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EXHIBIT 10.6    
  

[SCOTTSDALE
INSURANCE COMPANY LETTERHEAD] 

December 27,
1999 

Ms.
Lorraine Johnson, Esq.

Senior Legal Counsel

California Department of Insurance

45 Fremont St.

San Francisco, CA 94105 

Re:    Veterinary Pet Services, Inc.—Form A

Dear
Lorraine: 

        As
part of our commitment to the California Department regarding our acquisition of controlling interest in Veterinary Pet Services, Inc., we are committing to maintaining the required
capital and surplus of Veterinary Pet Insurance Company, in accordance with the statutory requirements of the California Insurance Department. 

        It
is our intent to achieve this via renegotiation of the Reinsurance Agreement between Scottsdale Insurance Company and Veterinary Pet Insurance Company. The outcome of this
renegotiated Agreement would be to reduce the amount of premium ceded from Scottsdale Insurance Company to Veterinary Pet Insurance Company and to also ensure that the impact of this Reinsurance
Agreement on Veterinary Pet Insurance Company's surplus is minimized. Additionally, steps will continue to be made regarding the adequacy of rates of Veterinary Pet Insurance Company and the business
produced through National Casualty Company. We believe that these steps will continue to ensure that
Veterinary Pet Insurance Company statutory surplus will be in excess of the $2,000,000 minimum statutory limit. 

        We
will complete our analysis and the revision to the Reinsurance Agreement in the year 2000. 

        If
you have any additional questions, please feel free to contact us. 

	

Very truly yours,	
 	

 
	

/s/  MICHAEL D. MILLER      
 Vice President Finance/Systems & Treasurer	
 	

 
	

MDM:lml

cc: M. Hartman	
 	

 

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Exhibit 10.7    
  

 
 

VETERINARY PET SERVICES, INC.    
    
    1996 OMNIBUS STOCK OPTION AND INCENTIVE PLAN    
  

   VETERINARY PET SERVICES, INC.  

 1996 OMNIBUS STOCK OPTION AND INCENTIVE PLAN  

	 
	 	 
	 	 
	 	PAGE

	I.	 	PURPOSE	 	1
	

II.	
 	

DEFINITIONS	
 	

1
	

III.	
 	

EFFECTIVE DATE	
 	

3
	

IV.	
 	

ADMINISTRATION	
 	

3
	

V.	
 	

PARTICIPATION	
 	

4
	

 	
 	

5.1	
 	

Eligibility	
 	

4
	 	 	5.2	 	Ten Percent Shareholders	 	4
	 	 	5.3	 	Stock Ownership	 	4
	 	 	5.4	 	Outstanding Stock	 	4
	

VI.	
 	

STOCK SUBJECT TO THE PLAN	
 	

4
	

VII.	
 	

OPTIONS	
 	

5
	

 	
 	

7.1	
 	

Stock Option Agreements	
 	

5
	 	 	7.2	 	Number of Shares	 	5
	 	 	7.3	 	Exercise Price	 	5
	 	 	7.4	 	Medium and Time of Payment	 	5
	 	 	7.5	 	Term and Transferability of Options	 	5
	 	 	7.6	 	Modification, Extension and Renewal of Options	 	5
	 	 	7.7	 	Limitation on Grant of Incentive Stock Options	 	5
	 	 	7.8	 	Other Provisions	 	6
	 	 	7.9	 	Specific Awards Approved by the Shareholders	 	6
	

VIII.	
 	

RESTRICTED STOCK PURCHASE AGREEMENTS	
 	

6
	

 	
 	

8.1	
 	

Stock Purchase Agreements	
 	

6
	 	 	8.2	 	Number of Shares	 	6
	 	 	8.3	 	Purchase Price	 	6
	 	 	8.4	 	Exercisability and Nontransferability of Purchase Rights	 	6
	 	 	8.5	 	Medium and Time of Payment	 	6
	 	 	8.6	 	Consent of Spouse	 	7
	 	 	8.7	 	Modification, Extension and Renewal of Purchase Rights	 	7
	 	 	8.8	 	Repurchase Option as to Unvested Shares	 	7
	 	 	8.9	 	Corporation's Right of First Refusal to Purchase Vested Shares	 	7
	 	 	8.10	 	Other Provisions	 	8
	

IX.	
 	

STOCK APPRECIATION RIGHTS	
 	

8
	

 	
 	

9.1	
 	

Grant	
 	

8
	 	 	9.2	 	Exercise of Stock Appreciation Rights	 	8
	 	 	9.3	 	Payment	 	8
	 	 	9.4	 	Maximum Stock Appreciation Right Term	 	9
	

X.	
 	

PERFORMANCE AWARDS	
 	

9
	

XI.	
 	

DIVIDEND EQUIVALENTS	
 	

9
	

XII.	
 	

STOCK PAYMENTS	
 	

9

i

 

	

XIII.	
 	

LOANS	
 	

9
	

XIV.	
 	

RIGHTS OF PARTICIPANTS AND BENEFICIARIES	
 	

10
	

 	
 	

14.1	
 	

Employee Status	
 	

10
	 	 	14.2	 	No Employment Contract	 	10
	 	 	14.3	 	No Transferability	 	10
	 	 	14.4	 	Plan Not Funded	 	10
	 	 	14.5	 	Adjustments upon Recapitalizations and Corporate Changes	 	11
	 	 	14.6	 	Termination of Employment	 	11
	 	 	14.7	 	Death of Participant	 	11
	 	 	14.8	 	Disability of Participant	 	12
	 	 	14.9	 	Retirement of Participant	 	12
	 	 	14.10	 	Rights as a Stockholder	 	12
	 	 	14.11	 	Deferral of Payments	 	12
	 	 	14.12	 	Acceleration of Awards	 	12
	

XV.	
 	

MISCELLANEOUS	
 	

12
	

 	
 	

15.1	
 	

Termination, Suspension and Amendment	
 	

12
	 	 	15.2	 	No Fractional Shares	 	13
	 	 	15.3	 	Tax Withholding and Tax Bonuses	 	13
	 	 	15.4	 	Restrictions of Elections Made by Participants	 	13
	 	 	15.5	 	Limitations on the Corporation's Obligations	 	13
	 	 	15.6	 	Compliance with Laws	 	13
	 	 	15.7	 	Governing Law	 	14
	 	 	15.8	 	Securities Law Requirements	 	14
	 	 	15.9	 	Execution	 	15

ii

  

 
 

VETERINARY PET SERVICES, INC.    
    
