Exhibit 10.2

Graco Inc. Non-Qualified Stock Option Agreement
[Grant Plan Long Name]
 
 

Graco Inc., a Minnesota corporation, (the “Company”), pursuant to the terms of
the Graco Inc. 2015 Stock Incentive Plan (the “Plan”), wishes to grant this
Option (as defined in the Terms and Conditions below) to you (“Employee”).

You must carefully read the Terms and Conditions governing this Option, as well
as the Prospectus and any other documents provided in connection with the Option
grant. Be sure you understand these documents and what your responsibilities and
obligations are before acknowledging receipt of the Option. If you are not
willing to agree to the Option Terms and Conditions, you must not accept the
Option and you should not sign the Option Grant Acknowledgment and Agreement. If
you accept the Option, you are accepting all of the Terms and Conditions that
are applicable to your receipt of the Option. If you do not accept the Option,
you are forfeiting your right to receive any potential benefits from the Option.
 
 
Employee: XXXX
Global ID: XXXXXXX
Award Type: XXXXXX
Date of Grant: XXXX
Award Expiration Date: XXXXX
Shares Granted: XXXXXX
Award Price: XX.XXUSD

Note: The statements above are qualified in their entirety by the Terms and
Conditions below, and should be read in conjunction with such Terms and
Conditions.

Executive Officer Grant

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TERMS AND CONDITIONS

1.    Grant of Option

The Company grants to Employee, the right and option (the “Option”) to purchase
all or any part of an aggregate of the Shares Granted of Common Stock of the
Company, par value USD 1.00 per share, at the Award Price per share on the terms
and conditions set forth below.

2.
Duration and Exercisability

A.
No portion of this Option may be exercised by Employee until the first
anniversary of the Date of Grant and then only in accordance with the Vesting
Schedule set forth below. In no event shall this Option or any portion of this
Option be exercisable following the tenth anniversary of the Date of Grant.

Vesting Schedule

Vesting Date
Portion of Option Exercisable
First Anniversary of Date of Grant
25%
Second Anniversary of Date of Grant
50%
Third Anniversary of Date of Grant
75%
Fourth Anniversary of Date of Grant
100%

If Employee does not purchase in any one year the full number of shares of
Common Stock of the Company to which Employee is entitled under this Option,
Employee may, subject to the terms and conditions of Section 3, purchase such
shares of Common Stock in any subsequent year during the term of this Option.
This Option shall expire as of the close of trading at the national securities
exchange on which the Common Stock is traded (“Exchange”) on the tenth
anniversary of the Date of Grant or if the Exchange is closed on the anniversary
date or the Common Stock of the Company is not trading on said anniversary date,
such earlier business day on which the Common Stock is trading on the Exchange.

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B.
During the lifetime of Employee, the Option shall be exercisable only by
Employee and shall not be assignable or transferable by Employee otherwise than
(i) by will or the laws of descent and distribution, or (ii) by designating a
beneficiary or beneficiaries (in a manner established by the Management
Organization and Compensation Committee of the Board of Directors of the Company
(the “Committee”)) to exercise the rights of Employee and receive any property
distributable with respect to the Option upon the death of the Employee (any
person to whom the Option has been transferred pursuant to this Section 2B, a
“Transferee”). The Transferee shall be subject to the provision of the
Agreement, and, as a condition to the transfer of the Option becoming effective,
the Transferee shall agree to be bound by the provision of this Agreement.

C.
Under no circumstances may the Option or any portion of the Option granted by
this Agreement be exercised after the term of the Option expires.

3.
Effect of Termination of Employment

A.
If Employee’s employment terminates for any reason other than Employee’s gross
and willful misconduct, death, retirement (as defined in Section 3D), or
disability (as defined in Section 3D), any portion of the Option that was
exercisable as of the date of termination of employment shall be exercisable at
any time within the period beginning on the day after termination of Employee’s
employment and ending at the close of trading on the Exchange ninety (90) days
later.

B.
If Employee’s employment terminates by reason of Employee’s gross and willful
misconduct during employment, including, but not limited to, wrongful
appropriation of Company or affiliate funds, serious violations of Company
policy, breach of fiduciary duty or the conviction of a felony, the unexercised
portion of the Option shall terminate as of the time of the misconduct. If the
Company determines subsequent to the termination of Employee’s employment for
whatever reason, that Employee engaged in conduct during employment that would
constitute gross and willful misconduct justifying termination, the Option shall
terminate as of the time of such misconduct. Furthermore, if the Option is
exercised in whole or in part and the Company thereafter determines that
Employee engaged in gross and willful misconduct during employment which would
have justified termination at any time prior to the date of such exercise, the
Option shall be deemed to have terminated as of the time of the misconduct and
the Company may elect to rescind the Option exercise.

