1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Heska Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
2 HESKA CORPORATION
1613 PROSPECT PARKWAY
FORT COLLINS, COLORADO 80525
(970) 493-7272
------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------
TIME.................................. 9:00 a.m. on Wednesday, May 24, 2000
PLACE................................. Heska Corporation
1613 Prospect Parkway
Fort Collins, Colorado
ITEMS OF BUSINESS..................... 1. To elect three directors to the
Board of Directors to serve until
the 2003 Annual Meeting of
Stockholders or until their
successors have been duly elected
and qualified;
2. To amend the Company's
Certificate of Incorporation to
increase the number of
authorized shares of common
stock of the Company from 40
million to 75 million;
3. To amend the Company's
Certificate of Incorporation to
modify and delete certain of the
supermajority provisions
therein;
4. To approve an amendment to the
Company's 1997 Employee Stock
Purchase Plan to increase the
number of shares reserved for
issuance under the plan by
500,000 shares; and
5. 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 27,
2000.
ANNUAL REPORT......................... Our 1999 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
-------------------------------
TIME 9:00 a.m. on Thursday May 16, 2002
PLACE Heska Corporation
1613 Prospect Parkway
Fort Collins, Colorado
ITEMS OF BUSINESS 1. To elect to the Board of Directors three directors
to serve until the 2005 Annual Meeting of
Stockholders or until their successors have been
duly elected and qualified.
2. To approve an amendment to the 1997 Employee Stock
Purchase Plan to increase the number of shares
Reserved for issuance under the plan by 1,000,000
shares.
3. To ratify and approve an amendment to Article 8 of
our Bylaws.
4. 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 26, 2002.
ANNUAL REPORT Our 2001 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
April 11, 2002 Ronald L. Hendrick
Executive Vice President,
Chief Financial Officer
and Secretary
April 3, 2000
3
HESKA CORPORATION
------------
PROXY STATEMENT
------------
These proxy materials are furnished to the stockholders of Heska
Corporation, a Delaware corporation ("Heska") in connection with the
solicitation of proxies to be used in voting at the 2000our 2002 Annual Meeting of
Stockholders of the Company and at any adjournment or postponement thereof. THE ENCLOSED PROXY IS SOLICITED BY THE
BOARD OF DIRECTORS OF THE COMPANY.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 24 2000,16, 2002, beginning at 9:00 a.m. The meeting will be held at Heska
Corporation, 1613 Prospect Parkway, Fort Collins, Colorado.
This Proxy Statement, form of proxy card and voting instructions are being mailed
starting April 3, 2000.11, 2002.
STOCKHOLDERS ENTITLED TO VOTE
Stockholders of record at the close of business on March 27, 200026, 2002 are
entitled to notice of and to vote at the Annual Meeting. As of that date, the
Companywe
had _____________________ 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, and 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 American Securities Transfer andComputershare 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
If any other matters are properly presented at the Annual Meeting for
consideration, the persons, named in theThe enclosed proxy card will havegrants the discretionproxy holders discretionary authority to
vote on thoseother matters for you.properly brought before the Annual Meeting. At the date
this proxy statementProxy Statement went to press, we dodid not know of any other matter to be
raised at the Annual Meeting. 4
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 the
Company'sour
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. The otherOther matters 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 unless the vote of more than a majority is
indicated in this Proxy Statement.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.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, certain of our directors and employees may make
solicitation by personal interview, telephone or facsimile. No additional
compensation will be paid to these people for such solicitation.
PROPOSAL 1 - ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES FOR DIRECTORS
The Company'sDIRECTOR
There are three Class II nominees for election this year. Detailed
information on these nominees is provided starting 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 stockholdersStockholders for a
three-year term of office. Mr. Pomroy, Dr. Stevenson and Dr. Hohnke serve as
Class III directors, whose terms expire in 2000; Mr. Schwarzer and Dr. Tebbit
serve as Class I directors, whose terms expire in 2001; and Dr. Grieve, Mr.
Dolan and Mr. Sasen serve as Class II directors, whose terms expire in 2002. The directors of each class hold their positions
until the Annual Meeting of stockholdersStockholders at which time their respective
successors are elected and qualified or until their earlier resignation, removal
from office, death, or incapacity. Three Class II directors are to be elected
at this meeting for a three-year term ending in 2005.
The Board of Directors proposes the election at the Annual Meeting of Dr.
Hohnke, Mr. PomroyA. Barr Dolan, Robert B.