    1996 OMNIBUS STOCK OPTION AND INCENTIVE PLAN    
  

I.    PURPOSE  

        The Plan is intended to provide incentive to key employees and directors of, and key consultants, vendors, customers, and others expected to provide significant
services to, the Corporation, to encourage proprietary interest in the Corporation, to encourage such key employees to remain in the employ of the Corporation and its Subsidiaries, to attract new
employees with outstanding qualifications, and to afford additional incentive to consultants, vendors, customers, and others to increase their efforts in providing significant services to the
Corporation. 

II.    DEFINITIONS.  

        2.1  "Award"
shall mean an Option, which may be designated an Incentive Stock Option or a Nonstatutory Stock Option, a Purchase Right, a Stock Appreciation Right, a
Performance Award, a Dividend Right or a Stock Payment, in each case as granted pursuant to the Plan. 

        2.2  "Award
Agreement" shall mean a Stock Option Agreement, Restricted Stock Agreement or a Purchase Right Agreement. 

        2.3  "Beneficiary"
shall mean the person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive the benefits specified under the Plan
in the event of a Participant's death. 

        2.4  "Board"
shall mean the Board of Directors of the Corporation. 

        2.5  "Code"
shall mean the Internal Revenue Code of 1986, as amended. 

        2.6  "Committee"
shall mean the committee, if any, appointed by the Board in accordance with Section 4 of the Plan. 

        2.7  "Common
Stock" shall mean the Common Stock, without par value, of the Corporation. 

        2.8  "Corporation"
shall mean VETERINARY PET SERVICES, INC., an Delaware corporation, and its Subsidiaries. 

        2.9  "Disability"
shall mean the condition of a Participant who is unable to [perform his or her substantial and material job duties due to injury or sickness or
such other condition as the Board or Committee may determine in its sole discretion/engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months]. 

        2.10 "Discount"
shall mean, with respect to the Purchase Price of Purchase Rights, the discount from the Fair Market Value of a Share as set forth in Section 8.3. 

        2.11 "Dividend
Equivalent" shall mean a right to receive a number of Shares or a cash amount, determined as provided in Article XII hereof. 

        2.12 "Eligible
Employee" shall mean an individual who is employed (within the meaning of Code Section 3401 and the regulations thereunder) by the Corporation. 

        2.13 "Event"
shall mean any of the following: 

        (a)  Any
person or entity (or group of affiliated persons or entities) acquires in one or more transactions, whether before or after the effective date of the Plan, ownership
of more than 

1

 

50 percent of the outstanding shares of stock entitled to vote in the election of directors of the Corporation; or 

        (b)  The
dissolution or liquidation of the Corporation or a reorganization, merger or consolidation of the Corporation with one or more entities, as a result of which the
Corporation is not the surviving entity, or a sale of all or substantially all of the assets of the Corporation as an entirety to another entity. 

For
purposes of this definition, ownership does not include ownership (i) by a person owning such shares merely of record (such as a member of a securities exchange, a nominee or a securities
depository system), (ii) by a person as a bona fide pledgee of shares prior to a default and determination to exercise powers as an owner of the shares, (iii) by a person who is not
required to file statements on Schedule 13D by virtue of Rule 13d-1(b) of the Securities and Exchange Commission under the Exchange Act, or (iv) by a person who owns
or holds shares as an underwriter acquired in connection with an underwritten offering pending and for purposes of resale. 

        2.14 "Exchange
Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. 

        2.15 "Exercise
Price" shall mean the price per Share of Common Stock, determined by the Board or the Committee, at which an Award may be exercised. 

        2.16 "Fair
Market Value" shall mean the value of one (1) Share of Common Stock, determined as follows: 

          (i)  If
the Shares are traded on an exchange, the price at which Shares traded at the close of business on the date of valuation; or 

        (ii)  If
the Shares are traded over-the-counter on the NASDAQ System, the closing price if one is available, or the mean between the bid and asked
prices on said System at the close of business on the date of valuation; or 

        (iii)  If
neither (i) nor (ii) above applies, the fair market value as determined by the Board or the Committee in good faith. Such determination shall be
conclusive and binding on all persons. 

        2.17 "Incentive
Stock Option" shall mean an option described in Section 422A(b) of the Code. 

        2.18 "Nonstatutory
Stock Option" shall mean an option not described in Section 422(b), 422A(b), 423(b) or 424(b) of the Code. 

        2.19 "Option"
shall mean either an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the Plan. 

        2.20 "Participant"
shall mean an Eligible Employee who has received an Award under the Plan. 

        2.21 "Performance
Award" shall mean a cash bonus, stock bonus or other performance or incentive award that is paid in cash, stock or a combination of both. 

        2.22 "Plan"
shall mean the VETERINARY PET SERVICES, INC. 1996 OMNIBUS STOCK OPTION AND INCENTIVE PLAN, as it may be amended from time to time. 

        2.23 "Purchase
Price" shall mean the Exercise Price times the number of Shares with respect to which an Award is exercised. 

        2.24 "Purchase
Right" shall mean the grant to an Employee of the right to purchase Shares under the Plan. 

        2.25 "Restricted
Stock" shall mean those Shares issued pursuant to a Restricted Stock Award that are not free of the restrictions set forth in the related Restricted Stock
Agreement. 

2

 

        2.26 "Restricted
Stock Award" shall mean an award of a fixed number of shares subject to payment of such consideration, if any, and such forfeiture provisions, as are set
forth in the related Restricted Stock Agreement. 

        2.27 "Retirement"
shall mean the voluntary termination of employment by an Employee upon the attainment of age sixty-five (65) and the completion of not
less than twenty (20) years of service with the Corporation or a Subsidiary. 

        2.28 "Share"
shall mean one (1) share of Common Stock, adjusted in accordance with Section 15.4 of the Plan (if applicable). 

        2.29 "Securities
Act" shall mean the Securities Act of 1933, as amended from time to time. 

        2.30 "Stock
Appreciation Right" shall mean the right to receive a number of Shares or a cash amount, or a combination of Shares and cash, based upon the Fair Market Value,
book value or other measure determined by the Board or the Committee, as the case may be, pursuant to Section 10.1 of the Plan. 

        2.31 "Stock
Payment" shall mean a payment in the form of Shares, or a Purchase Right, as part of a deferred compensation arrangement, made in lieu of all or any portion of
the compensation, including without limitation the salary, bonuses or commissions, that would otherwise become payable in cash to an Eligible Employee. 

        2.32 "Subsidiary"
shall mean any corporation at least fifty percent (50%) of the total combined voting power of which is owned by the Corporation or by another Subsidiary. 

        2.33 "Tax
Date" shall have the meaning set forth in Section 15.3 hereof. 

III.  EFFECTIVE DATE  

        The Plan was adopted by the Board on December 5, 1996 and by the Corporation's shareholders on February 19, 1997. The effective date of the Plan
shall be February 19, 1997 (the "Effective Date"). 