C.
If Employee shall die while employed by the Company or an affiliate and shall
not have fully exercised the Option, all shares remaining under the Option shall
become immediately exercisable. If Employee shall die within ninety (90) days
after a termination of employment which meets the criteria of Section 3A above,
only the portion of the Option for those shares that are vested as of the date
of termination shall be exercisable. The executor or administrator of Employee’s
estate or any Transferee may exercise the portion of such exercisable Option at
any time during a period beginning on the day after the date of Employee’s death
and ending at the close of trading on the Exchange on the tenth anniversary of
the Date of Grant.

D.
If Employee’s termination of employment is due to retirement or disability, all
shares remaining under the Option shall become immediately exercisable. Employee
shall be deemed to have retired if the termination of employment occurs for
reasons other than the Employee’s gross and willful misconduct, death, or
disability after Employee (i) has attained age 55 and 10 years of service with
the Company or an affiliate, or (ii) has attained age 65. Employee shall be
deemed to be disabled if the termination of employment

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occurs because Employee is unable to work due to an impairment which would
qualify as a disability under the Company’s long term disability program.
Employee may exercise the portion of the Option remaining unexercised at any
time during a period beginning on the day after the date of Employee’s
termination of employment and ending at the close of trading on the Exchange on
the tenth anniversary of the Date of Grant. If Employee should die during the
period between the date of Employee’s retirement or disability and the
expiration of the Option, the unexercised portion of the Option shall be
exercisable at any time during a period beginning the day after the date of
Employee’s death and ending at the close of trading on the Exchange on the tenth
anniversary of the Date of Grant.

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

F.
If the Option is exercised by a Transferee or the executors or administrators of
the estate of a deceased optionee, the Company shall be under no obligation to
issue stock hereunder unless and until the Company is satisfied that the
person(s) exercising the Option is the validly designated beneficiary or the
duly appointed legal representative of the deceased optionee’s estate or the
proper legatee or distributee thereof.

G.
For purposes of this Section 3, if the last day of the relevant period is a day
upon which the Exchange is not open for trading or the Common Stock is not
trading on that day, the relevant period will expire at the close of trading on
such earlier business day on which the Exchange is open and the Common Stock is
trading.

4.    Manner of Exercise

A.
Employee or other proper party may exercise the Option only by delivering within
the term of the Option 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 Sections 4B(2), 4B(3) and 4B(4),
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 as follows:

(1)
by cash or check (bank check, certified check, or personal check);

(2)
by delivering to the Company for cancellation, shares of Common Stock of the
Company which have a fair market value equal to the Option price;

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(3)
if the Employee is still serving as an executive officer of the Company on the
date of exercise, by a reduction in the number of shares of Common Stock to be
delivered upon exercise, which number of shares to be withheld shall have an
aggregate fair market value on the date of exercise equal to the exercise price;
or

(4)
by delivering to the Company a properly executed exercise notice, together with
irrevocable instructions to a broker to promptly deliver to the Company from
sale or loan proceeds the amount required to pay the exercise price.

For purposes of Sections 4B(2) and 4B(3), the fair market value per share of the
Company’s Common Stock shall be the closing price of the Common Stock on the day
immediately preceding the date of exercise on the Exchange. 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 Common Stock is not then traded on the Exchange, then the fair
market value shall be determined in such manner as the Company shall deem
reasonable.

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. Employee may pay
such amount by delivering to the Company for cancellation shares of Common Stock
of the Company with a fair market value equal to the minimum amount of such
withholding tax requirement by (i) electing to have the Company withhold shares
otherwise to be delivered with a fair market value equal to the minimum
statutory amount of such taxes required to be withheld by the Company, or (ii)
electing to surrender to the Company previously owned shares with a fair market
value equal to the amount of such minimum tax obligation.

6.    Change of Control

A.
Notwithstanding Section 2A hereof, the entire Option shall become immediately
and fully exercisable upon a “Change of Control” and shall remain fully
exercisable until either exercised or expiring by its terms. A “Change of
Control” means:

(1)
an acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“1934 Act”)), (a “Person”), of beneficial ownership (within the meaning of Rule
13d-3 of the 1934 Act) which, together with other acquisitions by such Person,
results in the aggregate beneficial ownership by such Person of 30% 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:

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(i)
an acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company,

(ii)
an acquisition by the Employee or any group that includes the Employee, or

(iii)
an acquisition by any entity pursuant to a transaction that complies with
clauses (a), (b) and (c) of Section 6A(3) below; 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 by or on behalf of a Person other than the Board; or

(3)
Consummation of a reorganization, merger or consolidation of the Company with or
into another entity or a 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”);
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 and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, a majority 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 (or
comparable equity interests), as the case may be, of the surviving or acquiring
entity resulting from such Business Combination (including, without limitation,
an entity that as a result of such transaction beneficially owns 100% of the
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities (or comparable equity securities) or all or
substantially all of the Company’s assets either directly or indirectly) in
substantially the same proportions (as compared to the other holders of the
Company’s common stock and voting securities prior to the Business Combination)
as their respective ownership, immediately prior to such Business Combination,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities,

(b)
no Person (excluding (i) any employee benefit plan (or related trust) sponsored
or maintained by the Company or such entity resulting from such Business
Combination or any entity controlled by the Company or the entity resulting from
such Business Combination, (ii) any entity beneficially owning 100% of the
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities (or comparable equity securities) or all or
substantially all of the Company’s assets either directly or indirectly and
(iii) the Employee and any group that includes the Employee) beneficially owns,
directly or indirectly, 30% or more of the then outstanding shares of common
stock

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(or comparable equity interests) of the entity resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities (or comparable equity interests) of such entity, and
(c)
immediately after the Business Combination, a majority of the members of the
board of directors (or comparable governors) of the entity 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

(4)
approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.

