In accordance with Board
policy, Mr. Olseth will retire from the Board on October 31, 2000.
Jerald L. Scott
Mr. Scott, 58, is retired. Prior to November, 1998, Mr. Scott was Senior
Vice President, Operations, H.B. Fuller Company, a worldwide manufacturer and
marketer of adhesives, sealants, coatings, paints and other specialty
chemical products. Mr. Scott has been a director of Graco since 1997.
William G. Van Dyke
Mr. Van Dyke, 54, is Chairman, Chief Executive Officer and President,
Donaldson Company, Inc., a diversified manufacturer of air and liquid
filtration products. Mr. Van Dyke has been a director of Graco since
1995 and is a director of Donaldson Company, Inc.
Directors whose terms continue until 2002:
David A. Koch
Mr. Koch, 69, is Chairman of the Board of the Company. He was Chairman and
Chief Executive Officer from 1985 to 1996. Mr. Koch has been a director of
Graco since 1962. He is also a director of ReliaStar Financial Corp. and
SurModics, Inc. As an exception to Board policy, the Board of Directors has
extended the mandatory retirement age for Mr. Koch, until May 31, 2001.
Lee R. Mitau
Mr. Mitau, 51, is Executive Vice President-Corporate Development, General
Counsel and Secretary of U.S. Bancorp (formerly First Bank System, Inc.), a
regional bank holding company. U.S. Bank National Association provides Graco
with cash management, loans and foreign exchange services. The trustee of the
Graco Employee Retirement Plan is First Trust National Association. Both of
these companies are subsidiaries of U.S. Bancorp. From 1983 to 1995, Mr.
Mitau was a partner of Dorsey & Whitney LLP. Mr. Mitau has been a director
of Graco since 1990 and is a director of H.B. Fuller Company. (See section
entitled Certain Business Relationships on page 11.)
Martha A.M. Morfitt
Ms. Morfitt, 42, is President, Chief Operating Officer and a director of CNS
Inc., a manufacturer and marketer of consumer products, including the Breathe
Right(R) nasal strip. From 1997 to 1998, she was Vice President, Meals, from
1994 to 1997, Vice President, Green Giant Brands, and from 1993 to 1994, Team
Leader, Green Giant Shelf Stable Vegetables, The Pillsbury Company, a
diversified marketer of packaged food products. Ms. Morfitt has been a
director of Graco since 1995.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1999, the Board of Directors met 5 times. Attendance of the Company's
directors at all Board and Committee meetings averaged 95 percent. During 1999,
each director attended at least 50 percent of the aggregate number of meetings
of the Board and of all committees of the Board on which he or she served.
The Board of Directors has an Audit Committee, a Governance Committee, and a
Management Organization and Compensation Committee. Membership as of March 3,
2000, the record date, was as follows:
Management
Organization
Audit Governance And Compensation
- -------------------- ------------------- ----------------------
W.G. Van Dyke, Chair L. R. Mitau, Chair M. A.M. Morfitt, Chair
R. O. Baukol G. Aristides L. R. Mitau
W. J. Carroll D. A. Koch D. R. Olseth
M. A.M. Morfitt D. R. Olseth J. L. Scott
J. L. Scott W. G. Van Dyke
Audit Committee (2 meetings in fiscal 1999)
o Reviews the accounting, control and legal compliance policies and
procedures of the Company.
Governance Committee (5 meeting in fiscal 1999)
o Evaluates policies related to Board membership and procedure;
o Recommends to the Board the persons to serve as Chairman of the Board and
as Chief Executive Officer;
o Reviews and makes recommendations on directors' compensation; and
o Recommends to the Board of Directors nominees for the position of director.
Management Organization and Compensation Committee (3 meetings in fiscal 1999)
o Develops the Company's philosophy on executive compensation;
o Determines the compensation of the Company's executive officers;
o Reviews and makes recommendations on management organization and succession
plans; and
o Administers the Company's executive stock option and incentive plans.
