Document:

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                                                                    EXHIBIT 10.1

                               PET QUARTERS, INC.
                            MANAGEMENT INCENTIVE PLAN

                                I. NAME; PURPOSE

         1.1 NAME. This instrument shall be known as the Pet Quarters, Inc.
Management Incentive Plan ("Plan").

         1.2 PURPOSE. The Plan is designed to benefit certain key employees of
Pet Quarters, Inc. and any entity in which Pet Quarters, Inc. or any subsidiary
owns, directly or indirectly, a majority of the voting stock (collectively these
shall be the "Company").

         The overall objectives of the Plan are to increase the long-term
financial success of the Company, and increase the value of the Company to its
stockholders by:

                  (a) attracting and retaining key personnel who are
instrumental in the continued success of the Company; and

                  (b) motivating key employees by providing them with the
opportunity to participate with the stockholders in the long-term growth and
financial success of the Company.

         1.3 OVERVIEW OF THE PLAN BENEFITS. The benefits to be provided under
this Plan, although more specifically set out herein, are stock awards, stock
options, or any combination of the foregoing (collectively the "Plan Benefits"),
subject to the terms and conditions stated in this Plan.

               II. ADMINISTRATION OF THE PLAN; PARTICIPANTS, ETC.

         2.1 THE BOARD. The Plan shall be administered by the Board of Directors
of Pet Quarters, Inc. (the "Board"), unless a committee of the Board shall be
designated.

         2.2 GRANT AND TERMS OF PLAN BENEFITS; ADMINISTRATION OF THE PLAN. The
Board, or the chief executive officer of the Company if delegated the authority
pursuant to this section, may grant Plan Benefits to Participants (hereafter
defined) on the terms and subject to the conditions stated in this Plan.

         The Board, or its designated committee, shall, subject to the
limitations of this Plan, have full power and discretion to interpret and
administer the Plan; to establish selection guidelines; to select eligible
persons for participation; and to determine the form of grant, either in the
form of stock awards, stock options or stock appreciation rights, or
combinations thereof, the number of shares subject to the grant, the fair market
value of the Common Stock (hereinafter defined) when necessary, the restriction
and forfeiture provisions relating to Restricted Stock, the time and conditions
of vesting or exercise, the conditions, if any, under which time of vesting or
exercise may be accelerated, the conditions, form, time, manner and terms of
payment of any award, and all other terms and conditions of the grant, provided
that all stock options shall be granted in

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compliance with and subject to the terms of Section 6 of this Plan. The Board,
or its designated committee, may establish rules, regulations and guidelines for
the administration of the Plan, and impose, incidental to a grant of Plan
Benefits, conditions with respect to employment or other activities not
inconsistent with or conflicting with the Plan.

         The Board may, in its discretion, delegate to the chief executive
officer of the Company, the power and authority with respect to the selection
of, and grants of Plan Benefits to, Participants subject to the rules,
regulations and guidelines of general application prescribed by the Board, or
its designated committee,. Any reference in this Plan to the Board shall be
deemed to include the chief executive officer if such person has been delegated
the power and authority pursuant to the preceding sentence. However, the chief
executive officer may not participate in the selection of, and grants of stock
options (or other awards under this Plan if such awards are performance based
and the Board desires such awards to qualify for the compensation deduction
exemption set forth in section 162(m) of the Internal Revenue Code of 1986, as
amended ("Section 162(m)")) to, a "Covered Employee" as defined by Section
162(m). "Covered Employee" shall mean any employee of the Company if: (a) as of
the close of the taxable year, such employee is the chief executive officer of
the Company or an individual acting in such a capacity, or (b) the total
compensation of such employee for the taxable year is required to be reported to
shareholders under the Securities Exchange Act of 1934 by reason of such
employee being among the four (4) highest compensated officers for the taxable
year (other than the chief executive officer).

         The interpretation by the Board of the terms and provisions of the Plan
and the administration thereof and all action taken by the Committee, shall be
final, binding and conclusive on the Company, its stockholders, all Participants
and employees of the Company, and upon their respective beneficiaries,
successors and assigns, and upon all other persons claiming under or through any
of them. By accepting Plan Benefits, each Participant and each person claiming
under or through him, shall be conclusively deemed to have indicated his
acceptance and ratification of, and consent to, all provisions of the Plan and
any action or decision under the Plan by the Company, the Board or its
designated committee.

         2.3 PLAN PARTICIPANTS. Unless denied the right to participate by
specific sections hereof, the following persons shall be eligible to be
Participants in the Plan and, subject to the discretion of the Board, receive
Plan Benefits:

         (a)      employees of the Company;

         (b)      officers of the Company;

         (c)      directors of the Company; and

         (d)      consultants engaged by the Company.

         The foregoing classes of persons shall be referred to herein as
"Participants."

         2.4 LIMITATION ON SHARES TO BE ISSUED; REVERSION OF UNEXERCISED SHARES.
The maximum number of shares of common stock of the Company, $0.001 par value
(the "Common Stock"), to be issued pursuant to all grants made under the Plan
shall be two million five hundred thousand shares. Shares awarded pursuant to
grants made under this Plan,

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which are not exercised for any reason (whether by reason of expiration,
surrender, cancellation, termination or forfeiture) shall again be available for
future grants.

         2.5 SHARES OF COMMON STOCK. Shares of Common Stock to be issued may be
authorized and unissued shares of Common Stock, treasury stock, or a combination
thereof. It is contemplated that the Company, although under no legal obligation
to do so, may from time to time purchase shares of Common Stock for the purpose
of paying all or any portion of any award payable in or measured by the values
of shares of Common Stock, or for the purpose of replacing shares issued or
transferred in payment of all or part of an award. All shares so purchased
shall, unless and until transferred in payment of an award, be at all times the
property of the Company available for any corporate purposes, and no
Participants or employees or beneficiary, individual or as a group, shall have
any right, title or interest in any shares of Common Stock so purchased.

         2.6 ADJUSTMENT PROVISIONS. In the event that any recapitalization, or
reclassification, split-up or consolidation of shares of Common Stock shall be
effective, or the outstanding shares of Common Stock are, in connection with a
merger or consolidation of the Company or a sale by the Company of all or a part
of its assets, exchanged for a different number or class of shares of stock or
other securities of the Company, or for shares of the stock or other securities
of any other corporation, or new, different or additional shares or other
securities of the Company or of another corporation are received by the holders
of Common Stock or any distribution is made to the holders of Common Stock other
than a cash dividend, (a) the maximum number and class of shares or other
securities that may be issued or transferred under the Plan, and (b) the number
of share units or the number and class of shares or other securities which are
the subject of any grant, shall in each case be equitably adjusted. If an
equitable adjustment cannot be made or the Board determines that further
adjustment is appropriate to accomplish fairly the purposes of the Plan, the
Board shall make such equitable adjustment under the Plan as it determines will
fairly preserve the Plan Benefits to the Participants and the Company.

         2.7 EFFECTIVE DATE AND TERM OF PLAN. The Plan shall be effective
immediately upon its approval by the stockholders. Awards may be made and shares
may be issued pursuant to the Plan on or after its effective date pursuant to,
and in accordance with, agreements for the issuance thereof entered into prior
to the effective date. The Plan shall terminate ten (10) years after it becomes
effective unless terminated prior thereto by action of the Board. No further
grants shall be made under the Plan after its termination, but termination shall
not affect the rights of any Participants under any grants made prior to
termination.

         2.8. PERFORMANCE BASED CRITERIA. If the Board, or its designated
committee, determines that grants of Stock Awards should be made to Participants
in order to qualify for the compensation deduction exemption established by
Section 162(m), the award shall be governed by this Section 2.8 of the Plan in
addition to other applicable sections of the Plan. The Board, or its designated
committee, shall base such compensation solely on account of the attainment of
one or more pre-established, objective performance goals. The performance goal
must be established in writing by the Board, or its designated committee, prior
to the commencement of the services to which the performance goal relates, but
no later than ninety (90) days after the commencement of the service period to
which it relates, and while the outcome is substantially uncertain (i.e., before
25% of the performance period has elapsed). Performance goals may be based on
one or more

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criteria: revenue, EPS, return on assets, return on capital, return on
investment, return on sales, productivity, market share, cash flow, generation
of free cash, Common Stock price, operating expense ratios, quality, delivery
performance or level of improvement in any of the foregoing.

         The written performance goal for a Covered Employee must be based on an
objective formula or standard for performance-based compensation, such that a
third party having knowledge of the relevant performance results could calculate
the amount to be paid to the employees and must specify the individual employees
or class of employees to which it applies. Once established, the Board, or its
designated committee, shall not be entitled any discretion to increase the
amount of grants under the Plan that would otherwise be due upon attainment of
the performance goal. The Board, or its designated committee, shall obtain
stockholder approval of the performance goal prior to the payment of the
compensation.

         The Board, or its designated committee, must certify in writing, prior
to the grant of Restricted Stock, that all of the performance goals and other
material terms of the arrangement for payment of the grants has been met. This
section of the Plan shall not apply to an award to a Participant unless the
Board has determined that such award should qualify for the compensation
deduction of Section 162(m).

                                III. STOCK AWARDS

         3.1 FORM OF AWARD. Stock awards, whether performance awards or fixed
awards, may be made to selected Participants in the form of shares of Common
Stock, but which may be forfeitable and/or with restrictions on transfer in any
form as hereinafter provided.

         3.2 PERFORMANCE AWARDS. Awards may be made in terms of a stated
potential maximum number of shares, with the actual number earned to be
determined by reference to the level of achievement of corporation, group,
division, individual or other specific objectives over a period or periods of
not less than one or more than ten years. No interests of any kind shall be
vested in an individual receiving a performance award until the conclusion of
the period or periods and the determination of the level of achievement
specified in the awards, and the time of vesting thereafter shall be specified
in the awards.

         3.3 FIXED AWARDS. Awards may be made to Participants which are not
contingent on the performance objectives but which are contingent on the
Participant's continuing in the employ of the Company, rendering consulting
services or refraining from competitive activities for a period to be specified
in the awards, which period shall not be less than one year.

         3.4 RIGHTS WITH RESPECT TO RESTRICTED STOCK. As used in the Plan, the
term "Restricted Stock" refers to all stock granted pursuant to this Plan. The
restriction on such stock may arise from specific restrictions included in the
stock grant by the Board or because the stock has not been registered pursuant
to the Securities Act of 1933, as amended. All shares of Restricted Stock issued
pursuant to this Plan shall bear a legend on the stock certificate identifying
the stock as restricted.

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         3.5 TERMS AND CONDITIONS. Awards shall contain such terms and
conditions as the Board, or its designated committee, shall specify, including,
without limitation, restrictions on the sale or other disposition of the shares,
or the forfeiture of the awards upon termination of employment prior to the
expiration for a designated period of time or the occurrence of other events. In
addition, shares of Restricted Stock issued pursuant to an award shall be
released from the restrictions at the times determined by the Board, or its
designated committee,. The awards shall be paid to the Participant in shares of
Restricted Stock.

                                IV. STOCK OPTIONS

         4.1      STOCK SUBJECT TO THE PLAN.

         (a)      Options may, from time to time on and after the effective date
                  of this Plan, be granted to employees of the Company or its
                  affiliates to purchase not more than the aggregate number of
                  shares of stock to be issued pursuant to grants made under the
                  Plan (subject to adjustment in accordance with paragraph
                  4.1(b) reserved in accordance with Section 2.4 of the Plan).
                  As the Board, or its designated committee, may determine from
                  time to time, the shares may consist either in whole or in
                  part, of shares of authorized but unissued Common Stock, or
                  shares of authorized and issued Common Stock reacquired by the
                  Company. If an option is surrendered or for any other reason
                  ceases to be exercisable in whole or in part, the shares which
                  were subject to such option but as to which the option has not
                  been exercised shall continue to be available under the Option
                  Plan.

         (b)      If there shall be any change in the stock subject to the Plan
                  or the stock subject to any option granted hereunder, through
                  merger, consolidation, reorganization, recapitalization,
                  reincorporation, stock split, stock dividend (in excess of
                  2%), or other change in the corporate structure of the
                  Company, appropriate adjustment shall be made by the Board, or
                  its designated committee, to the aggregate number of shares
                  subject to the Plan and the number of shares and price per
                  share subject to outstanding options in order to preserve, but
                  not to increase, the benefits of the optionee; provided,
                  however, that subject to any required action by the
                  stockholders, if the Company shall not be the surviving
                  corporation in any merger, consolidation, or reorganization,
                  every option outstanding hereunder shall terminate, unless the
                  surviving corporation shall (subject to any applicable
                  provisions of the Internal Revenue Code) assume (with
                  appropriate changes) the outstanding options or replace them
                  with new options of comparable value (in accordance with
                  Section 424(a) of the Internal Revenue Code). Notwithstanding
                  the preceding provisions, if such surviving corporation does
                  not so assume or replace the outstanding portions hereunder,
                  each optionee shall have the right immediately prior to such
                  merger, consolidation, or reorganization to exercise all of
                  his outstanding option(s), whether or not the options have
                  matured.

