HESKA CORPORATION
1613 PROSPECT PARKWAY
FORT COLLINS, COLORADO 80525
(970) 493-7272
____________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
____________
TIME 9:00 a.m. on Thursday May 17, 2001
PLACE Heska Corporation
1613 Prospect Parkway
Fort Collins, Colorado
ITEMS OF BUSINESS 1. To elect to the Board of Directors one
director to serve until the 2004 Annual Meeting
of Stockholders or until her successor has been
duly elected and qualified.
2. To amend the 1997 Stock Incentive Plan to
increase the number of options automatically
granted to outside directors.
3. To transact such other business as may
properly come before the Annual Meeting and any
adjournment or postponement of the Annual
Meeting. Management is presently aware of no
other business to come before the Annual
Meeting.
RECORD DATE You can vote if you are a stockholder of record
on March 23, 2001.
ANNUAL REPORT Our 2000 Annual Report, which is not a part of
the proxy soliciting material, is enclosed.
PROXY VOTING It is important that your shares be represented
and voted at the Meeting. Please vote in one
of these ways:
1. VISIT THE WEB SITE noted on your proxy
card to vote via the Internet; or
2. MARK, SIGN, DATE AND PROMPTLY RETURN the
enclosed proxy card in the postage-paid
envelope provided.
Any proxy may be revoked at any time prior to
its exercise at the Meeting.
/S/ Ronald L. Hendrick
Ronald L. Hendrick
Executive Vice President, Chief
April 4, 2001 Financial Officer and Secretary
HESKA CORPORATION
____________
PROXY STATEMENT
____________
These proxy materials are furnished to the stockholders of Heska
Corporation, a Delaware corporation in connection with the solicitation of
proxies to be used in voting at our 2001 Annual Meeting of Stockholders and at
any adjournment or postponement thereof. THE ENCLOSED PROXY IS SOLICITED BY OUR
BOARD OF DIRECTORS.
You are invited to attend our Annual Meeting of Stockholders to be held on
May 17, 2001, beginning at 9:00 a.m. The meeting will be held at Heska
Corporation, 1613 Prospect Parkway, Fort Collins, Colorado.
This Proxy Statement, proxy card and voting instructions are being mailed
starting April 4, 2001.
STOCKHOLDERS ENTITLED TO VOTE
Stockholders of record at the close of business on March 23, 2001 are
entitled to notice of and to vote at the Annual Meeting. As of that date, we
had 38,656,745 shares of common stock outstanding. Each holder of common stock
is entitled to one vote for each share held as of the record date. An
inspector of elections appointed by the Board of Directors will determine the
shares represented at the Annual Meeting, the validity of proxies and will
count all votes. Determinations of whether a quorum exists and whether
proposals are approved will be announced at the Annual Meeting.
PROXIES
Your vote is important. Stockholders of record may vote their proxies by
Internet or mail. The web site address is included on your proxy card. If you
choose to vote by mail, a postage-paid envelope is provided.
A proxy may be revoked at any time before it is exercised by (1) filing a
written revocation with the Secretary of the Company, (2) submitting a duly
executed proxy bearing a later date, or (3) voting by ballot at the Annual
Meeting.
Vote by Internet
You can vote your shares via the Internet. The web site for Internet
voting is on your proxy card. Internet voting is available 24 hours a day. You
will be given the opportunity to confirm that your instructions have been
properly recorded. If you vote via the Internet you do not need to return your
proxy card.
Vote by Mail
If you choose to vote by mail, simply mark your proxy, date and sign it,
and return it to Computershare Trust Company, Inc. in the postage-paid envelope
provided.
Voting at the Annual Meeting
The method by which you vote now will in no way limit your right to vote at
the Annual Meeting if you decide to attend in person. If your shares are held
in the name of a bank, broker or other holder of record, you must obtain a
proxy, executed in your favor, from the holder of record and bring it with you
to the meeting to be able to vote at the meeting.
All proxies returned prior to the Annual Meeting will be voted in
accordance with the instructions contained therein. If no choice is specified,
the shares will be voted FOR the proposals listed in this Proxy Statement.
Voting of Other Matters
The enclosed proxy card grants the proxy holders discretionary authority to
vote on other matters properly brought before the Annual Meeting. At the date
this Proxy Statement went to press, we did not know of any other matter to be
raised at the Annual Meeting.
LIST OF STOCKHOLDERS
A list of stockholders entitled to vote at the Annual Meeting will be
available at the Annual Meeting and for ten days prior to the meeting during
normal business hours at our offices at 1612 Specht Point Drive, Fort Collins,
Colorado, 80525, by contacting the Secretary of the Company.
REQUIRED VOTE
The presence in person or by proxy of the holders of a majority of our
outstanding shares constitutes a quorum for the transaction of business at the
Annual Meeting. Abstentions and broker "non-votes" are counted as present and
entitled to vote for purposes of determining a quorum.
Directors are elected by a plurality vote. Any other matter submitted for
stockholder approval at the Annual Meeting, will be decided by the affirmative
vote of a majority of shares present in person or represented by valid proxy and
entitled to vote on each such matter. Abstentions with respect to any matter
are treated as shares present or represented and entitled to vote on that matter
and thus have the same effect as negative votes. If a broker, bank or other
nominee, who is the record holder of certain shares indicates on a proxy that it
does not have discretionary authority to vote on a particular matter as to such
shares, or if shares are not voted in other circumstances in which proxy
authority is defective or has been withheld with respect to any matter, these
"non-voted" shares will be counted for quorum purposes but will not be counted
in determining whether stockholder approval of a particular matter has been
obtained.
COST OF SOLICITATION
We will bear the expense of soliciting proxies, including the expense of
preparing, printing and mailing proxy materials. In addition to the
solicitation of proxies by mail, solicitation may be made by certain of our
directors, officers and other employees by personal interview, telephone or
facsimile. No additional compensation will be paid to these people for such
solicitation.
PROPOSAL 1 - ELECTION OF DIRECTOR
DIRECTORS AND NOMINEE FOR DIRECTOR
There is one Class I nominee for election this year. Detailed information
on this nominee is provided on page 3 of this proxy statement. Our Board of
Directors is divided into three classes, with one class of directors elected
each year at the Annual Meeting of Stockholders for a three-year term of office.
The directors of each class hold their positions until the Annual Meeting of
Stockholders at which time their respective successors are elected and qualified
or until their earlier resignation, removal from office, death or incapacity.
One Class I director is to be elected at this meeting for a three-year term
ending in 2004.
The Board of Directors proposes the election of Dr. Edith W. Martin as a
Class I director. The persons named on the enclosed proxy card intend to vote
the proxy for the election of this nominee, unless you indicate on the proxy
card that your vote should be withheld from such nominee. If you are voting by
Internet, you will be instructed how to withhold your vote. Dr. Martin has
indicated her willingness to serve as a member of the Board of Directors if
elected; however, if she is unable or declines to serve as a director at the
time of the Annual Meeting, an event not now anticipated, proxies will be voted
for a nominee designated by the Board of Directors to fill the vacancy.