NOMINATION OF DIRECTORS
Shareholders may nominate candidates for election to the Board of Directors
who will be considered by the Board Governance Committee. Recommendations should
be made in writing and addressed to the Committee in care of the Secretary of
the Company at the Company's corporate headquarters. The By-laws provide that
timely notice must be received by the Secretary not less than 90 days prior to
the anniversary of the date of the Annual Meeting of Shareholders, the first
Tuesday in May of each year. The nominations must set forth (i) the name, age,
business and residential addresses and principal occupation or employment of
each nominee proposed in such notice; (ii) the name and address of the
shareholder giving the notice, as it appears in the Company's stock register;
(iii) the number of shares of capital stock of the Company which are
beneficially owned by each such nominee and by such shareholder; and (iv) such
other information concerning each such nominee as would be required under the
rules of the Securities and Exchange Commission in a proxy statement soliciting
proxies for the election of such nominee. Such notice must also include a signed
consent of each such nominee to serve as a director of the Company, if elected.
EXECUTIVE COMPENSATION
Report of the Management Organization and Compensation Committee
Overview
The Management Organization and Compensation Committee of the Board of
Directors (hereafter called "the Committee"), composed of five independent
nonemployee directors, is responsible for developing the Company's philosophy on
executive compensation. Consistent with this philosophy, the Committee develops
compensation programs for the Chief Executive Officer and each of the other
executive officers of the Company. On an annual basis, the Committee determines
the compensation to be paid to the Chief Executive Officer and other executive
officers, based on the provisions of the compensation plans.
Compensation plans which provide for grants or awards of Company stock to
executive officers are approved by the Board of Directors and the shareholders
of the Company. In 1993, the Internal Revenue Code ("the Code") was amended to
include a deductibility limit for remuneration to certain executive officers
[Section 162(m) of the Code]. Qualified performance-based compensation is not
subject to this deductibility limit. In order to qualify grants of stock options
and stock appreciation rights as performance-based compensation under Section
162(m), the Company's Long Term Stock Incentive Plan was amended to include an
annual periodic per person aggregate limit of 300,000 shares of Company stock
subject to award or grant. The Long Term Stock Incentive Plan meets the
requirements of Section 162(m) in all respects. In order to qualify annual
incentive awards to the Chief Executive Officer and other executive officers as
performance-based compensation under Section 162(m), the Company prepared an
Executive Officer Annual Incentive Bonus Plan that was approved by the
shareholders at the Annual Meeting of the Company on May 4, 1999. The Executive
Officer Annual Incentive Bonus Plan meets the requirements of Section 162(m) in
all respects.
Executive Compensation Philosophy and Program
It is the Company's philosophy to set its executive compensation structure at
levels which are competitive with those of durable goods manufacturers of
comparable size. These levels are determined by consulting a variety of
independent third-party executive compensation surveys. Executive compensation
is then delivered through:
o base salaries which recognize the experience and performance of individual
executives;
o aggressive, performance-driven incentives which:
- enhance shareholder value,
- balance annual and long-term corporate objectives; and
- provide meaningful amounts of Company stock; and
o competitive benefits.
The specific components of the executive compensation program are described
below:
Base salary ranges are established by the Committee, using the fiftieth
percentile salary and trend data for comparably-sized durable goods
manufacturers, as published in a variety of independent third-party executive
compensation surveys. The actual base salary of each officer, within the range,
is determined by the executive's performance, which is evaluated annually by the
Chief Executive Officer and reviewed and approved by the Committee. Both
financial and management factors are considered in the evaluation.
The Executive Officer Annual Incentive Bonus Plan (the "Executive Bonus
Plan") was available in 1999 to the Chief Executive Officer and any other
executive officer designated by the Committee. The Committee is authorized to
establish financial growth targets for each participant directly and
specifically tied to one or more financial measures. On or before the 90th day
of the Company's fiscal year, the Committee identifies the participants,
establishes the Targeted Bonus Maximum Percentages for each participant, and
establishes the applicable Financial Measures and the Company Performance
Target(s) for each Financial Measure, as these terms are defined in the
Executive Bonus Plan. At the close of the fiscal year, the Committee certifies
whether or not the Company Performance Target(s) have been attained.
The Annual Bonus Plan covers key managers of the Company and executive
officers who do not participate in the Executive Bonus Plan.
