S-8

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-8

REGISTRATION STATEMENT

Under

the Securities Act of 1933

FASTENAL COMPANY

(Exact Name of Registrant as Specified in its Charter)

Minnesota	41-0948415
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

2001 Theurer Boulevard

Winona, Minnesota 55987-1500

(Address of Principal Executive Office and Zip Code)

Fastenal Company Stock Option Plan

(Full Title of the Plan)

Daniel L. Florness

Executive Vice-President, Chief Financial Officer and Treasurer

Fastenal Company

2001 Theurer Boulevard

Winona, Minnesota 55987-1500

(Name and Address of Agent for Service)

copy to:

Jennifer Mewaldt

Faegre & Benson LLP

2200 Wells Fargo Center

90 South Seventh Street

Minneapolis, Minnesota 55402-3901

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Amount to be registered	Proposed maximum offering price per unit		Proposed maximum aggregate offering price (1)			Amount of registration fee
Common Stock, $.01 par value	632,760	$	20.00	$	12,655,200	(2)	$	1,355

(1) Calculated pursuant to Rule 457(h)(1).

(2) The shares being registered hereby are subject to, and will be sold upon the exercise of, nonstatutory employee stock options granted by the Registrant to certain of its employees, consisting of options to acquire an aggregate of 632,760 shares at an exercise price of $20.00 per share. The aggregate offering price for the shares purchasable at $20.00 per share is $12,655,200.

FASTENAL COMPANY

PART I INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS

The documents containing the information specified in Part I of Form S-8 have been or will be sent or given to participants as specified by Rule 428(b)(1) under the Securities Act of 1933.

PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

ITEM 3. Incorporation of Documents by Reference.

The Registrant hereby incorporates by reference into this Registration Statement the documents listed in (a) through (c) below:

(a) The Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005 (including information specifically incorporated by reference into the Form 10-K from the Registrant’s Annual Report to Shareholders for such fiscal year and the Registrant’s notice and proxy statement for its 2006 Annual Meeting of Shareholders);

(b) The Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006;

(c) The description of the Registrant’s common stock that is contained in the Registration Statement on Form 8-A dated August 12, 1987 filed by the Registrant under the Securities Exchange Act of 1934, including any amendment or report filed for the purpose of updating such description.

All documents subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all such securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from the date of filing of such documents.

Any statement contained in a document incorporated, or deemed to be incorporated, by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or incorporated herein by reference or in any other subsequently filed document that also is or is deemed to be incorporated by reference herein modifies or supersedes the statement. Any statement so modified or superseded shall be deemed, except as so modified or superseded, to constitute a part of this Registration Statement.

ITEM 4. Description of Securities.

Not applicable.

ITEM 5. Interests of Named Experts and Counsel.

Not applicable.

ITEM 6. Indemnification of Directors and Officers.

The Registrant is subject to the Minnesota Business Corporation Act (the “Corporation Act”). Section 302A.521 of the Corporation Act provides that, unless prohibited by its articles of incorporation or bylaws, a corporation must indemnify a director, committee member, officer or employee who is made or threatened to be made a party to a proceeding by reason of such person’s present or former official capacity against judgments, penalties, fines (including without limitation excise taxes assessed against such person with respect to an employee benefit plan), settlements and reasonable expenses (including attorneys’ fees and disbursements) incurred by such person in connection with the proceeding, if certain criteria are met. These criteria, all of which must be met by the person seeking indemnification, are (a) that such person has not been indemnified by another organization or employee benefit plan for the same judgments, penalties, fines, settlements and expenses; (b) that such person acted in good faith; (c) that no improper personal benefit was obtained by such person and such person satisfied certain statutory conflicts of interest provisions, if applicable; (d) that, in the case of a criminal proceeding, such person had no reasonable cause to believe that the conduct was unlawful; and (e) that such person acted in a manner he reasonably believed was in the best interests of the corporation or, in the case of conduct while serving as a director, officer, partner, trustee, governor, manager, employee or agent of another organization or employee benefit plan at the request of the corporation, not opposed to the best interests of the corporation. Section 302A.521 of the Corporation Act also provides that, unless prohibited by the corporation’s articles of incorporation or bylaws, if a director, committee member, officer or employee is made or threatened to be made a party to a proceeding, such person is entitled to payment or reimbursement by the corporation of reasonable expenses, including attorneys’ fees and disbursements, incurred by such person in advance of the final disposition of the proceeding (x) upon receipt by the corporation of a written affirmation by such person of a good faith belief that the criteria for indemnification have been satisfied and a written undertaking by such person to repay all amounts so paid or reimbursed if it is ultimately determined that the criteria for indemnification have not been satisfied; and (y) after a determination that the facts then known would not preclude indemnification. The determination as to eligibility for indemnification and advancement of expenses is required to be made by the members of the corporation’s board of directors or a committee of the board who are at the time not parties to the proceeding under consideration, by special legal counsel, by the shareholders who are not parties to the proceeding, or by a court.

