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                                                                   EXHIBIT 10.2


                              WSI INDUSTRIES, INC.
                         NON-QUALIFIED STOCK OPTION AND
                 STOCK APPRECIATION RIGHTS AGREEMENT (2005 PLAN)


         THIS AGREEMENT, made as of this ___ day of __________, 2007, between
WSI Industries, Inc., a Minnesota corporation (the "Company") and
________________, an employee of the Company (the "Employee.

         In accordance with the Company's 2005 Stock Plan (the "Plan"), the
Company desires, by affording the Employee an opportunity to purchase its Common
Shares, par value $0.10 (the "Shares"), to provide the Employee with an added
incentive to continue his services to the Company, and through his proprietary
interest, to increase his personal participation in the success of the Company.

         THEREFORE, the parties agree:

         1.       Grant of Option. The Company hereby grants to the Employee, as
a matter of separate agreement and not in lieu of salary or any other
compensation for services, the right and non-incentive stock option (the
"Option"), to purchase all or any part of an aggregate of _______ Thousand
(__,000) Shares on the terms and conditions herein set forth, at the price of
$_____ per Share.

         2.       Term of Option. Subject to the other provisions of this
Agreement, the number of Shares specified in paragraph 1 shall be purchasable,
in whole or in part, at any time and from time to time during a period of ten
(10) years from the date hereof.

         3.       Time of Exercise. Subject to the other provisions of this
Agreement, the number of Shares specified in paragraph 1 shall be purchasable in
whole or in part, at any time and from time to time in the amounts and during
the periods respectively indicated:

                  (a)      during the period beginning _______, 200_ and ending
                           _______, 20__, _____ Thousand (__,000) Shares;

                  (b)      during the period beginning _______, 200_ and ending
                           _______, 20__, an additional _____ Thousand (__,000)
                           Shares; and

                  (c)      during the period beginning _______, 200_ and ending
                           _______, 20__, an additional _____ Thousand (__,000)
                           Shares.

         4.       Termination of Option. This Option is exercisable by the
Employee as provided in paragraph 3 above, but only while he is an employee of
the Company or a subsidiary of the Company or under the following circumstances:


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                  (a) Except in the event of death or Disability (as defined in
         the Plan), in the event Employee ceases to be employed by the Company
         or a subsidiary of the Company, the Employee may exercise the Option
         within three months after such termination of employment. Neither the
         Plan nor this Agreement confers any right with respect to continuance
         of employment by the Company or by a subsidiary of the Company, nor
         will the Plan or this Agreement interfere in any way with the
         Employee's right, or the Company's right, to terminate employment of
         the Employee at any time. When employment is terminated because of
         deliberate, willful or gross misconduct as determined by the Company,
         all rights under the Option shall terminate and expire upon such
         termination of employment. Neither the transfer of the Employee from
         employment by the Company to employment by a subsidiary of the Company,
         nor the transfer of the Employee from employment by a subsidiary of the
         Company to employment by the Company or by another subsidiary of the
         Company shall be deemed a termination of employment of the Employee by
         the Company or by a subsidiary of the Company. A temporary leave of
         absence granted to the Employee shall not be deemed a termination of
         employment.

                  (b) If the Employee's employment by the Company or a
         subsidiary terminates by reason of death or disability, this Option may
         be exercised at any time within twelve months following such
         termination due to death or disability, by Employee's personal
         representative or by the person or persons to whom Employee's rights
         under the Option shall pass by will or by the laws of descent and
         distribution.

None of the provisions of this Agreement shall be considered to permit, under
any circumstances, the exercise of this Option, by any person, after
____________, 20__.

         5.       Grant of Stock Appreciation Right. As part of and not in
addition to the Option granted above, the Employee is granted and may exercise,
in lieu of exercise of the Option as provided above, a "Stock Appreciation
Right" or "SAR" for the equivalent number of Shares subject to this Option,
which entitles the Employee to be paid the excess, as of the Time of Exercise,
of (i) the Fair Market Value of the Shares associated with this Option (or the
portion thereof that is surrendered on exercise) over (ii) the exercise price of
such Shares as set forth in Section 1 above.