Stockholder nominations for the Board of Directors must be made following the
procedures set forth in the Bylaws not less than 60 days nor more than 90 days
prior to the scheduled date of the Annual Meeting. The deadline for a
stockholder to deliver notice of a nomination for the election of directors at
the 2001 Annual Meeting of Stockholders was March 16, 2001. No such nominations
were received.
There is currently a vacancy in Class I of the Board of Directors. We
intend to fill such vacancy with an independent director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF DR.
MARTIN AS OUR DIRECTOR.
BIOGRAPHICAL INFORMATION
Certain biographical information of the nominee and of the members of the
Board of Directors continuing in office after the Annual Meeting is set forth
below.
Class I
EDITH W. MARTIN, PH.D., age 55, has served us as a director since October
2000. Since, 1992, Dr. Martin has also served as President of Advanced Global
Technologies, Inc., a computer services company that she founded. She also has
served as a Managing Partner of M14M1 Enterprises since 1994. From March 1999
to March 2000, Dr. Martin was Chief Information Officer and Vice President at
Halliburton Company. She also served as Chief Information Officer and Vice
President at Eastman Kodak from January 1996 to October 1997, and as Executive
Vice President and Chief Technology Officer at Sallie Mae from 1994 to 1996.
From 1992 to 1994, Dr. Martin served as Vice President and Chief Information
Officer at Intelstat. She was a Vice President at Boeing from 1984 to 1992.
Prior to 1984, she was the Deputy Under-Secretary of Research and Advanced
Technology for the Department of Defense. Dr. Martin currently serves on the
board of Immunex Corporation and several private companies. In addition, she
serves on the audit, compensation and stock committees at Immunex. Dr. Martin
holds a Ph.D. and M.S. from Georgia Institute of Technology and a B.A. from Lake
Forest College.
Class II
A. BARR DOLAN, age 51, has served us as a director since March 1988, and
was Chairman of the Board of Directors from 1988 to January 1999. Mr. Dolan has
been the President of Charter Venture Capital, a venture capital management
firm, since 1982, a general partner of Charter Ventures since 1982, a general
partner of Charter Ventures II, L.P. since 1994 and managing director of Charter
Ventures III, L.P. since 1998. Mr. Dolan is also a director of several private
companies. He holds M.S. and B.A. degrees from Cornell University, an M.A.
degree from Harvard University and an M.B.A. from Stanford University.
ROBERT B. GRIEVE, PH.D., age 49, one of our founders, currently serves as
Chief Executive Officer and Chairman of the Board of Directors. Dr. Grieve was
named Chief Executive Officer effective January 1, 1999, Vice Chairman effective
March 1992 and Chairman of the Board effective May 2000. Dr. Grieve also served
as Chief Scientific Officer from December 1994 to January 1999 and Vice
President, Research and Development, from March 1992 to December 1994. He has
been a member of our Board of Directors since 1990. He holds a Ph.D. degree
from the University of Florida and M.S. and B.S. degrees from the University of
Wyoming.
JOHN F. SASEN, SR., age 58, has served us as a director since October 1998.
Since April 1998, he has served as Executive Vice President and Chief Marketing
Officer of PSS/World Medical, Inc., and from December 1993 he held various other
senior executive positions at PSS. From July 1993 to April 1998, Mr. Sasen
served as a Director of PSS. Prior to joining PSS in 1993, Mr. Sasen was Vice
President Sales, Marketing and Distributor Relations for a division of Becton
Dickinson & Company, a manufacturer of health care products. Mr. Sasen was with
Becton Dickinson for over 20 years. In addition, Mr. Sasen serves as a director
of Humascan, Inc., a manufacturer of a medical device. Mr. Sasen is the
immediate past Chairman of the Health Industry Distributors Association, a non-
profit organization that addresses the needs of the healthcare industry.
Class III
WILLIAM A. AYLESWORTH, age 58, has served us as a director since June 2000.
Mr. Aylesworth has served as Senior Vice President since 1988, Chief Financial
Officer since 1984 and Treasurer since 1982 for Texas Instruments Incorporated.
From 1972 to 1982, he served in treasury services, and from 1967 to 1972 he
served in the Control Management Program for Texas Instruments. Mr. Aylesworth
is also a director of Factory Mutual Insurance Company and various private
organizations. He holds an M.S. in industrial administration from Carnegie
Mellon University and a B.E.E. in electrical engineering from Cornell
University.
LYLE A. HOHNKE, PH.D., age 58, has served as a director since April 1996.
Dr. Hohnke is a general partner of Tullis Dickerson Company (formerly Javelin
Capital Fund, L.P.), a venture capital firm, a position he has held since 1994.
Dr. Hohnke was a co-founder of Diamond Animal Health, Inc. and served as
Chairman and CEO from 1994 until its acquisition by us in April 1996. From
January 1991 to October 1993 he was a general partner of Heart Land Seed Capital
Fund. Dr. Hohnke is also a director of Cytrx, Inc. and several private
companies. In addition, he is a member of the audit and compensation committees
of Cytrx, Inc. He holds Ph.D. and M.A. degrees from the University of Oregon,
an M.B.A. from the Hartford Graduate Institute and a B.A. degree from Western
Michigan University.
LYNNOR B. STEVENSON, PH.D., age 58, is one of our founders and has served
us as a director since March 1988. Dr. Stevenson served us as President and
Chief Executive Officer from March 1988 to March 1992. She currently is
President of Alta Biomedical Group LLC. Dr. Stevenson was President and Chief
Executive Officer of Cascade Oncogenics, Inc from December 1992 until December
2000. From July 1992 to April 1997, she was Director, Technology Transfer at
the University of Oregon. She holds a Ph.D. degree from Monash University,
Australia and B.Sc. and B.Ed. degrees from the University of Melbourne,
Australia.
BOARD AND COMMITTEE MEMBERSHIP AND MEETINGS
During 2000, the Board of Directors had two ongoing committees. Those
committees consisted of an Audit Committee and a Compensation Committee. The
Compensation Committee and Audit Committee are comprised entirely of non-
employee directors. There is no family relationship among any of the directors
or the nominee.
Except as noted below, all directors attended at least 75% of the aggregate
number of meetings of the Board of Directors and Board committees on which they
served during their respective terms of office. The Board of Directors held six
meetings during the year ended December 31, 2000.
The members of the Compensation Committee during 2000 were Mr. Dolan, Dr.
Hohnke and Mr. Sasen. Dr. Martin was appointed to the Compensation Committee in
October 2000. The Compensation Committee held four meetings during 2000. Dr.
Martin was unable to attend the only meeting for which she was eligible. The
Compensation Committee's functions are to make recommendations to the Board of
Directors with respect to general and specific compensation policies and
practices and to administer the 1997 Stock Incentive Plan and 1997 Employee
Stock Purchase Plan.
The members of the Audit Committee during 2000 were Mr. Dolan, Mr. Pomroy
and Dr. Tebbit. Mr. Aylesworth was appointed to the Audit Committee when Mr.
Pomroy resigned in June 2000. Dr. Martin was appointed to the Audit Committee
in October 2000 when Dr. Tebbit resigned. The Audit Committee held three
meetings during 2000. The Audit Committee's functions are to review the scope
of the annual audit, monitor the relationship with our independent auditors,
advise and assist the Board of Directors in evaluating the auditor's
examination, and provide oversight in connection with our financial and
accounting organization and financial reporting.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
selected Arthur Andersen LLP as the independent public accounting firm to audit
our financial statements for the fiscal year beginning January 1, 2001.
