Exhibit 10.1


 


TITAN MACHINERY INC.


2005 EQUITY
INCENTIVE PLAN


SECTION 1.


DEFINITIONS


As used herein, the
following terms shall have the meanings indicated below:


(a)          “Affiliate”
shall mean the Parent or a Subsidiary of the Company.


(b)          “Committee” shall
mean a Committee of two or more directors who shall be appointed by and serve
at the pleasure of the Board. If the Company’s securities are registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended,
then, to the extent necessary for compliance with Rule 16b-3, or any successor
provision, each of the members of the Committee shall be a “non-employee
director.” Solely for purposes of this Section 1(a), “non-employee director”
shall have the same meaning as set form in Rule 16b-3, or any successor
provision, as then in effect, of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended.


(c)          The “Company” shall
mean Titan Machinery Inc., a North Dakota corporation.


(d)          “Fair Market Value” as
of any date shall mean (i) if such stock is listed on the Nasdaq National
Market, Nasdaq SmallCap Market, or an established stock exchange, the price of
such stock at the close of the regular trading session of such market or
exchange on such date, as reported by The Wall Street Journal or a
comparable reporting service, or, if no sale of such stock shall have occurred
on such date, on the next preceding day on which there was a sale of stock;
(ii) if such stock is not so listed on the Nasdaq National Market, Nasdaq SmallCap
Market, or an established stock exchange, the average of the closing “bid” and “asked”
prices quoted by the OTC Bulletin Board, the National Quotation Bureau, or any
comparable reporting service on such date or, if there are no quoted “bid” and “asked”
prices on such date, on the next preceding date for which there are such
quotes; or (iii) if such stock is not publicly traded as of such date, the per
share value as determined by the Board, or the Committee, in its sole
discretion by applying principles of valuation with respect to the Company’s
Common Stock.


(e)          The “Internal Revenue
Code” or “Code” shall
mean the Internal Revenue Code of 1986, as amended from time to time.


(f)           The “Participant” means
(i) an employee of the Company or any Affiliate to whom an incentive stock
option has been granted pursuant to Section 9, (ii) a consultant or advisor to
or director, employee or officer of the Company or any Affiliate to whom a
nonqualified stock option has been granted pursuant to Section 10, or (iii) a consultant
or advisor to, or director, employee or officer of the Company or any Affiliate
to whom a restricted stock award has been granted pursuant to Section 11.


(g)          “Parent” shall mean any corporation which owns,
directly or indirectly in an unbroken chain, fifty percent (50%) or more of the
total voting power of the Company’s outstanding stock.



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(h)          The “Plan” means
the Titan Machinery Inc. 2005 Equity Incentive Plan, as amended hereafter from
time to time, including the form of Option and Award Agreements as they may be
modified by the Board from time to time.


(i)           “Stock,” “Option Stock” or
“Common Stock” shall mean Common
Stock of the Company (subject to adjustment as described in Section 12)
reserved for incentive and nonqualified stock options and restricted stock
awards pursuant to this Plan.


(j)           A “Subsidiary”
shall mean any corporation of which fifty percent (50%) or more of the total
voting power of outstanding stock is owned, directly or indirectly in an
unbroken chain, by the Company.


SECTION 2.


PURPOSE


The Plan has been
established to promote the interests of the Company, its Subsidiaries and its
stockholders by (i) attracting and retaining exceptional employees, consultants
and directors; (ii) motivating such employees, consultants and directors by
means of performance-related incentives to achieve long-range performance
goals; and (iii) enabling such employees, consultants and directors to
participate in the long-term growth and financial success of the Company.


It is the intention of the
Company to carry out the Plan through the granting of stock options which will
qualify as “incentive stock options” under the provisions of Section 422 of the
Internal Revenue Code, or any successor provision, pursuant to Section 9 of
this Plan, through the granting of nonqualified stock options pursuant to
Section 10 of this Plan, and through the granting of restricted stock awards
pursuant to Section 11 of this Plan. With respect to incentive stock options,
adoption of this Plan shall be and is expressly subject to the condition of
approval by the shareholders of the Company within 12 months before or after
the adoption of the Plan by the Board of Directors. Any incentive stock options
granted after adoption of the Plan by the Board of Directors shall be treated
as nonqualified stock options if shareholder approval is not obtained within
such 12-month period.