Article VI, Section 1 of the Registrant’s Restated Bylaws requires the Registrant to provide indemnification and advancement of expenses, including witness reimbursements, to any director, officer or employee of the Registrant made or threatened to be made a party to a proceeding, or appearing as a witness in a proceeding, by reason of the former or present official capacity of the person, in such manner, under such circumstances, and to such extent as is required or permitted by Section 302A.521 of the Corporation Act or by other provisions of law.

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Article VIII of the Registrant’s Restated Articles of Incorporation eliminates the personal liability of the directors of the Registrant to the Registrant and its shareholders for monetary damages for breach of fiduciary duty, other than liability of a director (a) for breach of the director’s duty of loyalty to the Registrant or its shareholders; (b) for acts or omissions not in good faith that involve intentional misconduct or a knowing violation of law; (c) under Section 302.559 (liability for illegal distributions to shareholders) or 80A.23 (liability for violations of the anti-fraud or registration provisions of state securities laws) of the Minnesota Statutes; (d) for any transaction from which the director derived an improper personal benefit; or (e) for any act or omission occurring prior to the effective date of Article VIII (June 3, 1987).

ITEM 7. Exemption from Registration Claimed.

Not applicable.

ITEM 8. Exhibits.

4.1	Restated Articles of Incorporation of the Registrant, as amended to date, are incorporated herein by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.
4.2	Restated Bylaws of the Registrant are incorporated herein by reference to Exhibit 3.2 to Registration Statement No. 33-14923.
5	Opinion of counsel regarding legality of securities.
23.1	Consent of counsel (included in Exhibit 5).
23.2	Consent of independent registered public accounting firm.
24	Powers of Attorney (included with the signature pages to this Registration Statement).
99	Fastenal Company Stock Option Plan.

ITEM 9. Undertakings.

The Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

(i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) to reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a

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fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective Registration Statement; and

(iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement;

provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Securities and Exchange Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Registration Statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

The Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis and State of Minnesota, on the 17th day of May, 2006.

FASTENAL COMPANY

/s/ Willard D. Oberton

Willard D. Oberton, Chief Executive Officer

POWER OF ATTORNEY

Each of the undersigned hereby appoints Willard D. Oberton and Daniel L. Florness, and each of them (with full power to act alone), as attorneys and agents for the undersigned, with full power of substitution, for and in the name, place and stead of the undersigned, to sign and file with the Securities and Exchange Commission under the Securities Act of 1933 any and all amendments and exhibits to this Registration Statement and any and all applications, instruments and other documents to be filed with the Securities and Exchange Commission pertaining to the registration of the securities covered hereby, with full power and authority to do and perform any and all acts and things whatsoever requisite and necessary or desirable.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons, representing a majority of the Board of Directors, in the capacities and on the dates indicated.