Representatives of Arthur Andersen LLP will be present at the meeting.
They will be given the opportunity to make a statement if they desire to do so,
and they will be available to respond to appropriate questions.
DIRECTORS' COMPENSATION
Each new outside director elected to our Board of Directors is
automatically granted as of the date of election an option to purchase 10,000
shares of common stock at an exercise price equal to the fair market value of
the common stock on the date of grant. The shares subject to these options vest
in four equal installments at annual intervals over the four-year period
commencing on the date of grant. Further, each outside director who continues
to serve in such capacity following any annual meeting of stockholders is
automatically granted an option as of the date of such meeting to purchase 2,000
shares of common stock at an exercise price equal to the fair market value of
the common stock on the date of grant. The shares subject to these options vest
on the first anniversary of grant. No director is eligible to receive the
10,000-share grant and a 2,000-share grant in the same year. Directors are
eligible to receive a greater number of options or shares than the automatic
grants described above under the 1997 Stock Incentive Plan. The Board of
Directors has approved, subject to stockholder approval, an amendment to the
1997 Stock Incentive Plan to increase the number of options granted annually to
outside directors. See "Proposal 2" herein.
In February 2001, the Board of Directors modified the existing policy to
compensate "outside" or non-employee directors with options to purchase Heska
common stock. Under this new policy, outside directors receive an option to
purchase 200 shares for attendance at a meeting of the Board of Directors, or
Board committee, which is less than four hours and an option to purchase 1,000
shares for attendance at a meeting of the Board of Directors, or Board
committee, which is four hours or more, or for consulting services of four hours
or more. These options are immediately exercisable and the exercise price is
equal to the fair market value on the date of grant. Directors are reimbursed
for their reasonable expenses for each meeting attended.
See "Employment Agreements" below for a description of the compensation
arrangement with Dr. Grieve.
BOARD COMPOSITION
Mr. Dolan was appointed to our Board of Directors in connection with equity
investments in us by Charter Ventures and Charter Ventures II, L.P. Dr. Hohnke
was appointed to our Board of Directors in connection with our acquisition of
Diamond.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 23, 2001 as
to shares of our common stock beneficially owned by: (i) each of the named
executive officers listed in the Summary Compensation Table; (ii) each of our
directors; (iii) all directors and executive officers of the Company as a group;
and (iv) each person who is known by us to own beneficially more than 5% of our
common stock.
Shares Percentage
Beneficially Beneficially
Owned(1) Owned(1)
------------- ------------
State of Wisconsin Investment Board (2) 6,468,000 16.7%
P.O. Box 7842
Madison, WI 53707
Entities associated with Charter Ventures (3) 6,206,924 16.1%
525 University Avenue, Suite 1500
Palo Alto, CA 94301
Novartis Tiergesundheit AG 3,705,389 9.6%
Klybeckstrasse A4A
4002 Basel
Switzerland
Zesiger Capital Group LLC (4) 3,524,500 9.1%
320 Park Avenue, 30th Floor
New York, NY 10022
Capital Group International, Inc. (5) 3,425,000 8.8%
1100 Santa Monica Blvd.
Los Angeles, CA 90025
Lombard Odier & Cie (6) 2,774,200 7.2%
11, Rue de la Corraterie
1204 Geneva
Switzerland
Ralston Purina Company (7) 2,331,187 5.9%
Checkerboard Square
St. Louis, MO 63164
William A. Aylesworth (11) 3,800 *
A. Barr Dolan (8)(12) 6,214,924 16.1%
Robert B. Grieve, Ph.D. (9)(11) 744,348 1.9%
Lyle A. Hohnke, Ph.D. (11) 116,425 *
Edith W. Martin, Ph.D.(11) 38,500 *
John F. Sasen, Sr. (11) 16,100 *
Fred M. Schwarzer (10)(11) 471,266 1.2%
Lynnor B. Stevenson, Ph.D. (11) 190,700 *
James H. Fuller (11) 283,167 *
Ronald L. Hendrick (11) 117,079 *
Giuseppe Miozzari, Ph.D. (11) 129,114 *
Dan Stinchcomb, Ph.D.(11) 77,754 *
All directors and executive officers as a
group (13 persons)(11)(12) 8,488,129 21.2%
________________
* Amount represents less than 1% of our common stock.
(1) To our knowledge, the persons named in the table have sole voting
and investment power with respect to all shares of common stock shown
as beneficially owned by them, subject to community property laws
where applicable and the information contained in the footnotes to
this table. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission and includes voting
and investment power with respect to securities. Shares of common
stock issuable upon exercise of stock options or warrants exercisable
within 60 days of March 23, 2001 are deemed outstanding and to be
beneficially owned by the person holding such option for purposes of
computing such person's percentage ownership, but are not deemed
outstanding for the purpose of computing the percentage ownership of
any other person.
(2) Based upon information derived from a Schedule 13G filed on
February 9, 2001 by State of Wisconsin Investment Board pursuant to
Section 13G of the Securities Exchange Act of 1934 and the rules
promulgated thereunder (the "Exchange Act"), reporting its beneficial
ownership of our common stock. According to the Schedule 13G, State
of Wisconsin Investment Board has sole power to vote and dispose of
5,468,000 shares. Also, includes 1,000,000 shares purchased in a
private placement on February 6, 2001.
(3) Includes 3,386,510 shares and options to purchase 1,000 shares of
common stock held by Charter Ventures and 2,818,414 shares and options
to purchase 1,000 shares of common stock held by Charter Ventures II,
L.P.
(4) Based upon information derived from a Schedule 13G filed on
February 12, 2001 by Zesiger Capital Group LLC pursuant to Section 13G
of the Exchange Act reporting its beneficial ownership of our common
stock. According to the Schedule 13G, Zesiger has the sole power to
vote 1,400,000 shares and the sole power to dispose of 1,987,000
shares. Also, includes 1,537,000 shares purchased in a private
placement on February 6, 2001.
(5) Based upon information derived from a Schedule 13G, filed on
February 12, 2001 by Capital Group International, Inc., pursuant to
the Exchange Act, reporting its beneficial ownership of our common
stock. According to the Schedule 13G, Capital has sole power to vote
2,832,900 shares and the sole power to dispose of 3,390,200 shares.
(6) Based upon information derived from a Schedule 13G filed by
Lombard Odier & Cie on February 14, 2001 to Section 13G of the
Exchange Act, reporting its beneficial ownership of shares. According
to the Schedule 13G, Lombard has sole power to vote and dispose of
2,755,000 shares.
(7) Based upon information derived from a Schedule 13G filed on
August 4, 1998 by Ralston Purina Company pursuant to Section 13G of
the Exchange Act, reporting its beneficial ownership of our common
stock. Includes 1,165,592 shares of common stock which may be
acquired upon exercise of warrants and do not have voting rights until
issued upon exercise. According to the Schedule 13G, Ralston Purina
has sole power to vote and dispose of 1,165,595 shares.