IV.  ADMINISTRATION  

        The Plan shall be administered by the Board in compliance with Rule 16b-3 of the Securities Exchange Act of 1934
("Rule 16b-3"), or by a Committee appointed by the Board, which Committee shall be constituted to permit the Plan to comply with Rule 16b-3, and which shall
consist of not less than three (3) members. The Board shall appoint one of the members of the Committee, if there be one, as
Chairman of the Committee. If a Committee has been appointed, the Committee shall hold meetings at such times and places as it may determine. Acts of a majority of the Committee at which a quorum is
present, or acts reduced to or approved in writing by a majority of the members of the Committee, shall be the valid acts of the Committee. The Board, or the Committee if there be one, shall from time
to time at its discretion select the Eligible Employees and consultants who are to be granted Awards, determine the number of Shares or cash, or the combination thereof, to be applicable to such
Award, and designate any Options as Incentive Stock Options or Nonstatutory Stock Options, except that no Incentive Stock Option may be granted to a non-employee director or a
non-employee consultant. A member of the Board or a Committee member shall in no event participate in any determination relating to Awards held by or to be granted to such Board or
Committee member; however, a member of the Board or a Committee member shall be entitled to receive Awards approved by the shareholders in accordance with the provisions of
Rule 16b-3. The interpretation and construction by the Board, or by the Committee if there be one, of any provision of the Plan or of any Award granted thereunder shall be final. No
member of the Board or of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award granted thereunder. In addition to any right of
indemnification provided by the Articles of Incorporation or 

3

 

Bylaws of the Corporation, such person shall be indemnified and held harmless by the Corporation from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him in
connection with any claim, suit, action or proceeding to which he may be a party by reason of any action or omission under the Plan. 

V.    PARTICIPATION  

        5.1  Eligibility.
Subject to the terms and conditions of Section 5.2 below, the Participants shall be such persons as the shareholders may approve or as the Committee
may select from among the following classes of persons: (i) Employees of the Corporation or of a Subsidiary (who may be officers, whether or not they are directors); and
(ii) Consultants, vendors, customers, and others expected to provide significant services to the Corporation or a Subsidiary. 

        For
purposes of this Plan, a Participant who is a director or a consultant, vendor, customer, or other provider of significant services to the Corporation or a Subsidiary shall be deemed
to be an Eligible Employee, and service as a director, consultant, vendor, customer, or other provider of significant services to the Corporation or a Subsidiary shall be deemed to be employment,
except that no Incentive Stock Option may be granted to a non-employee director or non-employee consultant, vendor, customer, or other provider of significant services to the
Corporation or a Subsidiary, and except that no Nonstatutory Stock Option may be granted to a non-employee director or non-employee consultant, vendor, customer, or other
provider of significant services to the Corporation or a Subsidiary other than upon a vote of a majority of disinterested directors finding that the value of the services rendered or to be rendered to
the Corporation or a Subsidiary by such non-employee director or non-employee consultant, vendor, customer, or other provider of services is at least equal to the value of the
Awards granted. 

        5.2  Ten-Percent
Shareholders. An Eligible Employee who owns more than ten percent (10%) of the total combined voting power of all classes of outstanding stock of
the Corporation, its parent or any of its Subsidiaries shall not be eligible to receive an Award for an Incentive Stock Option unless (i) the Exercise Price of the Shares subject to such Award
is at least one hundred ten percent (110%) of the Fair Market Value of such Shares on the date of grant; and (ii) such Award by its terms is not exercisable after the expiration of five
(5) years from the date of grant. 

        5.3  Stock
Ownership. For purposes of Section 5.2 above, in determining stock ownership an Eligible Employee shall be considered as owning the stock owned, directly or
indirectly, by of for his brothers, sisters, spouses, ancestors and lineal descendants. Stock owned, directly or indirectly, by or for a corporation, partnership, estate or trust shall be considered
as being owned proportionately by or for its shareholders, partners or beneficiaries. Stock with respect to which such Eligible Employee holds an Award shall not be counted. 

        5.4  Outstanding
Stock. For purposes of Section 5.2 above, "outstanding stock" shall include all stock actually issued and outstanding immediately after the grant of
the Award to the Participant. "Outstanding stock" shall not include shares authorized for issue under outstanding Options or Purchase Rights held by the Participant or by any other person. 

VI.  STOCK SUBJECT TO THE PLAN  

        The stock subject to Awards granted under the Plan shall be Shares of the Corporation's authorized but unissued or reacquired Common Stock. The aggregate number
of Shares which may be issued as Awards or upon exercise of Awards under the Plan shall not exceed one million five hundred thousand (1,500,000) shares. The number of Shares subject to unexercised
Options, Stock Appreciation Rights or Purchase Rights (plus the number of Shares previously issued under the Plan) shall not at any time exceed the number of Shares available for issuance under the
Plan. In the event that any unexercised Option, Stock Appreciation Right or Purchase Right, or any portion thereof, for any 

4

 

reason expires or is terminated, or if any shares subject to a Restricted Stock Award do not vest or are not delivered, the unexercised or unvested Shares allocable to such Option, Stock Appreciation
Right, Purchase Right or Restricted Stock Award may again be made subject to any Award. Any Shares withheld by the Corporation pursuant to Section 15.3 shall not be deemed to be issued. The
number of withheld Shares shall be deducted from the applicable Award and shall not entitle the Participant to receive additional Shares. The limitations established by this Article VI shall be
subject to adjustment in the manner provided in Section 14.5 hereof upon the occurrence of an event specified therein. 

VII. OPTIONS  

        7.1    Stock Option Agreements.    Options shall be evidenced by written stock option agreements in such form as
the
Committee shall from time to time determine. Such agreements shall comply with and be subject to the terms and conditions set forth below. 

        7.2    Number of Shares.    Each Option shall state the number of Shares to which it pertains and shall provide
for
the adjustment thereof in accordance with the provisions of Section 14.5 hereof. 

        7.3    Exercise Price.    Each Option shall state the Exercise Price thereof. The Exercise Price in the case of
any
Incentive Stock Option shall not be less than the Fair Market Value on the date of grant and, in the case of any Option granted to an Optionee described in Section 5.2 hereof, shall not be less
than one hundred ten percent (110%) of the Fair Market Value on the date of grant. The Exercise Price in the case of any Nonstatutory Stock Option shall not be less than eighty-five
percent (85%) of the Fair Market Value on the date of grant. 