         4.2      ELIGIBILITY. Persons who shall be eligible to have granted to
                  them the options provide for by this Plan shall be those
                  persons set out in Section 2.3 of the Plan, as the Board in
                  its sole discretion shall determine.

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         4.3(a)   PLAN REQUIREMENTS. This Plan will be approved by shareholders
                  of the Company within twelve (12) months of this date and, as
                  required by Section 422 of the Internal Revenue Code, shares
                  of Company stock issued pursuant to this Plan will meet the
                  following requirements:

         (1)      The individual receiving an option must be an employee,
                  officer, director or consultant of the Company.

         (2)      The total number of options that may be granted pursuant to
                  this Plan is 2,500,000.

         (3)      The option must be within ten (10) years of the date the Plan
                  is adopted or approved by shareholders whichever is earlier.

         (4)      Options granted pursuant to this Plan must be exercised no
                  later than ten (10) years from the date of grant.

         (5)      The option price will be no less than the fair market value of
                  the stock at the time the option is granted.

         (6)      The option is non-transferable by the grantee except by will
                  or the laws of descent and distribution and is exercisable,
                  during the lifetime of the grantee, only by the grantee.

         (7)      The grantee, at the time of the grant, does not own stock
                  possessing more than ten percent (10%) of the total combined
                  voting power of all classes of the Company.

         4.3(b)   ADMINISTRATION OF THE PLAN. The Plan shall be administered as
                  set forth in Section 2 of the Plan.

         4.4(a)   PURCHASE PRICE; TERMS; EXERCISE OF OPTIONS.

         (1)      Calculation of Purchase Price. The purchase price of the
                  Common Stock under each stock option shall be 100% of the fair
                  market value of the Common Stock on the date of grant (the
                  "Purchase Price"). The fair market value of the Common Stock
                  on any day shall be (i) if the principal market for the Common
                  Stock is a national securities exchange or the National Market
                  System of the National Association of Securities Dealers
                  Automated Quotations, the highest closing price of the Common
                  Stock on such exchange or system on the date the option is
                  granted or if no sale of the Company's Common Stock shall have
                  been made on any stock exchange on that day, on the next
                  preceding day on which there was a sale of such stock, or,
                  (ii) if the principal market for the Common Stock is not one
                  of the markets noted in 4.4(a)(1)(i) and the Common Stock is
                  quoted on the National Association of Securities Dealers
                  Automated Quotations System, the mean between the closing bid
                  and the closing asked prices for the Common Stock on such day
                  on such System, or (iii) if the principal market for the
                  Common Stock is not a national

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                  securities exchange and the Common Stock is not quoted on the
                  National Association of Securities Dealers Automated
                  Quotations System, the mean between the highest bid and lowest
                  asked price for the Common Stock on such day as reported by
                  the National Quotation Bureau, Inc.; provided that if clauses
                  (i), (ii), and (iii) of this paragraph are all inapplicable,
                  or if no trades have been made or no quotes are available for
                  such day, the fair market value of the Common stock shall be
                  determined by the Board by any method consistent with
                  applicable regulations adopted by the Commissioner of Internal
                  Revenue relating to the stock options. The Purchase Price
                  shall be subject to adjustment as provided in paragraph 2(b)
                  hereof.

         (2)      (a) Payment of Purchase Price. The Purchase Price shall become
                  due immediately upon exercise of the option and shall be
                  payable in full in cash. For purposes of this paragraph
                  4.4(a)(2), the exercise date shall be the date on which the
                  Company receives written notice of the exercise of the option,
                  together with payment of the Purchase Price in the form
                  authorized by the Board.

                  (b) Terms and Conditions of Options. Each option granted
                  pursuant to this Plan shall be evidenced by a written Stock
                  Option Agreement (the "Agreement") executed by the Company and
                  the person to whom such option is granted (the "Optionee").
                  The term of each option shall be for such a period of time,
                  not more than ten (10) years from the date it is granted, as
                  the Board may determine. All options granted under the Plan
                  shall expire on the earlier of (i) the term set by the Board
                  or (ii) 90 days after the Optionee's death, disability or
                  retirement, or (iii) termination (for any reason) of the
                  Optionee's employment with the Company. During the lifetime of
                  the Optionee, the option shall be exercisable only by the
                  Optionee and shall not be assignable or transferable other
                  than by will or the laws of descent and distribution. In
                  addition, the Agreement may contain such other terms,
                  provisions and conditions as may be determined by the Board
                  (and not inconsistent with this Plan) including, without
                  limitation, provisions relating to the effect upon
                  exercisability of the death or termination of employment of
                  the Optionee, the extension of credit to optionees by the
                  Company or the guarantee by the Company of loans to optionees
                  from third parties to finance the exercise of options granted
                  hereunder, and relating to the exercise of stock appreciation
                  rights with respect to options granted hereunder.

         (c)      Exercise of Option. The option shall be exercisable at any
                  time and from time to time pursuant to the exercise schedule
                  and in accordance with the terms of the Agreement as follows:

                  (1)      Exercise Schedule. The option shall be exercisable in
                           not more than ten (10) equal annual installments of
                           10% each of the total number of shares for which this
                           option is granted beginning on June 1 of each year,
                           and each June 1 of succeeding years thereafter.

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                  (2)      Method of Exercise. The option shall be exercisable
                           by a written notice delivered by the Optionee (or
                           other person exercising the option) to the Board.
                           The notice shall be addressed to the Board c/o Steve
                           Dempsey, President, Pet Quarters, Inc., P.O. Box 410,
                           Lonoke, Arkansas 72086. The notice shall:

                                    (i) state the election to exercise the
                           option, the number of shares in respect of which it
                           is being exercised, the person in whose name the
                           stock certificate or certificates for such shares of
                           Common Stock is to be registered, his address and
                           social security number (or if more than one, the
                           names, addresses and social security numbers of such
                           persons);

                                    (ii) contain such representations and
                           agreements as to the investment intent of the person
                           exercising the option with respect to such shares of
                           Common Stock as may be satisfactory to the Company's
                           counsel;

                                    (iii) be signed by the person or persons
                           entitled to exercise the option and, if the option is
                           being exercised by any person or persons other than
                           the Optionee, be accompanied by proof, satisfactory
                           to counsel for the Company, of the right of such
                           person or persons to exercise the Option; and

                                    (iv) be accompanied by payment to the
                           Company of the full Purchase Price of the shares with
                           respect to which the option is exercised. The
                           Purchase Price shall be paid in cash.

                  (3)      Conditions to be Satisfied Prior to Issuance of
                           Common Stock. The Company shall not be required to
                           issue or deliver any certificate for shares of Common
                           Stock purchased upon the exercise of an option (i)
                           prior to the completion of any registration or other
                           qualification of such shares under any state or
                           federal laws or rulings or regulations of any
                           government regulatory body, which the Company shall
                           determine to be necessary or advisable, or (ii) prior
                           to receiving an opinion of counsel, satisfactory to
                           the Company, that the sale or issuance of such shares
                           is exempt from these registration or qualification
                           requirements.

                  (4)      Restrictions on Exercise. As a condition to his
                           exercise of this option, the Company may require the
                           person exercising the option to make any
                           representation and warranty to the Company as may be
                           required by any applicable law or regulation.

         4.5 LOANS OR GUARANTEE OF LOANS. The Board may authorize the extension
of a loan to an optionee by the Company (or the guarantee by the Company of a
loan obtained by an Optionee from a third party) in order to assist an Optionee
to exercise an option granted under the Plan. The terms of any loans or
guarantees, including the interest rate and terms of repayment, will be subject
to the discretion of the Board. Loans and guarantees may be granted without

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security, the maximum credit available being the exercise price of the option
sought to be executed plus any federal and state income tax liability incurred
upon exercise of the option.

         4.6 TERMINATION AND NEW GRANT OF OPTIONS. The Board shall have the
authority to effect, at any time and from time to time, with the consent of the
affected Optionees, the termination of any or all outstanding options under the
Plan to grant in substitution therefor new options under the Plan covering the
same or different numbers of shares of Common Stock but having a Purchase Price
per share not less than fair market value on the net grant date.

         4.7 USE OF PROCEEDS. Proceeds realized from the sale of Common Stock
pursuant to options granted under the Plan shall constitute general funds of the
Company.

         4.8 AMENDMENT, SUSPENSION, OR TERMINATION OF THE PLAN.

         (a)      The Board may at any time suspend or terminate the Plan, and
                  may amend it from time to time in such respects as the Board
                  may deem advisable; provided, however, except as provided in
                  paragraph 4.1(b)hereof, the Board shall not amend the Plan in
                  the following respects without the consent of shareholders
                  then sufficient to approve the Plan in the first instance:

                           (i) to increase the maximum number of shares subject
                  to the Plan; or

                           (ii) to change the designation or class of persons
                  eligible to receive options under the Plan.

         (b)      Unless the Plan theretofore shall have been terminated, the
                  Plan shall terminate ten (10) years after the effective date
                  as set forth in Section 2.7 of the Plan. No option may be
                  granted when the Plan has been suspended, or after the
                  termination of the Plan, and no amendment, suspension or
                  termination of the Plan shall, without the Optionee's consent,
                  alter or impair any rights or obligations under any option
                  therefore granted to him under the Plan.

                           V. INDEMNIFICATION OF BOARD

         5.1 GRANTS. In addition to such other rights of indemnification as they
may have as directors or as members of the Board, the members of the Board shall
be indemnified by the Company against the reasonable expenses, including
attorney's fees actually and necessarily incurred in connection with the defense
of any action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any option granted
thereunder, and against all amounts paid by them in settlement thereof provided
such settlement is approved by independent legal counsel selected by the Company
or paid by them in satisfaction of a judgment in any such action, suit or
proceeding that such Board member is liable for negligence or misconduct in the
performance of his duties.

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                                 VI. AMENDMENTS

         6.1 AMENDMENTS. The Plan may be amended or terminated by the Board at
any time and in any respect, except that no amendment may be made without the
approval of the stockholders of the Company if such amendment would:

         (a)      increase the maximum number of shares of Common Stock
                  available for issuance under the Plan;

         (b)      modify the class of eligible employees who are Participants in
                  the Plan; or

         (c)      materially increase Plan Benefits accruing to Participants
                  under the Plan.

         Similarly, subject to obtaining the consent of the parties where
required by contract law, the Board may alter, amend or modify any award or
grant made pursuant to this Plan in any respect not in conflict with the
provisions of the Plan, if the Board deems such alteration, amendment or
modification to be in the best interest of the Participants or the Company by
reason of changes or interpretation in tax, securities or other applicable laws.

                                       10<PAGE>   1
                                                                    EXHIBIT 10.2

                               PET QUARTERS, INC.
                  EMPLOYEE EQUITY PARTICIPATION INCENTIVE PLAN

                                     HISTORY

         A.       On ____________, 2000, the Board of Directors (the "BOARD") of
                  PET QUARTERS, INC. (the "Company"), an Arkansas corporation,
                  created the Pet Quarters, Inc. Employee Equity Participation
                  Incentive Plan (the "PLAN").

                                     1. PLAN

1.1      PURPOSE. The purpose of the Plan is to promote the success of the
         Company by providing compensatory equity incentives in order to
         attract, motivate and retain employees. Capitalized terms are defined
         in SECTION 7.

1.2      ADMINISTRATION.

         1.2.1    BOARD. This Plan shall be administered by the Board, acting by
                  majority vote. The Board may delegate administrative functions
                  to third parties, including employees of the Company. All
                  actions of the Board are subject to this Plan.

         1.2.2    POWERS OF BOARD. The Board has authority to (a) construe and
                  interpret this Plan and any related agreements, (b) further
                  define the terms used in this Plan, (c) prescribe, amend and
                  rescind rules and regulations relating to the administration
                  of this Plan, (d) establish and modify the terms of Award
                  Agreements including, but not limited to, restrictions on
                  transfer and repurchase rights, including the mandatory
                  exchange of any previously issued Award for an Award with
                  similar terms and conditions of a successor entity or parent
                  corporation, (e) determine the effect, if any, on a
                  Participant's rights from leaves of absence, (f) make all
                  other determinations necessary or advisable for the
                  administration of this Plan, and (g) cause (i) the issuance of
                  new Award Agreements in exchange for previously issued Awards,
                  (ii) the acceleration of any outstanding Award Agreement, or
                  (iii) the termination of any outstanding Award Agreement,
                  pursuant to and in accordance with Section 6.2 hereof. The
                  determination of the Board on any of the foregoing matters
                  shall be conclusive, provided that such Board actions are not
                  inconsistent with applicable federal or state securities
                  registration exemption statutes.