(8) Represents shares and options held by Charter Ventures and
Charter Ventures II, L.P., with respect to which Mr. Dolan disclaims
beneficial ownership except to the extent of his proportionate share
therein. Mr. Dolan, one of our directors, is a general partner of each
of Charter Ventures and Charter Ventures II, L.P., and may be deemed a
beneficial owner of the shares held by such entities because of shared
voting power with respect to such shares.
(9) Does not include 15,649 shares of common stock held by Dr.
Grieve's wife, with respect to which Dr. Grieve disclaims beneficial
ownership.
(10) Does not include 949 shares of common stock held by Mr.
Schwarzer's wife, with respect to which Mr. Schwarzer disclaims
beneficial ownership.
(11) Includes an aggregate of 1,466,014 shares of common stock
issuable upon exercise of stock options currently exercisable within
60 days of March 23, 2001 as follows: Mr. Aylesworth, 3,800; Mr.
Dolan, 10,000, Dr. Grieve, 540,647; Dr. Hohnke, 30,034; Dr. Martin,
2,300; Mr. Sasen, 16,100; Mr. Schwarzer, 293,317; Dr. Stevenson,
11,700; Mr. Hendrick, 95,000; Mr. Fuller, 254,167; Dr. Miozzari,
79,115; Dr. Stinchcomb, 76,605; and Dr. Verser, 53,229.
(12) Includes shares held by the entities referenced in footnote
8 which are affiliated with a director.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation for services rendered in all
capacities to us for the three fiscal years ended December 31, 2000 of
(i) Robert B. Grieve, Chairman of the Board and Chief Executive Officer and
(ii) our four other most highly compensated executive officers as of
December 31, 2000, collectively referred to as the named executive officers.
Long Term
Compensation
Annual Awards
Compensation -----------------
----------------------------- Securities
Fiscal Salary Other Annual Underlying
Name and Principal Position Year ($)(1) Compensation($) Options(#)
--------------------------- ------ -------- ---------------- -----------------
Robert B. Grieve 2000 260,000 11,044 200,000
Chairman of the Board and 1999 245,400 - 200,000
Chief Executive Officer 1998 195,000 - 150,000
James H. Fuller 2000 249,600 8,595 150,000
President and Chief Operating 1999 229,200 (2) 68,730 (3) 350,000
Officer 1998 - - -
Ronald L. Hendrick 2000 187,720 4,725 115,000
Executive Vice President, Chief 1999 180,000 - -
Financial Officer and Secretary 1998 15,000 (4) - 100,000
Giuseppe Miozzari (5) 2000 189,200 - 12,000
Chief Executive Officer of Heska 1999 182,000 - 55,000
Holding AG 1998 175,300 - -
Dan T. Stinchcomb 2000 180,000 3,412 30,000
Executive Vice President, Research 1999 160,000 - 35,000
and Development 1998 135,000 - 20,000
________________________
(1) Salary includes amounts, if any, deferred pursuant to 401(k)
arrangements.
(2) Mr. Fuller's employment with us commenced on January 19, 1999 and
his 1999 salary reflects a partial year of employment.
(3) Includes a starting bonus of $60,000 and a moving expense
reimbursement of $8,730.
(4) Mr. Hendrick's employment with us commenced in December 1998 and
his 1998 salary reflects a partial year of employment.
(5) Dr. Miozzari's salary for the years 1999 and 1998 has been
adjusted to reflect the current rate of exchange.
STOCK OPTIONS
The following tables summarize option grants to, and exercises by, the
named executive officers during 2000, and the value of the options held by each
such person during the year ended December 31, 2000.
OPTION GRANTS IN 2000
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term (4)
---------------------------------------------------------- ------------------------------
Percentage of
Number of Total Options
Securities Granted to
Underlying Employees in Exercise
Options Fiscal Price Expiration
Name Granted(#)(1) Year ($/Sh)(2) Date(3) 5%($) 10%($)
----- ------------- --------------- --------- ---------- --------- ---------
Robert B. Grieve 200,000 28.96% 3.69 02/23/10 464,124 1,176,182
James H. Fuller 150,000 21.72% 3.69 02/23/10 348,093 882,136
Ronald L. Hendrick 65,000 9.41% 3.69 02/23/10 150,840 382,259
50,000 7.24% 2.00 08/02/10 62,889 159,374
Giuseppe Miozzari 12,000 1.74% 3.69 02/23/10 27,847 70,571
Dan T. Stinchcomb 30,000 4.34% 3.69 02/23/10 69,619 176,427
____________
(1) The right to exercise these stock options vests ratably on a
monthly basis over a four year period. Under the terms of our stock
plans, our Compensation Committee retains the discretion, subject to
certain limitations, to modify, extend or renew outstanding options
and to reprice outstanding options. Options may be repriced by
canceling outstanding options and reissuing new options with an
exercise price equal to the fair market value on the date of reissue,
which may be lower than the original exercise price of such canceled
options.
(2) The exercise price is equal to 100% of the fair market value on
the date of grant as determined by the Compensation Committee.
(3) The options have a term of ten years, subject to earlier
termination in certain events related to termination of employment.
(4) The 5% and 10% assumed rates of appreciation are suggested by the
rules of the Securities and Exchange Commission and do not represent
our estimate or projection of the future common stock price. There
can be no assurance that any of the values reflected in the table will
be achieved.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Securities Underlying Value of Unexercised In-the-
Unexercised Options Money Options at
at December 31, 2000(#) December 31, 2000($)(2)
--------------------------- ----------------------------
Shares Value
Acquired on Realized($)
Name Exercise(#) (1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------ ----------- ------------ ----------- -------------
Robert B. Grieve 103,400 213,382 487,309 307,291 33,975 -
James H. Fuller - - 198,958 301,042 - -
Ronald L. Hendrick - - 67,709 147,291 - -
Giuseppe Miozzari 50,000 69,700 68,991 48,009 - -
Dan T. Stinchcomb - - 66,292 52,708 - -
____________
(1) These values were calculated on the basis of the fair market
value of the underlying securities at the exercise date minus the
applicable per share exercise price.
(2) These values were calculated on the basis of the fair market
value per share of the common stock at December 31, 2000 ($0.68),
minus the applicable per share exercise price.
PENSION AND LONG-TERM INCENTIVE PLANS
We have no pension or long-term incentive plans.
EMPLOYMENT AGREEMENTS
During 2000, we were a party to employment agreements with each of the
named executive officers. All of the agreements provide for severance payments
if the individual's employment is terminated without cause, including
terminations in connection with a change in control. In the case of Dr. Grieve,
the payments set forth in his employment agreement are equal to one year's
salary plus an additional year of vesting under any stock arrangements if his
employment is involuntarily terminated. In the case of Mr. Fuller, the payments
set forth in his employment agreement are equal to one year's salary plus an
additional one year's vesting under any stock arrangements if the termination
takes place any time on or before January 18, 2002, or six months' salary and an
additional six months' vesting under any stock arrangements if the termination
takes place after that date. In the case of Mr. Hendrick, the payments set
forth in his employment agreement are equal to one year's salary if the
termination takes place any time on or before December 1, 2001, or six months'
salary if the termination takes place after that date. In the case of Dr.
