CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     Graco Inc. (the  "Company")  wishes to take  advantage of the "safe harbor"
provisions  regarding  forward-looking  statements  of  the  Private  Securities
Litigation  Reform Act of 1995 and is filing this Cautionary  Statement in order
to do so.

     From time to time various  forms filed by the Company  with the  Securities
and Exchange  Commission,  including the Company's Form 10-K, Form 10-Q and Form
8-K, its Annual  Report to  Shareholders,  and other  written  documents or oral
statements  released by the  Company,  may contain  forward-looking  statements.
Forward-looking  statements  generally  use words such as  "expect,"  "foresee,"
"anticipate,"   "believe,"   "project,"   "should,"   "estimate,"   and  similar
expressions,  and reflect the Company's expectations concerning the future. Such
statements are based upon currently available information, but various risks and
uncertainties  may cause the Company's actual results to differ  materially from
those expressed in these statements. Among the factors which management believes
could affect the Company's operating results are the following:


       o  With  respect to the  Company's  business  as a whole,  the  Company's
          prospects and operating results may be affected by:


          -    changing economic conditions in the United States and other major
               world economies,  including  economic downturns or recessions and
               foreign currency exchange rate fluctuations;


          -    international  trade factors,  including changes in international
               trade policy, such as trade sanctions,  increased tariff barriers
               and  other  restrictions,  weaker  protection  of  the  Company's
               proprietary  technology in certain foreign countries,  the burden
               of complying  with foreign laws and  standards,  and  potentially
               adverse taxes;


          -    the  ability  of  the  Company  to  develop  new   products   and
               technologies,  maintain and enhance its market position  relative
               to  its  competitors,   maintain  and  enhance  its  distribution
               channels,  realize productivity and product quality improvements,
               and continue to control expenses.


          -    the  ability  of  the  Company  and  its  suppliers,   customers,
               creditors  and  financial  service   organizations  to  implement
               information   processing   software   and   hardware   that  will
               accommodate the Year 2000;


          -    disruption in operations, transportation,  communication, sources
               of supply, customer operations or payment, caused by acts of God,
               labor  disputes,  war,  embargo,  fire or other cause  beyond its
               reasonable control.


       o  The  prospects  and  operating  results  of the  Company's  Contractor
          Equipment  Division  may be affected  by:  variations  in the level of
          housing  starts;  the level of repairs,  remodeling  and  additions to
          existing homes; the level of commercial and institutional building and
          remodeling activity;  the availability and cost of financing;  changes
          in the environmental  regulation of coatings; the consolidation in the
          paint manufacturing  industry;  changes in construction  materials and
          techniques;  the cost of labor in foreign markets; the regional market
          strength of certain competitors;  and the level of government spending
          on road construction and infrastructure development.


       o  The  prospects  and  operating  results  of the  Company's  Industrial
          Equipment  Division may be affected by the capital equipment  spending
          levels  of  industrial   customers,   the  availability  and  cost  of
          financing,  changes  in  the  environmental  regulation  of  coatings,
          changes in the  technical  characteristics  of  materials,  changes in
          application  technology,  and  the  ability  of the  Company  to  meet
          changing customer requirements.


       o  The  prospects  and  operating  results of the  Company's  Lubrication
          Equipment  Division  may be affected by  variations  in the  equipment
          spending  levels of the major oil companies,  and the relative  market
          strength and pricing  strategies of  competitors,  especially in major
          foreign markets.


       o  The  prospects  and  operating  results  of the  Company's  Automotive
          Equipment  Division may be affected by the equipment purchase plans of
          major automobile  manufacturers  worldwide (which are in turn impacted
          by the level of  automotive  sales  worldwide),  changes in automotive
          manufacturing processes, and the pricing strategies of competitors.