Grieve and Dr. StevensonJohn F. Sasen, Sr. as Class IIIII directors. The persons named on the
enclosed proxy card intend to vote the proxy for the election of these nominees,
unless you indicate on the proxy card that your vote should be withheld from any
or all of such nominees.nominee. If you are voting by Internet, you will be instructed how to withhold
your vote from some or all of such nominees.
Eachvote. All of the nominees hashave indicated his or hertheir willingness to serve as a
member of the Board of Directors if elected; however, if any nomineeone of them 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 anya 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 datefirst anniversary of the
date on which notice of the prior year's Annual Meeting.Meeting was mailed to
stockholders. The deadline for a stockholder to deliver notice of a nomination
for the election of directors at the 20002002 Annual Meeting of Stockholders was
March 25, 2000.4, 2002. No such nominations were received from any stockholder for the Annual
Meeting.received.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
MR. DOLAN, DR. HOHNKE,GRIEVE AND MR. POMROY AND DR. STEVENSONSASEN, SR. AS DIRECTORS OF THE COMPANY.
2
5OUR DIRECTORS.
BIOGRAPHICAL INFORMATION
Certain biographical information of each of the nominees and of the members of the
Board of Directors continuing in office after the Annual Meeting is set forth
below. There are no family relationships among any of the directors, nominees
or executive officers.
Class III
LYLE A. HOHNKE, PH.D.,I
G. IRWIN GORDON, age 56,51, has beenserved us as a director ofsince May 2001. Mr.
Gordon is the Company since
April 1996. Dr. Hohnke is a general partner of 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. ("Diamond")founder and served as Chairman and
CEO from 1994 until its acquisition by the Company 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 compensation committee 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.
DENIS H. POMROY, age 49, has been a director of the Company since March
1995. Mr. Pomroy was appointed a director in conjunction with Volendam
Investeringen N.V's. investment in the Company. He is presently Chief Financial
Officer of CopperCom, Inc. Mr. Pomroy also serves on the boards of two publicly
held technology companies: Madge Networks NV and Superscape Plc. Prior to his
employment with CopperCom, Mr. Pomroy was President of Volendam Capital Advisors
from 1996 to 1999. Mr. Pomroy also served as chief financial officer of Madge
Networks N.V. from 1989 through 1996. He holds a bachelors degree in engineering
from The University of Birmingham, England and is a fellowManaging Partner of The Chartered
Institute of Management Accountants of the U.K.
LYNNOR B. STEVENSON, PH.D., age 56, isTrion Group LP, a founder of the Companyconsulting
and has
been a director of the Company since March 1988. Dr. Stevensoninterim management firm. From July 2000 until August 2001, Mr. Gordon
served as President and Chief Executive Officer of the Company from March 1988 to March
1992. Dr. Stevenson is currently theGruma Corporation. He also
served as President and Chief ExecutiveOperating Officer of Cascade Oncogenics,Suiza Foods Corporation from
February 1998 to October 1999. Mr. Gordon joined Suiza in August 1997 as its
Executive Vice President and Chief Marketing Officer. Prior to joining Suiza,
Mr. Gordon held various positions with subsidiaries of PepsiCo, Inc., including
most recently as Senior Vice President Global Branding for Frito-Lay, Inc., from
May 1996 to August 1997. From July1983 to 1992, Mr. Gordon served as President and
General Manager of several international Frito-Lay companies before becoming
Senior Vice President Marketing, Sales and Public Relations of Frito-Lay
International from 1992 to April 1997, she was Director,
Technology Transfer1996. Prior to joining PepsiCo in 1992, Mr. Gordon
served in various capacities at the UniversityKellogg Company. He currently is a director
and member of Oregon. Shethe Audit Committee of Horizon Organic Holding Corp. Mr. Gordon
holds a Ph.D. degree in
biochemistry from Monash University, Australia and B.Sc. and B.Ed. degreesB.E. from the University of Melbourne, Australia.British Columbia and a Management
Certificate from Stanford University.
EDITH W. MARTIN, PH.D., age 56, 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 1996 to 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
and compensation committees at Immunex. Dr. Martin holds Ph.D. and M.S. degrees
from Georgia Institute of Technology and a B.A. from Lake Forest College.
Class I
FRED M. SCHWARZER,II
A. BARR DOLAN, age 48,52, has beenserved us as a memberdirector since March 1988, and
was Chairman of the Board of Directors of
the Company since June 1994 and Chairman of the Board sincefrom 1988 to January 1999. Since
July 1999 Mr. Schwarzer has also served as a Senior Vice President of C.M.