SECTION 3.


EFFECTIVE DATE OF PLAN


The Plan shall be effective
as of the date of adoption by the Board of Directors, subject to approval by
the shareholders of the Company as required in Section 2.


SECTION 4.


ADMINISTRATION


The Plan shall be
administered by the Board of Directors of the Company (hereinafter referred to
as the “Board”) or by a Committee
which may be appointed by the Board from time to time or by one or more
officers designated by the Board or Committee (collectively referred to as the “Administrator”). Except as otherwise
provided herein, the Administrator shall have all of the powers vested in it
under the provisions of the Plan, including but not limited to exclusive
authority (where applicable and within the limitations described in the Plan)
to determine, in its



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sole discretion, whether an incentive stock option,
nonqualified stock option or restricted stock award shall be granted, the individuals
to whom, and the time or times at which, options and awards shall be granted,
the number of shares subject to each option or award, the option price, and
terms and conditions of each option or award. The Administrator shall have full
power and authority to administer and interpret the Plan, to make and amend
rules, regulations and guidelines for administering the Plan, to prescribe the
form and conditions of the respective stock option and restricted stock award
agreements (which may vary from Participant to Participant) evidencing each
option or award and to make all other determinations necessary or advisable for
the administration of the Plan. The Administrator’s interpretation of the Plan,
and all actions taken and determinations made by the Administrator pursuant to
the power vested in it hereunder, shall be conclusive and binding on all
parties concerned.


No member of the Board or
the Committee shall be liable for any action taken or determination made in
good faith in connection with the administration of the Plan. In the event the
Board appoints a Committee as provided hereunder, any action of the Committee
with respect to the administration of the Plan shall be taken pursuant to a
majority vote of the Committee members or pursuant to the written resolution of
all Committee members.


SECTION 5.


PARTICIPANTS


The Administrator shall from
time to time, at its discretion and without approval of the shareholders,
designate those employees to whom incentive stock options shall be granted
pursuant to Section 9 of the Plan; those employees, officers, directors,
consultants and advisors of the Company or of any Affiliate to whom
nonqualified stock options shall be granted pursuant to Section 10 of the Plan;
and those employees, officers, directors, consultants and advisors of the
Company or any Affiliate to whom restricted stock awards shall be granted
pursuant to Section 11 of the Plan; provided, however, that consultants or
advisors shall not be eligible to receive stock options or restricted stock awards
hereunder unless such consultant or advisor renders bona fide services to the
Company or Affiliate and such services are not in connection with the offer or
sale of securities in a capital raising transaction and do not directly or
indirectly promote or maintain a market for the Company’s securities. The
Administrator may grant additional incentive stock options, nonqualified stock
options and restricted stock awards under this Plan to some or all Participants
then holding options or awards or may grant options and awards solely or
partially to new Participants. In designating Participants, the Administrator
shall also determine the number of shares to be optioned or awarded to each
such Participant. The Board may from time to time designate individuals as
being ineligible to participate in the Plan.


SECTION 6.


STOCK


The Stock to he optioned or
awarded under this Man shall consist of authorized but unissued shares of
Stock. One Million (1,000,000) shares of Stock shall be reserved and available
for stock options and restricted stock awards under the Plan; provided,
however, that the total number of shares of Stock reserved for options and
restricted stock awards under this Plan shall be subject to adjustment as
provided in Section 12 of the Plan; and provided, further, that all shares of
Stock reserved and available under the Plan shall constitute the maximum



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aggregate number of shares of Stock that may be
issued through incentive stock options. If (i) any portion of an outstanding
stock option or restricted stock award under the Plan for any reason expires,
(ii) any portion of an outstanding stock option is terminated prior to the
exercise of such option, or (iii) any portion of a restricted stock award is
terminated prior to the lapsing of any risks of forfeiture on such stock, the
shares of Stock allocable to such portion of the option or award shall continue
to be reserved for stock options and restricted stock awards under the Plan and
may be optioned or awarded hereunder.


SECTION 7.