The Annual Bonus Plan, available in 1999 to 14 executive officers and 36
other management employees, is structured to encourage growth in both sales and
net earnings by the Company. The plan determines individual awards for executive
officers by measuring Company performance against corporate sales and net
earnings growth targets established by the Committee in the first quarter of
each year. Sales and net earnings targets for 1999 were established to exceed
prior year results. In addition, the Chief Executive Officer has been given the
authority to establish divisional and regional growth targets for the executive
officers in charge of specific divisions and regions. Overall performance for
the divisional and regional executives is measured against both divisional and
corporate targets. Targets are set for minimum, midpoint and maximum payouts
under the plan. In 1999, the Committee established a range of payouts as a
percent of base salary for executive positions as follows:
Minimum Payout Maximum Payout
Position as a % of Base Salary as a % of Base Salary
- --------------------------------------------------------------------------------
Chief Executive Officer 0% 80%
Vice President (Board-elected) 0% 60%
Vice President (By appointment) 0% 50%
The actual Annual Bonus Plan award is determined by evaluating corporate,
divisional and regional performance against the established financial
objectives. For 1999, sales results led to an award that was 12.4 percent of the
maximum payout. Corporate net earnings results led to a maximum payout. Awards
were made to all executive officers under the 1999 Annual Bonus Plan.
Under the Chairman's Award Program, the Chairman is also able to grant a
total of $100,000 in individual discretionary awards to recognize significant
contributions by selected executive officers and other management employees. In
1999 a total of $90,000 was granted to 11 employees, including an award of
$15,000 to Charles L. Rescorla and $10,000 to Robert M. Mattison.
The Executive Long Term Incentive Program is structured to align the
interests of executive officers with those of all Graco shareholders. The Long
Term Incentive Program for 1999 consisted of stock options granted to the
executive officers. The number of stock options granted to each executive
officer was determined using competitive data for comparably-sized durable goods
manufacturers, as reflected in independent third-party long-term incentive
surveys. These options were non-incentive stock options with a 10-year duration
and a vesting schedule of 25 percent after two years, with 25 percent additional
vesting after years three, four and five.
Executive officers are eligible to participate in the employee benefit
programs available to all Graco employees.
Compensation of the Chief Executive Officer
James A. Earnshaw was named President and Chief Executive Officer on March 1,
1999. Mr. Earnshaw's base salary of $360,000 per year was established by the
Committee using competitive salary survey data. These data were based on
comparably sized durable goods manufacturing companies as published in
independent third-party compensation surveys. As this was Mr. Earnshaw's initial
year with the Company, his actual annual base salary was established in the
lower half of the salary range for this position. This would enable the
Committee to adjust his base salary in the future as warranted by Mr. Earnshaw's
performance. Mr. Earnshaw earned an annual bonus for 1999 under the Annual Bonus
Plan of $187,416, which represents 62 percent of his annual base salary. The
maximum payout as a percent of base salary for Mr. Earnshaw was 80 percent. The
1999 bonus award was based upon the growth in net sales and net earnings of the
Company. Sales of $442.5 million of 1999 represent a growth rate of 2.4 percent
over sales in 1998. Net earnings of $59.3 million in 1999 represent a growth
rate of 25.5 percent over net earnings in 1998. Mr. Earnshaw resigned his
positions as President and Chief Executive Officer and as a director effective
December 31, 1999.
Mr. Aristides served as Chief Executive Officer of the Company until February
28, 1999 and Vice Chairman until December 29, 1999. The Committee, using
competitive salary survey data, established Mr. Aristides' annualized base
salary between January 1, 1999 and April 30, 1999 at $460,000. These data were
based on comparably sized durable goods manufacturing companies as published in
independent third-party compensation surveys. For the period after May 1, 1999
the Committee established Mr. Aristides' annualized base salary at $276,000,
using competitive salary survey data as described above. Mr. Aristides earned a
bonus for 1999 under the Executive Officer Annual Incentive Bonus Plan of
$182,001. The maximum payout as a percent of base salary for Mr. Aristides from
January 1, 1999 to April 1999 was 80 percent. The maximum payout as a percent of
base salary from May 1, 1999 to December 29, 1999 was 60 percent. The 1999 bonus
award made to Mr. Aristides was based upon the growth in net sales and net
earnings of the Company. Sales of $442.5 million of 1999 represent a growth rate
of 2.4 percent over sales in 1998. Net earnings of $59.3 million in 1999
represent a growth rate of 25.5 percent over net earnings in 1998.