Capital, a diversified asset management firm and the parent corporation of
Charter Venture Capital. Mr. Schwarzer served as President and Chief Executive
Officer of the Company from November 1994 to December 31, 1998. Prior to that,
Mr. Schwarzer served as the Executive Vice President responsible for the
Company's strategic planning and corporate partnerships from June 1994. From
June through October 1994, Mr. Schwarzer was also an employee of Charter Venture
Capital. Mr. Schwarzer was the founder and a partner in the Mountain View,
California law firm of General Counsel Associates from August 1988 to June 1994
and, prior to founding General Counsel Associates, was a partner in the San
Francisco law firm of Pillsbury Madison & Sutro LLP. He holds a J.D. degree from
the University of California, Berkeley and a B.A. degree from the University of
Michigan.
GUY TEBBIT, PH.D., age 48, has been a director of the Company since March
1997 when he became Novartis Tiergesundheit AG's ("Novartis") designee on the
Board of Directors of the Company. Since January 1997, Dr. Tebbit has served as
Vice President, Research and Development, Regulatory Affairs and Professional
Services at Novartis Animal Health US, Inc ("Novartis US"). From January 1995 to
January 1997, he held the position of Director, Manufacturing and Regulatory
Affairs at Novartis US and from January 1992 to January 1995 he served as Senior
Product Development Manager at Novartis US. Dr. Tebbit holds a Ph.D. from Oregon
State University and a B.S. degree from Northern Illinois University.
Class II
ROBERT B. GRIEVE, PH.D., age 48, a founder of the Company, currently serves
as Chief Executive Officer and Vice Chairman of the Board of Directors. Dr.
Grieve was named Chief Executive Officer effective January 1, 1999 and Vice
Chairman effective December 1994. 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 the
Company's 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.
3
6
A. BARR DOLAN, age 50, has been a director of the Company since March 1988. 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 50, 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 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 57,59, has beenserved us as a director of the Company since October 1998.
Since April 1998, he has served as Executive Vice President and Chief Marketing
Officer of PSS/World Medical, Inc. ("PSS"), 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, ("Becton Dickinson"), 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.
Class III
WILLIAM A. AYLESWORTH, age 59, has served us as a director since June 2000.
Mr. Aylesworth has served as Senior Vice President since 1988 and Chief
Financial Officer of Texas Instruments Incorporated since 1984. He served as
Treasurer of Texas Instruments from 1982 to 2002. From 1972 to 1982, he served
in treasury services, and from 1967 to 1972, he held numerous assignments in
control, manufacturing, and marketing for Texas Instruments. Mr. Aylesworth is
the immediate pastalso 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 59, 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 several private companies and he is a
member of the Health Industry Distributors
Association,audit and compensation committees of several of these companies.
He holds Ph.D. and M.A. degrees from the University of Oregon, an M.B.A. from
the Hartford Graduate Institute and a non-profit organization that addressesB.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 needsUniversity of Oregon. She holds a Ph.D. degree from Monash University,
Australia and B.Sc. and B.Ed. degrees from the healthcare industry.University of Melbourne,
Australia.
BOARD AND COMMITTEE MEMBERSHIP AND MEETINGS
During 1999, theThe 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 nominees.
Except as noted below, all directorsheld eight meetings during 2001. No director
attended at leastfewer than 75% of the aggregate number of meetings of the Board of
Directors or the committees upon which such director served that were held
during his or her respective term of office, other than Dr. Martin who did not
attend three meetings of the Board of Directors and Board committees on which they
served.two committee meetings.
The Board of Directors held seven meetings duringhas an Audit Committee, Corporate Governance
Committee and a Compensation Committee. These committees are comprised entirely
of non-employee directors.
The Audit Committee principally reviews the year ended December
31, 1999. Dr. Tebbit attended fivescope of the seven meetings.
The members ofannual audit,
monitors the Compensation Committee during 1999 were Mr. Dolan, Dr.
Hohnkerelationship with our independent auditors, advises and Mr. Sasen. The Compensation Committee held two meetings during 1999.
The Compensation Committee's functions are to make recommendations toassists the
Board of Directors in evaluating the auditors' examination, and provides
oversight in connection with respect to generalour financial and specific compensation policiesaccounting organization and
practicesfinancial reporting. The Audit Committee consists of the CompanyDirectors Gordon, as
Chairman, Aylesworth, Dolan and to administer its 1997 Stock Incentive Plan and
1997 Employee Stock Purchase Plan.
The members ofMartin. In August 2001, the Audit Committee during 1999 werewas
reconstituted and Mr. Dolan,Gordon replaced Mr. Pomroy
and Dr. Tebbit.Aylesworth as Chairman. The Audit
Committee held three meetings during 1999.2001. Dr. Tebbit
was unable toMartin did not attend any meeting. The Audit Committee's functions are to review
the scopeone of the
annual audit, monitormeetings.