DURATION OF
PLAN


Incentive stock options may
be granted pursuant to the Plan from time to time during a period often (10)
years from the effective date as defined in Section 3. Nonqualified stock
options and restricted stock awards may be granted pursuant to the Plan from time
to time after the effective date of the Plan and until the Plan is discontinued
or terminated by the Board. Any incentive stock option granted during such
ten-year period and any nonqualified stock option or restricted stock award
granted prior to the termination of the Plan by the Board shall remain in full
force and effect until the expiration of the option or award as specified in
the written stock option or restricted stock award agreement and shall remain
subject to the terms and conditions of this Plan.


SECTION 8.


PAYMENT


Participants may pay for
shares of Stock upon exercise of stock options granted pursuant to this Plan
with cash, personal check, certified check, previously-owned shares of the
Company’s Common Stock, or such other form of payment as may be authorized by
the Administrator. Any Stock so tendered as part of such payment shall be
valued at such Stock’s then Fair Market Value. The Administrator may, in its
sole discretion, limit the forms of payment available to the Participant and
may exercise such discretion any time prior to the termination of the option
granted to the Participant or upon any exercise of the option by the
Participant. “Previously-owned shares” means shares of the Company’s Common
Stock which the Participant has owned for at least six (6) months prior to the
exercise of the stock option, or for such other period of time as may be
required by generally accepted accounting principles.


With respect to payment in
the form of Common Stock of the Company, the Administrator may require advance
approval or adopt such rules as it deems necessary to assure compliance with Rule
16b-3, or any successor provision, as then in effect, of the General Rules and
Regulations under the Securities Exchange Act of 1934, if applicable.


SECTION 9.


TERMS AND
CONDITIONS OF INCENTIVE STOCK OPTIONS


Each incentive stock option
granted pursuant to this Section 9 shall be evidenced by a written incentive
stock option agreement (the “Option Agreement”). The Option Agreement shall be in
such form as may be approved from time to time by the Administrator and may
vary



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from Participant to Participant; provided, however,
that each Participant and each Option Agreement shall comply with and be
subject to the following terms and conditions:


(a)          Number of Shares and Option Price. The Option
Agreement shall state the total number of shares covered by the incentive stock
option. To the extent required to qualify the Option as an incentive stock
option under Section 422 of the Internal Revenue Code, or any successor provision,
the option price per share shall not be less than one hundred percent (100%) of
the per share Fair Market Value of the Common Stock on the date the
Administrator grants the option; provided, however, that if a Participant owns
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of any Affiliate, the option price
per share of an incentive stock option granted to such Participant shall not be
less than one hundred ten percent (110%) of the per share Fair Market Value of
the Common Stock on the date of the grant of the option. The Administrator
shall have full authority and discretion in establishing the option price and
shall be fully protected in so doing.


(b)          Term and Exercisability of Incentive Stock Option.
The term during which any incentive stock option granted under the Plan may be
exercised shall be established in each case by the Administrator. To the extent
required to qualify the Option as an incentive stock option under Section 422
of the Internal Revenue Code, or any successor provision, in no event shall any
incentive stock option be exercisable during a term of more than 10 years after
the date on which it is granted; provided, however, that if a Participant owns
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of any Affiliate, the incentive stock
option granted to such Participant shall be exercisable during a term of not
more than five years after the date on which it is granted.


The Option Agreement shall
state when the incentive stock option becomes exercisable and shall also state
the maximum term during which the option may be exercised. In the event an
incentive stock option is exercisable immediately, the manner of exercise of
the option in the event it is not exercised in full immediately shall be
specified in the Option Agreement. The Administrator may accelerate the
exercisability of any incentive stock option granted hereunder which is not
immediately exercisable as of the date of grant.


(c)          Nontransferability. No incentive stock option shall
be transferable, in whole or in part, by the Participant other than by will or
by the laws of descent and distribution. During the Participant’s lifetime, the
incentive stock option may be exercised only by the Participant. If the
Participant shall attempt any transfer of any incentive stock option granted
under the Plan during the Participant’s lifetime, such transfer shall be void
and the incentive stock option, to the extent not fully exercised, shall
terminate.


(d)          No Rights as Shareholder. A Participant (or the
Participant’s successor or successors) shall have no rights as a shareholder
with respect to any shares covered by an incentive stock option until the date
of the issuance of a stock certificate evidencing such shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property), distributions or other rights for which the
record date is prior to the date such stock certificate is actually issued
(except as otherwise provided in Section 12 of the Plan).



