INCENTIVE STOCK OPTION AGREEMENT TOWER TECH HOLDINGS INC.

Exhibit 10.3

INCENTIVE STOCK OPTION AGREEMENT

TOWER TECH HOLDINGS INC.

2007 EQUITY INCENTIVE PLAN

THIS AGREEMENT is entered into and effective as of the     day of                 , 20    , by and between Tower Tech Holdings Inc., a Nevada corporation (the “Company”) and                              (“Participant”).

RECITALS

A.            Participant on the date hereof is a key employee or officer of the Company or one of its Affiliates; and

B.            The Company wishes to grant incentive stock options to Participant pursuant to this Agreement and the 2007 Equity Incentive Plan (the “Plan”); and

C.            The Administrator has authorized the grant of an incentive stock option to Participant to give Participant an inducement to acquire a proprietary interest in the Company and an added incentive to advance the interests of the Company and has determined that, as of the effective date of this Agreement, the fair market value of the Company’s common stock is                   Dollars ($                ) per share.

AGREEMENTS

In consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:

ARTICLE ▇. ▇▇▇▇▇ OF OPTION

The Company hereby grants to Participant the right, privilege, and option (the “Option”) to purchase up to                        (                       ) shares (the “Option Shares”) of the Company’s Common Stock, according to the terms and subject to the conditions hereinafter set forth and as set forth in the Plan. [The per share price to be paid by Participant in the event of an exercise of the Option shall be                         Dollars ($                  ) OR: Because Participant owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or its Parent or any Subsidiary, the per share price to be paid by Participant in the event of an exercise of the Option shall be                   Dollars ($               ), which is not less than one hundred ten percent (110%) of the fair market value of the Company’s Common Stock at the date of grant of this Option.]  The Option is intended to be an “incentive stock option,” as defined in Section 422 of the Internal Revenue Code as amended (the “Code”), to the extent permitted by Section 422(d) of the Code.

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ARTICLE II. DURATION OF OPTION AND EXERCISABILITY

A.            Initial Period of Exercisability. Except as provided in Articles II.B. and II.C. below, the Option shall become exercisable according to the following schedule. Once the Option becomes fully exercisable Participant may continue to exercise this Option under the terms and conditions of this Agreement until the first of the termination of this Option as provided herein or the Expiration Date (as defined below). If Participant does not purchase upon an exercise of this Option the full number of shares which Participant is then entitled to purchase, Participant may purchase upon any subsequent exercise prior to this Option’s termination or Expiration Date such previously unpurchased shares in addition to those Participant is otherwise entitled to purchase. Except as otherwise provided in Articles II.B. and II.C. below, the term during which this Option may be exercised will continue until 5:00 p.m. (Central time) on [the date that is no more than ten (10) years following the date of grant of this Option OR: for greater than ten percent (10%) holders insert the date that is no more than five (5) years following the date of grant of this Option]  (the “Expiration Date”), unless extension of the term is permissible under Code Section 424(a). In no event shall this Option be exercisable after the Expiration Date.

B.            Termination of Employment for Reasons Other Than Death or Disability. Except as provided in Article III below, in the event Participant ceases to be a key employee or officer of the Company or any Affiliate for any reason other than death or an event that constitutes permanent and total disability within the meaning of Section 22(e)(3) of the Code (“Disability”), any unexercised portion of this Option which was exercisable as of the date of such termination may be exercised, in whole or in part, by Participant before the earlier of (i) the close of business on the three-month anniversary date of such termination of employment, and (ii) the Expiration Date. To the extent this Option was not exercisable upon such termination of employment, or if Participant does not exercise the unexercised portion of the Option that was exercisable within the time specified in this Article II.B., all rights of Participant under this Option shall terminate, and the Option shall thereafter be void.

C.            Termination of Employment Due to Death or Disability. In the event Participant ceases to be a key employee or officer of the Company or any Affiliate by reason of death or Disability, any unexercised portion of this Option which was exercisable as of the date of such termination may be exercised, in whole or in part, by Participant (or by Participant’s heirs or legal representative(s) in the event of death or Disability) before the earlier of (i) the close of business on the twelve-month anniversary date of such termination of employment and (ii) the Expiration Date. To the extent this Option was not exercisable upon such termination of employment, or if Participant does not exercise the unexercised portion of the Option that was exercisable within the time specified in this Article II.C., all rights of Participant under this Option shall terminate, and the Option shall thereafter be void.