NAME	TITLE	DATE
/s/ Robert A. Kierlin	Chairman of the Board	May 17, 2006
Robert A. Kierlin
/s/ Stephen M. Slaggie	Director	May 17, 2006
Stephen M. Slaggie
/s/ Michael M. Gostomski	Director	May 17, 2006
Michael M. Gostomski
/s/ John D. Remick	Director	May 17, 2006
John D. Remick

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/s/ Henry K. McConnon	Director	May 17, 2006
Henry K. McConnon
/s/ Robert A. Hansen	Director	May 17, 2006
Robert A. Hansen
/s/ Reyne K. Wisecup	Director	May 17, 2006
Reyne K. Wisecup
/s/ Michael J. Dolan	Director	May 17, 2006
Michael J. Dolan
/s/ Willard D. Oberton Willard D. Oberton	Chief Executive Officer (Principal Executive Officer)	May 17, 2006
/s/ Daniel L. Florness Daniel L. Florness	Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)	May 17, 2006

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INDEX TO EXHIBITS

Exhibit.
4.1	Restated Articles of Incorporation of the Registrant, as amended to date (incorporated in the Registration Statement by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005).
4.2	Restated Bylaws of the Registrant (incorporated in the Registration Statement by reference to Exhibit 3.2 to Registration Statement No. 33-14923).
5	Opinion of counsel regarding legality of securities (electronically filed).
23.1	Consent of counsel (included in Exhibit 5).
23.2	Consent of independent registered public accounting firm (electronically filed).
24	Powers of Attorney (included with signature pages to the Registration Statement).
99	Fastenal Company Stock Option Plan (electronically filed).

EX-5

EXHIBIT 5

FAEGRE & BENSON LLP

2200 Wells Fargo Center

90 South Seventh Street

Minneapolis, Minnesota 55402-3901

612/766-7000

FACSIMILE 612/766-1600

May 17, 2006

Fastenal Company

2001 Theurer Boulevard

Winona, Minnesota 55987-1500

Ladies and Gentlemen:

In connection with the Registration Statement on Form S-8 under the Securities Act of 1933, as amended (the “Registration Statement”), relating to an offering of 632,760 shares of Common Stock, par value $.01 per share (the “Shares”), of Fastenal Company, a Minnesota corporation (the “Company”), to be issued by the Company upon the exercise of nonstatutory employee stock options (the “Options”) granted under the Fastenal Company Stock Option Plan (the “Plan”), we have examined such corporate records and other documents, including the Registration Statement and the Plan, and have reviewed such matters of law as we have deemed necessary for this opinion, and, based on such examination and review, we advise you that in our opinion all necessary corporate action on the part of the Company has been taken to authorize the issuance and sale of the Shares and that, when issued and sold upon exercise of the Options as contemplated by the Registration Statement and the Plan, the Shares will be legally and validly issued, fully paid and non-assessable.

We are admitted to the practice of law in the State of Minnesota and the forgoing opinions are limited to the laws of that state.

We consent to the filing of this opinion as an exhibit to the Registration Statement.

Very truly yours,
Faegre & Benson LLP
By:	/s/ Jennifer R. Mewaldt
	Jennifer R. Mewaldt

EX-23.2

EXHIBIT 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Fastenal Company:

We consent to the incorporation by reference in the registration statement on Form S-8 of Fastenal Company of our reports dated February 22, 2006, with respect to the consolidated balance sheets of Fastenal Company as of December 31, 2005 and 2004, and the related consolidated statements of earnings, stockholders’ equity and comprehensive income and cash flows for each of the years in the three-year period ended December 31, 2005, and the related financial statement schedule, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005, and the effectiveness of internal control over financial reporting as of December 31, 2005, which reports are included in the December 31, 2005 annual report on Form 10-K of Fastenal Company.

/s/ KPMG LLP

Minneapolis, Minnesota

May 17, 2006

EX-99

EXHIBIT 99

FASTENAL COMPANY STOCK OPTION PLAN

This Plan is adopted and made by Fastenal Company, a Minnesota corporation with principal offices at Winona, Minnesota (the “Company”), for the benefit of certain employees of the Company and its subsidiaries.

1. Purpose.

The Fastenal Company Stock Option Plan (the “Plan”) is intended to advance the interests of the Company, its shareholders, and its subsidiaries, by encouraging and enabling selected employees upon whose judgment, initiative and effort the Company and its subsidiaries are dependent for the successful conduct of their business, to acquire and retain a proprietary interest in the Company by ownership of its Shares. All Options granted under the Plan and all Shares sold upon exercise of Options are granted and sold by the Company. Options granted under the Plan will not be options that meet the requirements of Section 422 of the Internal Revenue Code of 1986 (the “Code”).