Miozzari, the payments (including amounts mandated by Swiss law) would be six
months' salary if he is terminated without cause other than a change in control,
or one year's salary if he is terminated without cause due to a change in
control. In the case of Dr. Stinchcomb, the payments set forth in this
employment agreement are equal to six months' salary if he is terminated without
cause other than a change in control, or one year's salary if he is terminated
without cause due to a change in control.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
This report on executive compensation is provided by the Compensation
Committee of the Board of Directors to assist stockholders in understanding the
objectives and procedures used in establishing the compensation of our executive
officers. Four non-employee directors, Mr. Dolan, Dr. Hohnke, Dr. Martin and
Mr. Sasen, served on the Compensation Committee during the last fiscal year.
RESPONSIBILITIES OF THE COMPENSATION COMMITTEE
The Compensation Committee acts on behalf of the Board of Directors. Our
responsibilities include:
* Establishing the Company's compensation philosophy for all employees,
including the Chief Executive Officer and other executive officers;
* Reviewing the performance of the Chief Executive Officer;
* Determining salary levels and stock grants for the Chief Executive
Officer and other executive officers;
* Administering the Company's 1997 Stock Incentive Plan and Employee
Stock Purchase Plan, including determining the number and type of
options to be granted to employees of the Company and its
subsidiaries and the terms of such grants.
COMPENSATION PHILOSOPHY AND OBJECTIVES
We believe that compensation of the Company's executive officers should
promote the success of the Company by attracting, retaining and motivating all
employees, including executive officers, while aligning their interests with the
Company's long-term and strategic interests and the interests of stockholders.
Competition for skilled employees, particularly management level employees, in
the Company's industry is intense and the Committee seeks to provide total
compensation packages that will attract and retain superior caliber individuals,
yet be consistent with the Company's financial situation and stage of
development.
KEY ELEMENTS OF EXECUTIVE COMPENSATION
Until the Company has achieved operational profitability, we believe that
the use of traditional performance standards, such as profit levels and return
on equity, are not appropriate in the evaluation of executive officer
performance. Instead, the Committee evaluates the performance of executive
officers and sets their compensation based primarily on the Company's
achievement of its business objectives, such as developing and introducing
products, obtaining appropriate financing, developing its intellectual property
portfolio and entering into collaborations with other companies and academia.
The Committee also evaluates each officer's individual contribution toward the
achievement of these objectives and of other individual objectives. Currently,
the Company's compensation structure for executive officers includes a
combination of base salary, stock options and performance based cash incentive
under a management incentive compensation plan.
Base Salary. Salary levels are largely determined through comparisons with
companies of similar headcount and market capitalizations or complexity in the
biotechnology industry. Actual salaries are based on individual performance
contributions within a competitive salary range for each position that is
established through evaluation of responsibilities and market comparisons. We
believe, that the Company's salary levels for the executive officers are at a
level that, at the time such salary determinations were made, were considered to
be reasonable and necessary given the Company's financial resources and the
stage of its development. This belief is based on our knowledge of executive
compensation in the industry and based on practices of comparable companies in
the Company's industry.
Stock Options. We believe that stock options provide excellent long-term
incentives for executive officers to increase the Company's market value for the
benefit of all stockholders. We are responsible for determining the number and
terms of options to be granted to executive officers, taking into account such
factors as individual and Company performance, policies regarding cash
compensation and practices of comparable companies in the Company's industry.
Options granted to executive officers have exercise prices equal to fair market
value on the date of grant, vest over a four-year period and expire ten years
from the date of grant. Vesting ceases and the vested portion of options must
be exercised should the executive leave the Company's employ (subject to any
rights to partial acceleration of vesting upon termination without cause under
employment agreements). This Committee believes that these vesting provisions
help both to retain qualified employees and to motivate them to achieve long-
term increases in stock value, providing continuing benefits to the Company and
its stockholders beyond those in the year of grant.
Management Incentive Compensation Plan. We believe that cash performance
based incentives can also serve an important role in executive compensation. We
have adopted a management incentive compensation plan which replaces the prior
executive bonus plan. The management incentive compensation plan will provide
incentives to the executives of the Company to meet and exceed certain
predetermined annual net income and revenue goals. We have established these
financial goals for the 2001 calendar year, and any such incentives with respect
to the 2001 calendar year will only be paid after the audited financial results
for the year are available. While we believe that providing cash bonuses to the
executives of the Company is an essential part of creating a competitive
executive compensation package, we have determined that paying the great
majority of such bonuses only if specific predetermined financial goals are
achieved provides a very strong incentive to the Company's management to achieve
financial performance that will be beneficial to the Company and its
stockholders.
CHIEF EXECUTIVE OFFICER COMPENSATION
The annual salary of Robert B. Grieve, the Company's Chairman of the Board
and Chief Executive Officer, was increased to $260,000 in 2000, and we awarded
him a stock option in February 2000 to purchase an additional 200,000 shares of
common stock. These options have the terms described above. Given the
Company's stage of development, the use of traditional performance standards,
such as profit levels and return on equity, were not considered to be
appropriate in the evaluation of Dr. Grieve's performance.
QUALIFYING COMPENSATION
It is the Company's policy generally to qualify compensation paid to
executive officers for deductibility under section 162(m) of the Internal
Revenue Code. Section 162(m) generally prohibits the Company from deducting the
compensation of executive officers that exceeds $1,000,000 unless that
compensation is based on the satisfaction of objective performance goals. The
Company's 1997 Stock Incentive Plan is structured to qualify awards under such
plans as performance-based compensation and to maximize the tax deductibility of
such awards. However, the Company reserves the discretion to pay compensation
to its executive officers that may not be deductible.
The foregoing report has been furnished by the Compensation Committee of
the Board of Directors and shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent the Company specifically incorporates this report by
reference and shall not otherwise be deemed filed under such Acts.
Respectfully submitted,
A. Barr Dolan
Lyle A. Hohnke
Edith W. Martin
John F. Sasen, Sr., Chairman
REPORT OF THE AUDIT COMMITTEE
The Audit Committee reviews the Company's accounting, auditing and
financial reporting practices on behalf of the Board of Directors. The members
of the Audit Committee during 2000 were Mr. Dolan, Mr. Pomroy and Dr. Tebbit.
Mr. Aylesworth was appointed to the Audit Committee when Mr. Pomroy resigned in
June. Dr. Martin was appointed to the Committee in October when Dr. Tebbit
resigned. The members of this Audit Committee meet the independence and
experience requirements of the Nasdaq Stock Market.
The Board of Directors has adopted a charter outlining the functions this
Committee is to perform. A copy of this charter is attached to this proxy
statement as Appendix A. These functions include:
* Monitoring the corporate financial reporting and internal and external
audits of the Company;
* Providing the results of its examinations and recommendations derived
therefrom to the Board of Directors; and
* Nominating independent auditors.
In performing all of these functions, we act only in an oversight capacity.
We rely on the work and assurances of Company management, which has the primary
responsibility for the financial statements and reports, and of the independent
auditors, who, in their report, express an opinion on the conformity of the
Company's annual financial statements to generally accepted accounting
principles.
In this context, during the year 2000, we met and held discussions with
management and the independent auditors. Management represented to us that the
Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles, and the Audit Committee has reviewed
and discussed the consolidated financial statements with management and the
independent auditors. In our meetings with the independent auditors, we
discussed matters required to be discussed by the auditors with audit committees
under Statement of Auditing Standards No. 61 (Communication with Audit
Committees).