7.
Adjustments; Fundamental Change

A.
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 Employee’s 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.

B.
In the event of a proposed (i) dissolution or liquidation of the Company, (ii) a
sale of substantially all of the assets of the Company, (iii) a merger or
consolidation of the Company with or into any other corporation, regardless of
whether the Company is the surviving corporation, or (iv) a statutory share
exchange involving the capital stock of the Company (each, a “Fundamental
Change”), the Committee may, but shall not be obligated to:

(1)
with respect to a Fundamental Change that involves a merger, consolidation or
statutory share exchange, make appropriate provision for the protection of the
Option by the substitution of options and appropriate voting common stock of the
corporation surviving any such merger or consolidation or, if appropriate, the
“parent corporation” (as defined in Section 424(e) of the Internal Revenue Code
of 1986, as amended from time to time, and any regulations promulgated
thereunder, or any successor provision) of the Company or such surviving
corporation, in lieu of the Option and shares of Common Stock of the Company, or

(2)
with respect to any Fundamental Change, including, without limitation, a merger,
consolidation or statutory share exchange, declare, prior to the occurrence of
the Fundamental Change, and provide written notice to the holder of the Option
of the declaration, that the Option, whether or not then exercisable, shall be
canceled at the time of, or immediately prior to the occurrence of, the
Fundamental Change in exchange for payment to the holder of the Option, within
20 days after the Fundamental Change, of cash (or, if the Committee so elects in
lieu of solely cash, of such form(s) of consideration, including cash and/or
property, singly or in such combination as the Committee shall determine, that
the holder of the Option would have received as a result of the Fundamental
Change if the holder of the Option had exercised the Option immediately prior to
the Fundamental Change) equal to, for each share of Common Stock covered by the
canceled Option, the amount, if any,

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by which the Fair Market Value (as defined in this Section 7B) per share of
Common Stock exceeds the exercise price per share of Common Stock covered by the
Option. At the time of the declaration provided for in the immediately preceding
sentence, the Option shall immediately become exercisable in full and the holder
of the Option shall have the right, during the period preceding the time of
cancellation of the Option, to exercise the Option as to all or any part of the
shares of Common Stock covered thereby in whole or in part, as the case may be.
In the event of a declaration pursuant to this Section 7B, the Option, to the
extent that it shall not have been exercised prior to the Fundamental Change,
shall be canceled at the time of, or immediately prior to, the Fundamental
Change, as provided in the declaration. Notwithstanding the foregoing, the
holder of the Option shall not be entitled to the payment provided for in this
Section 7B if such Option shall have expired or been forfeited. For purposes of
this Section 7B only, “Fair Market Value” per share of Common Stock means the
fair market value, as determined in good faith by the Committee, of the
consideration to be received per share of Common Stock by the shareholders of
the Company upon the occurrence of the Fundamental Change, notwithstanding
anything to the contrary provided in this Agreement.
8.    Miscellaneous

A.
This Option is issued pursuant to the Plan and is subject to its terms. The
terms of the Plan are available for inspection during business hours at the
principal offices of the Company.

B.
This Agreement shall not create an employment relationship between Employee and
the Company and shall not confer on Employee any right with respect to
continuance of employment by the Company or any of its affiliates or
subsidiaries, nor will it interfere in any way with the right of the Company to
terminate such employment at any time.

C.
Neither Employee, the Employee’s legal representative, a Transferee, nor the
executor(s) or administrator(s) of the Employee’s estate shall be, or have any
of the rights or privileges of, a shareholder of the Company in respect of any
shares of Common Stock receivable upon the exercise of this Option, in whole or
in part, unless and until such shares shall have been issued upon exercise of
this Option.

D.
This Option has been granted to Employee as a purely discretionary benefit and
shall not form part of Employee’s salary or entitle Employee to receive similar
option grants in the future. Benefits received under the Plan shall not be used
in calculating severance payments, if any.

E.
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.

F.
The internal law, and not the law of conflicts, of the State of Minnesota, USA,
shall govern all questions concerning the validity, construction and effect of
this Agreement, the Plan and any rules and regulations relating to the Plan or
this Option.

G.
Employee hereby consents to the transfer by Employee’s employer or the Company
of information relating to Employee’s participation in the Plan, including the
personal data set forth in this Agreement, between them or to other related
parties in the United States or

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elsewhere, or to any financial institution or other third party engaged by the
Company, but solely for the purpose of administering the Plan and this Option.
Employee also consents to the storage and processing of such data by such
persons for this purpose.

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