Answer:
"The principal said he is making an exception for me, Grandpa, and I'm getting the jacket after all."
Step-by-step explanation:
First, sentences must always start with a capital letter. Second, it seems to me that the given sentence is a direct quotation from the speaker (grandson) since the pronoun used is in the first-person point of view (me, I'm). Hence, direct quotes must be enclosed with quotation marks (" "). The correct version of the given quote is as follows:
"The principal said he is making an exception for me, Grandpa, and I'm getting the jacket after all."