In addition, we received and discussed with the auditors their annual
written report on their independence from the Company and its management which
is made under Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and considered whether the provision of non-
audit services by the auditors was compatible with maintaining the auditor's
independence.
In reliance on these reviews and discussions and the report of the
independent auditors, we have recommended to the Board of Directors, and the
Board has approved, that the audited financial statements be included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000, for
filing with the Securities and Exchange Commission.
Respectfully submitted,
William A. Aylesworth, Chairman
A. Barr Dolan
Edith W. Martin
AUDIT FEES, FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES AND ALL
OTHER FEES
In connection with services rendered by Arthur Andersen LLP during the year
2000, fees for the last annual audit were $100,500, and all other fees were
$58,950, including audit related services of $28,000 and nonaudit services of
$30,950. Audit related services generally include fees for statutory audits and
accounting consultations. Nonaudit services consist primarily of tax advisory
services. We did not incur any fees for financial information systems design
and implementation.
The Audit Committee has been advised by Arthur Andersen LLP that neither
the firm, nor any member of the firm, has any financial interest, direct or
indirect, in any capacity in us or our subsidiaries.
STOCK PRICE PERFORMANCE GRAPH
The following graph illustrates a comparison of the cumulative total
stockholder return (change in stock price plus reinvested dividends) of our
common stock with the Center for Research in Securities Prices Total Return
Index for the Nasdaq Stock Market (U.S. and Foreign) and the CRSP Total Return
Index for Nasdaq Pharmaceutical Stocks assuming an investment of $100 in each on
December 31, 1997, the year of our initial public offering. The comparisons in
the graph are required by the Securities and Exchange Commission and are not
intended to forecast or be indicative of possible future performance of our
common stock.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG HESKA CORPORATION, THE NASDAQ STOCK
MARKET
INDEX (U.S. AND FOREIGN) AND THE NASDAQ PHARMACEUTICAL STOCK INDEX
Nasdaq
Nasdaq US Pharmaceutical Heska
Date & Foreign Stocks Corporation
------- ---------- -------------- -----------
Dec-97 100.000 100.000 100.000
Jun-98 119.843 101.491 89.398
Dec-98 138.505 127.297 35.863
Jun-99 169.977 142.218 18.691
Dec-99 258.201 239.265 18.182
Jun-00 251.773 325.975 17.172
Dec-00 155.890 297.608 5.560
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Compliance with Section 16(a) of the Securities Exchange Act of 1934
requires our directors, executive officers and persons who own more than 10% of
a registered class of our equity securities to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of common stock and other of our equity securities. Directors,
officers and 10% or greater stockholders are required by SEC regulations to
furnish us with copies of all of the Section 16(a) reports they file. Based
solely upon a review of the copies of the forms furnished to us and the
representations made by the reporting persons to us, we believe that during
fiscal 2000 our directors, officers and 10% or greater stockholders complied
with all filing requirements under Section 16(a) of the Exchange Act.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
COLLABORATIVE AGREEMENTS
Ralston Purina Company
In July 1998, we entered into a Research and Licensing Agreement with
Ralston Purina. Pursuant to that agreement, Ralston Purina acquired exclusive
rights to license certain of our discoveries, know-how and technologies for
innovative diets for dogs and cats, and we have agreed to allocate certain
resources to research, develop and commercialize pet food products that are the
subject of the collaboration. The first product from this strategic alliance
was introduced by Ralston Purina in July 2000. This new product is a specialty
diet for the nutritional management of feline diabetes mellitus. We will
receive a royalty from Ralston Purina on sales of this product, as well as any
additional products developed under this collaboration.
Also in July 1998, Ralston Purina acquired 1.165 million shares of our
common stock for $14.75 million in cash, and also acquired, for an additional
cash payment of $250,000, warrants to purchase an additional 1.165 million
shares of common stock. The exercise price of the warrants is $12.67 for the
first year of the warrants, increasing by 20% per year for each of the second
and third years of the warrant. The warrants were vested immediately as of
July 30, 1998 and expire on July 30, 2001 with respect to any unexercised
warrants.
Novartis
Novartis, one of our principal stockholders, has ongoing marketing rights
to various of our products under development and is a party to a Screening and
Development Agreement and Right of First Refusal Agreement. Novartis obtained
such rights in connection with its purchase of our preferred stock in April 1996
(which converted into common stock upon the closing of our initial public
offering), but did not make any separate payments for these rights.
Effective as of August 18, 1998, we entered into an Exclusive Distribution
Agreement with Novartis Agro K.K., Tokyo, an affiliate of Novartis. Under the
terms of the agreement Novartis Agro will have exclusive rights to market and
distribute selected Heska-branded products in Japan. Novartis Agro is
responsible for the registration of these products in Japan. The initial
product to be marketed under the agreement is Solo Step (TM) CH. In
consideration of these distribution rights, Novartis has entered into a Right
of First Refusal Agreement wherein Novartis granted us a right of first refusal
to evaluate forpossible development and marketing worldwide certain new product
technologies for the veterinary market as they become available from Novartis.
In January 2001, we entered into a distribution agreement with Novartis
Animal Health, Inc., granting them exclusive distribution rights for the sale of
our E-Screen (TM) test product in Europe. In March 2001, we entered into a
distribution agreement with Novartis Animal Health Canada, Inc., granting them
exclusive distribution rights for the sale of our Flu Avert (TM) I.N. vaccine
in Canada.
LOAN TO EXECUTIVE OFFICER
In December 1999, we approved a personal loan to Dr. Grieve in the amount
of $100,000. This loan is evidenced by a promissory note which is due and
payable on December 23, 2002. Interest on the outstanding principal balance
accrues at the rate of 5.74% per annum. Payment of any unpaid principal balance
together with all accrued and unpaid interest can be accelerated and become
payable within ninety days after Dr. Grieve's relationship with us is terminated
for any reason other than Dr. Grieve's death or permanent disability.
PROPOSAL 2 - AMENDMENT TO THE 1997 STOCK INCENTIVE PLAN
SUMMARY OF 1997 STOCK INCENTIVE PLAN
The Board of Directors and stockholders approved the 1997 Stock Incentive
Plan in March 1997. The purpose of the Plan is to promote our long-term success
and the creation of stockholder value by (a) encouraging employees, outside
directors and consultants to focus on critical long-range objectives, (b)
encouraging the attraction and retention of employees, outside directors and
consultants with exceptional qualification, and (c) linking employees, outside
directors and consultants directly to stockholder interests through increased
stock ownership. The Plan seeks to achieve this purpose by providing awards in
the form of incentive and non-qualified stock options ("NQO") to purchase our
common stock. As of January 1, 2001, a total of 7,643,853 shares of our common
stock was available for issuance under the Plan. The aggregate number of shares
issuable under the Plan and the aggregate amount issuable to any one participant
are subject to adjustment in the event of any change to our common stock due to
a stock split or recapitalization, stock dividend or other similar action or
event.
It is our practice to grant all stock options at an exercise price equal to
the closing price of our stock on the date of grant. However, the Plan provides
for the grant of non-qualified stock options at a discount of no more than 15%.