The Members of the Committee
Ms. Martha A.M. Morfitt
Mr. Lee Mitau
Mr. Dale Olseth
Mr. Jerald Scott
Mr. William Van Dyke
<PAGE>
Comparative Stock Performance Graph
The graph below compares the cumulative total shareholder return on the
common stock of the Company for the last five fiscal years with the cumulative
total return of the S&P 500 Index and of the Dow Jones Factory Equipment Index
over the same period (assuming the value of investment in Graco common stock and
each index was 100 on December 30, 1994, and all dividends were reinvested).
Five Year* Cumulative Total Shareholder Returns
[GRAPH - Table below lists data points included in graph]
Dow Jones
Year Graco Inc. S&P 500 Factory Equipment
- ---- ---------- ------- -----------------
1994 100 100 100
1995 144 137 132
1996 180 169 134
1997 262 226 150
1998 291 290 120
1999 406 351 120
*Fiscal Year Ended Last Friday in December
<PAGE>
Summary Compensation Table
The following table shows both annual and long-term compensation awarded to
or earned by the Chief Executive Officers and the four most highly compensated
executive officers of the Company whose total annual salary and bonus for 1999
exceeded $100,000.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
-------------------------------------------------- -------------------------
(a) (b) (c) (d) (e) (f) (g) (i)
Other Restricted Securities All Other
Annual Stock Underlying Compen-
Name and Salary Bonus Compen- Award(s) Options/ sation
Principal Position Year ($)<F1><F2> ($)<F1><F3>sation ($) ($)<F4> SARs (#)<F4> ($)<F5><F6>
- ------------------- ---- -------- -------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
George Aristides 1999 $406,876 $182,001 0 0 40,000 $ 4,800
Chief Executive 1998 432,106 290,233 0 0 40,000 4,800
Officer 1997 402,102 262,965 0 $1,164,375<F6> 60,000 3,467
James A. Earnshaw 1999 300,495 187,416 0 0 90,000 1,800
Chief Executive 1998 0 0 0 0 0 0
Officer 1997 0 0 0 0 0 0
Charles L. Rescorla 1999 150,262 91,141 0 0 7,500 4,800
Vice President, 1998 135,295 87,837 0 0 5,000 4,800
Manufacturing & 1997 129,877 35,687 0 0 4,500 3,412
Distribution
Operations
Roger L. King 1999 200,711 36,000 0 0 10,000 37,040<F8>
Vice President and 1998 195,864 114,485 117,739<F7> 0 10,000 39,182<F8>
General Manager, 1997 187,788 59,901 28,501<F7> 0 7,500 40,971<F9>
European Operations
Dale D. Johnson 1999 160,287 76,234 0 0 10,000 4,800
President and 1998 138,178 80,589 0 0 10,000 4,800
Chief Operating 1997 111,586 46,660 0 0 4,500 3,053
Officer
Robert M. Mattison 1999 150,639 75,281 0 0 5,000 4,800
Vice President, 1998 146,864 73,908 0 0 5,000 4,800
General Counsel and 1997 140,526 69,031 0 0 7,500 3,464
Secretary
<FN>
<F1>
(1) Deferred compensation is included in Salary and Bonus in the year earned.
<F2>
(2) In addition to base salary, the reported figure includes amounts
attributable to the imputed value of the group term life insurance benefit for
each of the named executive officers.
<F3>
(3) Bonus includes any awards under the Executive Officer Annual Incentive Bonus
Plan, the Annual Bonus Plan and the Chairman's Award Program described in the
Management Organization and Compensation Committee Report. Chairman's Awards for
1999 included a $15,000 award to Mr. Rescorla and a $10,000 award to Mr.
Mattison. Mr. Johnson received $10,000 for 1998, Mr. Rescorla received $33,000
for 1998 and Mr. King received $25,000 for 1997 under the Chairman's Award
Program.
<F4>
(4) On December 12, 1997, the Board of Directors approved a three-for-two stock
split effective February 4, 1998, for shares outstanding on January 7, 1998. The
number of restricted shares and options, as well as the exercise price for
options, has been restated in this table and all subsequent tables to reflect
the split.
<F5>
(5) The compensation reported includes the Company contributions under the Graco
Employee Investment Plan (excluding employee contributions), plus Company
contributions under the Graco Employee Stock Ownership Plan for 1997. The
allocation of stock under the Graco Employee Stock Ownership Plan ended
September 30, 1997, at which time the ten-year allocation term of the Plan
expired. For 1999, the Company contribution accrued under the Graco Employee
Investment Plan for each named executive officer was as follows: $4,800 for Mr.