2. Definitions.

(a) “Administrator” means the body administering the Plan, as specified in Section 9.

(b) “Board” means the Board of Directors of the Company.

(c) “Company” means Fastenal Company, a Minnesota corporation, and any successor corporation.

(d) “Common Stock” means the Company’s $.01 par value Common Stock.

(e) “Date of Grant” means the date on which the Administrator approves the grant of an Option under the Plan.

(f) “Option” means an Option granted under the Plan.

(g) “Optionee” means a person to whom an Option, which has not expired, has been granted under the Plan.

(h) “Shares” shall mean shares of Common Stock, or such other securities or property as may become subject to Options pursuant to an adjustment as provided under Section 7 of the Plan.

(i) “Subsidiary” or “Subsidiaries” means a subsidiary corporation or corporations of the Company as defined in Section 424 of the Code.

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(j) “Successor” means the legal representative of the estate of a deceased Optionee or the person or persons who acquire the right to exercise an Option by bequest or inheritance or by reason of the death of any Optionee.

3. Shares Subject to Options.

The aggregate number of authorized and unissued Shares for which Options may be granted and which may be purchased upon the exercise of Options granted under the Plan shall not exceed 3,793,865¹, subject to adjustment under the provisions of paragraph 7. In the event any Option shall, for any reason, terminate or expire or be surrendered without having been exercised in full, other Options may be granted covering the Shares subject to the unexercised portion of such Option. The maximum number of Shares subject to Options that may be granted to any one individual under this Plan during any fiscal year of the Company (the “Maximum Annual Grant”) is 20,000 Shares², subject to adjustment under the provisions of paragraph 7.

4. Participants.

All employees of the Company and its Subsidiaries shall be eligible to participate in the Plan, subject to any criteria, categories, or limitations that may be established by the Administrator from time to time. Criteria for participation may reflect an employee’s contribution to the success of the Company, including the employee’s responsibility for Company revenues and profits, responsibility for managing other employees, possession of special skills, and length of service. The Administrator shall determine participation, grant Options, and specify the number of Shares subject to each Option.

5. Grant of Options.

Options shall be granted at such times as may be determined by the Administrator, as long as Shares remain available for award under the Plan, or until the Plan is terminated as provided herein.

6. Terms and Conditions of Options.

All Options granted under the Plan shall be evidenced by a written agreement or certificate in such form and with such terms as the Administrator may from time to time approve, subject to the following limitations and conditions:

(a) Option Price. The Option price per Share with respect to each Option shall be determined and stated by the Administrator at the time of grant. Such Option price shall be not less than the closing price at which Shares of the Common Stock were traded on the securities exchange or Nasdaq National Market System on which the Shares are then listed and traded on

¹ This number has been subsequently adjusted pursuant to the terms of the Plan to 7,587,730 to reflect the two-for-one stock split effected by the Company in November 2005.

² This number has been subsequently adjusted pursuant to the terms of the Plan to 40,000 to reflect the two-for-one stock split effected by the Company in November 2005.

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the most recent trading date preceding the date of grant. If the Common Stock is not then listed and traded upon a securities exchange or the Nasdaq National Market System, such Option price shall be not less than the fair market value of a Share on the date of grant, as determined by the Administrator. The determination of the Option price by the Administrator shall be binding upon the Optionee and all other persons.

(b) Period of Option. The expiration date with respect to each Option shall be determined and stated by the Administrator at the time of grant.

(c) Vesting of Shareholder Rights. Neither an Optionee nor any transferee pursuant to a Permitted Transfer (as defined below) shall have any of the rights of a shareholder of the Company until the Option has been exercised and the certificates evidencing the Shares purchased are properly delivered to such Optionee or transferee.

(d) Exercise of Option. The period during which each Option may be exercised shall be determined and stated by the Administrator in the award agreement or certificate at the time of grant. Except as otherwise provided in this Plan, an Option may be exercised only while the Optionee is employed by the Company or a Subsidiary, and only if the Optionee has been continuously so employed since the date the Option was granted.

