Exhibit 10.7 to Nature Vision, Inc. Form 10-K for fiscal year ended December 31, 2005



Exhibit 10.7


NATURE VISION, INC.

INCENTIVE OPTION AGREEMENT


          This
incentive option agreement (this “Agreement”)
among Nature Vision, Inc., f/k/a Photo Control Corporation, a Minnesota
corporation (the “Company”) and
Jeffrey P. Zernov (the “Optionee”),
takes effect on August 31, 2004, (the “Grant
Date”). Subject to the terms and conditions of this Agreement, the
Company hereby grants to the Optionee an option (the “Option”) under the Company’s 2004 Stock Incentive Plan
(the “Plan”) to purchase 87,206 shares of Common
Stock (the “Shares”). 


	
 

	
 

	
 


	
1.

	
Incentive Stock Option. The Option shall be
  an Incentive Stock Option, as that term is used and defined in the Plan.


	
 

	
 


	
2.

	
Purchase Price. The purchase price of the
  Shares shall be $0.89 per Share, which is not less than the Fair Market Value
  of the Shares as of the Grant Date.


	
 

	
 


	
3.

	
Period of Exercise. The Option will expire
  on the May 25, 2008, (the “Expiration Date”). The Option may be exercised
  only while the Optionee is actively engaged in providing services to the
  Company as an Eligible Employee and as otherwise provided in Section 6 of
  this Agreement.


	
 

	
 


	
4.

	
Vesting Schedule. 87,206 Shares will vest
  and may be purchased in accordance with the terms of this Agreement on the
  Grant Date.


	
 

	
 


	
5.

	
Transferability. The Option is not
  transferable except by will or the laws of descent and distribution and may
  only be exercised during the lifetime of the Optionee by the Optionee.


	
 

	
 


	
6.

	
Termination of Services. Except as otherwise
  agreed to by the Company and the Optionee in writing, in the event that the
  Optionee ceases to provide services to the Company as an Eligible Employee,
  the Optionee may purchase Shares which have vested under Section 4 in the
  three months following the date of the termination, subject to the following:
  


	
 

	
 

	
 


	
 

	
(a)

	
If the
  Optionee’s employment was terminated due to the Optionee’s Retirement or
  Total Disability, the Optionee may purchase Shares which have vested under
  Section 4 in the 12 months following the date of the termination. 


	
 

	
 

	
 


	
 

	
(b)

	
If the
  Optionee dies, the Option may be exercised (to the extent exercisable by the
  Optionee at the date of death) by the legal representative of the Optionee or
  by a person who acquired the right to exercise the Option by bequest or
  inheritance or by reason of the death of the Optionee, but the Option must be
  exercised within one year after the date of the Optionee’s death.


	
 

	
 

	
 


	
 

	
(c)

	
If the
  Optionee’s employment was terminated by the Company for cause, as determined
  by the Administrator in his, her or its sole discretion, the Option and all
  of the Optionee’s rights under this Agreement shall terminate immediately.


	
 

	
 

	
 


	
 

	
(d)

	
Notwithstanding
  the foregoing, in no event may any Shares be purchased after the Expiration
  Date. 


	
 

	
 

	
 


	
7.

	
Right to Terminate. Nothing in the Option or
  in any agreement entered into pursuant to the Option will interfere with or
  limit in any way the right of the Company to terminate the employment or
  service of any Eligible Employee at any time, nor confer upon any Eligible
  Employee any right to continue in the employ or service of the Company.


	
 

	
 


	
8.

	
No Rights of Shareholders.
  The Optionee does not have any dividend rights, voting rights or other rights
  or privileges of a shareholder with respect to any Shares covered by the
  Option until the date of issuance of a stock certificate for such Shares. No
  adjustment shall be made for cash dividends or other rights for which











	
 

	
 

	
 


	
 

	
the record
  date is before the date of such an issuance, except as expressly provided in
  the Plan.


	
 

	
 


	
9

	
Method of Exercise. 