                  (a) A SAR may be exercised only with respect to the Shares for
         which its related Option is then exercisable. SARs may be exercised for
         all or part of the Shares subject to this Option upon the surrender of
         the right to exercise the equivalent number of Shares of this Option.
         The exercise of the Option shall reduce the number of Shares subject to
         the SAR by the number of Shares exercised.

                  (b) Upon the exercise of a SAR, the Employee shall be entitled
         to receive Shares of equivalent value (based on the Fair Market Value
         on the Time of Exercise of the SAR), rounded down to the nearest whole
         Share equal to the amount set forth above.


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                  (c) The term "Option" as used in this Agreement, unless the
         context clearly indicates otherwise, shall refer to the SAR. The right
         to exercise and the terms and conditions thereof, and the rights of the
         Employee under the Plan and this Agreement with respect to the Shares
         subject to the SAR shall be the same as the terms and conditions to
         which the Option is subject.

                  (d) The Company shall deduct from the number of Shares
         deliverable upon exercise of a SAR such number of Shares as may be
         required to pay the amount of any federal, state or local taxes of any
         kind required by law to be withheld with respect to the settlement of a
         SAR under the Agreement. Shares withheld or surrendered to satisfy tax
         withholding will be valued at Fair Market Value as of the date such
         Shares are withheld or surrendered.

         6.       Rights of Shareholder. The Employee shall have none of the
rights of a shareholder with respect to the Shares subject to this Option until
the Shares shall have been issued to him upon exercise of the Option.

         7.       Transferability of Option. This Option shall not be
transferable by the Employee otherwise than by will or the laws of descent and
distribution, and is exercisable, during his lifetime, only by him. Any attempt
to assign, transfer, pledge, hypothecate, or otherwise dispose of this Option
contrary to the provisions hereof, or any attachment or similar process upon
this Option, shall be null and void and without effect.

         8.       Adjustments to Option. In the event that, prior to the
purchase of the maximum number of Shares purchasable under this Option, the
Company shall have effected one or more reclassifications, combinations, stock
dividends or split-ups of the Shares of the Company, or other like transactions,
or mergers, consolidations or other transactions relating to the Shares, the
number of Shares thereafter purchasable under this Option may be adjusted,
upward or downward, by the Board of Directors of the Company as it deems
equitable to prevent dilution or enlargement of the option rights herein
granted. The determination by the Board of Directors shall be final.

         9.       Procedure for Exercise. Exercise of this Option shall be by
delivery of written notice and this Agreement to the Company at its principal
office specifying the number of Shares with respect to which this Option is
being exercised. If less than the full number of Shares purchasable are to be
purchased, the number of Shares purchased shall be noted on this Agreement. Cash
or a check acceptable to the Company in an amount equal to the full purchase
price of the Shares to be purchased shall accompany such written notice. In the
event this Option is being exercised by any person or persons other than the
Employee, the notice of exercise shall be accompanied by appropriate proof of
the right of such person or persons to exercise this Option.

         10.      Transfer of Shares. The Employee understands that upon
exercise of this Option, in whole or in part, the Shares purchased may not be
sold, transferred, pledged or otherwise disposed of unless the Shares are
registered under the Securities Act of 1933, or unless the


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Company has received an opinion of counsel satisfactory to the Company that said
registration is not required.

         11.      Incorporation of Plan. In addition to the terms and conditions
set forth herein, this Option is also subject to all of the terms, provisions
and conditions set forth in the Plan pursuant to which this Option is granted, a
copy of which is available for review at the principal offices of the Company.

         IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the day and year first above written.


                                          WSI INDUSTRIES, INC.



                                          By
                                              ---------------------------------
                                          Its
                                              ---------------------------------



                                         --------------------------------------
                                                    [Employee]


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