(e) Manner of Exercise. Each exercise of an Option shall be in writing, in such form as the Administrator may prescribe, delivered to the Administrator or its designee, specifying the number of Shares being purchased and accompanied by payment of the Option price for such Shares, by check payable to the Company or in such other manner as the Administrator may prescribe.

(f) Nontransferability of Options. No Option shall be transferable or assignable by an Optionee, otherwise than by will or the laws of descent and distribution or pursuant to a domestic relations order as defined by the Code or Title I of the Employment Retirement Income Security Act (each a “Permitted Transfer”). Each Option shall be exercisable only by the Optionee or by a transferee pursuant to a Permitted Transfer. No Option shall be pledged or hypothecated in any way and no Option shall be subject to execution, attachment, or similar process.

(g) Termination of Employment. Except as otherwise provided in paragraph 6(h), upon termination of an Optionee’s employment with the Company or a Subsidiary, (i) any outstanding Option held by such Optionee shall terminate except to the extent that it is immediately exercisable by its terms at the date of such termination of employment and (ii) to the extent any such Option is immediately exercisable by its terms at the date of such termination of employment, it shall remain exercisable until the earlier of 90 days after the date of such termination of employment or the date of expiration of such Option. The granting of an Option to a Participant does not alter in any way the existing rights of the Company and its Subsidiaries to terminate such person’s employment at any time for any reason or for no reason, nor does it confer upon such person any rights or privileges except as specifically provided for in the Plan.

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(h) Death of Optionee. If an Optionee dies while in the employ of the Company or any Subsidiary, any outstanding Option shall be exercisable by the Optionee’s Successor during the same period and to the same extent as the option could have been exercised by the Optionee had the Optionee lived and remained employed by the Company or a Subsidiary.

7. Adjustments.

(a) Except as provided in paragraph 7(c), in the event of a capital adjustment resulting from a stock dividend, stock split, reorganization, merger, consolidation, or a combination or exchange of Shares, the number and kind of Shares subject to the Plan and the Maximum Annual Grant and the number and kind of Shares under each outstanding Option shall be adjusted consistent with such capital adjustment. The Option price of any Share under each outstanding Option shall be adjusted so that there will be no change in the aggregate purchase price payable upon exercise of any such Option. The granting of an Option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reorganizations, reclassifications, or changes of its capital or business structure or to merge, consolidate, dissolve, liquidate, or sell or transfer all or any part of its business or assets.

(b) In the event of the dissolution or liquidation of the Company, any Option granted under the Plan shall terminate as of a date to be fixed by the Administrator, provided that not less than 30 days written notice of the date so fixed shall be given to each Optionee and each such Optionee shall have the right during such period (but in no event beyond the expiration date of the applicable Option) to exercise each of his outstanding Options as to all or any part of the Shares covered thereby including Shares as to which such Option would not otherwise be exercisable by reason of an insufficient lapse of time.

(c) In the event of a Reorganization (as hereinafter defined) in which the Company is not the surviving or acquiring company, or in which the Company is or becomes a wholly-owned subsidiary of another company after the effective date of the Reorganization, then

(1) If there is no plan or agreement respecting the Reorganization (“Reorganization Agreement”) or if the Reorganization Agreement does not specifically provide for the change, conversion, or exchange of the Shares under outstanding and unexercised Options for securities of another corporation, then any Option granted under the Plan shall terminate as of a date to be fixed by the Administrator, provided that not less than 30 days written notice of the date so fixed shall be given to each Optionee and each such Optionee shall have the right during such period (but in no event beyond the expiration date of the applicable Option) to exercise each of his outstanding Options as to all or any part of the Shares covered thereby including Shares as to which such Option would not otherwise be exercisable by reason of an insufficient lapse of time; or

(2) If there is a Reorganization Agreement and if the Reorganization Agreement specifically provides for the change, conversion, or exchange of the Shares under outstanding and unexercised Options for securities of another corporation, then the securities received on account of such Shares shall be subject to the Plan and then-outstanding Options. The Administrator may make appropriate adjustment in the

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number and kind of Shares for the purchase of which Options may be granted under the Plan and for the Maximum Annual Grant. In addition, the Administrator shall make appropriate adjustment in the number and kind of Shares as to which outstanding Options, or portions thereof then unexercised, shall be exercisable, to the end that the interest of the holder of the Option shall, to the extent practicable, be maintained as before the occurrence of such event. Such adjustment in outstanding Options shall be made without change in the total price applicable to the unexercised portion of the Option but with a corresponding adjustment in the Option price per Share.