The Corporate Governance Committee is responsible for monitoring the
independent auditor's relationship
with the Company, advisestructure, size and assistcomposition of the Board of Directors and, in consultation
with the Chief Executive Officer, recommending for nomination candidates for
election to the Board of Directors. The Corporate Governance Committee is also
responsible for evaluating the auditor's examination,compensation of Board members and provide oversight to the Company's financial and
accounting
organization and financial reporting.
DIRECTORS COMPENSATION
In August 1999,responsibilities of other Board committees. The Corporate
Governance Committee is further responsible for reviewing the balance of
expertise and skills among Board members, Board and committee effectiveness,
individual director performance and succession planning for top management
positions. Names of prospective candidates for election to the Board of
Directors approvedmay be submitted to the Secretary for referral to the Corporate
Governance Committee. Any stockholder who wishes to make a nomination for
election to the Board of Directors at an annual or special meeting for the
election of directors must comply with procedures set forth in our Bylaws. The
Corporate Governance Committee consists of Directors Aylesworth, as Chairman,
Gordon, Sasen and Hohnke. The Corporate Governance Committee was formed in
August 2001 and did not hold any meetings during 2001.
The Compensation Committee is responsible for reviewing and approving our
compensation policies, including the compensation paid to executive officers,
and administering our stock incentive plans. The Compensation Committee
consists of Directors Sasen, as Chairman, Dolan, Hohnke and Martin. The
Compensation Committee held three meetings in 2001. Dr. Martin did not attend
one of the meetings.
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 40,000
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, (i) 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
40,000 shares of common stock at an exercise price equal to the fair market
value of the common stock on the date of grant and (ii) each outside director
who will serve as chairperson of a committee of the Board of Directors,
following any annual meeting of stockholders, is automatically granted an
additional option 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. These
annual grants are 100% vested at the time of grant. No director is eligible to
receive the initial 40,000-share grant and the annual 40,000-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.
It is our policy to compensate each "outside" or non-employee directorsdirector with
additional options to purchase Heskashares of our common stock.
Non-employeestock for attendance at
Board meetings, Board Committee meetings and for consulting services rendered to
the Company. Under this policy, outside directors receive an option to purchase
100200 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 5001,000 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. In
addition, each new non-employee director elected to the Company's 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 non-employee
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.
See "Employment Agreements" below for a description of the compensation
arrangement with Dr. Grieve, an officer and director of the Company.
4
7Grieve.
BOARD COMPOSITION AND VOTING AGREEMENT
Mr. Dolan was appointed to the Company'sour Board of Directors in connection with equity
investments in the Companyus by Charter Ventures and Charter Ventures II, L.P. (collectively, "Charter"). Dr. TebbitHohnke
was appointed to theour Board of Directors in connection with our acquisition of
Diamond.
PROPOSAL 2 -AMENDMENT TO THE 1997 EMPLOYEE STOCK PURCHASE PLAN
We are seeking your approval of an equity investmentamendment to our 1997 Employee Stock
Purchase Plan (the "Plan") to increase the number of shares of our common stock
available for issuance under the Plan by 1,000,000 shares, from 750,000 to
1,750,000 shares. The Board of Directors approved this amendment in February
2002. The Plan has been suspended, as there are not sufficient shares available
for purchase and will be reinstated if this increase is approved. The purpose
of the Plan is to provide our employees with an opportunity to increase their
stake in the Companysuccess of our business by Novartis
Tiergesundheit AG ("Novartis"). Mr. Pomroypurchasing our stock at a discount to
the fair market value through a convenient payroll deduction plan. We believe
the Plan is an important component of our employee compensation package and
approximately 40% of our employees participated in the Plan during the most
recent purchase period. We also believe that the Plan assists us in attracting
and retaining skilled personnel. The essential features of the Plan are
summarized below.
SUMMARY OF 1997 EMPLOYEE STOCK PURCHASE PLAN
General. The Plan was appointed tooriginally approved by the Board of Directors and
stockholders in April 1997 and provides our employees with the opportunity to
purchase shares of common stock through payroll deductions. The number of
shares of common stock previously reserved for issuance under the Plan was
750,000 shares. As of December 31, 2001, 743,639 shares of common stock had
been sold under the Plan, leaving 6,361 shares available for purchase.