         1.2.3    BINDING DETERMINATIONS. Any action taken by, or inaction of,
                  the Company, or the Board relating to this Plan is within the
                  absolute discretion of that group or entity. No member of the
                  Board, or officer or employee of the Company or any
                  Subsidiary, will be liable for any such action or inaction. In
                  determining whether to take any action permitted under this
                  Plan, the Company or the Board may rely upon the advice of
                  counsel and accountants of the Company, and such determination
                  shall be conclusive.

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1.3      PARTICIPATION. Awards may be granted only to Eligible Persons. An
         Eligible Person who has been granted an Award may, if otherwise
         eligible, be granted additional Awards.

1.4      SHARES SUBJECT TO PLAN.

         1.4.1    NUMBER OF SHARES. The aggregate number of Shares that may be
                  issued pursuant to all Awards may not exceed __________. Each
                  of the foregoing limits is subject to adjustment under Section
                  6.2. Shares may be issued for any lawful consideration.

         1.4.2    CALCULATION OF AVAILABLE SHARES AND REPLENISHMENT. If any
                  Option or Stock Appreciation Right lapses or terminates
                  without having been exercised in full, or any Shares subject
                  to a Restricted Stock Award or Performance Share Award do not
                  vest or are not delivered, the unpurchased, unvested or
                  undelivered Shares will again be available for purposes of
                  this Plan. The foregoing sentence does not apply to Shares
                  withheld under Section 6.5.1.

1.5      GRANT OF AWARDS. The Board will determine the Eligible Persons to whom
         Awards will be granted, the terms and conditions of Awards (which need
         not be identical) and the number of Shares subject to each Award. Each
         Award will be evidenced by an Award Agreement approved by the Board.
         The grant of an Award is made on the Award Date.

1.6      EXERCISE OF AWARDS. An exercisable Award will be deemed to be exercised
         when the Secretary of the Company receives an executed Exercise
         Agreement from the Participant, together with payment of any required
         Purchase Price or other payments (including, without limitation, any
         withholding of taxes requested or required by the Company pursuant to
         Section 6.5) as well as delivery of any other materials required by the
         Board. Awards are exercisable only for whole shares. Fractional shares
         will be disregarded for all purposes under this Plan.

         1.6.1    CASH OR NOTE EXERCISES. The Purchase Price of each Award Share
                  must be paid in full at the time of each purchase in one or a
                  combination of the following methods, to the extent authorized
                  by the Board or set forth in the Award Agreement: (a) cash or
                  cashier's check payable to the Company or (b) if the Board
                  approves, a Note. Shares used to satisfy the Purchase Price
                  will be valued at their Fair Market Value on the exercise
                  date.

         1.6.2    CASHLESS EXERCISES. Award Agreements may also provide that an
                  Option may be exercised, in whole or in part, in a "cashless"
                  exercise, upon delivery to the Company of a properly executed
                  notice to the Company to the extent authorized by the Board or
                  set forth in the Award Agreement.

                                       2
<PAGE>   3

                                   2. OPTIONS

2.1      GRANTS. Options maybe granted to any Eligible Person. Each Option must
         be designated by the Board as either an NQSO or an ISO, and such intent
         will be indicated in the Award Agreement. If no such intent is
         indicated, such Option will be an NQSO. ISOs may be granted only to
         Eligible Persons who are employed by the Company or a corporation that
         is a "parent" or "subsidiary" corporation within the meaning, of
         Sections 424(e) and 424(f) of the Code, respectively.

2.2      OPTION PRICE. The Purchase Price per Award Share will be determined by
         the Board, provided that

         2.2.1    GENERAL PRICE RESTRICTION. The Purchase Price per Award Share
                  must be at least 85% (110% in the case of a Significant
                  Holder) of the Fair Market Value of the Shares on the Award
                  Date.

         2.2.2    ISO PRICE RESTRICTION. In the case of ISOs, the Purchase Price
                  per Award Share must be at least 100% (110% in the case of a
                  Significant Holder) of the Fair Market Value of the Shares on
                  the Award Date.

2.3      OPTION PERIOD. Each Option will expire on a date determined by the
         Board, but not later than 10 years after the Award Date, and will be
         subject to earlier termination as set forth in this Plan or in the
         Award Agreement.

2.4      EXERCISE OF OPTIONS. An Option shall become exercisable, in whole or in
         part, on the date or dates specified in the Award Agreement and
         thereafter such portion will remain exercisable until the earliest of
         its exercise or its expiration or termination in accordance with the
         Award Agreement, or as otherwise set forth in this Plan. At least 100
         Shares must be purchased at one time unless the number of Shares
         purchased is the total number at the time available for purchase under
         the Option. If an Option granted concurrently with a Stock Appreciation
         Right is exercised, the number of Shares subject to the Option and the
         related Stock Appreciation Right will be reduced by the number of
         Shares subject to any portion of the Option that has previously been
         exercised.

2.5      VESTING RATE. Unless otherwise provided in the Award Agreement to
         purchase Award Shares pursuant to the Option shall vest at the rate of
         20% per year over 5 years from the Award Date, subject to reasonable
         conditions. However, an Option granted to an officer, director or
         consultant may become fully exercisable, subject to reasonable
         conditions such as continued employment, at any time or during any
         period established by the Company.

2.6      LIMITATIONS ON GRANT OF ISOS.

         2.6.1    $100,000 LIMIT. If the aggregate Fair Market Value of Award
                  Shares with respect to which ISOs first become exercisable by
                  a Participant in any calendar year exceeds $100,000, taking
                  into account Award Shares subject to all ISOs

                                       3
<PAGE>   4

                  granted by the Company that are held by the Participant, the
                  excess will be treated as if issued pursuant to a NQSO. To
                  determine whether the $100,000 limit is exceeded, the Fair
                  Market Value of Award Shares subject to the Options shall be
                  determined as of the Award Dates of each respective Option. In
                  reducing the number of Options treated as ISOs to meet the
                  $100,000 limit, Award Shares under the most recently granted
                  Options will be reduced first. If a reduction of
                  simultaneously granted Options is necessary to meet the
                  $100,000 limit, the Company may designate which Award Shares
                  are to be treated as Award Shares acquired pursuant to an ISO.

         2.6.2    LIMITATION ON PURCHASE PRICE AND TERM. No ISO may be granted
                  to a Significant Holder unless the Purchase Price of the Award
                  Shares is at least 110% of the Fair Market Value of the Award
                  Shares and such Option by its terms is not exercisable after
                  the expiration of five years from the Award Date.

                          3. STOCK APPRECIATION RIGHTS

3.1      GRANTS. The Board may grant Stock Appreciation Rights concurrently with
         the grant of other Awards or independently. A Stock Appreciation Right
         granted concurrently with the grant of another Award may extend to all
         or a portion of the Shares covered by the related Award. A Stock
         Appreciation Right will entitle the Participant who holds the related
         Award, upon exercise of such Stock Appreciation Right and surrender of
         the related Award, or portion thereof, to receive payment of an amount
         determined pursuant to Section 3.3.

3.2      EXERCISE OF STOCK APPRECIATION RIGHTS.

         3.2.1    CONCURRENTLY GRANTED STOCK APPRECIATION RIGHTS. A Stock
                  Appreciation Right granted concurrently with another Award
                  shall be exercisable only to the extent that the related Award
                  is exercisable, and only when the Fair Market Value of the
                  Award Shares exceeds the exercise price of the related Award.
                  If a Stock Appreciation Right granted concurrently with an
                  Award is exercised, the number of Award Shares will be charged
                  against the maximum number of Shares that may be issued
                  pursuant to Awards. The number of Shares subject to the Stock
                  Appreciation Right and the related Award will also be reduced
                  by such number of shares. If a Stock Appreciation Right
                  granted concurrently with an Award extends to fewer than all
                  the Shares covered by the related Award, and if a portion of
                  the related Award is subsequently exercised, the number of
                  Shares subject to the unexercised Stock Appreciation Right
                  will be reduced only to the extent that the remaining number
                  of Shares covered by such related Award is fewer than the
                  remaining number of Shares subject to such Stock Appreciation
                  Right.

         3.2.2    INDEPENDENT STOCK APPRECIATION RIGHT. A Stock Appreciation
                  Right granted independently of another Award will be
                  exercisable pursuant to the terms of the applicable Award
                  Agreement.

                                       4
<PAGE>   5

3.3      PAYMENT.

         3.3.1    CONCURRENTLY GRANTED STOCK APPRECIATION RIGHTS. Upon exercise
                  of a Stock Appreciation Right and surrender of an exercisable
                  portion of the related Award, the Participant will be entitled
                  to receive payment of an amount determined by multiplying

                  (a)       The difference between the Purchase Price per Share
                            under the related Award and the Fair Market Value of
                            a Share on the exercise date of such Stock
                            Appreciation Right, by

                  (b)      The number of Shares with respect to which such Stock
                           Appreciation Right is being exercised.

         3.3.2    INDEPENDENT STOCK APPRECIATION RIGHTS. Upon exercise of a
                  Stock Appreciation Right granted independently of an Award,
                  the Participant will be entitled to receive payment of an
                  amount based on the difference between the Fair Market Value
                  per Share on the Award Date and the Fair Market Value per
                  Share on the exercise date of such Stock Appreciation Right.
                  Such amount shall be paid as described in Section 3.3.3.

         3.3.3    FORM OF PAYMENT. The amount determined under Section 3.3.1 or
                  3.3.2 will be paid solely in cash, or, if the Board approves,
                  in Shares (valued at Fair Market Value on the exercise date of
                  the Stock Appreciation Right), or in any combination of Shares
                  and cash.

                           4. RESTRICTED STOCK AWARDS

4.1      GRANTS. The Board may grant one or more Restricted Stock Awards to any
         Eligible Person. Each Award Agreement will specify the number of Shares
         to be issued to the Participant, the Award Date, the consideration for
         such Shares to be paid by the Participant, the extent to which the
         Participant will be entitled to dividends, voting and other rights in
         respect of the Shares, and the restrictions imposed on such Shares.

4.2      RESTRICTIONS.

         4.2.1    LEGEND. Stock certificates evidencing Shares of Restricted
                  Stock pending the lapse of restrictions will bear a legend
                  making appropriate reference to the restrictions imposed and
                  will be held by the Company or by a third party designated by
                  the Board until the restrictions have lapsed.

         4.2.2    FURTHER ASSURANCE. Upon issuance of Restricted Stock, the
                  Participant may be required to provide such further assurance
                  and documents as the Board requires.

         4.2.3    RESTRICTIONS ON TRANSFER. Except as provided under this Plan
                  or the Award Agreement, Restricted Stock may not be sold,
                  assigned, transferred, pledged or

                                       5
<PAGE>   6

                  otherwise disposed of or encumbered, either voluntarily or
                  involuntarily, until the restrictions have lapsed.

         4.2.4    DIVIDENDS AND VOTING RIGHTS. Unless otherwise provided in the
                  Award Agreement, a Participant receiving a Restricted Stock
                  Award will be entitled to cash dividends and voting rights for
                  all Award Shares issued even though they are not vested, but
                  such rights will terminate immediately as to any unvested
                  Award Shares that cease to be eligible for vesting.

         4.2.5    REPAYMENT. If the Participant has paid or received cash
                  (including any dividends) in connection with a Restricted
                  Stock Award, the Award Agreement will specify whether and to
                  what extent such cash will be returned (with or without an
                  earnings factor) as to any unvested Award Shares that cease to
                  be eligible for vesting.

         4.2.6    PURCHASE PRICE. The Purchase Price per Award Share must be at
                  least 85% (100% in the case of a Significant Holder) of the
                  Fair Market Value of the Shares on the Award Date.

4.3      FORM OF PAYMENT. The amount determined under Section 4.1 will be paid
         solely in cash or in the form of a Note. If payment is by Note, the
         Participant will pledge the Restricted Stock Award and the Award Shares
         to the Company as security for payment of the Note. Pursuant to the
         terms of the Award Agreement, the Shares will be delivered to the
         Participant upon payment of the Note obligation.

                           5. PERFORMANCE SHARE AWARDS

5.1      GRANTS. The Board may grant Performance Share Awards based upon factors
         the Board deems relevant. The Award Agreement shall specify the maximum
         number of Shares (if any) subject to the Performance Share Award, the
         consideration to be paid for any Shares issuable to the Participant,
         the duration of the Award, and the conditions upon which delivery of
         any Shares or cash to the Participant will be based. The amount of cash
         or Shares that may be deliverable pursuant to such Award will be based
         upon the degree of attainment over a specified period (a "performance
         cycle") of such measure(s) of the performance of the Company (or any
         part thereof) or the Participant as may be established by the Board.
         The Board may provide for full or partial credit, prior to completion
         of such performance cycle or the attainment of the performance
         achievement specified in the Award Agreement, in the event of the
         Participant's death, Retirement, Total Disability, or an Event, or as
         the Board determines.