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ARTICLE III. CHANGE OF CONTROL

A.            Acceleration. Notwithstanding anything in the Plan or this Agreement to the contrary, if, upon or within one year of a Change of Control (as defined below), the Company or a succeeding entity terminates Participant’s employment relationship, this Option shall become immediately and fully exercisable upon such Change of Control and shall remain exercisable until the earlier of (i) the Expiration Date, and (ii) the date determined by the Administrator in connection with the terms of the Plan (including, without limitation, upon consummation of the Change of Control, if so determined by the Administrator). If Participant does not exercise this Option, as the case may be, within the time specified in this Article III.A., all rights of Participant under this Option shall be forfeited. If Participant exercises this Option on a date that is after the three-month anniversary of the date of his termination of employment, this Option shall be treated as a nonqualified stock option and shall no longer qualify as an incentive stock option under Code Section 422.

B.            Change of Control Defined. For purposes of this Article III, a “Change of Control” means:

i. The consummation of any merger, consolidation, exchange, or reorganization to which the Company is a party if the individuals and entities who were stockholders of the Company immediately prior to the effective date of such transaction have, immediately following the effective date of such transaction, beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of less than fifty percent (50%) of the total combined voting power of all classes of securities issued by the surviving corporation;

ii. The stockholders of the Company approve any plan or proposal for the liquidation of the Company;

iii. A sale, lease or other transfer of all or substantially all of the assets of the Company to any person or entity which is not an Affiliate of the Company; or

iv. The acquisition, without prior approval by resolution adopted by the Board, of direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of securities of the Company representing, in the aggregate, more than fifty percent (50%) or more of the total combined voting power of all classes of the Company’s then-issued and outstanding securities by any person or entity or by a group of associated persons or entities acting in concert; provided, however, that a Change of Control will not be deemed to occur if such acquisition is initiated by Participant or an entity in which Participant owns fifty percent (50%) or more of the total combined voting power of all classes of such entity’s securities, or if Participant or such entity is a member of the group of associated persons or entities acting in concert.

C. Limitation on Change of Control Payments. Participant shall not be entitled to receive any Change of Control Payment, as defined below, which would constitute a “parachute payment” for purposes of Code Section 280G, or any successor provision, and the regulations thereunder. In the event any Change of Control Payment payable to Participant would constitute

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a “parachute payment,” Participant shall have the right to designate those Change of Control Payments which would be reduced or eliminated so that Participant will not receive a “parachute payment.”  For purposes of this Article III.C., a “Change of Control Payment” shall mean any payment, benefit or transfer of property in the nature of compensation paid to or for the benefit of Participant under any arrangement which is considered contingent on a Change of Control for purposes of Code Section 280G, including, without limitation, any and all of the Company’s salary, bonus, incentive, restricted stock, stock option, equity-based compensation or benefit plans, programs or other arrangements, and shall include the acceleration of this Option.

ARTICLE IV. MANNER OF OPTION EXERCISE

A.            Notice. This Option may be exercised by Participant in whole or in part from time to time, subject to the conditions contained in the Plan and herein, by delivery, in person or by registered mail, to the Company at its principal executive office, of a written notice of exercise. Such notice shall be in a form satisfactory to the Administrator, shall identify the Option, shall specify the number of Option Shares with respect to which the Option is being exercised, and shall be signed by the person or persons so exercising the Option. Such notice shall be accompanied by payment in full of the total purchase price of the Option Shares purchased; the exercise of the Option shall be deemed effective upon receipt of such notice by the Company and upon payment that complies with the terms of the Plan and this Agreement. In the event that the Option is being exercised, as provided by the Plan and Article II.C., above, by Participant’s heirs or legal representative(s), the notice shall be accompanied by appropriate proof of right of such person or persons to exercise the Option. As soon as practicable after the effective exercise of the Option, Participant (or Participant’s heirs or legal representative(s) in the event of death or Disability) shall be recorded on the stock transfer books of the Company as the owner of the Option Shares purchased, and the Company may deliver to Participant (or Participant’s heirs or legal representative(s)) one or more duly issued stock certificates evidencing such ownership. All requisite original issue or transfer documentary stamp taxes shall be paid by the Company.