        7.4    Medium and Time of Payment.    The Purchase Price shall be payable in full in United States dollars upon
the
exercise of the Option; provided, however, that if the applicable Stock Option Agreement so provides the Purchase Price may be paid (i) by the surrender of Shares in good form for transfer,
owned by the Participant and having a Fair Market Value on the date of exercise equal to the Purchase Price, or in any combination of cash and Shares, as long as the sum of the cash so paid and the
Fair Market Value of the Shares so surrendered equal the Purchase Price, (ii) by cancellation of indebtedness owed by the Corporation to the Participant, (iii) with a full recourse
promissory note executed by the Participant, or (iv) any combination of the foregoing. The interest rate and other terms and conditions of such note shall be determined by the Committee. The
Committee may require that the Participant pledge his or her Shares to the Corporation for the purpose of securing the payment of such note. In no event shall the stock certificate(s) representing
such Shares by released to the Participant until such note shall be been paid in full. 

        7.5    Term and Nontransferability of Options.    Each Option shall state the time or times which all or part
thereof
becomes exercisable. No Option shall be exercisable after the expiration of ten (10) years from the date it was granted, and no Option granted to a Participant described in Section 5.2
hereof shall be exercisable after the expiration of five (5) years from the date it was granted. During the lifetime of the Participant, the Option shall be exercisable only by the Participant
and shall not be assignable or transferable. In the event of the Participant's death, the Option shall not be transferable by the Participant other than by will or the laws of descent and
distribution. 

        7.6    Modification, Extension and Renewal of Option.    Within the limitations of the Plan, the Committee may
modify,
extend or renew outstanding Options or accept the cancellation of outstanding Options (to the extent not previously exercised) for the granting of new Options in substitution therefor. The foregoing
notwithstanding, no modification of an Option shall, without the consent of the Participant, alter or impair any rights or obligations under any Option previously granted. 

        7.7    Limitation on Grant of Incentive Stock Options.    In the case of Incentive Stock Options granted
hereunder,
the aggregate Fair Market Value (determined as of the date of the grant thereof) of the Shares with respect to which Incentive Stock Options become exercisable by any Participant for the first 

5

 

time during any calendar year (under this Plan and all other plans maintained by the Corporation, its parent or its Subsidiaries) shall not exceed One Hundred Thousand Dollars ($100,000). The Board
or Committee may, however, with the Participant's consent authorize an amendment to the Incentive Stock Option which renders it a Nonstatutory Stock Option. 

        7.8    Other Provisions.    The Stock Option Agreements authorized under the Plan may contain such other
provisions
not inconsistent with the terms of the Plan (including, without limitation, restrictions upon the exercise of the Option) as the Committee shall deem advisable. 

        7.9    Specific Awards Approved by the Shareholders.    Subject to the approval by the vote of the shareholders
at the
Annual Meeting of the Shareholders on February 19, 1997, the individuals whose names are set forth in Exhibit "A," a copy of which is attached hereto and incorporated herein by this reference,
shall be deemed granted Nonstatutory Stock Options as of the Effective Date, in the amounts and for the amount indicated opposite their respective names, and in accordance with the vesting schedule
set forth therein, all in accordance with the provisions set forth in this Article VII of the Plan. The provisions of this Section 7.9 shall not be amended more than once every six
(6) months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder, and are intended to be construed in accordance
with the provisions pertaining to "formula awards" under Paragraph (c)(2)(ii) of Rule 16b-3. 

VIII.  RESTRICTED STOCK PURCHASE RIGHTS  

        8.1    Stock Purchase Agreements.    Purchase Rights shall be evidenced by written Stock Purchase Agreements in
such
form as the Committee shall from time to time determine. Such agreements shall comply with and be subject to the terms and conditions set forth below. 

        8.2    Number of Shares.    Each Purchase Right shall state the number of Shares to which it pertains and shall
provide for the adjustment thereof in accordance with the provisions of Section 14.5 hereof. 

        8.3    Purchase Price.    Each Stock Purchase Agreement shall state the Purchase Price per Share at which the
Purchase
Right may be exercised, which shall not be less than the Fair Market Value of a Share on the
date on which the Purchase Rights are granted. Unless the Board or Committee otherwise determines, the Purchase Price per Share at which any Purchase Right granted under the Plan may be exercised
shall not be less than the Fair Market Value of a Share as of the date on which the Purchase Right is granted, less a discount (the "Discount") equal to not more than seventy-five percent
(75%) of such value. 

        8.4    Exercisability and Non-Transferability of Purchase Rights.    Purchase Rights granted to an
Eligible Employee pursuant to the Plan must be exercised within sixty (60) days after the later to occur of (i) Board approval of the grant of the Purchase Right or (ii) delivery
of notice of such grant. Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner and shall expire immediately upon the death of the Participant or
the termination of such Participant's employment with the Corporation. 

        8.5    Medium and Time of Payment.    The Purchase Price shall be payable in full in United States dollars upon
exercise of the Purchase Right; provided, however, that if the applicable Stock Purchase Agreement so provides, the Purchase Price may be paid (i) by the surrender of Shares in good form for
transfer, owned by the person exercising the Purchase Right and having a Fair Market Value on the date of exercise equal to the Purchase Price, or in any combination of cash and Shares, as long as the
sum of the cash so paid and the Fair Market Value of the Shares so surrendered equal the Purchase Price, or (ii) with a full recourse promissory note executed by the Participant. The interest
rate and other terms and conditions of such note shall be determined by the Committee. The Committee may require that the Participant pledge his or her Shares to the Corporation for the purpose of
securing the payment of such note. In no event shall the stock certificate(s) representing such Shares by released to 

6

 

the Participant until such note shall be been paid in full. In the event the Corporation determines that it is required to withhold state or Federal income tax as a result of the exercise of a
Purchase Right, as a condition to the exercise thereof, a Participant may be required to make arrangements satisfactory to the Corporation to enable it to satisfy such withholding requirements. In
addition, the Participant shall agree to immediately notify the Corporation if he or she files an election pursuant to Section 83(b) of the Code with respect to receipt of the Shares. 

        8.6    Consent of Spouse.    Each Participant who is married must cause his or her spouse to sign and deliver
the
Stock Purchase Agreement to the Corporation, in the place provided for such signature on the Stock Purchase Agreement. 

        8.7    Modification, Extension and Renewal of Purchase Rights.    Within the limitations of the Plan, the Board
or the
Committee may modify, extend or renew outstanding Purchase Rights or accept the cancellation of outstanding Purchase Rights (to the extent not previously exercised) for the granting of new Purchase
Rights in substitution therefor. The foregoing notwithstanding, no modification of a Purchase Right shall, without the consent of the Employee, alter or impair any rights or obligations under any
Purchase Right previously granted. 