5.2      RESTRICTIONS ON AWARDS OF STOCK. Any Shares awarded to a Participant
         pursuant to Section 5.1 may be, as determined by the Board on the Award
         Date, Restricted Stock and, as such, may be subject to all or some of
         the restrictions and requirements described above in Sections 4.2 and
         4.3.

                                       6
<PAGE>   7

                               6. OTHER PROVISIONS

6.1      RIGHTS OF ELIGIBLE PERSONS, PARTICIPANTS AND BENEFICIARIES.

         6.1.1    NO BINDING COMMITMENT. Status as an Eligible Person is not a
                  commitment that any Award will be made to any Eligible Person.

         6.1.2    NO EMPLOYMENT CONTRACT. Nothing contained in this Plan (or any
                  document related hereto) shall confer upon any Eligible Person
                  or Participant any right to continue in the service or employ
                  of the Company or constitute any contract or agreement of
                  service or employment, or interfere in any way with the right
                  of the Company to reduce such person's compensation or other
                  benefits or to terminate the services or employment of such
                  person, with or without cause. Nothing contained in this Plan
                  (or any related document) shall affect any other contractual
                  right of any Eligible Person or Participant.

         6.1.3    LIMITATIONS ON TRANSFERABILITY. Amounts payable pursuant to an
                  Award will be paid only to the Participant or, if the
                  Participant dies, to the Participant's Beneficiary. If a
                  Personal Representative has been appointed for a Participant,
                  payment will be made to the Personal Representative. Other
                  than by will or the laws of descent and distribution or other
                  exception to transfer restrictions authorized by the Board, no
                  benefit payable under, or interest in, this Plan or in any
                  Award shall be subject in any manner to anticipation,
                  alienation, sale, transfer, assignment, pledge, encumbrance or
                  charge, and any such attempted action shall be void. No such
                  benefit or interest shall be, in any manner, liable for, or
                  subject to, debts, contracts, liabilities, engagements or
                  torts of any Eligible Person, Participant or Beneficiary. The
                  Board shall disregard any attempted transfer, assignment or
                  other alienation prohibited by this Plan or applicable law and
                  shall pay or deliver such cash or Shares in accordance with
                  this Plan.

         6.1.4    NO TRUST OR FUND. Awards are payable in Shares or from the
                  general assets of the Company. No Participant, Beneficiary or
                  other person shall have any right, title or interest in any
                  fund or in any specific asset (including Shares) of the
                  Company by reason of any Award. Neither the provisions of this
                  Plan (or of any documents related hereto), nor the creation or
                  adoption of this Plan, nor any action taken pursuant to this
                  Plan, shall create a trust of any kind or a fiduciary
                  relationship between the Company and any Participant,
                  Beneficiary or other person. If a Participant, Beneficiary or
                  other person acquires a right to receive anything other than
                  Shares upon exercise of an Award, such right will be no
                  greater than the night of any unsecured general creditor of
                  the Company.

6.2      ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ACCELERATION, POSSIBLE
         EARLY TERMINATION OF AWARDS.

         6.2.1    ADJUSTMENTS. If the outstanding Shares are changed into or
                  exchanged for cash or a different number or kind of shares or
                  securities of the Company or of another

                                       7
<PAGE>   8

                  issuer, or if additional Shares or new or different securities
                  are distributed with respect to the outstanding Shares,
                  through a reorganization or merger to which the Company is a
                  party, 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 will
                  be made in the number and kind of Shares or other
                  consideration that is subject to or may be delivered under
                  this Plan and pursuant to outstanding Awards.

         6.2.2    ACCELERATION. Upon the occurrence of an Event, the Board may
                  (i) make each Option and Stock Appreciation Right immediately
                  exercisable, vest Restricted Stock free of restrictions, and
                  pay to each Participant the number of Shares covered by each
                  Performance Share Award, (ii) determine that only certain
                  benefits under Awards shall be accelerated and the extent to
                  which they shall be accelerated, and/or (ill) establish a
                  different time in respect of such Event for such acceleration.
                  Any discretion with respect to these events shall be limited
                  to the extent required by applicable accounting requirements
                  in the case of a transaction intended to be accounted for as a
                  pooling-of-interests transaction. If the Board does not
                  accelerate the benefits under Awards upon the occurrence of
                  such Event pursuant to this Section 6.2.2, and, within two (2)
                  years after the occurrence of such Event, a Participant's
                  employment or services with the Company terminates for any
                  reason other than for Cause, then effective as of the day
                  prior to the date of such termination, all of the
                  Participant's Options and Stock Appreciation Rights shall
                  become immediately exercisable, the Participant's Restricted
                  Stock shall vest free of restrictions, and, within a
                  reasonable time after such date of termination, the number of
                  Shares covered by each of the Participant's Performance Share
                  Awards shall be paid to the Participant. The Board may accord
                  any Participant a night to refuse any acceleration, whether
                  pursuant to the Award Agreement or otherwise.

         6.2.3    POSSIBLE EARLY TERMINATION OF AWARDS. If any Option has been
                  fully accelerated pursuant to Section 6.2.2 but is not
                  exercised prior to (a) a dissolution of the Company, or (b) a
                  reorganization event described in Section 6.2.1 that the
                  Company does not survive, or (c) the consummation of a
                  reorganization event described in Section 6.2.1 that results
                  in an Event approved by the Board, and no provision has been
                  made for the survival, substitution, exchange or other
                  settlement of such Award, such Award shall thereupon
                  terminate.

6.3      TERMINATION OF EMPLOYMENT.

         6.3.1    OPTIONS.

         (a)      Any Option, to the extent not exercised, will terminate and
                  become null and void upon a termination of employment of a
                  Participant, except as set forth in this Section or otherwise
                  expressly provided in the Award Agreement. All Options shall
                  be subject to earlier termination under Section 2.3, and any
                  and all rights under an Option, to the extent not exercised or
                  vested, will expire immediately

                                       8
<PAGE>   9

                  upon a termination of employment of a Participant for Cause.
                  The Board will be the sole judge of Cause.

         (b)      Unless otherwise expressly provided in the Award Agreement, a
                  Participant will have the following time periods to exercise
                  Options to the extent they were exercisable on the date of the
                  Participant's termination of employment:

                  (i)      If the Participant's employment terminates by any
                           reason other than death, Total Disability or Cause,
                           the Participant will have 90 days after the date of
                           termination of employment to exercise any Option;

                  (ii)     If the Participant's employment terminates for Cause,
                           all Options shall terminate or lapse immediately upon
                           the Participant's termination of employment;

                  (iii)    If the Participant's employment terminates by reason
                           of Total Disability, or if the Participant suffers a
                           Total Disability within 90 days after a termination
                           of employment described in Section 6.3.1(b)(i), the
                           Participant or the Participant's Personal
                           Representative, as the case may be, may exercise, at
                           any time within 180 days after the date of Total
                           Disability (or, if earlier, termination of
                           employment) any Option; or

                  (iv)     If the Participant dies while employed by the
                           Company, or within 90 days after a termination of
                           employment under Section 6.3.1(b)(i) or 6.3.1(b)(iii)
                           above, the Participant's Beneficiary may exercise, at
                           any time within 180 days after the date of the
                           Participant's death (or, if earlier, termination of
                           employment) any Option.

         6.3.2    STOCK APPRECIATION RIGHTS. Each Stock Appreciation Right
                  granted concurrently with an Award will have the same
                  termination provisions and exercisability periods as the
                  related Award. The termination provisions and exercisability
                  periods of any Stock Appreciation Right granted independent of
                  an Award will be established by the Board.

         6.3.3    RESTRICTED STOCK AWARDS AND PERFORMANCE SHARE AWARDS. If a
                  Participant's employment terminates for any reason, (a) Shares
                  subject to the Participant's Restricted Stock Award will be
                  treated in accordance with the related Award Agreement to the
                  extent such Shares have not become vested on the date of
                  termination of employment; and (b) Shares subject to the
                  Participant's Performance Share Award will be forfeited in
                  accordance with the related Award Agreement to the extent such
                  Shares have not been issued or become issuable on that date.

         6.3.4    ADJUSTMENTS TO EXERCISABLE PORTION. Notwithstanding the
                  foregoing, if a Participant's employment or services with the
                  Company terminates for any reason other than for Cause, the
                  Board may increase the portion of a Participant's Award

                                       9
<PAGE>   10

                  exercisable to the Participant, or the Participant's
                  Beneficiary or Personal Representative, as the case may be,
                  upon such terms as the Board determines.

         6.3.5    EFFECT OF CESSATION OF SUBSIDIARY STATUS. If an entity ceases
                  to be a Subsidiary, such action will be deemed for purposes of
                  this Plan to be a termination of services or employment of
                  each Eligible Person of that entity who does not continue as
                  an Eligible Person of the Company or another Subsidiary.

6.4      GOVERNMENT REGULATIONS. This Plan, the granting of Awards, the issuance
         or transfer of Shares, and the payment of money, pursuant thereto are
         subject to all applicable federal and state laws, rules and regulations
         and to such approvals by any regulatory or governmental agency
         (including, but not limited to, "no action" positions of the
         Commission) that may, in the judgment of the Board, be necessary or
         advisable. Without limiting the generality of the foregoing, no Awards
         may be granted, no Shares will be issued, and no cash payments may be
         made by the Company, pursuant to any such Award, unless and until, in
         each such case, all legal requirements applicable to the issuance or
         payment have been complied with. In connection with any stock issuance
         or transfer, the person acquiring the Shares must, if requested, give
         assurances satisfactory to the Board in respect of such matters as the
         Board deems desirable to assure compliance with all applicable legal
         requirements. A Participant will not be entitled to the privilege of
         stock ownership as to any Shares not actually issued to such
         Participant.

6.5      TAXES.

         6.5.1    WITHHOLDING OBLIGATION. Upon any exercise, vesting, or payment
                  of any Award or, if required under the Code, upon the
                  disposition by a Participant or other person of Shares
                  acquired pursuant to the exercise of an ISO prior to
                  satisfaction of the holding period requirements of Section 422
                  of the Code, the Company has the right at its option to
                  require payment by cashier's check payable to the Company of,
                  or to deduct from amounts payable in cash, the amount of any
                  taxes that the Company may be required to withhold with
                  respect to such transactions. If a tax is required to be
                  withheld in connection with the issuance or transfer of
                  Shares, the Participant may elect, with Board approval, to
                  have the Company reduce the number of such Shares issued or
                  transferred by the number of Shares (valued at Fair Market
                  Value) necessary to accomplish such withholding.

         6.5.2    TAX WITHHOLDING LOANS. The Board may permit a loan from the
                  Company to a Participant in the amount of any taxes that the
                  Company may be required to withhold, for a term, at a rate of
                  interest and pursuant to such other terms established by the
                  Board.

                                       10
<PAGE>   11

6.6      AMENDMENT, TERMINATION AND SUSPENSION.

         6.6.1    AMENDMENT, TERMINATION AND SUSPENSION. The Board may, at any
                  time, terminate or, from time to time, amend, modify or
                  suspend this Plan or any part hereof. In addition, the Board
                  may, from time to time, amend or modify any provision of this
                  Plan and, with the consent of the Participant, make such
                  modifications of the terms of such Participant's Award as it
                  deems advisable. Upon the occurrence of an Event, however, the
                  Board may modify the terms of any Participant's Award with or
                  without the consent of the Participant. The Board, with the
                  consent of the Participant, also may amend the terms of any
                  Option or Stock Appreciation Right to provide that the
                  Purchase Price of the Shares remaining subject to the original
                  Award be reestablished at a price in compliance with the other
                  Sections of this Plan and in no event less than 100% of the
                  Fair Market Value of the Shares on the effective date of the
                  amendment. No modification of any other term of any Award that
                  is amended in accordance with the foregoing shall be required,
                  although the Board may make such further modifications of any
                  such Award as are not inconsistent with this Plan. No Awards
                  may be granted during any suspension of this Plan or after its
                  termination.

         6.6.2    SHAREHOLDER APPROVAL. If an amendment would materially (a)
                  increase the benefits accruing to Participants, (b) increase
                  the aggregate number of Shares that may be issued or (c)
                  modify the requirements of eligibility for participation in
                  this Plan, the amendment shall be approved by the Board and,
                  to the extent then required by applicable law, by the
                  shareholders of the Company.

         6.6.3    EFFECT ON OUTSTANDING AWARDS. Awards issued before the
                  effective date of any amendment, suspension or termination of
                  this Plan will not without specific action of the Board and
                  the consent of the Participant, in any way modify, amend,
                  alter or impair any rights or obligations under any such
                  Award. Except, upon the occurrence of an Event, the Board may
                  modify the terms of any Participant's Award with or without
                  the consent of the Participant.