B.            Payment. At the time of exercise of this Option, Participant may determine whether to pay the total purchase price of the Option Shares to be purchased solely in cash (including a personal check or a certified or bank cashier’s check, payable to the order of the Company) or by transfer from Participant to the Company of previously-owned shares of Common Stock of the Company with a then current aggregate Fair Market Value equal to such total purchase price, or by a combination of cash and such previously-owned shares of Common Stock. The Administrator may reject Participant’s election to pay all or part of the purchase price under this Option with previously-owned shares of common stock and may require such purchase price to be paid entirely in cash if, in the sole discretion of the Administrator, payment in previously-owned shares would cause the Company to be required to recognize a charge to earnings in connection therewith. For purposes of this Agreement, (a) “previously-owned shares” shall mean shares of Common Stock of the Company that Participant has owned for at least six months prior to the time of exercise, and (b) “Fair Market Value” will be determined as set forth in the Plan.

C.            Investment Purpose. The Company shall not be required to issue or deliver any shares of Common Stock under this Option unless (a)(1) such shares are covered by an effective and current registration statement under the Securities Act of 1933 and applicable state securities laws or

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(2) if the Administrator has determined not to so register such shares, exemptions from registration under the Securities Act of 1933 and applicable state securities laws are available for such issuance (as determined by counsel to the Company) and the Company has received from Participant (or Participant’s heirs(s) or legal representative(s), in the event of death or Disability) any representations or agreements requested by the Company in order to permit such issuance to be made pursuant to such exemptions, and (b) the Company has obtained any other consent, approval or permit from any state or federal governmental agency which the Administrator shall, in its sole discretion upon the advice of counsel, deem necessary or advisable. Unless a registration statement under the Securities Act of 1933 is in effect with respect to the issuance or transfer of Option Shares, transfer of such shares shall be restricted unless the Company receives an opinion of counsel satisfactory to the Company to the effect that registration under the Securities Act of 1933 and applicable state securities laws is not required with respect to such transfer.

ARTICLE V. NONTRANSFERABILITY

This Option shall not be transferable by Participant, either voluntarily or involuntarily, or subject to any lien, directly or indirectly, by operation of law or otherwise, except as provided in the Plan. Any attempt to transfer or encumber this Option other than in accordance with the Plan shall void this Option and this Option, to the extent not fully exercised, shall terminate.

ARTICLE VI. LIMITATION OF LIABILITY

Nothing in this Agreement shall be construed to (a) limit in any way the right of the Company or any Affiliate to terminate the status of Participant as an employee of the Company at any time, or (b) be evidence of any agreement or understanding, express or implied, that the Company or any Affiliate will employ Participant in any particular position, at any particular rate of compensation or for any particular period of time.

ARTICLE VII. DISPOSITIONS AND WITHHOLDING TAXES

A.            Notification of Disqualifying Disposition.       Prior to making a disposition (as defined in Section 424(c) of the Code) of any shares of Common Stock acquired pursuant to the exercise of this Option before the expiration of two years after the date hereof or before the expiration of one year after the date on which such shares of Common Stock were transferred to Participant pursuant to exercise of this Option, Participant shall send written notice to the Company of the proposed date of such disposition, the number of shares to be disposed of, the amount of proceeds to be received from such disposition and any other information relating to such disposition that the Company may reasonably request. The right of Participant to make such a disposition shall be conditioned on the receipt by the Company of all amounts necessary to satisfy any federal, state or local withholding tax requirements attributable to such disposition. The Administrator shall have the right, in its sole discretion, to endorse any certificates representing the Option Shares with a legend restricting transfer and to cause a stop transfer order to be entered with the Company’s transfer agent until such time as the Company receives the amounts necessary to satisfy such withholding requirements or until the later of the expiration of two years from the date hereof or one year from the date on which such shares were transferred to Participant pursuant to the exercise of this Option.