Administration. The Compensation Committee administers the Plan. The
Plan, and the right of participants to make purchases thereunder, is intended to
qualify under the provisions of Sections 421 and 423 of the Company in connection with an investment inInternal Revenue
Code. All questions of interpretation or application of the CompanyPlan are determined
by
Volendam Investeringen N.V. ("Volendam"). Dr. Hohnke was appointed to the Board of Directors or its appointed committee, and its decisions are
final, conclusive and binding upon all participants.
Eligibility and Participation. Currently, all U.S. employees who work more
than 20 hours per week for more than five months per calendar year, and have
been employed by us or one of our U.S. subsidiaries for more than 30 consecutive
days are eligible to participate in the Plan, unless the employee would own 5%
or more of the Companytotal combined voting power of our stock at the end of an
offering period. Participation in connection with the Company's April 1996
acquisitionPlan is voluntary.
Offering Dates. Shares of Diamond.
Novartis, Volendamstock are offered for purchase through a series
of overlapping 24-month offering periods. New offering periods start on each
January 1 and Charter (collectively,July 1. Each offering period is comprised of four successive six-
month accumulation periods.
Purchase Price. The purchase price per share is 85% of the "Investors") are partieslower of
(a) the closing price per share on the last trading day before the commencement
of the applicable offering period, or Entry Price, or (b) the closing price of
the stock on the last trading day of the accumulation period, or Exit Price.
Payroll Deductions; Payment of Purchase Price. Employees may authorize
payroll deductions in 1% multiples of cash compensation for each accumulation
period they complete within an offering period, up to a Voting Agreement datedmaximum of 10%. An
employee may discontinue his or her participation in the Plan at any time and
may increase or decrease the rate of payroll deduction not more than two times
during any accumulation period.
Purchase of Stock. By executing an enrollment form, an employee is
entitled to purchase shares on the last day of the accumulation period. The
maximum number of shares that may be purchased during an accumulation period is
determined at the end of the period by dividing the amount accumulated in such
participant's account during the period by the lower of the Entry Price or the
Exit Price, subject to a maximum of 5,000 shares. Unless the employee's
participation is discontinued prior to such purchase date, his or her purchase
of the shares will occur automatically at the end of the accumulation period at
the applicable price.
Notwithstanding the foregoing, no participant may purchase shares if
immediately after such purchase, the participant would own stock and/or
outstanding options to purchase stock comprising five percent or more of the
total combined voting power of our stock. In addition, no participant is
permitted to purchase stock with a value in excess of $25,000 (determined at the
fair market value of the stock at the time such option is granted) in any
calendar year.
Withdrawal. Generally, a participant may withdraw from an offering period
at any time by written notice without affecting his or her eligibility to
participate in future offering periods. However, once a participant withdraws
from a particular offering period, that participant may not participate again in
the same offering period. To participate in a subsequent offering period, the
participant must deliver a new subscription agreement to us.
Termination of Employment. Termination of a participant's employment for
any reason, including disability or death, cancels his or her option and
participation in the Plan immediately. In such event, the payroll deductions
credited to the participant's account will be returned to him or her or, in the
case of death, to the person or persons entitled thereto as provided in the
Plan.
Changes in Capitalization. The number of April 12, 1996 (the "Voting Agreement"). Undershares reserved under the Voting Agreement each Investor agreed to votePlan,
the limit on the number of shares which may be purchased during an the
accumulation period and the purchase price per share of common stock under the
Plan shall be proportionately adjusted for any increase or act with respect to alldecrease in the
number of outstanding shares of our common stock resulting from a subdivision or
consolidation of shares, the Company's votingpayment of a stock now owneddividend, any other increase or
subsequently acquireddecrease in such shares effected without receipt or payment of consideration by
such
Investor such that one designeeus, the distribution of eachthe shares of Novartis, Volendam and Charter is
electeda subsidiary to our stockholders or a
similar event. Such adjustment shall be made by the Board of Directors, whose
determination in that respect shall be final, binding and conclusive.
Change of Control, Merger or Consolidation. In the event of a change of
control (as defined in the Plan), the Board of Directors shall shorten any
accumulation periods and offering periods then in progress by setting a new
exercise date and any offering periods shall end on the new exercise date. The
new exercise date shall be prior to the change of control and the shares will be
purchased automatically on the new exercise date, unless the participant has
already withdrawn from the offering period. In the event of a merger or
consolidation which does not constitute a change of control, the Plan shall
continue unless the plan of merger or consolidation provides otherwise.