6.7      AMOUNT OFFERED AND SOLD. Both the number of securities offered and sold
         and the Aggregate Offering Price (defined below) of securities offered
         and sold shall be limited to the maximum amounts defined in Sections
         6.7.2 and 6.7.3 below.

         6.7.1    DEFINITION OF AGGREGATE OFFERING PRICE. "Aggregate Offering
                  Price", as defined by Rule 701(b)(4)(i) under the Securities
                  Act of 1933 and used in this Plan, means the sum of all cash,
                  property, notes, cancellation of debt or other consideration
                  to be received by the issuer for the issuance of the
                  securities. Non-cash consideration should be valued in
                  reference to bona fide sales of that consideration within a
                  reasonable time, or, in the absence of sales, on the fair
                  value as determined by an accepted standard.

                                       11
<PAGE>   12

         6.7.2    CALCULATED RESTRICTION. The amount of securities offered and
                  sold in reliance on Rule 701 under the Securities Act of 1933
                  shall not exceed the greater of $500,000 or the amount
                  determined by paragraph (a) or (b) below:

                  (a)      The Aggregate Offering Price of securities of the
                           Company subject to outstanding offers in reliance on
                           Rule 701, plus securities sold in the preceding 12
                           months in reliance on Rule 701, shall not exceed 15%
                           of the total assets of the Company, measured at the
                           end of its previous fiscal year; or

                  (b)      The number of securities of the Company subject to
                           outstanding offers in reliance on Rule 701, plus
                           securities sold in the preceding 12 months in
                           reliance on Rule 701, shall not exceed 15% of the
                           outstanding securities of that class. The outstanding
                           securities of a class shall include securities
                           issuable pursuant to the exercise of outstanding
                           options, warrants, rights and convertibles unless
                           such options, warrants, rights and convertibles were
                           issued under Rule 701. If the securities offered or
                           sold under Rule 701 are convertible securities, then
                           the number of securities subject to outstanding
                           offers and sold shall be deemed to be the shares into
                           which such securities may be converted.

         6.7.3    TWELVE-MONTH RESTRICTION. The Aggregate Offering Price of
                  securities of the Company subject to outstanding offers in
                  reliance on Rule 701 under the Securities Act of 1933, plus
                  securities sold in the preceding 12 months in reliance on Rule
                  701, shall in no event exceed $5,000,000.

6.8      EFFECTIVE DATE OF PLAN. This Plan will be effective upon its approval
         by the Board, subject to approval by the shareholders of the Company
         within twelve months from the date of such Board approval.

6.9      TERM OF PLAN. Unless previously terminated by the Board, this Plan will
         terminate at the close of business on June 30, 2010 and no Awards will
         be granted under it thereafter.

6.10     GOVERNING LAW. This Plan and all documents related hereto shall be
         governed by, and construed in accordance with, the laws of the State of
         Arkansas. If any provision is held by a court of competent jurisdiction
         to be invalid and unenforceable, the remaining provisions of this Plan
         will continue to be fully effective. It is the intent of the Company
         that this Plan and the Awards satisfy and be interpreted in a manner
         that satisfies the applicable requirements of Section 1361, et. seq.,
         of the Code and regulations promulgated thereunder at any time that the
         Company has elected to be taxed as an S-Corporation thereunder. If any
         provision of this Plan or of any Award Agreement would otherwise
         frustrate or conflict with the intent expressed above, that provision
         to the extent possible shall be interpreted and deemed amended to avoid
         such conflict.

6.11     COPY OF PLAN. The Company will provide each Participant with a copy of
         the Plan.

                                       12
<PAGE>   13

6.12     DISCLOSURE REQUIREMENTS.

         6.12.1   GENERAL OBLIGATIONS. In general, if the Company issues
                  securities under the Plan pursuant to the Arkansas exemption
                  from registration under Arkansas __________________________,
                  the Company will provide its financial statements to all
                  individuals holding securities under the Plan at least on an
                  annual basis. This requirement may be waived if the issuance
                  of securities under the Plan is limited to key employees whose
                  duties in connection with the issuer assure them access to
                  equivalent information.

         6.12.2   OBLIGATIONS IN PRIVATE PLACEMENTS. If the Company issues
                  securities under the Plan pursuant to the federal exemption
                  from registration under Rule 506 of the Securities Act of 1933
                  to any purchaser who is not an Accredited Investor, then all
                  purchasers in the offering must receive, at a reasonable time
                  prior to the sale of securities, both the non-financial
                  statement information as well as the financial statement
                  information required by Rule 502(b)(2) under the Securities
                  Act of 1933.

6.13     NOTICE OF OFFER OR SALE. The Company will file with any necessary state
         or federal agencies the proper notice before making any offers or sales
         under this Plan.

6.14     PROHIBITION ON ADVERTISING. The offer and sale of a security under the
         Plan must not be accomplished by the publication of any advertisement,
         though the circulation to offerees of private placement memoranda is
         permitted provided that the information is not disseminated to the
         public.

                                 7. DEFINITIONS

         "ACCREDITED INVESTOR" is defined in Rule 501(a) of Regulation D adopted
by the Securities and Exchange Commission under the Securities Act of 1933 (17
CFR Sec. 230.501(a)).

         "AGGREGATE OFFERING PRICE" is defined in Section 6.7.1.

         "AWARD" means any Option, Stock Appreciation Right, Restricted Stock
Award, or Performance Share Award granted under this Plan.

         "AWARD AGREEMENT" means a written agreement, approved by the Board,
setting forth the terms of an Award. Award Agreements for ISOs shall include any
terms and conditions required for "incentive stock options" under Section 422 of
the Code.

         "AWARD DATE" means the date upon which the Board took the action
granting an Award or such later date set by the Board.

         "AWARD SHARES" means _________________________________________________.

                                       13
<PAGE>   14

         "BENEFICIARY" means the person(s) or trust(s) entitled by will or the
laws of descent and distribution to receive the benefits specified under this
Plan if a Participant dies. If the Company is an S-Corporation, the
Participant's Beneficiary must be a person eligible to be an S-Corporation
shareholder pursuant to Section 1361 of the Code.

         "BOARD" means the Board of Directors of the Company.

         "CAUSE" means that the Board, acting in good faith, determines that the
Participant has: (a) committed a material breach of the Participant's duties and
responsibilities (other than as a result of incapacity due to a Total
Disability); (b) been convicted of a felony, or entered a plea of guilty or nolo
contendere with respect to such a crime; (c) violated any fiduciary duty or duty
of loyalty owed to the Company; (d) been generally incompetent or grossly
negligent in the discharge of the Participant's duties and responsibilities; (e)
engaged or is engaging in immoderate use of alcoholic beverages or narcotics or
other substance abuse; or (f) violated any of the Company's established
employment policies in effect from time to time.

         "CODE" means the Internal Revenue Code of 1986, as amended from time to
time.

         "COMMISSION" means the Securities and Exchange Commission.

         "COMMON STOCK" means the Common Stock of the Company.

         "COMPANY" means PET QUARTERS, INC., an Arkansas corporation, and its
successors, and, only where the context so warrants, its Subsidiaries.

         "ELIGIBLE PERSON" means (a) an officer of the Company, (b) an employee
of the Company, (c) a director of the Company, (d) a general partner of the
Company, or (e) a consultant or advisor to the Company provided that bona fide
services shall be rendered by such consultants and advisors and such services
are not in connection with the offer and sale of securities in a capital-raising
transaction. Service as an Eligible Person shall be considered employment for
all purposes of this Plan; provided, however. that only individuals who satisfy
clause (a) of this definition may be granted ISOs under this Plan.

         "EVENT" means approval by the shareholders of the Company of any of the
following:

         (a)      The dissolution or liquidation of the Company;

         (b)      An agreement to merge or consolidate, or otherwise reorganize,
                  with or into one or more entities other than Subsidiaries, as
                  a result of which less than 50% of the outstanding voting
                  securities of the surviving or resulting entity are, or are to
                  be, owned by former shareholders of the Company;

         (c)      The sale of substantially all of the Company's business assets
                  to a person or entity that not a Subsidiary; or

                                       14
<PAGE>   15

         (d)      A person or entity that is not a stockholder of the Company on
                  the date this Plan is adopted by the Board acquiring directly
                  or indirectly 50% or more of the Company's outstanding voting
                  securities.

         "EXERCISE AGREEMENT" means a written agreement, approved by the Board,
setting forth the terms for exercise of an Award.

         "FAIR MARKET VALUE" on any date shall mean the fair market value of a
Share as determined by the Board in good faith. Any determination as to fair
market value made pursuant to this Plan shall be determined without regard to
any restriction other than a restriction that, by its terms, will never lapse,
and shall be conclusive and binding on all persons.

         "ISO" means an option designated as an incentive stock option within
the meaning of Section 422 of the Code, the award of which contains such
provisions as are necessary to comply with that Section.

         "MARKET PRICE" means, if the Shares are publicly traded, the average of
the daily closing prices per Share for the 30 consecutive trading days before
the date in question. The closing price for each day will be the last sales
price regular way or, if no such sale takes place on such day, the average of
the closing bid and ask prices regular way on the principal United States
trading market on which the Shares are listed or admitted to trading. If the
Shares are not listed or admitted to trading on a recognized United States
trading market, the Market Price will be the price per Share implied from the
Company's most recent issuances of Common Stock for securities convertible into
or exchangeable for Common Stock, if any such issuance has occurred in the six
(6) months prior to the date in question. If no such issuance has occurred, the
Market Price will be the fair market value per Share, on an enterprise theory of
valuation, determined by the Company's Board of Directors acting in good faith
with advice from a recognized valuation expert.

         "NQSO" means an option designated as or deemed by Section 2.1 or 2.6 to
be a nonqualified stock option.

         "NOTE" means a promissory note approved by the Board evidencing a loan
from the Company to the Eligible Person of an amount equal to the Purchase Price
of an Award. Any Note shall be subject to the following terms: (a) the principal
of the Note shall not exceed the amount required to be paid to the Company upon
the exercise or receipt of such Award, and the note shall be delivered directly
to the Company in consideration of such exercise or receipt; (b) the term of
Note, including extensions, shall not exceed five (5) years; (c) the Note shall
provide for recourse to the Participant; (d) the Note shall bear interest at a
rate determined by the Board, but not less than the interest rate necessary to
avoid the imputation of interest under the Code; (e) the unpaid principal
balance of the Note shall become due and payable on the tenth day after the
termination of employment or service of the Participant; (f) if required by the
Board or by applicable law, the Note shall be secured by a pledge of any Shares
or Awards financed thereby (and other collateral if required by the Board); and
(g) the terms shall conform with applicable rules and regulations of the Federal
Reserve Board as then in effect.

                                       15
<PAGE>   16

         "OPTION" means an option to purchase Shares under this Plan. An Option
shall be designated by the Board as an NQSO or an ISO.

         "PARTICIPANT" means an Eligible Person who has been granted an Award.

         "PERFORMANCE SHARE AWARD" means an Award made pursuant to Section 5.

         "PERSONAL REPRESENTATIVE" means the person or persons who, upon Total
Disability or incompetence of a Participant, has lawfully acquired on behalf of
the Participant the power to exercise the rights and receive the benefits
specified in this Plan. If the Company is an S-Corporation, the Participant's
Personal Representative must be a person eligible to be an S-Corporation
shareholder pursuant to Section 1361 of the Code.

         "PURCHASE PRICE" means the exercise price, if any, payable by the
Participant to the Company upon exercise of an Award in accordance with the
applicable Award Agreement and Exercise Agreement; provided, however, that such
exercise price shall not be less than the minimum lawful consideration required
under applicable state law.

         "RESTRICTED STOCK" means Shares awarded to a Participant, subject to
payment of such consideration, if any, and such conditions on vesting and
transfer and such other restrictions as are established in or pursuant to this
Plan, for so long as such Shares remain unvested under the terms of the
applicable Award Agreement.

         "RESTRICTED STOCK AWARD" means an Award of Restricted Stock made
pursuant to Section 4.

         "RETIREMENT" means retirement from employment by, or providing services
to, the Company or any Subsidiary and, in the case of employees, at the
Company's normal retirement age and in accordance with the retirement policies
of the Company then in effect.

         "SHARES" means shares of the Company's Common Stock.

         "SIGNIFICANT HOLDER" means any person who, on the Award Date, owns, or
who is deemed to own under Section 424(d) of the Code, outstanding Shares
possessing more than 10% of the total combined voting power of all classes of
stock of the Company.

         "STOCK APPRECIATION RIGHT" means a right to receive a number of Shares
or an amount of cash, or a combination of Shares and cash, determined as
provided in Section 3.3. Any Stock Appreciation Right granted in connection with
an ISO shall contain such terms as may be required to comply with the Code.