        8.8.    Repurchase Option as to Unvested Shares.    

        (a)  Termination
of Employment. In the event of the voluntary or involuntary termination or cessation of employment or association of the Participant with the Corporation or
any Subsidiary for any reason whatsoever, with or without cause (including death or disability), the Corporation shall, upon the date of such termination, have an irrevocable, exclusive option to
repurchase (the "Repurchase Option") all or any portion of the Shares held by the Employee that are subject to the Repurchase Option as of such date at the original Purchase Price. 

        (b)  Vesting.
Initially, all of the Shares shall be subject to the Repurchase Option. Thereafter, the Repurchase Option shall lapse and expire, or "vest," as to a specified
number of the Shares in accordance with a schedule to be determined by the Board or the Committee, as the case may be, which shall be attached to the Stock Purchase Agreement to be entered into
between the Participant and the Corporation as provided in Section 8.1 above. All Shares which continue to be subject to the Repurchase Option are sometimes hereinafter referred to as "Unvested
Shares." 

        (c)  Notice.
Within ninety (90) days following the date of the Participant's termination of employment by the Corporation, the Corporation shall notify the Employee as
to whether it wishes to repurchase the Unvested Shares pursuant to the exercise of the Repurchase Option. If the Corporation elects to repurchase said Unvested Shares, it shall set a date for the
closing of the transaction at the Executive Offices of the Corporation, not later than thirty (30) days from the date such notice. 

        (d)  Transfers.
Except for transfers to Participant's descendants and spouses, the Participant shall not transfer by sale, assignment, hypothecation donation or otherwise any
of the Shares or any interest therein prior to the release of such Shares from the Repurchase Option. 

        (e)  Assignment.
The Corporation's Repurchase Option may be assigned in whole or in part to any stockholder or stockholders of the Corporation or other persons or
organizations. 

        8.9    Corporation's Right of First Refusal to Purchase Vested Shares.    Each Stock Purchase Agreement entered
into
as provided herein shall provide for a right of first refusal and option on the part of the Corporation to purchase all or any part of any Shares which are no longer subject to the Repurchase Option
which the Participant purposes to sell, transfer or otherwise dispose of (except for transfers to Participant's descendants and spouses) on the following terms and conditions: 

        (a)  The
Participant must notify the Corporation in writing of any proposed sale, transfer or other disposition of any of the Shares, specifying the proposed transferee, the
number of Shares 

7

 

proposed to be transferred, and the price at which such Shares are to be sold, transferred or otherwise disposed. 

        (b)  The
Corporation shall have a period of thirty (30) days from receipt of such notice to notify the Participant in writing as to whether or not the Corporation
elects to purchase all or a specified portion of such Shares at the lower of (i) price per share set forth in the notice given by the Participant, or (ii) the Fair Market Value for a
share of the Corporation's Common Stock, without restrictions, on the date on which the notice is given by Participant to the Corporation (determined as provided in Section 2.13 above), less in
either case an amount equal to the Discount. 

        (c)  If
the Corporation elects not to purchase all of the Shares specified in the notice, the Participant may sell, transfer or otherwise dispose of the remaining Shares in
strict accordance with the terms specified in the notice within ninety (90) days following the date of the notice. It is understood and agreed that any transferee of any of such Shares (other
than the Corporation) will take and acquire all of such Shares subject to the continuing right of first refusal and option on the part of the Corporation to purchase all or any portion of such Shares
from the transferee on all of the same terms and conditions as are set forth in the Stock Purchase Agreement, unless the Participant shall have paid to the Corporation, out of the proceeds from the
sale of such Shares or otherwise, an amount equal to the lesser of (i) the Discount or (ii) the amount by which the Fair Market Value for a share of the Corporation's Common Stock,
without restrictions, on the date on which the notice is given by Participant to the Corporation (determined as provided in Section 2.13 above) exceeds the price per Share paid by the
Participant for such Shares. 

        8.10    Other Provisions.    The Stock Purchase Agreements authorized may contain such other provisions not
inconsistent with the terms of the Plan as the Board or the Committee shall deem advisable. 

IX.  STOCK APPRECIATION RIGHTS  

        9.1    Grant.    Stock Appreciation Rights related or unrelated to Options or other Awards may be granted to
Eligible
Employees (i) at any time if unrelated to an Award or if related to an Award other than an Incentive Stock Option; or (ii) only at the time of grant of an Option if related thereto. A
Stock Appreciation Right may extend to all or a portion of the shares covered by a related Award. 

        9.2    Exercise of Stock Appreciation Rights.    A Stock Appreciation Right granted in connection with an Award
shall
be exercisable only at such time or times, and to the extent, that a related Award is exercisable. A Stock Appreciation Right granted in connection with an Option may be exercisable only when the Fair
Market Value of the stock subject to the Option exceeds the exercise price of the Incentive Stock Option. 

        9.3    Payment.    

        (a)  Upon
the exercise of a Stock Appreciation Right, and, if such Stock Appreciation Right is related to an Award, surrender of an exercisable portion of the related Award,
the Participant shall be entitled to receive payment of an amount determined by multiplying: 

          (i)  the
difference obtained by subtracting the purchase price of a share of Common Stock specified in the related Award, or if such Stock Appreciation Right is unrelated to
an Award, from the Fair Market Value, book value or other measure specified in the Award of such Stock Appreciation Right of a share of Common Stock on the date of exercise of such Stock Appreciation
Right, by 

        (ii)  the
number of shares as to which such Stock Appreciation Right has been exercised. 

8

   
        (b)  The Board or the Committee, as the case may be, in its sole discretion, may require settlement of the amount determined under paragraph (b) above solely in cash,
solely in shares of Common Stock (valued at Fair Market Value on the business day next preceding the date of exercise of such Stock Appreciation Right), or partly in such shares and partly in cash. 

        9.4    Maximum Stock Appreciation Right Term.    Each Stock Appreciation Right and all rights and obligations
thereunder shall expire on such date as shall be determined by the Board or the Committee, but not later than ten (10) years after the date of the Award thereof, and shall be subject to earlier
termination as provided in the related Award Agreement and Sections 14.6, 14.7, 14.8, 14.9 and 15.1. 

X.    PERFORMANCE AWARDS  

        One or more Performance Awards may be granted to any Eligible Employee. The value of such Awards may be linked to the market value, book value or other measure of
the value of the Common stock or other specific performance criteria determined appropriate by the Board or the Committee, in each case on a specified date or over any period determined by the Board
or the Committee, or may be based upon the appreciation in the market value, book value or other measure of the value of a specified number of shares of Common stock over a fixed period determined by
the Board or the Committee. In making such determinations, the Board or the Committee shall consider (among such other factors as it deems relevant in light of the specific type of award) the
contributions, responsibilities and other compensation of the Participant. 