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(e)          Withholding. The Company or its Affiliate shall be
entitled to withhold and deduct from future wages of the Participant all legally
required amounts necessary to satisfy any and all withholding and
employment-related taxes attributable to the Participant’s exercise of an
incentive stock option or a “disqualifying disposition” of shares acquired
through the exercise of an incentive stock option as defined in Code Section
421(b). In the event the Participant is required under the Option Agreement to
pay the Company, or make arrangements satisfactory to the Company respecting
payment of, such withholding and employment-related taxes, the Board may, in
its discretion and pursuant to such rules as it may adopt, permit the
Participant to satisfy such obligation, in whole or in part, by electing to
have the Company withhold shares of Common Stock otherwise issuable to the
Participant as a result of the exercise of the incentive stock option having a
Fair Market Value equal to the minimum required tax withholding, based on the
minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes, that are applicable to the supplemental income
resulting from the option. In no event may the Company or any Affiliate
withhold shares having a Fair Market Value in excess of such statutory minimum
required tax withholding. The Participant’s election to have shares withheld
for this purpose shall be made on or before the date the incentive stock option
is exercised or, if later, the date that the amount of tax to be withheld is
determined under applicable tax law. Such election shall be approved by the
Board and otherwise comply with such rules as the Board may adopt to assure
compliance with Rule 16b-3, or any successor provision, as then in effect, of
the General Rules and Regulations under the Securities Exchange Act of 1934, if
applicable.


(f)           Other Provisions. The Option Agreement authorized
under this Section 9 shall contain such other provisions as the Administrator
shall deem advisable. Any such Option Agreement shall contain such limitations
and restrictions upon the exercise of the option as shall be necessary to ensure
that such option will be considered an “incentive stock option” as defined in
Section 422 of the Internal Revenue Code or to conform to any change therein.


SECTION 10.


TERMS AND
CONDITIONS OF NONQUALIFIED STOCK OPTIONS


Each nonqualified stock
option granted pursuant to this Section 10 shall be evidenced by a written
nonqualified stock option agreement (the “Option
Agreement”). The
Option Agreement shall be in such form as may be approved from time to time by
the Administrator and may vary from Participant to Participant; provided,
however, that each Participant and each Option Agreement shall comply with and
be subject to the following terms and conditions:


(a)          Number of Shares and Option Price. The Option
Agreement shall state the total number of shares covered by the nonqualified
stock option. Unless otherwise determined by the Administrator, the option
price per share shall be one hundred percent (100%) of the per share Fair
Market Value of the Common Stock on the date the Administrator grants the
option.


(b)          Term and Exercisability of Nonqualified Stock Option.
The term during which any nonqualified stock option granted under the Plan may
be exercised shall be established in each case by the Administrator. The Option
Agreement shall state when the nonqualified stock option becomes exercisable
and shall also state the maximum term during which the option may be exercised.
In the event a nonqualified stock option is exercisable immediately, the manner
of exercise of the option in the event it is not exercised in full immediately
shall be specified in the



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Option Agreement. The
Administrator may accelerate the exercisability of any nonqualified stock
option granted hereunder which is not immediately exercisable as of the date of
grant.


(c)          Withholding. The Company or its Affiliate shall be
entitled to withhold and deduct from future wages of the Participant all
legally required amounts necessary to satisfy any and all withholding and
employment-related taxes attributable to the Participant’s exercise of a nonqualified
stock option. In the event the Participant is required under the Option
Agreement to pay the Company or Affiliate, or make arrangements satisfactory to
the Company or Affiliate respecting payment of such withholding and
employment-related taxes, the Administrator may, in its discretion and pursuant
to such rules as it may adopt, permit the Participant to satisfy such
obligation, in whole or in part, by delivering shares of the Company’s Common
Stock or by electing to have the Company or Affiliate withhold shares of Common
Stock otherwise issuable to the Participant as a result of the exercise of the
nonqualified stock option having a Fair Market Value equal to the minimum
required tax withholding, based on the minimum statutory withholding rates for
federal and state tax purposes, including payroll taxes, that are applicable to
the supplemental income resulting from such exercise. In no event may the
Company or Affiliate withhold shares having a Fair Market Value in excess of
such statutory minimum required tax withholding. The Participant’s election to
have shares withheld for this purpose shall be made on or before the date the
nonqualified stock option is exercised or, if later, the date that the amount
of tax to be withheld is determined under applicable tax law. Such election
shall be approved by the Administrator and otherwise comply with such rules as
the Administrator may adopt to assure compliance with Rule 16b-3, or any
successor provision, as then in effect, of the General Rules and Regulations
under the Securities Exchange Act of 1934, if applicable.