         "SUBSIDIARY" means any corporation or other entity a majority or more
of the outstanding voting stock or voting power of which is beneficially owned
directly or indirectly by the Company.

                                       16
<PAGE>   17

         "TOTAL DISABILITY" means a "Permanent and total disability" within the
meaning of Section 22(e)(3) of the Code and such other disabilities,
infirmities, afflictions, or conditions as the Board may include.

                                       17
<PAGE>   18

THIS AGREEMENT AND THE UNDERLYING SHARES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY BLUE
SKY LAWS. THIS AGREEMENT MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION
UNDER APPLICABLE SECURITIES LAWS.

                             STOCK OPTION AGREEMENT

<TABLE>
<CAPTION>
                                             Vesting Schedule:
<S>                                          <C>
Exercise Price Per Share:     $                     Shares on       ________ __, 2000
                                                    Shares on       ________ __, 2001
Number of Shares:                                   Shares on       ________ __, 2002
                                                    Shares on       ________ __, 2003
Expiration Date:                                    Shares on       ________ __, 2004
                                                    Shares on       ________ __, 2005
</TABLE>

         Pet Quarters, Inc. (the "Company") and the individual identified below
(the "Participant"), enter into this [ ] NONQUALIFIED STOCK OPTION AGREEMENT /
[ ] INCENTIVE STOCK OPTION AGREEMENT (consisting of seven pages and three
Exhibits) as of _______________ ___, ____ (the "AGREEMENT"). Participant
acknowledges receipt of the Pet Quarters, Inc. Employee Equity Participation
Incentive Plan (the "PLAN") pursuant to which this Agreement has been executed.

PET QUARTERS, INC.                                   PARTICIPANT

By:
   ---------------------------------   ------------------------------------

Name:                                  Name:
     -------------------------------        -------------------------------
     (printed)                              (printed)

Title:
      ------------------------------

                                    ARTICLE 1
                                  DEFINED TERMS

         Capitalized terms used herein and not otherwise defined herein shall
have the meaning assigned to such terms in the Plan.

                                       18
<PAGE>   19

                                    ARTICLE 2
                     OPTION GRANT, EXERCISE AND REPLACEMENT

2.1      GRANT. This Agreement evidences the Company's grant to the Participant
         of the right and option to purchase, on the terms and conditions set
         forth herein and in the Plan (this "Option"), all or any part of the
         Shares listed on page one at the exercise price per share set forth on
         page one (the "Exercise Price"), exercisable as set forth herein, prior
         to the close of business on the [expiration date listed on page one]
         [the earlier of the termination date of the plan or the day before the
         tenth anniversary of the Award Date] [five years] (the "Expiration
         Date"). The Exercise Price equals the Fair Market Value of the
         Company's Common Stock as of the Award Date. If the Incentive Stock
         Option box is checked on page one, it is the intent of the Company that
         this Option constitute an incentive stock option within the meaning of
         Section 422 of the Code.

2.2      EXERCISABILITY. Subject to the Plan, this Option shall become
         exercisable in cumulative installments at the times set forth in the
         vesting schedule on page one. This Option shall only be exercisable in
         respect of whole Shares, and fractional Share interests shall be
         disregarded. At least 100 Shares must be purchased at one time unless
         the number purchased is the total number at the time available for
         purchase under this Option.

2.3      METHOD OF EXERCISE.

         2.3.1    CASH. Exercise of this Option for cash requires delivery to
                  the Secretary of the Company of (a) a Subscription Form in the
                  form of Exhibit A, (b) an executed Exercise Agreement in the
                  form of Exhibit C (the "Exercise Agreement"), (c) this Option,
                  and (d) payment made in accordance with and in a form
                  permitted by the Plan for the full Purchase Price of the
                  Shares to be purchased, subject to such further limitations
                  and rules or procedures as the Board may from time to time
                  establish as to any non-cash payment and as to the tax
                  withholding requirements of the Plan. In addition, the
                  Participant (or the Participant's Beneficiary or Personal
                  Representative) shall furnish any written statements required
                  by this Agreement or the Plan.

         2.3.2    CASHLESS EXERCISE. This Option can also be exercised, in whole
                  or in part, in a "cashless" exercise, upon delivery to the
                  Company of (a) a Cashless Exercise Form in the form of Exhibit
                  B, (b) an executed Exercise Agreement in the form of Exhibit
                  C, (c) this Option, and (d) any payments required under the
                  Plan or by the Board. In a cashless exercise, the right to
                  purchase each Share may be exchanged for that number of Shares
                  of Common Stock determined by multiplying the number one (1)
                  by a fraction, the numerator of which will be the difference
                  between (y) the then current Market Price and (z) the Exercise
                  Price, and the denominator of which will be the then current
                  Market Price.

2.4      ISSUANCE OF SHARES. Upon the exercise of this Option, the Company will
         immediately issue the Shares purchased to the person exercising this
         Option, and promptly deliver to such person a certificate or
         certificates representing such Shares. If this Option is

                                       19
<PAGE>   20

         exercised in part, the Company will promptly deliver to the person
         exercising this Option a new Option Agreement identical to this Option
         Agreement, dated the date hereof, but evidencing the right to purchase
         only the remaining Shares. The Company will pay all expenses, transfer
         taxes and other charges payable in connection with its issuance and
         delivery of such document.

2.5      CONTINUING RIGHT TO PURCHASE CUMULATIVELY. If the Participant does not
         in any year purchase all or any part of the Shares to which the
         Participant is entitled, then the Participant has the right
         cumulatively thereafter to purchase any Shares not so purchased and
         such right shall continue until this Option terminates or expires.

2.6      LOSS OF OPTION. Upon receipt of evidence reasonably satisfactory to the
         Company of the loss, theft, destruction or mutilation of this Option,
         and upon receipt of an indemnity satisfactory to the Company or, in the
         case of any such mutilation, upon surrender of this Option, the Company
         will deliver a new, identical Option.

                                    ARTICLE 3
                          CONSIDERATION TO THE COMPANY

         In consideration of the granting of this Option by the Company, the
Participant agrees to render faithful and efficient services to the Company,
with such duties and responsibilities as the Company shall from time to time
prescribe. Nothing contained in this Agreement or in any other documents related
to the Plan shall confer upon the Participant any night to continue performing
services for the Company or constitute any contract of employment, or interfere
in any way with the right of the Company to reduce such person's compensation or
other benefits or to terminate the services of the Participant, with or without
Cause.

                                    ARTICLE 4
                                   TERMINATION

4.1      TERMINATION OF OPTION UPON TERMINATION OF SERVICES. This Option and all
         other rights hereunder, to the extent not exercised, will terminate and
         become null and void upon the termination of Participant's services for
         the Company, except that:

         4.1.1    REASON OTHER THAN DEATH, TOTAL DISABILITY OR FOR CAUSE. If the
                  Participant's services for the Company terminate for any
                  reason other than death, Total Disability or for Cause, the
                  Participant has 90 days after the date of termination to
                  exercise this Option to the extent this Option was exercisable
                  on the date of termination.

         4.1.2    FOR CAUSE. If the Participant's services for the Company are
                  terminated for Cause, this Option shall lapse immediately upon
                  the Participant's termination of services for the Company.

         4.1.3    TOTAL DISABILITY. If the Participant's services for the
                  Company are terminated as a result of a Total Disability, or
                  if the Participant suffers a Total Disability within

                                       20
<PAGE>   21

                  90 days of any termination of services under this SECTION 4.1,
                  the Participant or the Participant's Personal Representative,
                  as the case may be, shall have 180 days from the date of Total
                  Disability (or, if earlier, the date of termination of
                  Participant's services) to exercise this Option to the extent
                  this Option was exercisable on such date.

         4.1.4    DEATH. If the Participant dies while in the service of the
                  Company, or within 90 days after any termination of services
                  described in this SECTION 4.1, then this Option may be
                  exercised within a period of 180 days after the Participant's
                  date of death (or, if earlier, the date of termination of
                  Participant's services), by the Participant's Beneficiary to
                  the extent this Option was exercisable on the such date.

4.2      TERMINATION OF OPTION ON EXPIRATION DATE. Notwithstanding the
         foregoing, in no event may this Option be exercised by anyone after the
         Expiration Date.

4.3      TERMINATION OF OPTION ON CERTAIN EVENTS. The Board retains the right to
         terminate this Option to the extent not previously exercised upon an
         event or transaction in which the Company does not survive.

                                    ARTICLE 5
                             RESTRICTIONS ON SHARES

5.1      LEGEND. Shares issued pursuant to this Option are subject to certain
         restrictions on disposition under the Exercise Agreement, and a
         repurchase right under the Exercise Agreement. The Shares will bear, in
         addition to any other legends which may be required by the Plan, this
         Agreement or applicable securities laws, a legend evidencing this
         restriction on disposition and this repurchase right,

5.2      SECURITIES ACT LEGEND. Shares issued pursuant to this Option will bear,
         in addition to any other legends which may be required by the Plan,
         this Agreement or applicable securities laws, a legend similar to
         legend on page one of this Agreement, to the extent necessary under
         applicable Securities Laws.

                                    ARTICLE 6
              PRIVILEGES OF STOCK OWNERSHIP; NONDISTRIBUTIVE INTENT

6.1      RESTRICTION ON RIGHT. The Participant shall not be, nor have any of the
         rights or privileges of, a shareholder of the Company in respect of the
         Shares unless and until certificates representing such Shares are
         issued by the Company to the Participant. Upon the issuance and
         transfer of Shares to the Participant pursuant to the Exercise
         Agreement, unless a registration statement is in effect under the
         Securities Act of 1933, as amended, ("SECURITIES ACT") and applicable
         state securities laws, relating to such issued and transferred Shares,
         the Shares may be issued and transferred to the Participant only if he
         or she represents and warrants in writing to the Company the items
         covered in the Exercise Agreement. The Participant or any other person
         then entitled to exercise this

                                       21
<PAGE>   22

         Option or portion thereof will indemnify the Company against and hold
         it free and harmless from any loss, damage, expense or liability
         resulting to the Company if any sale or distribution of the Shares by
         such person is contrary to the representations and agreement referred
         to above.

6.2      STOP-TRANSFER. The Board may take whatever additional actions it deems
         appropriate to insure the observance and performance of such
         representations and agreement and to effect compliance with the
         Securities Act and any other federal or state securities laws or
         regulations. Without limiting the generality of the foregoing, the
         Board may require an opinion of counsel acceptable to it to the effect
         that any subsequent transfer of Shares acquired upon exercise of this
         Option does not violate the Securities Act, and may issue stop-transfer
         orders covering such Shares. No Shares shall be issued and transferred
         unless and until there shall have been full compliance with any then
         applicable regulatory requirements (including those of exchanges upon
         which any Common Stock of the Company may be listed).

                                    ARTICLE 7
                                  MISCELLANEOUS

7.1      ASSIGNMENTS. This Agreement and all of the provisions hereof shall be
         binding upon and inure to the benefit of the parties hereto and their
         respective successors and permitted assignees. Except as otherwise
         provided in the Plan, neither this Agreement nor any of the rights,
         interests or obligations hereunder shall be assigned or transferred by
         either party without the prior written consent of the other.

7.2      NOTICES. Any notice to be given under the terms of this Agreement shall
         be in writing and addressed to the Company at its principal off-ice to
         the attention of the President and Chairman, and to the Participant at
         the address given to the Company for payroll purposes, or at such other
         address as either party may hereafter designate in writing (which may
         be a facsimile). Notice will be deemed to have been given and received
         when delivered to the address specified by the party to receive the
         notice. Either party may, at any time by giving five (5) days' prior
         written notice to the other, designate any other address in
         substitution of the foregoing address.

7.3      PLAN. This Option and all rights of the Participant under this
         Agreement are subject to, and the Participant agrees to be bound by,
         all of the terms and conditions of the provisions of the Plan, all of
         which are incorporated herein by this reference, to the extent such
         provisions are applicable. In the event of a conflict or inconsistency
         between the terms and conditions of this Agreement and of the Plan, the
         terms and conditions of the Plan shall govern. Unless otherwise
         expressly provided in other sections of this Agreement, provisions of
         the Plan that confer discretionary authority on the Board do not (and
         shall not be deemed to) create any rights in the Participant unless
         such rights are expressly set forth herein or are otherwise in the sole
         discretion of the Board so conferred by appropriate action of the Board
         under the Plan after the date hereof.

                                       22
<PAGE>   23

7.4      NOTICE OF DISPOSITION. The Participant agrees to notify the Company of
         any intended sale or other disposition of any shares of Common Stock
         received upon exercise of this Option.