	
 

	
 


	
 

	
(a)

	
The Option
  may be exercised and Shares may be purchased by the Optionee’s delivery of
  written notice to the Company in the form attached to this Agreement as Exhibit A (each, an “Exercise
Notice”). Each Exercise Notice
  must be accompanied by (i) payment of the full purchase price of the Shares
  to be purchased, in such form or combination of forms as described in this
  Section 9, and, if applicable, (ii) proof of the right to exercise the Option
  and purchase Shares if the exercise and purchase are pursuant to the terms
  described in Sections 6(a) and (b) of this Agreement. 


	
 

	
 

	
 


	
 

	
(b)

	
As soon as
  practicable after the Administrator has concluded, in his, her or its sole
  and absolute discretion that the Optionee has fully satisfied the conditions
  described in Section 9(a) (and if applicable Section 12), the Company will
  cause the number of such Shares so exercised under the Option to be issued
  and will deliver certificates representing the number of such Shares,
  registered in the name of the Optionee or other such person designated by the
  Optionee’s Beneficiary if the Option was exercised in accordance with Section
  6(b). 


	
 

	
 

	
 


	
 

	
(c)

	
When
  exercising the Option and purchasing Shares, the Optionee may make payment in
  one of the following ways: (i) in cash, or by check payable to the Company;
  (ii) if so authorized by the Administrator, by a promissory note made by the
  Optionee in favor of the Company which is (A) upon such terms and conditions
  determined by the Administrator, (B) bearing interest at a rate sufficient to
  avoid imputed interest under the Code, and (C) secured by the Shares so
  exercised and purchased in compliance with applicable law (including, without
  limitation, state corporate law and federal margin requirements); or (ii) by
  shares of Common Stock already owned by the Optionee; provided, however,
  that the Administrator in his, her, or its absolute discretion may limit the
  Optionee’s ability to exercise the Option by delivering shares of Common
  Stock, and any shares of Common Stock so delivered which were initially
  acquired upon exercise of the Option or another stock option agreement with
  the Company must have been owned by the Optionee at least six months as of
  the date of delivery. 


	
 

	
 

	
 


	
10.

	
Withholding. In any case where withholding
  is required or advisable under federal, state or local law in connection with
  any exercise and purchase of Shares by the Optionee, as a condition to the
  issuance of such Shares the Company is authorized to withhold appropriate
  amounts from amounts payable to the Optionee to cover such tax withholding or
  may require the Optionee to remit to the Company an amount equal to such
  appropriate amounts. 


	
 

	
 


	
11.

	
Changes in Capitalization, Dissolution, Liquidation and
  Reorganization. This Agreement is subject to modification
  upon the occurrence of certain events as described in Section 8.2 of the
  Plan.


	
 

	
 


	
12.

	
Investment Representation. The Optionee acknowledges and agrees that the
  Company may condition the exercise and purchase of any Shares pursuant to
  this Agreement on the Optionee’s delivery to the Company of the following if
  a registration statement under applicable securities laws is not in effect
  with respect to any Shares issued at the time the Optionee exercises the
  Option: (a) an investment representation from the Optionee in a form
  acceptable to the Company’s counsel; (b) a restrictive legend on any
  certificates issued for the Shares in a form acceptable to the Company’s
  counsel; and (c) a stop order with the Company or its transfer agent.


	
 

	
 


	
13.

	
Incorporation of the Plan. This Agreement is
  made in accordance with the terms and conditions of the Plan, which is
  incorporated into this Agreement by reference. Terms used but not otherwise
  defined in this Agreement have the meanings ascribed to them in the Plan. In
  the event of a conflict between the provisions of the Plan and the provisions
  of this Agreement, the provisions of the Plan shall control and govern. The
  Optionee acknowledges that he or she has read the Plan and agrees to be bound
  by its terms.


	
 

	
 


	
14.

	
Severability. In the event any provision of
  this Agreement shall be held illegal or invalid for any reason, the
  illegality or invalidity shall not affect the remaining parts of this
  Agreement, and this Agreement shall be construed and enforced as if the illegal
  or invalid provision had not been included.





2






	
 

	
 


	
15.