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B.            General Obligation. The Company is entitled to (a) withhold and deduct from future payments to Participant, or make other arrangements for the collection of, all legally required amounts necessary to satisfy any federal, state or local withholding tax requirements attributable to Participant’s exercise of this Option, including, without limitation, a disposition of shares of Common Stock described in Article VII.A. above, that causes this Option to cease to qualify as an “incentive stock option” within the meaning of Section 422 of the Code and the regulations thereunder, or (b) require Participant promptly to remit the amount of such withholding to the Company before acting on any such disposition of shares of Common Stock. In the event that the Company is unable to withhold such amounts, for whatever reason, Participant hereby agrees to pay to the Company an amount equal to the amount the Company would otherwise be required to withhold under federal, state or local law.

C.            Use of Shares. The Administrator may, in its sole discretion and subject to such rules as the Administrator may adopt, permit Participant to satisfy, in whole or in part, any withholding tax obligation which may arise in connection with the exercise of this Option either by electing to have the Company withhold from the shares of Common Stock to be issued upon the exercise of this Option that number of shares of common stock, or by electing to deliver to the Company previously-owned shares of common stock, in either case having a Fair Market Value (determined as set forth in the Plan) on the date such tax is determined under the Code (the “Tax Date”) equal to the amount necessary to satisfy the minimum required tax withholding amount 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 withhold shares having a Fair Market Value in excess of such statutory minimum required tax withholding. Participant’s election to have the company withhold shares of Common Stock or to deliver previously-owned shares of Common Stock upon exercise is irrevocable and is subject to the consent of the Administrator and shall 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 and Exchange Act of 1934, if applicable. To the extent that shares of Common Stock may be issued prior to the Tax Date to the electing Participant, Participant hereby agrees to surrender that number of shares on the Tax Date having an aggregate Fair Market Value (determined as set forth in the Plan) equal to the withholding tax due.

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ARTICLE VIII. CAPITAL ADJUSTMENTS

Pursuant and subject to Section 14 of the Plan, 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 of shares, rights offering, reclassification of the common stock, or any other change in the corporate structure or shares of the Company, the Administrator, in order to prevent dilution or enlargement of the rights of Participant, may make appropriate adjustment as to the number and kind of securities subject to this Option. Any such adjustment affecting this Option shall be made without change in the aggregate purchase price applicable to the unexercised portion of the Option but with an appropriate adjustment in the price for each share or other unit of any security subject to the Option. Without the consent of Participant, however, no such change shall be made in the terms of the Option if such change would disqualify the Option from treatment as an “incentive stock option” within the meaning of Code Section 422, or any successor provision, or would be considered a modification, extension or renewal of an option under Code Section 424(h), or any successor provision.

ARTICLE IX. BINDING EFFECT

This Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

ARTICLE X. 2007 EQUITY INCENTIVE PLAN

The Option represented by this Agreement has been granted under, and is subject to the terms of, the Plan. The terms of the Plan are hereby incorporated by reference herein in their entirety and Participant, by execution hereof, acknowledges having received a copy of the Plan. Capitalized terms not defined herein shall have the meaning set forth in the Plan. The provisions of this Agreement shall be interpreted as to be consistent with the Plan and any ambiguities herein shall be interpreted by reference to the Plan. In the event that any provision hereof is inconsistent with the terms of the Plan, the latter shall prevail.

ARTICLE XI. MISCELLANEOUS

A.            Employment or Other Relationship; Rights as Stockholder. This Agreement shall not confer on Participant any right with respect to the continuance of employment or any other relationship with the Company or any of its Affiliates, nor will it interfere in any way with the right of the Company to terminate such employment or relationship. Participant shall have no rights as a stockholder with respect to shares subject to the Option until such shares have been issued to Participant upon exercise of the Option. 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 shares are issued, except as provided in Section 14 of the Plan.