Amendment and Termination of the Company.Plan. The Investors furtherBoard of Directors may at any
time terminate or amend the Plan. No amendment shall be effective unless it is
approved by the holders of a majority of the votes cast at a duly held
stockholders' meeting, if such amendment would require stockholder approval in
order to comply with Section 423 of the Code.
FEDERAL INCOME TAX CONSEQUENCES
The proposed amendment will have no effect upon the tax consequences to
participants or us.
The following brief summary of the effect of federal income taxation upon
the participant and us with respect to the shares purchased under the Plan does
not purport to be complete, and does not discuss the tax consequences of a
participant's death or the income tax laws of any state or foreign country in
which the participant may reside.
The Plan, and the right of participants to make purchases thereunder, is
intended to qualify under the provisions of Sections 421 and 423 of the Code.
Under these provisions, no income will be taxable to a participant until the
shares purchased under the Plan are sold or otherwise disposed of. Upon sale or
other disposition of the shares, the participant will generally be subject to
tax in an amount that depends upon the holding period. If the shares are sold
or otherwise disposed of more than two years from the first day of the
applicable offering period and more than one year from the date of purchase, the
participant will recognize ordinary income measured as the lesser of (a) the
excess of the fair market value of the shares at the time of such sale or
disposition over the purchase price, or (b) an amount equal to 15% of the fair
market value of the shares as of the first day of the applicable offering
period. Any additional gain will be treated as long-term capital gain. If the
shares are sold or otherwise disposed of before the expiration of these holding
periods, the participant will recognize ordinary income generally measured as
the excess of the fair market value of the shares on the date the shares are
purchased over the purchase price. Any additional gain or loss on such sale or
disposition will be long-term or short-term capital gain or loss, depending on
the holding period. We generally are not entitled to a deduction for amounts
taxed as ordinary income or capital gain to a participant except to the extent
of ordinary income recognized by participants upon a sale or disposition of
shares prior to the expiration of the holding periods described above.
PARTICIPATION IN THE PLAN
The following table sets forth the number of shares purchased under the
Plan during 2001 by each of (i) the named executive officers; (ii) all executive
officers as a group; and (iii) all employees, including all officers who are not
currently executive officers, as a group. Non-employee directors are not
eligible for participation in the Plan.
NUMBER OF SHARES
PURCHASED UNDER THE
Name and Position PLAN IN 2001
---------------------------------------- -------------------
Robert B. Grieve -
Chairman of the Board and Chief Executive Officer
Nominee for election as a director
James H. Fuller 10,000
President and Chief Operating Officer
Ronald L. Hendrick 9,303
Executive Vice President, Chief Financial
Officer and Secretary
Dan T. Stinchcomb -
Executive Vice President, Research and
Development
Carol T. Verser 6,084
Executive Vice President, Intellectual
Property and Business Development
All executives officers as a group 25,387
All employees, including all officers who are not 301,352
executive officers, as a group
VOTE REQUIRED FOR 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 Employee Stock Purchase Plan
will become effective immediately.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE 1997
EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL 3 - AMENDMENT TO ARTICLE 8 OF THE BYLAWS
SUMMARY OF PROPOSAL
On January 10, 2002, our Board of Directors approved the submission of an
amendment to our Bylaws that would impose additional restrictions on the grant
and repricing of stock options and certain types of "toxic financings" to our
stockholders. This amendment of our Bylaws requires stockholder approval.
Section 8.1 of our current Bylaws requires that all options to any officer
or director must be granted at no less than the closing market price on the date
of grant and contains certain limitations on our ability to reprice stock
options. Section 8.1 provides that any amendment of Section 8.1 requires
stockholder approval. Section 8.1 was added at the request of one of our
stockholders, the State of Wisconsin Investment Board ("SWIB"), as a condition
to its purchase of common stock in our December 1999 public offering. In
addition, we have agreed to vote their sharescertain restrictions on our ability to sell or issue
common stock or other equity securities for a purchase price which is subject to
adjustment based on the market price of our common stock at the time of
conversion, exercise or exchange (sometimes referred to as "toxic financings"),
without first consulting our five largest shareholders. We agreed to this
restriction in such mannerFebruary 2001 as a condition to elect as the remaining directorsSWIB's purchase of common stock
in our private offering of securities in February 2001.