7.5      INTERPRETATION. If any claim is made by the Participant relating to any
         conflict, omission or ambiguity in this Agreement, no presumption or
         burden of proof or persuasion will be implied because this Agreement
         was prepared by or at the request of the Company or its counsel. The
         Participant acknowledges that the Participant has had the opportunity
         to consult with the Participant's own counsel prior to the execution
         hereof.

7.6      AMENDMENTS. Except as otherwise provided in the Plan, any amendments to
         this Agreement must be in writing and designated as an amendment, and
         signed by both parties hereto.

7.7      SEVERABILITY. The provisions of this Agreement are severable. The
         invalidity, in whole or in part, of any provision of this Agreement
         shall not affect the validity or enforceability of any other of its
         provisions. If one or more provisions hereof shall be declared invalid
         or unenforceable, the remaining provisions shall remain in full force
         and effect and shall be construed in the broadest possible manner to
         effectuate the purposes hereof. The parties further agree to replace
         such void or unenforceable provisions of this Agreement with valid and
         enforceable provisions which will achieve, to the extent possible, the
         economic, business and other purposes of the void or unenforceable
         provisions.

7.8      HEADLINES REFERENCES; EXHIBITS. The headings in this Agreement are only
         for convenience and ease of reference and are not to be considered in
         construction or interpretation of this Agreement, nor as evidence of
         the intention of the parties hereto. All exhibits, schedules and
         appendices attached to this Agreement are incorporated herein. Except
         where otherwise indicated, all references in this Agreement to Sections
         refer to Sections of this Agreement.

7.9      COUNTERPARTS. This Agreement may be executed in separate counterparts,
         each of which shall be deemed an original, and when executed,
         separately or together, all of such counterparts shall constitute a
         single original instrument, effective in the same manner as if all
         parties hereto had executed one and the same instrument.

7.10     ENTIRE AGREEMENT. This Agreement (together with its Exhibits and other
         documents referred to herein) is the complete and exclusive statement
         of agreement and understanding of the parties with respect to matters
         in this Agreement and is a complete and exclusive statement of the
         terms and conditions thereof. This Agreement replaces and supersedes
         all prior written or oral agreements, statements, correspondence,
         negotiations and understandings by and among the parties with respect
         to the matters covered by it. No representation, statement, condition
         or warranty not contained in this Agreement is binding on the parties.

                                       23
<PAGE>   24

7.11     GOVERNING LAW. This Agreement shall be governed by and construed in
         accordance with the laws of the State of Arkansas, excluding that body
         of law relating to conflict of laws.

                                       24
<PAGE>   25

                                CONSENT OF SPOUSE

         In consideration of the execution of the foregoing Stock Option
Agreement by Pet Quarters, Inc., I, ____________________________________, the
spouse of the Participant herein named, do hereby agree to be bound by all of
the terms and provisions thereof and of the Plan.

DATED:
      ---------------------         ------------------------------------------
                                    Signature of Spouse

                                    ------------------------------------------
                                    Name (printed)

                                       25
<PAGE>   26

                                    EXHIBIT A

                                SUBSCRIPTION FORM
                 TO BE EXECUTED UPON EXERCISE OF OPTION FOR CASH

         The undersigned exercises the right to purchase ______ Shares,
evidenced by (a) this Subscription Form, (b) the enclosed, executed Exercise
Agreement, (c) the enclosed Option, and (d) payment of the Purchase Price in
full ($__________________). Certificate(s) for such shares are to be issued and
delivered as set forth below.

                                       HOLDER

                                       -----------------------------------------

                                       Name:
                                            ------------------------------------

                                       Date:
                                            ------------------------------------

         If the Holder is other than the Participant, specify Holder's status as
(1) Beneficiary or (2) Personal Representative.

                                       -----------------------------------------
                                       Status

Name to appear on the stock certificate:

         Printed Name:
                      ---------------------------------------------------
         Address:
                      ---------------------------------------------------

                      ---------------------------------------------------

                      ---------------------------------------------------

         Social Security Number:
                                -----------------------------------------
         (or Employer Identification Number, or other identifying number)

If the foregoing exercise is not for all of the Shares purchasable under this
Option, please register and deliver a new Option for the unexercised portion as
follows:

         Printed Name:
                      ---------------------------------------------------
         Address:
                      ---------------------------------------------------

                      ---------------------------------------------------

                      ---------------------------------------------------

         Social Security Number:
                                -----------------------------------------
         (or Employer Identification Number, or other identifying number)

                                       A-1
<PAGE>   27

                                    EXHIBIT B

                             CASHLESS EXERCISE FORM

         The undersigned Holder exercises the right to purchase _______
___Shares, evidenced by (a) this Cashless Exercise Form, (b) the enclosed,
executed Exercise Agreement, (c) the enclosed Option, and (d) any payments
required under the Plan or by the Board. The undersigned Holder requests that
the Company exchange the Option for Shares as provided in Section 2.3.2 of the
Option. Certificate(s) for such shares are to be issued and delivered as set
forth below.

                                       HOLDER

                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Date:
                                            ------------------------------------

         If the Holder is other than the Participant, specify Holder's status as
(1) Beneficiary or (2) Personal Representative.

                                       -----------------------------------------
                                       Status

Name to appear on the stock certificate:

         Printed Name:
                      ---------------------------------------------------
         Address:
                      ---------------------------------------------------

                      ---------------------------------------------------

                      ---------------------------------------------------

         Social Security Number:
                                -----------------------------------------
         (or Employer Identification Number, or other identifying number)

If the foregoing exercise is not for all of the Shares purchasable under this
Option, please register and deliver a new Option for the unexercised portion as
follows:

         Printed Name:
                      ---------------------------------------------------
         Address:
                      ---------------------------------------------------

                      ---------------------------------------------------

                      ---------------------------------------------------

         Social Security Number:
                                -----------------------------------------
         (or Employer Identification Number, or other identifying number)

Calculation of Cashless Exercise:

         M =      Market Price (current):
                                         ------------------------
         E =      Exercise Price:
                                         ------------------------
         X =      Number of Shares to be issued for each right to purchase one
                  Share exchanged:

                   M-E
                  ------  =  ---------------------
                    M

Total number of Shares issuable:
                                 -----------------------
Total number of Shares to be issued:
                                     -----------------------

                                       B-1
<PAGE>   28

                                    EXHIBIT C

                               PET QUARTERS, INC.
                               EXERCISE AGREEMENT

         This Exercise Agreement (this "AGREEMENT"), dated as of is made and
entered into by and between Pet Quarters, Inc., an Arkansas corporation (the
"COMPANY"), and _________________ (the "PURCHASER").

                                    RECITALS

         WHEREAS, under the Company's Pet Quarters, Inc. Employee Equity
Participation Incentive Plan (the "Plan"), the Purchaser holds an option (the
"OPTION") to purchase all. or any part of a designated amount of authorized but
unissued shares of common stock of the Company and in connection therewith, as
evidenced by that certain Stock Option Agreement dated as of _________________
(the "OPTION AGREEMENT") of which this Agreement is a part and incorporated
therein;

         WHEREAS, the Purchaser desires to exercise the Option and purchase from
the Company and the Company wishes to issue and sell to the Purchaser shares of
its common stock, ("Common Stock"), in accordance with and subject to the terms
and conditions set forth in this Agreement.

         NOW, THEREFORE, in consideration of the above premises and the
representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:

                                    ARTICLE 1
                        PURCHASE AND SALE OF COMMON STOCK

1.1      COMMON STOCK. Upon the terms and conditions contained herein, the
         Company hereby sells and issues to the Purchaser, and the Purchaser
         purchases from the Company, at a purchase price of $ ____________ per
         share, __________ shares of Common Stock (the "SHARES").

1.2      PAYMENT AND DELIVERY. The Company hereby delivers to the Purchaser
         stock certificate(s) representing the Shares against delivery to the
         Company by the Purchaser of consideration of ________________________
         pursuant to either Section 2.3.1 or Section 2.3.2 of the Option
         Agreement. The Company acknowledges receipt of such consideration.

                                      C-1
<PAGE>   29

                                    ARTICLE 2
                           INVESTMENT REPRESENTATIONS

         The Purchaser acknowledges that the Shares are not being registered
under the Securities Act of 1933, as amended ("Act"), based, in part, on
reliance that the issuance of the Shares is exempt from registration under
Section 4(2) of the Act as not involving any public offering. The Purchaser
further acknowledges that the Company's reliance on such exemption is
predicated, in part, on the representations set forth below made by the
Purchaser to the Company:

2.1      FOR PURCHASER'S OWN ACCOUNT. The Purchaser is acquiring the Shares
         solely for the Purchaser's own account, for investment purposes only,
         and not with an intent to sell, or for resale in connection with any
         distribution of all or any portion of the Shares within the meaning of
         the Act;

2.2      RELATIONSHIP OR EXPERIENCE. Either (a) the Purchaser has a preexisting
         business relationship with the Company or its officers or directors, or
         (b) the Purchaser has sufficient business or financial experience, or
         has relied upon the advice of the Purchaser's legal counsel, tax
         advisors, and/or investment advisors, to have the capacity to protect
         the Purchaser's interests in connection with the purchase of the
         Shares;

2.3      RESTRICTED SECURITIES. The Purchaser understands that the Shares are
         characterized as "restricted securities" under the federal securities
         laws since the Shares are being acquired from the Company in a
         transaction not involving a public offering and that under such laws
         and applicable regulations such securities may be resold without
         registration under the Act only in certain limited circumstances. The
         Purchaser represents that the Purchaser is familiar with Rule 144
         promulgated under the Act, as presently in effect, and understands the
         resale limitations imposed thereby and by the Act; and

2.4      NO ORAL REPRESENTATION OR SOLICITATION. At no time was an oral
         representation made to the Purchaser relating to the purchase of the
         Shares nor was the Purchaser presented with or solicited by any
         leaflet, public or promotional meeting, newspaper or magazine article,
         radio or television advertisement or any other form of general
         advertising relating to the purchase of the Shares.

                                    ARTICLE 3
                             RESTRICTIONS ON SHARES

         The Purchaser agrees not to transfer the Shares except in accordance
with the express terms of this Section 3 and unless the proposed transferee (a)
is not a direct or indirect competitor of the Company and (b) agrees with the
Company in writing to be bound by each of the following subsections of this
Section 3. Any attempted transfer in violation of this Section 3 shall be void
and of no effect.

3.1      COMPLIANCE WITH SECURITIES LAWS. Without in any way limiting the
         representations set forth above, the Purchaser further agrees not to
         make any disposition of all or any portion

                                      C-2
<PAGE>   30

         of the Shares, except in compliance with applicable state securities
         laws and unless and until: (a) there is then in effect a registration
         statement under the Act covering such proposed disposition and such
         disposition is made in accordance with such registration statement; (b)
         such disposition is made in accordance with Rule 144 under the Act; or
         (c) the Purchaser shall have notified the Company of the proposed
         disposition and shall have furnished the Company with a statement of
         the circumstances surrounding the proposed disposition, and if
         requested by the Company, the Purchaser shall have furnished the
         Company with an opinion of counsel acceptable to Company counsel, that
         such disposition will not require registration under the Act and will
         be in compliance with applicable state securities laws.

3.2      RIGHT OF FIRST REFUSAL.

         3.2.1    OFFER TO COMPANY. The Purchaser's Shares (or any interest
                  therein) may not be offered for sale or sold or otherwise
                  transferred or disposed of, by operation of law or otherwise,
                  to any person or entity other than the Company unless the
                  Shares that the holder proposes to* sell or otherwise dispose
                  of (the "Offered Shares") are first offered to the Company as
                  follows: (a) the holder shall give written notice to the
                  Company, setting forth the name and address of the prospective
                  transferee, the number of Offered Shares, the offered price
                  and the proposed terms and conditions of the transaction; and
                  (b) the Company shall have thirty (30) days following receipt
                  of such notice to purchase all (but not less than all) of the
                  Offered Shares for such price and pursuant to such proposed
                  terms.

         3.2.2    PERIOD FOR TRANSFER. If the Company elects not to purchase the
                  Offered Shares, the Offered Shares shall be released from the
                  restrictions created by this Section 3.2 for a period of
                  twenty (20) days, beginning immediately after the Company
                  provides written notice to the holder declining to purchase
                  the Offered Shares, or the expiration of the thirty (30) day
                  period, whichever is earlier, solely for the purpose of a bona
                  fide sale or other disposition to the proposed transferee, at
                  the price and upon the terms specified in the notice referred
                  to above. If, at the expiration of such twenty (20) day
                  period, the Offered Shares have not been so transferred, such
                  Shares shall then be subject to all of the provisions of this
                  Section 3.2 again and may not thereafter be sold, transferred
                  or otherwise disposed of, except in the manner and upon the
                  terms herein provided. Notwithstanding the foregoing, the
                  Purchaser may sell, convey or otherwise transfer or dispose of
                  any of such Shares to an executor, administrator, heir,
                  testamentary trustee or legatee of such shareholder, subject
                  to the limitations below.