(d)          Transferability. The Administrator may, in its sole
discretion, permit the Participant to transfer any or all nonqualified stock
options to any member of the Participant’s “immediate family” as such term is
defined in Rule 16a-l(e) promulgated under the Securities Exchange Act of 1934,
or any successor provision, or to one or more trusts whose beneficiaries are
members of such Participant’s “immediate family” or partnerships in which such
family members are the only partners; provided, however, that the Participant
cannot receive any consideration for the transfer and such transferred
nonqualified stock option shall continue to be subject to the same terms and
conditions as were applicable to such nonqualified stock option immediately
prior to its transfer.


(e)          No Rights as Shareholder. A Participant (or the
Participant’s successor or successors) shall have no rights as a shareholder
with respect to any shares covered by a nonqualified stock option until the
date of the issuance of a stock certificate evidencing such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property), distributions or other rights for which
the record date is prior to the date such stock certificate is actually issued
(except as otherwise provided in Section 11 of the Plan).


(f)           Other Provisions. The Option Agreement authorized
under this Section 10 shall contain such other provisions as the Administrator
shall deem advisable.



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SECTION 11.


RESTRICTED
STOCK AWARDS


Each restricted stock award
granted pursuant to the Plan shall be evidenced by a written restricted stock
agreement (the “Restricted Stock Agreement). The Restricted Stock Agreement
shall be in such form as may be approved from time to time by the Administrator
and may vary from Participant to Participant; provided, however, that each
Participant and each Restricted Stock Agreement shall comply with and be
subject to the following terms and conditions:


(a)          Number of Shares. The Restricted Stock Agreement
shall state the total number of shares of Stock covered by the restricted stock
award.


(b)          Risks of Forfeiture. The Restricted Stock Agreement
shall set forth the risks of forfeiture, if any, which shall apply to the
shares of Stock covered by the restricted stock award, and shall specify the
manner in which such risks of forfeiture shall lapse. The Administrator may, in
its sole discretion, modify the manner in which such risks of forfeiture shall
lapse but only with respect to those shares of Stock which are restricted as of
the effective date of the modification.


(c)          Issuance of Restricted Shares. The Company shall
cause to be issued a stock certificate representing such shares of Stock in the
Participant’s name, and shall deliver such certificate to the Participant;
provided, however, that the Company shall place a legend on such certificate
describing the risks of forfeiture and other transfer restrictions set forth in
the Participant’s Restricted Stock Agreement and providing for the cancellation
and return of such certificate if the shares of Stock subject to the restricted
stock award are forfeited.


(d)          Rights as Shareholder. Until the risks of forfeiture
have lapsed or the shares subject to such restricted stock award have been
forfeited, the Participant shall be entitled to vote the shares of Stock
represented by such stock certificates and shall receive all dividends
attributable to such shares, but the Participant shall not have any other rights
as a shareholder with respect to such shares.


(e)          Withholding Taxes. The Company or its Affiliate
shall be entitled to withhold and deduct from future wages of the Participant
all legally required amounts necessary to satisfy any and all withholding and
employment-related taxes attributable to the Participant’s restricted stock
award. In the event the Participant is required under the Restricted Stock
Agreement to pay the Company or Affiliate, or make arrangements satisfactory to
the Company or Affiliate respecting payment of, such withholding and
employment-related taxes, the Administrator may, in its discretion and pursuant
to such rules as it may adopt, permit the Participant to satisfy such
obligations, in whole or in part, by delivering shares of Common Stock,
including shares of Stock received pursuant to a restricted stock award on
which the risks of forfeiture have lapsed. Such shares shall have a Fair Market
Value equal to the minimum required tax withholding, based on the minimum
statutory withholding rates for federal and state tax purposes, including
payroll taxes, that are applicable to the supplemental income resulting from
the lapsing of the risks of forfeiture on such restricted stock. In no event
may the Participant deliver shares having a Fair Market Value in excess of such
statutory minimum required tax withholding. The



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Participant’s election to
deliver shares of Common Stock for this purpose shall be made on or before the
date that the amount of tax to be withheld is determined under applicable tax
law. Such election shall be approved by the Administrator and otherwise comply
with such rules as the Administrator may adopt to assure compliance with Rule
16b-3, or any successor provision, as then in effect, of the General Rules and
Regulations under the Securities Exchange Act of 1934, if applicable.