Aristides; $1,800 for Mr. Earnshaw; $4,800 for Mr. Rescorla, $4,800 for Mr.
King; $4,800 for Mr. Johnson, and $4,800 for Mr. Mattison. The Company
contribution under the Graco Employee Investment Plan increased January 1, 1998
to a dollar for dollar match up to the first 3% of employee contribution.
<F6>
(6) A restricted stock grant was made to Mr. Aristides on May 6, 1997, in the
amount shown on the table. The vesting schedule was as follows: 15,000 shares
vested on March 31, 1998, 22,500 shares vested on March 31, 1999, and 30,000
shares on December 27, 1999.
<F7>
(7) The reported figure represents a tax equalization payment, attributable to
Mr. King's expatriate assignment.
<F8>
(8) The reported figure includes a goods and services cost differential provided
to Mr. King as a result of his expatriate assignment.
</FN>
</TABLE>
Option Grants Table (Last Fiscal Year)
The following table shows the stock options granted to the named executive
officers during 1999, their exercise price and their grant date present value.
<TABLE>
<CAPTION>
Individual Grant Grant Date Value<F2>
--------------------------------------------------- ----------------
(a) (b) (c) (d) (e) (f)
Number of % of Total
Securities Options Exercise Grant
Underlying Granted to or Base Date
Options Employees in Price Expiration Present
Name Granted (#) Fiscal Year ($/Sh) Date Value ($)
- ------------------- ----------- ------------ -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
George Aristides<F1> 40,000 8.8% $ 21.50 12/29/02 $ 369,200
James A. Earnshaw 90,000 19.8% 21.31 06/30/00 830,700
Charles L. Rescorla<F1> 7,500 1.7% 21.50 02/22/09 69,225
Roger L. King<F1> 10,000 2.2% 21.50 02/22/09 92,300
Dale D. Johnson<F1> 10,000 2.2% 21.50 02/22/09 92,300
Robert M. Mattison<F1> 5,000 1.1% 21.50 02/22/09 46,150
<FN>
<F1>
(1) Non-incentive stock options were granted on February 22, 1999, in the
amounts shown on the table. The options may be exercised in equal installments
over four years, beginning with the second anniversary date of the grant.
<F2>
(2) The Black-Scholes option pricing model has been used to determine the grant
date present value. Annual volatility was calculated using monthly returns for
36 months prior to the grant date; the interest rate was set using U.S. Treasury
securities of similar duration to the option period as of the grant date; and
dividend yield was established as the yield on the grant date. A 10 percent
discount for nontransferability and a 3 percent discount to reflect the
possibility of forfeiture over a two-year period were applied. For grants
expiring on February 22, 2009, the assumptions used in the model were annual
volatility of 43.31 percent, interest rate of 5.07 percent, dividend yield of
1.80 percent, and time to exercise of 10 years.
</FN>
</TABLE>
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year-End Option
Values
The following table shows the value of outstanding in-the-money options at
the end of the fiscal year for the named executive officers.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options Options
at FY-End (#) at FY-End ($)<F2>
Shares Value
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($)<F1> Unexercisable Unexercisable
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
George Aristides 170,343 $3,823,706 211,424/0 $ 3,566,936/0
James A. Earnshaw 0 0 90,000/0 $ 1,310,850/0
Charles L. Rescorla 0 0 16,425/15,875 $443,626/190,734
Roger L. King 41,875 $1,020,354 31,870/31,574 $803,084/434,029
Dale D. Johnson 0 0 6,675/20,875 $171,138/258,547
Robert M. Mattison 0 0 13,729/17,057 $342,271/222,876
<FN>
<F1>
(1) "Value realized" is the difference between the closing price of the
Company's common stock on the day of exercise and the option price of the
options multiplied by the number of shares received.
<F2>
(2) "Value at fiscal year-end" is the difference between $35.875, the closing
price of the Company's common stock on December 31, 1999, and the option price
multiplied by the number of shares subject to option.
</FN>
</TABLE>
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 percent 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 Internal Revenue Code of 1989, as amended, (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 an amount that will
put the executive in the same after-tax position as if no excise tax under the
Code had been imposed.
It is the practice of the Company to continue to provide base salary to
selected executive officers whose employment is involuntarily terminated by the
Company for a period of twelve months or until the officer secures other
employment.