The Compensation Committee fixes the term and conditions of each option at the
time of grant, the term generally is ten years from the date of grant.
All regular full-time U. S. employees receive incentive stock options and
all regular full-time European employees receive non-qualified stock options
when they are hired. Additional options may be granted based upon merit. All
employee grants vest monthly over a four-year period. As of January 1, 2001, we
had approximately 335 employees and 18 consultants which had been granted stock
options.
The exercise price of options granted under the Plan, including applicable
tax withholding, if any, must be paid in full at the time of exercise. The
method of payment is determined by the Compensation Committee and may consist of
cash, other shares of common stock, promissory note or irrevocable directions to
a securities broker to sell all or part of the option shares and to deliver the
sale proceeds to us.
Currently, outside directors receive an automatic grant of an immediately
exercisable non-qualified option to purchase 10,000 shares of stock when they
first join the Board. This option is subject to repurchase by us at the
exercise price if the director's service terminates for any reason. This right
to repurchase lapses in four equal installments at annual intervals over a 48-
month period commencing on the date of grant. In addition, each non-employee
director who will continue serving as a member of the Board upon the conclusion
of each annual meeting of stockholders receives an immediately exercisable non-
qualified option to purchase 2,000 shares of stock. These options are also
subject to repurchase for a period of one year from the date of grant.
PROPOSED AMENDMENT
Management recently reviewed the size of our existing automatic grants to
outside directors and decided that in order to maintain our ability to attract
and retain qualified members to our Board the grants must be increased.
Management presented to the Compensation Committee a recommendation to amend the
Plan to increase the amount of the initial grant of stock options from 10,000
shares to 40,000 shares and the amount of the annual grant of stock options from
2,000 shares to 40,000 shares. In addition, they proposed an additional annual
grant of an option to purchase 2,000 shares to each chairman of a committee of
the Board of Directors. The Compensation Committee approved the amendments and
submitted them to the Board for approval in February 2001. The Plan has been
amended, subject to stockholder approval. All other terms of the automatic
grants remain the same.
These amendments amend and restate the first sentences of Sections 7.1 and
7.2 of the Plan to read as follows:
7.1 INITIAL GRANTS. Each Outside Director who first becomes a member of
the Board shall receive a one-time grant of an NQO covering 40,000 Common
Shares (subject to adjustment under Article 9) (1).
7.2 ANNUAL GRANTS. Upon the conclusion of each regular annual meeting of
the Company's stockholders, (i) each Outside Director who will continue
serving as a member of the Board thereafter shall receive an NQO covering
40,000 Common Shares, except that such NQO shall not be granted in the
calendar year in which the same Outside Director received the NQO described
in Section 7.1, and (ii) each director who will serve as chairman of a
Board committee thereafter shall receive an NQO covering 2,000 Common
Shares (both awards are subject to adjustment under Article 9).
_________________
(1) Article 9 covers changes to the stock options as a result of a stock
split, recapitalization, spin-off or similar occurrence.
REQUIRED APPROVAL
The affirmative vote of the holders of a majority of our outstanding common
stock is required to approve this proposal. Therefore, failure to vote will
have the same effect as a vote against the amendment. If approved by the
stockholders, the proposed amendment to the 1997 Stock Incentive Plan will
become effective immediately.
PARTICIPATION IN THE 1997 STOCK INCENTIVE PLAN
The grant of options under the 1997 Stock Incentive Plan to employees,
including the named executive officers, is subject to the discretion of the
Compensation Committee. As of the date of this proxy statement, there has been
no determination by the Compensation Committee with respect to future awards
under the Plan. Accordingly, future awards are not determinable. The following
table sets forth information with respect to the grant of options to the named
executive officers and to other persons participating in the Plan during the
fiscal year 2000.
Weighted Average
Shares Underlying Exercise Price Per
Name and Position Options Granted Share ($/SH)
----------------- ----------------- ------------------
Robert B. Grieve 200,000 3.69
Chairman of the Board of Directors and
Chief Executive Officer
James H. Fuller 150,000 3.69
President and Chief Operating Officer
Ronald L. Hendrick 65,000 3.29
Executive Vice President, Chief Financial 50,000 2.00
Officer and Secretary
Giuseppe Miozzari 12,000 3.69
Managing Director Heska AG
Dan T. Stinchcomb 30,000 3.69
Executive Vice President, Research
and Development
Executive Officer Group (including persons named above) 522,000 3.60
Non-Executive Director Group 253,200 3.33
Edith W. Martin, Nominee for Director 10,100 1.31
Non-Executive Officer Employee Group 129,293 3.43
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the effect of federal income taxation
upon the participant and us under the Plan based upon the Internal Revenue Code.
This summary is not intended to be complete and does not discuss the income tax
laws of any municipality, state or country outside of the United States. It is
advisable that a participant contact his or her own qualified tax advisor
concerning the application of tax laws.
If an option granted under the Plan is an incentive stock option, the
optionee will recognize no taxable income upon grant or exercise of the
incentive stock option unless the alternative minimum tax rules apply. Upon the
resale or exchange of the shares any gain (or loss) will be taxed to the
optionee as ordinary income (or loss) or capital gain (or loss), depending on
how long the optionee has held the stock.
All options that do not qualify as incentive stock options are taxed as
non-qualified stock options. An optionee will not recognize any taxable income
at the time of grant of a non-qualified stock option. However, upon the
exercise of a non-qualified stock option, the optionee will generally recognize
ordinary income for federal income tax purposes measured by the excess, if any,
of the then fair market value of the shares over the exercise price. The
ordinary income recognized upon exercise of a non-qualified stock option by an
optionee who is also one of our employees will be treated as wages for tax
purposes and will be subject to tax withholding out of the current compensation,
if any, paid to the optionee. Upon resale of such shares by the optionee, any
difference between the sale price and fair market value on the date of exercise
will be treated as capital gain (or loss).
We will be entitled to a tax deduction in the same amount as the ordinary
income, if any, recognized by the optionee (i) upon exercise of a non-qualified
stock option and (ii) upon the sale of shares acquired by exercise of an
incentive stock option in a disqualifying disposition. We will not be allowed a
deduction for federal income tax purposes as a result of the exercise of an
incentive stock option, regardless of the applicability of the alternative
minimum tax.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE 1997
STOCK INCENTIVE PLAN.
STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
Proposals of stockholders submitted pursuant to Rule 14a-8 under the
Securities and Exchange Act of 1934, as amended and intended to be presented for
consideration at our 2002 Annual Meeting of Stockholders must be received by us
not later than November 30, 2001 in order to be considered for inclusion in our
proxy materials for that meeting.
The Company's Bylaws also establish an advance notice procedure with
respect to certain stockholder proposals and director nominations. In the event
a stockholder wishes to nominate a candidate for election as a director, or
wishes to propose any other matter for consideration at the Annual Meeting,
other than proposals to be included in the Proxy Statement, written notice of
such intent to make such nomination or propose such action must be given to the
Secretary of the Company pursuant to certain procedures set forth in the
Company's Bylaws, a copy of which is available upon request from the Secretary
of the Company. These procedures provide, among other things, that such
shareholder's written notice of intent must be delivered to the Secretary of the
Company not less than 60 days nor more than 90 days prior to the scheduled
meeting date; unless less than 70 days prior notice or public disclosure of the
date of the meeting is given or made by the Company, in which event such notice
of intent must be received not later than the earlier (i) of the 10th day
following the date on which notice of the meeting was mailed or such public
disclosure made or (ii) two (2) days prior to the date of the scheduled meeting.