(f)           Nontransferability. No restricted stock award shall
be transferable, in whole or in part, by the Participant, other than by will or
by the laws of descent and distribution, prior to the date the risks of
forfeiture described in the restricted stock agreement have lapsed. If the
Participant shall attempt any transfer of any restricted stock award granted
under the Plan prior to such date, such transfer shall be void and the
restricted stock award shall terminate.


(g)          Other Provisions. The Restricted Stock Agreement
authorized under this Section 11 shall contain such other provisions as the
Administrator shall deem advisable.


SECTION 12.


RECAPITALIZATION,
SALE, MERGER, EXCHANGE OR LIQUIDATION


In the event of an increase
or decrease in the number of shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued shares
of Common Stock effected without receipt of consideration by the Company, the
Board may, in its sole discretion, adjust the number of shares of Stock
reserved under Section 6 hereof, the number of shares of Stock covered by each
outstanding stock option and restricted stock award, and, if applicable, the
price per share thereof to reflect such change. Additional shares which may be
credited pursuant to such adjustment shall be subject to the same restrictions
as are applicable to the shares with respect to which the adjustment relates.


Unless otherwise provided in
the Option or Restricted Stock Agreement, in the event of an acquisition of the
Company through the sale of substantially all of the Company’s assets and the
consequent discontinuance of its business or through a merger, consolidation,
exchange, reorganization, reclassification, extraordinary dividend, divestiture
or liquidation of the Company (collectively referred to as a “transaction”),
the Board may provide for one or more of the following:


(a)          the equitable acceleration of the exercisability of any
outstanding options and the lapsing of the risks of forfeiture on any
restricted stock awards;


(b)          the complete termination of this Plan, the cancellation of
outstanding options not exercised prior to a date specified by the Board (which
date shall give Participants a reasonable period of time in which to exercise
the options prior to the effectiveness of such transaction), and the
cancellation of any restricted stock awards for which the risks of forfeiture
have not lapsed;


(c)          that Participants holding outstanding stock options shall
receive, with respect to each share of Stock subject to such options, as of the
effective date of any such transaction, cash in an amount equal to the excess
of the Fair Market Value of such Stock on the date immediately preceding the
effective date of such transaction over the option price per share of such
options;



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provided that the Board may,
in lieu of such cash payment, distribute to such Participants shares of Common
Stock of the Company or shares of stock of any corporation succeeding the
Company by reason of such transaction, such shares having a value equal to the
cash payment herein;


(d)          that Participants holding outstanding restricted stock
awards shall receive, with respect to each share of Stock subject to such
awards, as of the effective date of any such transaction, cash in an amount
equal to the Fair Market Value of such Stock on the date immediately preceding
the effective date of such transaction; provided that the Board may, in lieu of
such cash payment, distribute to such Participants shares of Common Stock of
the Company or shares of stock of any corporation succeeding the Company by
reason of such transaction, such shares having a value equal to the cash
payment herein;


(e)          the continuance of the Plan with respect to the exercise of
options which were outstanding as of the date of adoption by the Board of such
plan for such transaction and provide to Participants holding such options the
right to exercise their respective options as to an economically equivalent
number of shares of stock of the corporation succeeding the Company by reason
of such transaction; and


(f)          the continuance of the Plan with respect to restricted
stock awards for which the risks of forfeiture have not lapsed as of the date
of adoption by the Board of such plan for such transaction and provide to
Participants holding such awards the right to receive an economically
equivalent number of shares of stock of the corporation succeeding the Company
by reason of such transaction.