As a condition to purchasing common stock in our private offering in
December 2001, SWIB required that we submit to our stockholders a further
amendment to Section 8.1 of the Company individuals unaffiliated with anyBylaws that would impose additional restrictions
on the grant or repricing of stock options and further limit our ability to
participate in certain types of financings. Specifically, we would be
prohibited from taking the following actions without first obtaining the
approval of the Investors but who are
reasonably acceptable to allholders of a majority of the Investors. By executingshares entitled to vote at a duly
convened meeting of our stockholders:
* grant any stock option, including stock appreciation rights, at less than
100% of the Voting
Agreement,fair market value on the Companydate of grant;
* reduce the exercise price of any stock option or stock appreciation
right, or cancel and re-grant options at a lower exercise price
(including a "6 month and 1 day" exchange program);
* sell or issue any security which is convertible, exercisable or
exchangeable into shares of common stock, having a conversion, exercise
or exchange price which is subject to downward adjustment based on the
market price of our common stock at a future date; or
* enter into an equity line of credit or similar agreement or arrangement
to sell or issue stock at a price that is fixed after the execution date
of the agreement, whether or not based on any predetermined price-
setting formula or calculation method.
The full text of the proposed amendment and restatement of Article 8 of our
Bylaws is set forth on Appendix A of this Proxy Statement, and we encourage you
to read it in its entirety.
The Board of Directors carefully considered the additional restrictions
being imposed on us when it agreed to use its best effortssubmit this amendment to our stockholders
as a condition to SWIB's purchase of shares of common stock. The Board took
into account the existing restrictions in our Bylaws as well as our previous
agreement to limitations on financing activities. The Board noted that the
additional restrictions relating to stock options might limit our ability to
retain management or motivate employees during a period when our stock price had
declined significantly and specifically that the additional limitations would
have prohibited the restricted stock exchange program that we implemented in
October 2001. The Board also considered the additional restrictions imposed on
our ability to participate in certain types of financing activities. The Board
noted that these types of "toxic financings" are often the only financing terms
available to financially distressed companies and the additional requirement of
obtaining stockholder approval might cause significant delay or be an impediment
to obtaining such financing. The Board of Directors also considered that
submitting the nominee of
each of Novartis, Volendam and Charterproposed Bylaw amendment to be electedour stockholders was a condition to
the Company'ssale of its common stock in December 2001 and that such financing was in the
best interests of our stockholders. Therefore, the Board of Directors. The Voting Agreement terminates on December 31, 2005, unless prior to
that date anyDirectors
recommends a vote in favor of the Investors ceases to beneficially hold 2,000,000 shares (as
adjusted for stock splits, recapitalizations and similar events)Bylaw amendment.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the votingholders of a majority of our outstanding common
stock ofis required to approve this proposal. Therefore, failure to vote will
have the Company.
5
same effect as a vote against the amendment. If approved by the
stockholders, the proposed amendment to our Bylaws will become effective
immediately.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND
ARTICLE 8 OF OUR BYLAWS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 27, 200026, 2002 as
to shares of the Company'sour common stock beneficially owned by: (i) each of the Named Executive Officersnamed
executive officers listed in the Summary Compensation Table; (ii) each of the Company'sour
directors; (iii) all of our directors and executive officers of the
Company as a group; and
(iv) each person who is known by the Companyus to own beneficially more than 5% of the Company'sour
common stock.
Shares Percentage
Beneficially Beneficially
Owned(1) Owned(1)
------------SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OWNED(1)
- ------------------------------------------------- ------------- ------------
State of Wisconsin Investment Board (2) 9,490,182 19.8%
P.O. Box 7842
Madison, WI 53707
Entities associated with Charter Ventures (2)........................................................ 5,206,924(3) 8,414,717 17.6%
525 University Avenue, Suite 1500
Palo Alto, CA 94301
Novartis Tiergesundheit AG..................................................AG 3,705,389 7.7%
Klybeckstrasse A4A
4002 Basel
Switzerland
Volendam Investeringen, N.V. (3)............................................ 2,304,633
14 John B. Gorsiraweg, P.O. Box 3889
Curacao, Netherlands Antilles
Capital Group International, Inc. (4)....................................... 2,179,000
Capital Guardian Trust Company
11100 Santa Monica Blvd.
Los Angeles, CA 90025
Ralston Purina Company (5).................................................. 2,331,184
Checkerboard Square
St. Louis, MO 63164
State of Wisconsin Investment Board (6)..................................... 5,223,000
P.O. Box 7842
Madison, WI 53707
Zesiger Capital Group LLC (7)............................................... 2,860,000(4) 6,033,060 12.6%