Effective December 31, 1999, Mr. Earnshaw resigned his positions as President
and Chief Executive Officer and as a director. To fulfill the terms of Mr.
Earnshaw's employment agreement with the Company, Mr. Earnshaw and the Company
entered into a separation agreement under which Mr. Earnshaw was paid a lump sum
of $840,000 (two years base salary) and the stock options granted to Mr.
Earnshaw on March 1, 1999 became immediately exercisable until June 30, 2000.
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 percent of average
monthly compensation, less 18 percent 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 the five consecutive
highest years' salary during the last ten years of service, including base
salary, Executive Officer Annual Incentive Bonus Plan awards, and Annual Bonus
Plan awards, but excluding Executive Long Term Incentive Program awards.
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. Effective January 1, 1999,
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 Graco Employee 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. Aristides, 26 years; Mr. Rescorla, 11 years; Mr. King, 29 years;
Mr. Johnson, 21 years; and Mr. Mattison, 7 years. Mr. Earnshaw did not vest
under the terms of the Retirement Plan. A maximum of 30 years has previously
been counted in the pension benefit calculation. For 1999 and subsequent years,
the 30 year maximum has been eliminated.
<TABLE>
<CAPTION>
Estimated Aggregate Annual Retirement Benefit
---------------------------------------------
Final Average 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years 45 Years
Compensation Service Service Service Service Service Service Service Service Service
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$200,000 $13,508 $ 27,016 $ 40,525 $ 54,033 $ 67,541 $ 81,049 $ 94,557 $108,066 $121,574
300,000 20,758 41,516 62,275 83,033 103,791 124,549 145,307 166,066 170,000
400,000 28,008 56,016 84,025 112,033 140,041 168,049 170,000 170,000 170,000
500,000 35,258 70,516 105,775 141,033 170,000 170,000 170,000 170,000 170,000
600,000 42,508 85,016 127,525 170,000 170,000 170,000 170,000 170,000 170,000
700,000 49,758 99,516 149,275 170,000 170,000 170,000 170,000 170,000 170,000
800,000 57,008 114,016 170,000 170,000 170,000 170,000 170,000 170,000 170,000
</TABLE>
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. Deferred compensation agreements remain in effect
for Mr. Mattison and Mr. Aristides.
Directors' Fees
During 1999, the Company paid each director, except directors who also served
as officers, an annual retainer of $15,000, plus a meeting fee of $900 for each
Board meeting and $700 for each Committee meeting attended. 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.
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 June 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. Seven 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.
In 1996, shareholders approved a Nonemployee Director Stock Option Plan.
Under this Plan, nonemployee directors receive an initial option grant of 3,000
shares upon first appointment or election and an annual option grant of 2,250
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 may be exercised
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, is Executive Vice
President-Corporate Development, General Counsel and Secretary of U.S. Bancorp,
a bank holding company. U.S. Bank National Association is the lead bank in a
syndicate of ten banks with which the Company entered into a five-year
$190,000,000 reducing revolving credit facility. The July 2, 1998 repurchase of
5,800,000 shares of the Company's common stock from the Company's largest
shareholder, the Trust under the Will of Clarissa L. Gray, was financed in part
by an initial borrowing of $158,000,000 under this credit facility, $56,000,000
of which remained outstanding as of March 3, 2000. For further information see
footnote F to the Company's financial statements in its annual report to
shareholders for fiscal year 1999.
BENEFICIAL OWNERSHIP OF SHARES
The following information, furnished as of March 3, 2000, indicates
beneficial ownership of the common shares of the Company by each director, each
nominee for election as director, the executive officers listed in the Summary
Compensation Table who are still executive officers on that date, and by all
directors and executive officers as a group. Except as otherwise indicated, the
persons listed have sole voting and investment power.
Percent of
Amount and Nature of Common Stock
Name of Beneficial Owner Beneficial Ownership<F1><F2> Outstanding*
- --------------------------------------------------------------------------------
G. Aristides<F4> 176,940
R. O. Baukol 9,926
R.G. Bohn 0
W.J. Carroll 264
D. D. Johnson 12,888
D. A. Koch<F3><F4><F5> 1,542,987 7.6%
R. M. Mattison<F4> 32,100
L. R. Mitau 8,726
M. A.M. Morfitt<F4> 7,493
D. R. Olseth 23,255
C. L. Rescorla<F4> 30,607
J. L. Scott 4,436
W. G. Van Dyke 7,500
All directors and
executive officers as a
group (19 persons)<F3><F4><F5><F6> 1,973,698 9.7%
* Less than one 1 percent, if no percentage is given.