The Board may restrict the
rights of or the applicability of this Section 12 to the extent necessary to
comply with Section 16(b) of the Securities Exchange Act of 1934, the Internal
Revenue Code or any other applicable law or regulation. The grant of an option,
restricted stock or award pursuant to the Plan shall not limit in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge,
exchange or consolidate or to dissolve, liquidate, sell or transfer all or any
part of its business or assets.


SECTION 13.


SECURITIES
LAW COMPLIANCE AND

RESTRICTIONS ON TRANSFER


No shares of Stock shall be issued pursuant to the Plan unless and
until there has been compliance, in the opinion of Company’s counsel, with all
applicable legal requirements, including without limitation, those relating to
securities laws and stock exchange listing requirements. As a condition to the
issuance of Stock to Participant, the Administrator may require Participant to
(i) represent that the shares of Stock are being acquired for investment and
not resale and to make such other representations as the Administrator shall
deem necessary or appropriate to qualify the issuance of the shares of Stock as
exempt from the Securities Act of 1933 and any other applicable securities
laws, and (ii) represent that Participant shall not dispose of the shares of
Stock in violation of the Securities Act of 1933 or any other applicable
securities laws or any company policies then in effect.



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As a further condition to
the grant of any stock option or the issuance of Stock to Participant,
Participant agrees to the following:


(a)          In the event the Company advises Participant that it plans
an underwritten public offering of its Common Stock in compliance with the
Securities Act of 1933, as amended, and the underwriter(s) seek to impose
restrictions under which certain shareholders may not sell or contract to sell
or grant any option to buy or otherwise dispose of part or all of their stock
purchase rights of the underlying Common Stock, Participant will not, for a
period not to exceed 180 days from the prospectus, sell or contract to sell or
grant an option to buy or otherwise dispose of any stock option granted to
Participant pursuant to the Plan or any of the underlying shares of Common
Stock without the prior written consent of the underwriter(s) or its
representative(s).


(b)          In the event the Company makes any
public offering of its securities and determines in its sole discretion that it
is necessary to reduce the number of issued but unexercised stock purchase
rights so as to comply with any state’s securities or Blue Sky law limitations
with respect thereto, the Board of Directors of the Company shall have the
right (i) to accelerate the exercisability of any stock option and the date on
which such option must be exercised, provided that the Company gives
Participant prior written notice of such acceleration, and (ii) to cancel any
options or portions thereof which Participant does not exercise prior to or
contemporaneously with such public offering.


(c)          In the event of a transaction (as
defined in Section 12 of the Plan), Participant will comply with Rule 145 of
the Securities Act of 1933 and any other restrictions imposed under other
applicable legal or accounting principles if Participant is an “affiliate” (as
defined in such applicable legal and accounting principles) at the time of the
transaction, and Participant will execute any documents necessary to ensure
compliance with such rules.


The Company reserves the
right to place a legend on any stock certificate issued upon the exercise of an
option or upon the grant of a restricted stock award pursuant to the Plan to
assure compliance with this Section 13.


SECTION 14.


AMENDMENT
OF THE PLAN


The Board may from time to
time, insofar as permitted by law, suspend or discontinue the Plan or revise or
amend it in any respect; provided, however, that no such revision or amendment,
except as is authorized in Section 12, shall impair the terms and conditions of
any stock option or restricted stock award which is outstanding on the date of
such revision or amendment to the material detriment of the Participant without
the consent of the Participant. Notwithstanding the foregoing, no such revision
or amendment shall (i) materially increase the number of shares subject to the
Plan except as provided in Section 12 hereof, (ii) change the designation of
the class of employees eligible to receive stock options or restricted stock
awards, (iii) decrease the price at which options may be granted, or (iv)
materially increase the benefits accruing to Participants under the Plan,
without the approval of the shareholders of the Company if such approval is
required for compliance with the requirements of any applicable law or
regulation. Furthermore, the Plan may not, without the approval of the
shareholders, be amended



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in any manner that will cause incentive stock
options to fail to meet the requirements of Section 422 of the Internal Revenue
Code.


SECTION 15.


NO
OBLIGATION TO EXERCISE OPTION


The granting of a stock
option shall impose no obligation upon the Participant to exercise such option.
Further, the granting of a stock option or restricted stock award hereunder
shall not impose upon the Company or any Affiliate any obligation to retain the
Participant in its employ for any period.



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