B.            Securities Law Compliance. The exercise of all or any parts of this Option shall only be effective at such time as counsel to the Company shall have determined that the issuance and delivery of Common Stock pursuant to such exercise will not violate any state or federal

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securities or other laws. Participant may be required by the Company, as a condition of the effectiveness of any exercise of this Option, to agree in writing that all Common Stock to be acquired pursuant to such exercise shall be held, until such time that such Common Stock is registered and freely tradable under applicable state and federal securities laws, for Participant’s own account without a view to any further distribution thereof, that the certificates for such shares shall bear an appropriate legend to that effect and that such shares will be not transferred or disposed of except in compliance with applicable state and federal securities laws.

C.            Lockup Period Limitation. Participant agrees that 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 that the underwriter(s) seek to impose restrictions under which certain stockholders 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 hereby agrees that for a period not to exceed 180 days from the prospectus, Participant will not sell or contract to sell or grant an option to buy or otherwise dispose of this option or any of the underlying shares of common stock without the prior written consent of the underwriter(s) or its representative(s).

D.            Blue Sky Limitation. Notwithstanding anything in this Agreement to the contrary, 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 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 this Option and the date on which this Option must be exercised, provided that the Company gives Participant 15 days’ prior written notice of such acceleration, and (ii) to cancel any portion of this Option or any other option granted to Participant pursuant to this Agreement which is not exercised prior to or contemporaneously with such public offering. Notice shall be deemed given when delivered personally or when deposited in the United States mail, first class postage prepaid and addressed to Participant at the address of Participant on file with the Company.

E.             Accounting Compliance. Participant agrees that, in the event a Change of Control occurs and Participant is an “affiliate” of the Company or any Subsidiary (as defined in applicable legal and accounting principles) at the time of such Change of Control, Participant will comply with all requirements of Rule 145 of the Securities Act of 1933, as amended, and the requirements of such other legal or accounting principles, and will execute any documents necessary to ensure such compliance. For purposes of this Agreement, the term “Change of Control” shall have the meaning set forth in Article III above.

F.             Stock Legend. The certificates for any shares of Common Stock purchased by Participant (or, in the case of death, Participant’s heirs or legal representative(s)) shall bear an appropriate legend to reflect the restrictions of this Article XI and Article IV.C., provided, however, that failure to so endorse any of such certificates shall not render invalid or inapplicable this Article XI.

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G.            Shares Reserved. The Company shall at all times during the term of the option period reserve and keep available such number of shares as will be sufficient to satisfy the requirements of this Agreement.

H.            Arbitration. Any dispute arising out of or relating to this Agreement or the alleged breach of it, or the making of this Agreement, including claims of fraud and inducement, shall be discussed between the disputing parties in a good faith effort to arrive at a mutual settlement of any such controversy. If, notwithstanding, such dispute cannot be resolved, such dispute shall be settled by binding arbitration. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be a retired state or federal judge or an attorney who has practiced securities or business litigation for at least ten (10) years. If the parties cannot agree on an arbitrator within twenty (20) days, any party may request that a judge of the Circuit Court of Manitowoc County, Wisconsin select an arbitrator. Arbitration will be conducted pursuant to the provisions of this Agreement and the commercial arbitration rules of the American Arbitration Association, unless such rules are inconsistent with the provisions of this Agreement. Limited civil discovery shall be permitted for the production of documents and taking of depositions. Unresolved discovery disputes may be brought to the attention of the arbitrator who may dispose of such disputes. The arbitrator shall have the authority to award any remedy or relief that a court of this state could order or grant; provided, however, that punitive or exemplary damages shall not be awarded. The arbitrator may award to the prevailing party, if any, as determined by the arbitrator, all of its costs and fees, including the arbitrator’s fee, administrative fees, travel expenses, out-of-pocket expenses and reasonable attorney’s fees. Unless otherwise agreed by the parties, the place of any arbitration proceedings shall be Green Bay, Wisconsin.

ARTICLE XII. GOVERNING LAW

This Agreement and all rights and obligations hereunder shall be construed in accordance with the Plan and governed by the laws of the State of Wisconsin.

[Signature page follows.]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective the day and year first above written.

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