XI.  DIVIDEND EQUIVALENTS  

        A Participant may also be granted "Dividend Equivalents" based on the dividends declared on the Common Stock, to be credited as of dividend payment dates, during
the period between the Award Date and the date such Award is exercised, vests or expires, as determined by the Board or the Committee. Such Dividend Equivalents shall be converted to cash or
additional shares of Common Stock by such formula and at such time and subject to such limitations as may be determined by the Board or the Committee. 

XII. STOCK PAYMENTS  

        The Board or the Committee may approve Stock Payments to Eligible Employees who elect to receive such payments in the manner determined from time to time by the
Board or the Committee. The number of shares shall be determined by the Board or the Committee and may be based upon the Fair Market Value, book value or other measure of the value of such shares on
the Award Date or on any date thereafter. 

XIII.  LOANS  

        The Corporation may, with the Board's or the Committee's approval, extend one or more loans to Participants in connection with the exercise or receipt of
outstanding Awards granted under the Plan; provided any such loan shall be subject to the following terms and conditions: 

          (i)  The
principal of the loan shall not exceed the amount required to be paid to the Corporation upon the exercise or receipt of one or more Awards under the Plan less the
aggregate Par Value of any Common Stock deliverable on such event, and the loan proceeds shall be paid directly to the Corporation in consideration of such exercise or receipt. 

        (ii)  The
initial term of the loan shall be determined by the Board or the Committee; provided that the term of the loan, including extensions, shall not exceed a period of
ten years. 

9

 

        (iii)  The
loan shall be with full recourse to the Participant, shall be evidenced by the Participant's promissory note and shall bear interest at a rate determined by the
Board or the Committee but not less than the Corporation's average cost of funds as of a date within thirty-one (31) days of the date of such loan, as determined by the Board or the
Committee. 

        (iv)  In
the event a Participant terminates his or her employment at the request of the Corporation, the unpaid principal balance of the note hall become due and payable on
the tenth (10th) business days after such termination; provided, however, that if a sale of such shares would cause such Participant to incur liability under Section 16(b) of the Exchange Act,
the unpaid balance shall become due and payable on the tenth (10th) business day after the first day on which a sale of such shares could have been made without incurring such liability assuming for
these purposes that there are no other transactions by the Participant subsequent to such termination. In the event a Participant terminates employment other than at the request of the Corporation,
the unpaid principal balance of the note shall become due and payable six (6) months after the date of such termination. 

XIV. RIGHTS OF ELIGIBLE EMPLOYEES, PARTICIPANTS AND BENEFICIARIES  

        14.1    Employee Status.    Status as an Eligible Employee shall not be construed as a commitment that any Award
will
be made under the Plan to an Eligible Employee or to Eligible Employees generally. 

        14.2    No Employment Contract.    Nothing contained in the Plan (or in the Award Agreements or in any other
documents
related to the Plan or to Awards) shall confer upon any Eligible Employee or any Participant any right to continue in the employee of the Corporation or constitute any contract or agreement of
employment, or interfere in any way with the right of the Corporation to reduce such person's compensation or to terminate the employment of such Eligible Employee or Participant, with or without
cause, but nothing contained in the plan or any document related thereto shall affect any other contractual right of any Eligible Employee or Participant. Nothing contained in the plan (or in the
Award Agreements or in any other documents related to the Plan or the Awards) shall confer upon any director of the Corporation any right to continue as a director of the Corporation. 

        14.3    No Transferability.    Awards may be exercised only by, and amounts payable or shares issuable pursuant
to an
Award shall be paid only to or registered only in the name of, the Participant or, in the event of the Participant's death, to the Participant's Beneficiary or, in the event of the Participant's
Disability, to the Participant's Personal Representative or, if there is none, to the Participant. Other than by will or the laws of descent and distribution, no right or benefit under the Plan or any
Award, including, without limitation, any Option or share of Restricted Stock that has not vested, shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge and any such attempted action shall be void and no such right or benefit shall be, in any manner, liable for, or subject to, debts, contract, liabilities, engagements or torts of
any Eligible Employee, Participant or Beneficiary, in any case except as may otherwise be expressly required by applicable law. The Board or the Committee shall disregard any attempt at transfer,
assignment or other alienation prohibited by the preceding sentence and shall pay or deliver such cash or shares of Common Stock in accordance with the provisions of the Plan. Notwithstanding the
foregoing, the Board or the Committee may authorize exercise by or transfers or payments to a third party in a specific case or more generally; provided, however, with respect to any option or similar
right (including any stock appreciation right) such discretion may only be exercised to the extent that applicable rules under Section 16 of the Exchange Act would so permit without
disqualifying the Plan from certain benefits thereunder. 

        14.4    Plan Not Funded.    No Participant, Beneficiary or other person shall have any right, title or interest
in any
fund or in any specific asset (including shares of Common Stock) of the Corporation by 

10

 

reason of any Award granted hereunder. There shall be no funding of any benefits which may become payable hereunder. Neither the provisions of the Plan (or of any documents related hereto), nor the
creation or adoption of the plan, nor any action taken pursuant to the provisions of the Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship between the
Corporation and any Participant, Beneficiary. To the extent that a Participant, a Beneficiary or other person acquires a right to receive an Award hereunder, such right shall be no greater than the
right of any unsecured general creditor of the Corporation. Awards payable under the Plan shall be paid in shares of Common Stock or from the general assets of the Corporation, and no special or
separate fund or deposit shall be established and no segregation of assets or shares shall be made to assure payment of such Awards. 

        14.5    Adjustment Upon Recapitalizations and Corporate Changes.    If the outstanding shares of Common Stock
are
changed into or exchanged for cash or a different number or kind of shares or securities of the Corporation, or if the outstanding shares of the Common Stock are increased, decreased, exchanged for,
or otherwise changed, or if additional shares or new or different shares or securities are distributed with respect to the outstanding shares of the Common Stock, through a reorganization or merger in
which the Corporation is the surviving entity or through a combination, consolidation, recapitalization, reclassification, stock split, stock dividend, reverse stock split, stock consolidation or
other capital change or adjustment, an appropriate adjustment shall be made in the number and kind of shares of other consideration that is subject to or may be delivered under the Plan and pursuant
to outstanding Awards. A corresponding adjustment to the consideration payable with respect to Awards granted prior to any such change and to the price, if any, to be paid in connection with
Restricted Stock Awards shall also be made as appropriate. Corresponding adjustments shall be made with respect to Stock Appreciation Rights related to Options to which they are related. In addition,
the Board or the Committee may grant such additional rights in the foregoing circumstances as the Board or the Committee deems to be in the best interest of any Participant and the Corporation in
order to preserve for the Participant the benefits of an Award. 