	
Choice of Law and Venue. This Agreement is
  made under and must be governed by the laws of the State of Minnesota,
  without regard to conflict of laws principles. The Company and the Optionee
  each consent to venue any suit or action under or with regard to this
  Agreement in an appropriate court with jurisdiction in Hennepin County,
  Minnesota.


	
 

	
 


	
16.

	
Entire Agreement. This
  Agreement constitutes the entire agreement of the parties with respect to the
  subject matter hereof and supercedes all prior understandings and statements,
  written and oral.


	
 

	
 


	
17.

	
Compliance with the Code. The Option is
  intended to qualify as an “incentive stock option” under Code Section 422. If
  any provision of this Agreement is susceptible to more than one
  interpretation, such interpretation shall be given thereto as is consistent
  with the Option being treated as an incentive stock option under the Code.


	
 

	
 


	
18.

	
$100,000 Limitation. Notwithstanding
  anything to the contrary contained in this Agreement, to the extent that the
  total Fair Market Value (determined as of the date of grant of an option) of
  Shares with respect to which the Option and any other incentive stock options
  granted by the Company becomes exercisable for the first time during any
  calendar year exceeds $100,000, such option(s) shall be treated as a
  Nonstatutory Stock Option(s). This Section 18 shall be applied by taking
  options into account in the order in which they were granted.


	
 

	
 


	
19.

	
Change of Control. The Optionee and the
  Company have certain rights and owe certain obligations in connection with
  certain change of control “Events,” which are fully described in Section 8.4
  of the Plan. 


	
 

	
 


	
 

	
The parties
  have executed this Agreement to be made effective as of the Grant Date.








	
 

	
 

	
 

	
 


	
 

	
NATURE VISION, INC.


	
 

	
 

	
 

	
 


	
 

	
By:

	
 

	
/s/ Michael
  Day


	
 

	
 

	


	



	
 

	
Name:

	
 

	
Michael Day


	
 

	
 

	


	



	
 

	
Title:

	
 

	
Chief
  Executive Officer


	
 

	
 

	


	



	
 

	
 

	
 

	
 


	
 

	
OPTIONEE


	
 

	
 


	
 

	
 

	
/s/ Jeffrey
  P. Zernov


	
 

	


	



	
 

	
Jeffrey P.
  Zernov





3






Exhibit A

FORM OF NOTICE OF EXERCISE OF STOCK OPTION ISSUED

UNDER NATURE VISION, INC.’S 2004 STOCK INCENTIVE PLAN


	
 

	
 


	
To:

	
Secretary


	
 

	
Nature
  Vision, Inc.


	
 

	
213 NW
  Fourth Street


	
 

	
Brainerd,
  Minnesota 56401





          I
hereby exercise my Option dated ___________ (the “Option”) to purchase _______ shares of Nature Vision, Inc.’s
(the “Company”) Common Stock at the Option purchase price of $________ per
share (the “Shares”). Payment for
the Shares is enclosed, in the form permitted by the Option or the Company.  


	
 

	
 

	
 

	
 

	
 


	
 

	
I request
  that the Shares be issued to me as follows:


	
 

	
 

	
 


	
 

	


	
 


	
 

	
(name in
  which the Shares should be issued)

	
 


	
 

	
 

	
 


	
 

	


	
 


	
 

	
(Social
  Security Number)

	
 


	
 

	
 

	
 


	
 

	


	
 


	
 

	
(Street and
  Number)

	
 


	
 

	
 

	
 


	
 

	


	
 


	
 

	
(City)

	
(State)

	
(Zip Code)

	
 








	
 

	
 

	
 

	
 


	
 

	
_____

	
 

	
I intend to
  hold the Shares at least one year. (If I do sell within one year of exercise,
  I will give the Administrator a copy of the broker’s confirmation of the sale
  as soon as I receive it.)


	
 

	
 


	
 

	
_____

	
 

	
I intend to
  sell the stock within one year of exercise, and will give the Administrator a
  copy of the broker’s confirmation of the sale as soon as I receive it.


	
 

	
Dated:___________________,
  ___________.


	
 

	
 


	
 

	
Signature:


	
 

	






4