[FN]
<F1>
(1) All share data reflects the three-for-two stock split effective February 4,
1998.
<F2>
(2) Includes 210,735 shares with respect to which executive officers have a
right, as of May 2, 2000, to acquire beneficial ownership upon the exercise of
vested stock options.
<F3>
(3) Includes the following shares owned by spouses of directors and named
executive officers as to which the director or executive officer may be deemed
to share voting and investment power: Mr. Koch, 52,491 shares.
<F4>
(4) Excludes the following shares as to which beneficial ownership is
disclaimed: (i) 542,782 shares owned by the Graco Employee Retirement Plan, as
to which Messrs. Aristides, Koch, Ms. Morfitt and certain executive officers of
the Company share voting and investment power as members of the Company's
Investment Committee; (ii) 23,393 shares held by The Graco Foundation; and (iii)
222,500 shares held by the Greycoach Foundation. With respect to (ii) and (iii),
Mr. Koch shares voting and investment power as a director.
<F5>
(5) Includes 993,642 shares held by the Clarissa L. Gray Trust, of which Mr.
Koch's wife, Barbara Gray Koch, and their children are the beneficiaries and as
to which Mr. Koch shares voting and investment power as trustee. See
"Principal Shareholders."
<F6>
(6) If the shares referred to in footnote 3 above, as to which one or more
directors and designated executive officers share voting power, were included,
the number of shares beneficially owned by all directors, nominees for election
as director and executive officers would be 2,762,373 shares, or 13.5 percent of
the outstanding shares.
</FN>
Principal Shareholders
The following table identifies each person or group known to the Company to
beneficially own as of March 3, 2000, more than 5 percent of the outstanding
common shares of the Company, the only class of security entitled to vote at the
Annual Meeting.
Beneficial Percent
Ownership of Class
- --------------------------------------------------------------------------------
Trust under the Will of Clarissa L. Gray,
and David A. Koch<F1><F2> 1,542,987 shares 7.6%
Ariel Capital Management, Inc.<F3> 1,791,330 shares 8.8%
[FN]
<F1>
(1) Includes 993,642 shares owned by the Clarissa L. Gray Trust. Mr. Koch is one
of the trustees of the Trust and the beneficiaries of the Trust are Mrs.
Koch and their children. The other trustees are Paul M. Torgerson, a
partner at Dorsey & Whitney LLP, Minneapolis, Minnesota, and US Bancorp of
South Dakota, N.A., Sioux Falls, South Dakota. The Trustees share voting
and dispositive power. Includes 519,519 shares owned by David A. Koch or
Mrs. Koch. Includes 29,826 shares with respect to which Mr. Koch has a
right, as of May 2, 2000, to acquire beneficial ownership upon the exercise
of vested stock options.
<F2>
(2) Excludes the following shares as to which beneficial ownership is
disclaimed: (i) 542,782 shares owned by the Graco Employee Retirement Plan,
as to which Messrs. Aristides, Koch, Ms. Morfitt and certain executive
officers of the Company share voting and investment power as members of the
Company's Investment Committee; (ii) 23,393 shares held by The Graco
Foundation; and (iii) 222,500 shares held by the Greycoach Foundation. With
respect to (ii) and (iii), Mr. Koch shares voting and investment power as a
director.
<F3>
(3) Based on information included in a Schedule 13G filed on December 31, 1999.
</FN>
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 1999, except for an inadvertent
late filing by Jerald L. Scott who purchased 1,000 shares in March, 1999.
<PAGE>
PROPOSAL 2
PROPOSAL TO ADOPT AN AMENDMENT TO THE COMPANY'S RESTATED ARTICLES OF
INCORPORATION
On February 25, 2000, the Company's Board of Directors adopted a resolution
deleting Article 3 from the Company's Restated Articles of Incorporation (the
"Amendment"). The Amendment would leave the matters currently subject to Article
3 to regulation by various provisions of the Minnesota Business Corporation Act,
Chapter 302A of the Minnesota Statutes (the "Act"). Shareholders must approve
this Amendment to the Company's Restated Articles of Incorporation.