        14.6    Termination of Employment, Except by Death, Disability or Retirement.    If a Participant ceases to be
an
Employee for any reason other than his or her death, Disability or Retirement, such Participant shall have the right, subject to the restrictions of Section 14.3 above, to exercise any Award at
any time within three (3) months after termination of employment, but only to the extent that, at the date of termination of employment, the Participant's right to exercise such Award had
accrued pursuant to the terms of the applicable agreement and had not previously been exercised; provided, however, that if the Participant was terminated for cause (as defined in the applicable
agreement) any Award not exercised in full prior to such termination shall be canceled. For this purpose, the employment relationship shall be treated as continuing intact while the Participant is on
military leave, sick leave or other bona fide leave of absence (to be determined in the sole discretion of the Board or the Committee). The foregoing notwithstanding, in the case of an Incentive Stock
Option, employment shall not be deemed to continue beyond the ninetieth (90th) day after the Participant's reemployment rights are guaranteed by statute or by contract. 

        14.7    Death of Participant.    If an Participant dies while an Employee, or after ceasing to be an Employee
but
during the period while he or she could have exercised the Award under this Section 14.7, and has not fully exercised the Award, then the Award may be exercised in full at any time within
twelve (12) months after the Participant's death (but not later than the date of termination fixed in the applicable agreement), by the executors or administrators of his or her estate or by
any person or persons who have acquired the Award directly from the Participant by bequest or inheritance, but only to the extent that, at the date of death, the Participant's right to exercise such
Award had accrued and
had not been forfeited pursuant to the terms of the applicable agreement and had not previously been exercised. 

11

 

        14.8    Disability of Participant.    If an Participant ceases to be an Employee by reason of Disability, such
Participant shall have the right to exercise the Award at any time within twelve (12) months after termination of employment (but not later than the termination date fixed in the applicable
agreement), but only to the extent that, at the date of termination of employment, the Participant's right to exercise such Award had accrued pursuant to the terms of the applicable agreement and had
not previously been exercised. 

        14.9    Retirement of Participant.    If an Participant ceases to be an Employee by reason of Retirement, such
Participant shall have the right to exercise the Award at any time within three (3) months after termination of employment (but not later than the termination date fixed in the applicable
agreement), but only to the extent that, at the date of termination of employment, the Participant's right to exercise such Award had accrued pursuant to the terms of the applicable agreement and had
not previously been exercised. 

        14.10    Rights as a Stockholder.    An Participant, or a transferee of an Participant, shall have no rights as
a
stockholder with respect to any Shares covered by his or her Award until the date of the issuance of a stock certificate for 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 issued, except as provided in
Section 14.5 hereof. 

        14.11    Deferral of Payments.    The Board or the Committee may approve the deferral of any payments that may
become
due under the Plan. Such deferrals shall be subject to any conditions, restrictions or requirements as the Board or the Committee may determine. 

        14.12    Acceleration of Awards.    Immediately prior to the occurrence of an Event, (i) each Option and
Stock
Appreciation Right under the Plan shall become exercisable in full; (ii) Restricted Stock delivered under the Plan shall immediately vest free of restrictions; and (iii) each other Award
outstanding under the Plan shall be fully vested or exercisable, unless, prior to the Event, the Board or the Committee otherwise determines that there shall be no such acceleration or vesting of an
Award or otherwise determines those Awards which shall be accelerated or vested and to the extent to which they shall be accelerated or vested, or that an Award shall terminate, or unless in
connection with such Event the Board provides (A) for the assumption of such Awards theretofore granted; or (B) for the substitution for such Awards of new awards covering securities or
obligations (or any combination thereof) of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of shares and prices; or (C) for the
payment of the fair market value of the then outstanding Awards. In addition, the Board or the Committee may grant such additional rights in the foregoing circumstances as the Board or the Committee
deems to be in the best interest of the Participant and
the Corporation in order to preserve for the Participant the benefits of an Award. For purposes of this Section 14.12 only, Board shall mean the Board of Directors of the Corporation as
constituted immediately prior to the Event. In addition, the Board may in its sole discretion accelerate the exercisability or vesting of any or all Awards outstanding under the Plan in circumstances
under which the Board or the Committee determines such acceleration appropriate. 

XV.  MISCELLANEOUS  

        15.1    Termination, Suspension and Amendment.    The Board or the Committee may, at any time, suspend, amend,
modify
of terminate the Plan (or any part thereof) and may, with the consent of a Participant, authorize such modifications of the terms and conditions of such Participant's Award as it shall deem advisable;
provided that, except as permitted under the provisions of Section 14.5 hereof, no amendment or modification of the plan may be adopted without approval by a majority of the shares of 

12

 

the Common Stock represented (in person or by proxy) at a meeting of stockholders at which a quorum is present and entitled to vote thereat, if such amendment or modification would: 

          (i)  materially
increase the benefits accruing to Participants under the plan within the meaning of Rule 16b-3 under the Exchange Act or any successor
provision; 

        (ii)  materially
increase the aggregate number of shares which may be delivered pursuant to Awards granted under the Plan; or 

        (iii)  materially
modify the requirements of eligibility for participation in the Plan. 

        Neither
adoption of the plan nor the provisions hereof shall limit the authority of the Board to adopt other plans or to authorize other payments of compensation and benefits under
applicable law. No Awards under the plan may be granted or amended during any suspension of the Plan or after its termination. The amendment, suspension or termination of the Plan shall not, without
the consent of the Participant, alter or impair any rights or obligations pertaining to any Awards granted under the plan prior to such amendment, suspension or termination. 

        15.2    No Fractional Shares.    No Award or installment thereof shall be exercisable except in respect of whole
shares, and fractional share interests shall be disregarded. 

        15.3    Tax Withholding and Tax Bonuses.    As required by law, federal, state or local taxes that are subject
to the
withholding of tax at the source shall be withheld by the Corporation as necessary to satisfy such requirements. The Corporation is entitled to require deduction from other compensation payable to
each Participant or, in the alternative: (i) the Corporation may require the Participant to advance such sums; or (ii) if a Participant elects, the Corporation may withhold (or require
the return of) Shares having the Fair Market Value equal to the sums required to be withheld. If the Participant elects to advance such sums directly, written notice of that election shall be
delivered prior to such exercise and, whether pursuant to such election or pursuant to a requirement imposed by the Corporation, payment in cash or by check of such sums for taxes shall be delivered
within ten (10) days after the exercise date. If the Participant elects to have the Corporation withhold Shares (or be entitled to the return of Shares) having a Fair Market Value equal to the
sums required to be withheld, the value of the Shares to be withheld (or returned) will be equal to the Fair Market Value on the date the amount of tax to be withheld (or subject to return) is to be
determined (the "Tax Date"). 