Any such notice must contain certain specified information concerning the
proposed matter and the stockholder submitting the proposed matter, all as set
forth in the Bylaws. The chairman of the Annual Meeting may refuse to
acknowledge the nomination of any person or the request for such other action
not made in compliance with the foregoing procedures. If the foregoing
procedures are not followed and such nomination or other request for action is
nonetheless permitted, the proxy holders appointed by the Company herein shall
have discretionary voting authority with respect to such matters at the Annual
Meeting.
OTHER MATTERS
We are not aware of any other business that will be presented at the Annual
Meeting. If any other business is properly brought before the Annual Meeting,
it is intended that proxies will be voted in accordance with the judgment of the
persons voting the proxies.
Whether or not you plan to attend the meeting, please vote by Internet or
mark, sign, date and promptly return the enclosed proxy card in the enclosed
envelope. No postage is required for mailing in the United States.
By Order of the Board of Directors.
/S/ Ronald L. Hendrick
Ronald L. Hendrick
Executive Vice President,
Chief Financial Officer and Secretary
Fort Collins, Colorado
April 4, 2001
HESKA CORPORATION
AUDIT COMMITTEE CHARTER
PURPOSE
The Board of Directors of Heska Corporation (Heska or the Company), hereby
defines and establishes the role of its Audit Committee (the Committee). The
Audit Committee will make such examinations as are necessary to monitor the
corporate financial reporting and the internal and external audits of Heska and
its subsidiaries, to provide to the Board of Directors the results of its
examinations and recommendations derived therefrom, to outline to the Board
improvements made, or to be made, in internal accounting controls, to nominate
independent auditors, and to provide the Board such additional information and
materials as it may deem necessary to make the Board aware of significant
financial matters that require board attention.
In addition, the Audit Committee will undertake those specific duties and
responsibilities listed below and such other duties as the Board of Directors
may from time to time prescribe.
COMPOSITION AND MEMBERSHIP
The Committee shall be comprised of at least three (3) directors, one of whom
shall be appointed Committee Chairman by the Board of Directors. All Committee
members must be independent directors, in accordance with the corporate
governance rules of the Nasdaq National Market. The members of the Audit
Committee will be appointed by and will serve at the discretion of the Board of
Directors.
MEETINGS
The Audit Committee will meet at least one time each year. The Audit Committee
may establish its own schedule which it will provide to the Board of Directors
in advance.
The Audit Committee will meet separately with the Chief Executive Officer and
separately with the Chief Financial Officer of the Company at least annually to
review the financial affairs of the Company. The Audit Committee will meet with
the independent auditors of the Company, at such times as it deems appropriate,
to review the independent auditor's examination and audit report.
MINUTES
The Audit Committee will maintain written minutes of its meetings, which minutes
will be filed with the minutes of the meetings of the Board of Directors.
RESPONSIBILITIES
The responsibilities of the Audit Committee shall include:
1. Reviewing on a continuing basis the adequacy of the Company's system of
internal controls;
2. Reviewing on a continuing basis the activities, organizational structure
and qualifications of the Company's internal audit function, if any;
3. Reviewing the independent auditors' proposed audit scope and approach;
4. Conducting a post-audit review of the financial statements and audit
findings, including any significant suggestions for improvements provided
to management by the independent auditors;
5. Reviewing the performance of the independent auditors;
6. Reviewing before release the audited financial statements and Management's
Discussion and Analysis in the Company's annual report on Form 10-K;
7. Reviewing before release the unaudited quarterly operating results in
the Company's quarterly earnings release;
8. Overseeing compliance with SEC requirements for disclosure of auditor's
services and audit committee members and activities;
9. Reviewing management's monitoring of compliance with the Company's
Standards of Business Conduct and with the Foreign Corrupt Practices Act;
10. Reviewing, in conjunction with counsel, any legal matters that could have a
significant impact on the Company's financial statements;
11. Providing oversight and review of the Company's asset management policies,
including an annual review of the Company's investment policies and
performance for cash and short-term investments;
12. If necessary, instituting special investigations and, if appropriate,
hiring special counsel or experts to assist;
13. Reviewing related party transactions for potential conflicts of interest;
14. Prepare a report for inclusion in the Company's proxy statements regarding
whether the committee has reviewed and discussed certain matters with
management and the independent auditors and whether the committee has
recommended to the Board that the audited financial statements be included
in the Company's Annual Report on Form 10-K;
15. File a copy of the committee charter every three years with the Company's
proxy statement; and
16. Performing other oversight functions as requested by the full Board of
Directors.
In addition to the above responsibilities, the Audit Committee will undertake
such other duties as the Board of Directors delegates to it, and will report, at
least annually, to the Board regarding the Committee's examinations and
recommendations.
THE FOREGOING CHARTER WAS ADOPTED BY THE BOARD OF DIRECTORS OF HESKA CORPORATION
ON MAY 24, 2000.
PROXY HESKA CORPORATION PROXY
1613 Prospect Parkway
Fort Collins, Colorado 80525
(I) THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints the Board of Directors of Heska
Corporation, or its designee, the undersigned's true and lawful agent and proxy
with full power of substitution, to represent the undersigned at the Annual
Meeting of Stockholders to be held at 1613 Prospect Parkway, Fort Collins,
Colorado on May 17, at 9:00 a.m., and at any adjournment thereof, to vote as
designated below:
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The Board of Directors recommends a vote FOR proposal 1 and 2
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1. To elect one director, Edith W. Martin, to
the Board of Directors to serve until the 2004 FOR WITHOLD
Annual Meeting of Stockholders or until her [ ] [ ]
successor has been duly elected and qualified;
and
2. To approve an amendment to the Company's
1997 Stock Incentive Plan to increase the number FOR AGAINST ABSTAIN
of shares automatically granted to outside [ ] [ ] [ ]
directors;
3. In their discretion, the Proxies are
authorized to vote on any other matters which may
properly come before the Annual Meeting and any
adjournment or postponement of the Annual Meeting
as set forth in the Proxy Statement.
Date________________________, 2001
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Signature
Stockholder Name and address here
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Signature if held jointly
Please sign exactly as name(s) appears
hereon. When shares are held by joint
tenants, both should sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such. If
a corporation, please sign in full corporate
name by president or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
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VOTE BY INTERNET
QUICK *** EASY***IMMEDIATE
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YOUR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN THE SAME
MANNER AS IF YOU HAVE MARKED SIGNED AND RETURNED YOUR PROXY CARD.
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TO VOTE BY INTERNET: Connect to the Website listed below: You will be asked to
enter a control number which is located at the bottom of this form. Then follow
the instructions. THE WEB SITE FOR VOTING IS: www.proxyvoting.com/heska
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IF YOU VOTE BY INTERNET, DO NOT MAIL IN THE PROXY CARD.
THANK YOU FOR VOTING!
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CONTROL NUMBER
123 456 7890
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