At present, Article 3 of the Company's Restated Articles of Incorporation
limits the ability of the Company's Board of Directors (the "Board") to
authorize any sale, lease or other transfer of all or substantially all of the
property and assets of the Company without shareholder approval. Elimination of
Article 3 would cause the provisions of Section 302A.661 of the Act to be
applicable to Graco.
Subdivision 1 of Section 302A.661 of the Act permits the Board, without
shareholder approval, to sell, lease, transfer or otherwise dispose of all or
substantially all of the Company's property and assets only in the usual and
regular course of the Company's business, and also permits the transfer of all
or substantially all of the Company's property and assets to a wholly-owned
subsidiary of the Company.
The proposed Amendment would permit action by the Board of Directors under
Subdivision 1 of Section 302A.661. Shareholder approval would still be required
for the transfer of all or substantially all of the Company's property and
assets other than those allowed by Subdivision 1. Subdivision 2 of Section
302A.661 specifically requires shareholder approval of any sale, lease, transfer
or other disposal of all or substantially all of the Company's property and
assets that is not in the usual and regular course of the Company's business. In
addition, Article 6 of the Company's Restated Articles of Incorporation would
still require a two-thirds affirmative vote by the Company's shareholders to
approve certain mergers, sales of assets and similar transactions with a
shareholder owning 15% or more of the company's outstanding stock. Business
combinations involving the Company and an interested shareholder must satisfy
certain minimum price terms unless approved by either a majority of the
directors who are unaffiliated with the interested shareholder or two-thirds of
the voting power of the Company's outstanding stock. The Amendment would not
affect the provisions of Article 6.
The Board believes that the proposed Amendment would give the Board greater
flexibility in the management of the Company's business and financial affairs.
Without the full authority permitted in Section 302A.661 of the Act, the Board
is restricted in its ability to deal with certain situations that may present
themselves to the Company. The Amendment would enable the Board to act when
prompt action would be desirable. For example, the Board might wish to create a
business structure involving the transfer of all or substantially all of the
Company's property to wholly-owned subsidiaries to enhance the Company's overall
financial, commercial or tax position.
On February 25, 2000, the Board of Directors authorized the creation of a
wholly-owned subsidiary of Graco Inc. under Minnesota law. In the event that
shareholders approve the Amendment at the Company's Annual Meeting on May 2,
2000, it is the intent of the Board to transfer a large portion of the assets
and property of the Company to this wholly-owned subsidiary. As consideration
for the transfer, the subsidiary will issue stock to Graco Inc. In light of the
recent expansion of the Company's distribution channels and with the prospect of
increased business activity in all states, the Board has determined that a
restructuring as indicated would optimize the Company's commercial position and
augment its tax planning opportunities.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Common
Stock present and entitled to vote at the Annual Meeting of Shareholders is
required to approve the Amendment to delete Article 3 from the Company's
Restated Articles of Incorporation.
The Board of Directors recommends a vote FOR the approval of the Amendment to
delete Article 3 as being in the best interests of the Company and its
shareholders.
<PAGE>
PROPOSAL 3
PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT PUBLIC AUDITORS
Deloitte & Touche LLP has acted as independent auditors for the Company since
1962. The Board of Directors recommends ratification of the selection of
Deloitte & Touche LLP as independent auditors for the current year. If the
shareholders do not ratify the selection of Deloitte & Touche LLP, the selection
of the independent auditors will be reconsidered by the Board of Directors. A
representative of Deloitte & Touche LLP 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 of Directors 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 2000 Annual Meeting. Any shareholder wishing to have
a matter considered for inclusion in the proxy statement for the Annual Meeting
in the year 2001 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 December
1, 2000.
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 shareholder
proposal submitted at the Annual Meeting in year 2001 if the Company has not
received advance written notice of the matter from the proponent by February 2,
2001.
YOU ARE RESPECTFULLY REQUESTED TO EXERCISE YOUR RIGHT TO VOTE. YOU MAY DO SO
BY CALLING OUR TOLL-FREE TELEPHONE VOTE NUMBER (1-800-240-6326) AND FOLLOWING
THE VOICE INSTRUCTIONS OR BY FILLING IN 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
/s/Robert M. Mattison
Robert M. Mattison
Secretary
Dated: March 30, 2000
(C) 2000 Graco Inc. 3/00 6.5M Printed in U.S.A.
NOTE: New telephone voting number available - call 1-800-240-6326.