         3.2.3    TRANSFEREES BOUND. Any transferee of Shares originally issued
                  under this Agreement other than the Company, whether or not
                  such transferee is a permitted transferee, shall be subject to
                  the same restrictions as the transferor, and any attempted
                  disposition of such shares or any interest therein by
                  operation of law or otherwise to any other person without the
                  written agreement of the transferee to be bound by the
                  restrictions on transfer set forth in this Section 3 shall be
                  null and

                                      C-3
<PAGE>   31

                  void. Each proposed transferee must agree in writing to be
                  bound by the restrictions on transfer of this Section 3 and
                  such other provisions as the Company may reasonably impose to
                  preserve its closely-held status.

3.3      LOCK-UP AGREEMENT. If at any time the Company proposes to register its
         Common Stock under the Act in connection with an underwritten public
         offering of the Company's Common Stock, the Purchaser agrees to enter
         into a lock-up agreement with the underwriter or underwriters selected
         for such underwriting by the Company restricting any offer, sale, offer
         to sell, contract to sell, grant of any option to purchase or otherwise
         sell, transfer, pledge, or dispose (collectively, a "Transfer") of any
         of the shares of Common Stock of the Company or any securities
         convertible into, or exchangeable or exercisable for, shares of the
         Company's Common Stock for a period commencing as of 14 days prior to
         and ending not more than one year after the effective date of a
         registration statement covering such public offering of the Company's
         securities. The Purchaser agrees and consents to the entry of
         stop-transfer instructions with the Company's transfer agent against
         the Transfer of the Company's securities beneficially owned by the
         Purchaser.

                                    ARTICLE 4
                                REPURCHASE RIGHT

4.1      REPURCHASE RIGHT. If the Purchaser shall cease to perform services for
         the Company (whether as a result of Purchaser's death or Total
         Disability or termination by the Company for any reason or cause
         whatsoever), the Company shall have the night during a 180-day period
         after such cessation or termination (the "CALL PERIOD") to repurchase,
         and the Purchaser shall be obligated to sell the Shares at a price
         equal to the Repurchase Price as defined in Section 4.2; provided,
         however, that if the Purchaser purchases the shares after such
         cessation or termination pursuant to the Option Agreement, then the
         Call Period shall begin on the date such purchase is made (the date
         hereof) and not on the date of such cessation or termination. The right
         of the Company to repurchase and the obligation of the Purchaser to
         sell the Shares to the Company shall terminate after the expiration of
         the Call Period. If the Company does not exercise its night to
         repurchase the Shares during the Call Period, then any transfer of the
         Shares by the Purchaser shall continue to be subject to the provisions
         of Section 3 hereof If the Company elects to exercise its right to
         repurchase the Shares during the Call Period, such repurchase shall be
         consummated no later than 10 days after the date on which the
         Repurchase Price has been determined in accordance with Section 4.2
         hereof. The Repurchase Price shall be paid at the closing by check or
         by a promissory note of Company pursuant to Section 4.3 of this
         Agreement against surrender by the Purchaser of a stock certificate
         evidencing the Shares with duly endorsed stock powers.

4.2      DETERMINATION OF REPURCHASE PRICE. "REPURCHASE PRICE" means a price
         determined to be the fair market value of the Shares, determined in
         good faith by the Board taking into account such factors as it deems
         relevant, including, but not limited to, the fact that the Shares are
         illiquid and represent a minority interest in the Company.
         Notwithstanding the foregoing, the Repurchase Price may be based on an
         appraisal of the fair market value of

                                      C-4
<PAGE>   32

         the Shares (the "APPRAISED VALUE") to be repurchased if (a) the
         Purchaser elects after reviewing the Repurchase Price as determined by
         the Company's Board and (b) an appraisal of the value of the Company's
         Common Stock has not been conducted within the last six months. If an
         appraisal has been conducted within the last six months, the Appraised
         Value shall be the value determined by such appraisal with any
         necessary adjustment to reflect that the Shares are illiquid and
         represent a minority interest in the Company. If the Purchaser elects
         to have an appraisal and an appraisal has not been conducted within the
         last six months, the Company shall designate an independent appraiser.
         The Company and the Purchaser shall each bear one-half of all appraisal
         costs. The Appraised Value shall constitute a conclusive determination
         of the Repurchase Price binding on all parties notwithstanding a higher
         or lower value determined by the Company's Board.

4.3      PAYMENT BY PROMISSORY NOTE. If the amount due to the Purchaser for the
         purchase of the Shares pursuant to Section 3.2 or Section 4.1 exceeds
         five percent of the Company's book value at the end of the month
         immediately preceding the date of purchase, the Company may, in its
         discretion, elect to pay such amount in three annual installments, the
         first installment to be made within 30 days of the day of delivery of
         certificates or other instruments representing the Shares so purchased
         (the "First Delivery Date"), the second installment to be paid, with
         interest accruing from the First Delivery Date at the prime rate of the
         Company's primary bank lender as of the First Delivery Date, on the
         first anniversary of the First Delivery Date (the "Second Delivery
         Date"), and the third installment to be paid, with interest accruing
         from the Second Delivery Date at the prime rate of the Company's
         primary bank lender as of the Second Delivery Date, on the second
         anniversary of First Delivery Date.

                                    ARTICLE 5
                              COME ALONG; GO ALONG

         If any shareholder(s) of the Company sell or exchange more than 50% of
the outstanding voting stock of the Company in a single or series of related
transactions, the Company shall use its best efforts to cause the purchaser of
such shares to acquire, and the Purchaser agrees to sell, the Shares for the
same price, terms and conditions that are applicable to the shares of such
controlling shareholder(s) to be transferred. Notwithstanding anything to the
contrary in this Section 5, the provisions hereof shall not apply to: (a) any
sale or other transfer of stock between shareholders of the Company; (b) any
repurchase by the Company of any shares of Common Stock; (c) any transfer of
shares of Common Stock to any inter vivos trust, or in connection with estate
planning or the death of any person; or (d) any sale pursuant to a public
offering.

                                    ARTICLE 6
                            STOCK CERTIFICATE LEGENDS

6.1      LEGEND. The Purchaser understands and acknowledges that the certificate
         evidencing the Shares (or evidencing any other securities issued with
         respect thereto pursuant to any stock split, stock dividend, merger or
         other form of reorganization or recapitalization)

                                      C-5
<PAGE>   33

         shall bear, in addition to any other legends which may be required by
         the Plan, this Agreement, or applicable state securities laws, the
         following legends:

                  "The sale, assignment, transfer, pledge or hypothecation of
         the shares represented by this certificate or any interest therein is
         subject to an agreement dated as of _____________, ______ (a signed
         counterpart of which is on file at the office of the Company), that
         includes restrictions on transfer, and the shares are subject to a
         repurchase right in favor of Company and a right of first refusal, as
         provided therein."

6.2      SECURITIES ACT LEGEND. Prior to registration under applicable federal
         and state securities laws of the issuance of the Shares, all
         certificates evidencing such Shares also shall bear the following
         legend and/or any other appropriate or required legends under
         applicable laws or Section 6.4 of the Plan:

                  "The shares represented by this certificate have not been
         registered or qualified under the Securities Act of 1933, as amended,
         (the "Act") or any state securities laws, have been acquired for
         investment purposes only, and no sale or transfer of such shares shall
         be valid or effective except (a) pursuant to a registration statement
         under the Act and registration or qualification under applicable state
         securities laws, each of which has become effective and is current with
         respect to the shares being sold; or (b) pursuant to a specific
         exemption from registration under the Act and applicable state
         securities laws, but only upon prior written authorization of such sale
         or transfer by counsel for, or other authorization by, Company."

                                    ARTICLE 7
                                  MISCELLANEOUS

7.1      TERMINATION UPON PUBLIC OFFERING-, TERMINATION UPON CHANGE IN CONTROL.

         7.1.1    UPON PUBLIC OFFERING. Articles 2, 3, 4, 5, and 6 of this
                  Agreement shall terminate upon the closing of a bona fide
                  underwritten public offering of the Company's Common Stock
                  that results in net proceeds to the Company in excess of $10
                  million, or the filing of a registration statement on Form S-8
                  (or its equivalent) with respect to the Shares issued pursuant
                  to this Agreement.

         7.1.2    UPON CHANGE OF CONTROL. Article 4 shall terminate upon a
                  Change of Control. "CHANGE OF Control" means either (a) an
                  acquisition of equity interests of the Company by any
                  acquiring person or entity, other than a shareholder of the
                  Company on the date the Plan was adopted, if the acquiring
                  person or entity would thereafter be the beneficial owner of
                  50% or more of the Common Stock or be entitled to elect more
                  than 50% of the Board; (b) a merger or consolidation of the
                  Company resulting in the holders of the Common Stock
                  immediately prior to such transaction holding less than 50% of
                  the total voting stock of the surviving company after such
                  transaction; or (c) a sale or exchange of all or more than 50%

                                      C-6
<PAGE>   34

                  (by value) of the property and assets of the Company. Change
                  of Control does not include any merger or combination of the
                  Company with any or all of its affiliates or any other similar
                  restructuring.

7.2      CAPITALIZED TERMS. Capitalized terms not otherwise defined herein shall
         have the meaning specified in the Plan.

7.3      ASSIGNMENTS. This Agreement and all of the provisions hereof shall be
         binding upon and inure to the benefit of the parties hereto and their
         respective successors and permitted assigns. Neither this Agreement nor
         any of the rights, interests or obligations hereunder shall be assigned
         by either party without the prior written consent of the other;
         provided, however, the Company may assign its rights under Sections
         3.2, 4.1, 4.2 and 4.3 to any person.

7.4      NOTICES. Any notice, demand, request or other communication herein
         requested or permitted to be given shall be in writing and given in the
         manner set forth in the Option Agreement.

7.5      INTERPRETATION. If any claim is made by the Participant relating to any
         conflict, omission or ambiguity in this Agreement, no presumption or
         burden of proof or persuasion will be implied because this Agreement
         was prepared by or at the request of the Company or its counsel. The
         Participant acknowledges that the Participant has had the opportunity
         to consult with the Participant's own counsel prior to the execution
         hereof.

7.6      AMENDMENTS. Any amendments to this Agreement must be in writing and
         designated as an amendment, and signed by both parties hereto.

7.7      SEVERABILITY. The provisions of this Agreement are severable. The
         invalidity, in whole or in part, of any provision of this Agreement
         shall not affect the validity or enforceability of any other of its
         provisions. If one or more provisions hereof shall be declared invalid
         or unenforceable, the remaining provisions shall remain in full force
         and effect and shall be construed in the broadest possible manner to
         effectuate the purposes hereof. The parties further agree to replace
         such void or unenforceable provisions of this Agreement with valid and
         enforceable provisions which will achieve, to the extent possible, the
         economic, business and other purposes of the void or unenforceable
         provisions.

7.8      HEADINGS, REFERENCES; EXHIBITS. The headings in this Agreement are only
         for convenience and ease of reference and are not to be considered in
         construction or interpretation of this Agreement, nor as evidence of
         the intention of the parties hereto. All exhibits, schedules and
         appendices attached to this Agreement are incorporated herein. Except
         where otherwise indicated, all references in this Agreement to Sections
         refer to Sections of this Agreement.

7.9      COUNTERPARTS. This Agreement may be executed in separate counterparts,
         each of which shall be deemed an original, and when executed,
         separately or together, all of such

                                      C-7
<PAGE>   35

         counterparts shall constitute a single original instrument, effective
         in the same manner as if all parties hereto had executed one and the
         same instrument.

7.10     ENTIRE AGREEMENT. This Agreement (together with its Exhibits and other
         documents referred to herein) is the complete and exclusive statement
         of agreement and understanding of the parties with respect to matters
         in this Agreement and is a complete and exclusive statement of the
         terms and conditions thereof. This Agreement replaces and supersedes
         all prior written or oral agreements, statements, correspondence,
         negotiations and understandings by and among the parties with respect
         to the matters covered by it. No representation, statement, condition
         or warranty not contained in this Agreement is binding on the parties.

7.11     GOVERNING LAW. This Agreement shall be governed by and construed in
         accordance with the laws of the State of Arkansas, excluding that body
         of law relating to conflict of laws.

         IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.

                                            PET QUARTERS, INC.

                                       By:
                                          --------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                            "PURCHASER"

                                       Name:
                                            ------------------------------------
                                       Address:
                                               ---------------------------------
                                               ---------------------------------
                                               ---------------------------------
                                       Social Security Number:
                                                              ------------------

FORM OF OWNERSHIP:         [ ] individual           [ ] community property
                           [ ] joint tenants        [ ] tenants in common

                                      C-8

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