The term “Reorganization” as used in this subparagraph (c) of this paragraph 7 shall mean any statutory merger, statutory consolidation, statutory share exchange, sale of all or substantially all of the assets of the Company, or sale, pursuant to an agreement with the Company, of securities of the Company pursuant to which the Company is or becomes a wholly-owned subsidiary of another company after the effective date of the Reorganization.

(d) Adjustments and determinations under this paragraph 7 shall be made by the Administrator, as specified herein, and its decisions as to what adjustments or determinations shall be made, and the extent thereof, shall be final, binding, and conclusive.

8. Restrictions on Issuing Shares.

The exercise of each Option and the issuance of Shares in connection therewith shall be subject to the condition that if at any time the Administrator shall determine in its discretion that the satisfaction of withholding tax or other withholding liabilities, or that the listing, registration, or qualification of any Shares otherwise deliverable upon such exercise upon any securities exchange or the Nasdaq National Market or under any state or federal law, or that the consent or approval of any regulatory body, is necessary or desirable as a condition of, or in connection with, such exercise or the delivery or purchase of Shares pursuant thereto, then in any such event, such exercise shall not be effective unless such withholding, listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Administrator.

9. Administration of Plan.

The Plan shall be administered by the Board or by a committee of two or more directors of the Company appointed by the Board (the “Administrator”). If the Plan is administered by a committee, it shall report all action taken by it to the Board. In administering the Plan, the Administrator shall be governed by and shall adhere to the provisions of the Plan, including any criteria for eligibility or participation established by the Board from time to time. Subject to the foregoing, the Administrator shall determine eligibility to participate in the Plan, ascertain the number of Shares for which each participant is eligible in accordance with any established criteria, grant Options, construe and interpret the Plan, and make all other determinations and take all other actions deemed necessary or advisable for the proper administration of the Plan. All such actions and determinations shall be conclusively binding for all purposes and upon all persons. The Administrator may delegate administrative duties under this Plan to such officers or employees of the Company or others as it may determine.

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10. Delivery of Shares and Proceeds.

Upon the exercise of an Option, the Administrator shall cause a certificate for the purchased Shares to be issued by the Company’s transfer agent and delivered to the Optionee. The proceeds received from the sale of Shares pursuant to the exercise of Options granted under the Plan shall be the property of the Company, and shall be delivered to it promptly by the Administrator.

11. Amendment, Suspension, or Termination of Plan.

The Board may at any time suspend or terminate the Plan or may amend it from time to time in such respects as it may deem advisable in order that the Options granted thereunder may conform to any changes in the law or in any other respect which it may deem to be in the best interests of the Company. Unless the Plan shall theretofore have been terminated as provided herein, the Plan shall terminate when all available Shares have been granted and no granted Option is outstanding. No Option may be granted during any suspension or after the termination of the Plan. No amendment, suspension, or termination of the Plan shall, without an Optionee’s consent, impair any of the rights or obligations under any outstanding Option theretofore granted to such Optionee under the Plan. A Participant’s consent to any amendment, suspension, or termination of the Plan or to any Option issued pursuant to the Plan shall be deemed to have been given if the Participant fails to object in writing within 15 days after written notice thereof, given in person or by certified mail sent to the Participant’s address contained in the records of the Company. To the extent considered necessary to comply with applicable provisions of law or the listing requirements of any applicable securities exchange or the Nasdaq National Market, any such amendments to the Plan may be made subject to approval by the shareholders of the Company.

12. Adoption and Effective Date of Plan.

The Plan is approved and adopted by the Board of Directors on April 15, 2003. It will be submitted to the Shareholders of the Company at the next annual meeting. The Plan will be effective if approved by a majority of the outstanding Shares present and entitled to vote at such meeting, upon such approval or upon such other date as may be specified in the resolution of approval.

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