        15.4    Restrictions on Elections Made by Participants.    Elections by Participants to have Shares withheld (or
subject to return) for this purpose will be subject to the following restrictions: (i) the election must be made prior to the Tax Date; (ii) the election must be irrevocable;
(iii) the election will be subject to the Board's disapproval; and (iv) if the Participant is an "officer" within the meaning of Section 16 of the Exchange Act, the election shall
be subject to such additional restrictions as the Board or the Committee may impose in an effort to secure the benefits of any regulations thereunder. 

        15.5    Limitations on the Corporation's Obligations.    The Corporation shall not be obligated to issue shares
and/or
distribute cash to the Participant upon any Award exercise until such payment has been received or Shares have been withheld, unless withholding (or offset against a cash payment) as of or prior to
the exercise date is sufficient to cover all such sums due or which may be due with respect to such exercise. In addition, the Board or the Committee may grant to a Participant a cash bonus in any
amount required by federal, state, or local tax law to be withheld with respect to an Award. 

        15.6    Compliance with Laws.    The Plan, the granting of Awards under the Plan, the Stock Option Agreements
and
Stock Purchase Agreements and the delivery of Options, Shares and Awards (and/or the payment of money or Common Stock) pursuant thereto and the extension of any loans hereunder are subject to such
additional requirements as the Board or the Committee may impose to assure or facilitate compliance with all applicable federal and state laws, rules and regulations (including, without limitation,
securities laws and margin requirements) and to such approvals by any regulatory or 

13

 

governmental agency which may be necessary or advisable in connection therewith. In connection with the administration of the Plan or the grant of any Award, the Board or the Committee may impose
such further limitations or conditions as in its opinion may be required or advisable to satisfy, or secure the benefits of, applicable regulatory requirements (including those rules promulgated under
Section 16 of the Exchange Act or those rules that facilitate exemption from or compliance with the Securities Act or the Exchange Act), the requirements of any stock exchange upon which such
shares or shares of the same class are then listed, and any blue sky or other securities laws applicable to such shares. 

        15.7    Governing Laws.    The Plan and all Awards granted under the Plan and the documents evidencing Awards
shall be
governed by, and construed in accordance with, the laws of the State of California, except as to those matters governed by the laws of the State of Arizona as the state of incorporation of the
Corporation. 

        15.8    Securities Law Requirements.    

        (a)  Legality
of Issuance. The issuance of any Shares upon the exercise of any Option and the grant of any Option shall be contingent upon the following: 

          (i)  the
Corporation and the Participant shall have taken all actions required to register the Shares under the Securities Act of 1933, as amended (the "Securities Act"),
and to qualify the Option and the Shares under any and all applicable state securities or "blue sky" laws or regulations, or to perfect an exemption from the respective registration and qualification
requirements thereof; 

        (ii)  any
applicable listing requirement of any stock exchange on which the Common Stock is listed shall have been satisfied; and 

        (iii)  any
other applicable provision of state of Federal law shall have been satisfied. 

        (b)  Restrictions
on Transfer. Regardless of whether the offering and sale of Shares under the plan has been registered under the Securities Act or has been registered or
qualified under the securities laws of any state, the Corporation may impose restrictions on the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock
certificates) if, in the judgment of the Corporation and its counsel, such restrictions are necessary or desirable in order to achieve compliance with the provisions of the Securities Act, the
securities laws of any state or any other law. In the event that the sale of Shares under the Plan is not registered under the Securities Act but an exemption is available which required an investment
representation or other representation, each Participant shall be required to represent that such Shares are being acquired for investment, and not with a view to the sale or distribution thereof, and
to make such other representations as are deemed necessary or appropriate by the Corporation and its counsel. Any determination by the Corporation and its counsel in connection with any of the matters
set forth in this Section 15.6(b) shall be conclusive and binding on all persons. Stock certificates evidencing Shares acquired under the Plan pursuant to an unregistered transaction shall bear
the following restrictive legend and such other restrictive legends as are required or deemed advisable under the provisions of any applicable law: 

"THE
SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"). ANY TRANSFER OF SUCH SECURITIES WILL BE INVALID UNLESS A REGISTRATION
STATEMENT UNDER
THE SECURITIES ACT IS IN EFFECT AS TO SUCH TRANSFER OR IN THE OPINION OF COUNSEL FOR THE ISSUER SUCH REGISTRATION IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE SECURITIES ACT." 

        (c)  Registration
or Qualification of Securities. The Corporation may, but shall not be obligated to register or qualify the issuance of Awards and/or the sale of Shares
under the Securities Act or any 

14

 

other applicable law. The Corporation shall not be obligated to take any affirmative action in order to cause the issuance of Awards or the sale of Shares under the plan to comply with any law. 

        (d)  Exchange
of Certificates. If, in the opinion of the Corporation and its counsel, any legend placed on a stock certificate representing shares issued under the Plan is no
longer required, the holder of such certificate shall be entitled to exchange such certificate for a certificate representing the same number of Shares but lacking such legend. 

        15.9    Execution.    To record the adoption of the Plan in the form set forth above by the Board effective as
of
February 19, 1997, the Corporation has caused this Plan to be executed in the name and on behalf of the Corporation where provided below by an officer of the Corporation thereunto duly
authorized. 

	 	 	VETERINARY PET SERVICES, INC.
	

 	
 	

By:	
 	

 
	 	 	 	 	
 Jack L. Stephens,
 President
	

ATTEST:	
 	

 	
 	

 
	

 Bruce H. Haglund,
 Secretary	
 	

 	
 	

 
	

(SEAL)	
 	

 	
 	

 

15

  

 
 

EXHIBIT "A"    
    
    VETERINARY PET SERVICES, INC.    
    
    1996 OMNIBUS STOCK OPTION AND INCENTIVE PLAN    
    
    SCHEDULE OF NONSTATUTORY STOCK OPTION AWARDS    
  

	Name
 
	 	Position With

the Company
	 	Number of

Shares
	 	Exercise

Price

        All
Nonstatutory Stock Options granted as set forth in this schedule vest as follows: 

EXHIBIT A-1

QuickLinks

Exhibit 10.7

VETERINARY PET SERVICES, INC. 1996 OMNIBUS STOCK OPTION AND INCENTIVE PLAN

VETERINARY PET SERVICES, INC. 1996 OMNIBUS STOCK OPTION AND INCENTIVE PLAN

EXHIBIT "A" VETERINARY PET SERVICES, INC. 1996 OMNIBUS STOCK OPTION AND INCENTIVE PLAN SCHEDULE OF NONSTATUTORY STOCK OPTION AWARDS

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00044-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00044-of-00352.parquet"}]]