320 Park Avenue, 30th Floor
New York, NY 10022
Capital Group International, Inc. (5) 2,967,500 6.2%
1100 Santa Monica Blvd.
Los Angeles, CA 90025
Lombard Odier & Cie (6) 3,911,851 8.2%
11, Rue de la Corraterie
1204 Geneva
Switzerland
William A. Aylesworth (9) 64,000 *
A. Barr Dolan (8)(13)....................................................... 5,209,924(7)(9)(10) 8,473,517 17.7%
G. Irwin Gordon (9) 45,800
Robert B. Grieve, Ph.D. (8)(9)(13)............................................. 577,576 965,181 2.0%
Lyle A. Hohnke, Ph.D. (13).................................................. 110,125
Denis H. Pomroy (10)(13).................................................... 2,336,033(9) 166,225 *
Edith W. Martin, Ph.D. (9) 93,900 *
John F. Sasen, Sr. (13)...................................................... 7,900
Fred M. Schwarzer (11)(13).................................................. 426,692(9) 68,000 *
Lynnor B. Stevenson, Ph.D. (13)............................................. 185,300
Guy Tebbit, Ph.D. (12)...................................................... 3,705,389(9) 240,100 *
James H. Fuller (13)........................................................ 125,667(9) 512,957 *
Ronald L. Hendrick (13)..................................................... 47,495
R. Lee Seward, D.V.M. (13).................................................. 227,427
Giuseppe Miozzari,(9) 229,402 *
Dan Stinchcomb, Ph.D. (13)............................................... 89,271(9) 112,962 *
Carol T. Verser, Ph.D. (9) 95,934 *
All directors and executive officers as a group
(14 persons)(13)(14)..................................................... 13,161,777(9)(10) 11,220,234 22.8%
- ----------------
* Amount represents less than 1% of the Company'sour common stock.
6
9
(1) To the Company'sour 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 27, 200026,
2002 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 12, 2002 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 9,490,182 shares.
(3) Based upon information derived from a Schedule 13D filed on
January 9, 2002 by entities associated with Charter Ventures
pursuant to Section 13D of the Exchange Act reporting their
beneficial ownership of our common stock. According to the
Schedule 13D, these entities have sole power to vote and dispose
of 8,414,717 shares. Includes 3,386,5103,387,510 shares and options to
purchase 1,000 shares of common stock held by Charter Ventures
and 1,818,4145,027,207 shares and options to purchase 1,000 shares of
common stock held by Charter Ventures II, L.P.
(3) Based upon information derived from a Schedule 13G, as amended, filed by
Volendam Investeringen N.V. pursuant to Section 13 of the Securities
Exchange Act of 1934 and the rules promulgated thereunder (the "Exchange
Act") reporting its beneficial ownership of Common Stock as of February 16,
1999. According to the Schedule 13G Volendam has sole power to vote and
dispose of the shares.
(4) Based upon information derived from a Schedule 13G as amended, filed on
February 14, 2002 by Zesiger Capital Group International, Inc., and Capital Guardian Trust Company
(collectively, "Capital") pursuant to the Exchange Act, reporting its
beneficial ownership of common stock as of February 10, 2000. According to
the Schedule 13G, Capital has sole power to vote 1,894,000 shares and the
sole power to dispose of 2,179,000 shares.
(5) Based upon information derived from a Schedule 13G filed by Ralston Purina
Company ("Ralston Purina")LLC pursuant to
Section 13G of the Exchange Act reporting its beneficial
ownership of shares as of August 4, 1998. Includes
1,165,592 shares ofour common stock which may be acquired upon exercise of
warrants and do not have voting rights until issued upon exercise.stock. According to the Schedule 13G,
Ralston PurinaZesiger has the sole power to vote 3,799,960 shares and the sole
power to dispose of these6,033,060 shares.
(6)(5) Based upon information derived from a Schedule 13G, filed on
February 11, 2002 by State of
Wisconsin Investment Board ("SWIB")Capital Group International, Inc., pursuant
to Section 13G of the Exchange Act reporting its beneficial
ownership of shares as of January 10, 2000.our common stock. According to the Schedule 13G,
SWIBCapital has sole power to vote 2,577,200 shares and the sole
power to dispose of these2,967,500 shares.
(7)(6) Based upon information derived from a Schedule 13G filed by
Zesiger Capital
Group LLC ("Zesiger") pursuantLombard Odier & Cie on February 14, 2002 to Section 13G of the
Exchange Act reporting its beneficial ownership of Common stock as of January 28, 2000.shares.
According to the Schedule 13G, ZesigerLombard has the sole power to vote 2,105,000 shares
and the sole power to
dispose of 2,860,0003,911,851 shares.
(8)(7) 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, a
directorone of the Company,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)his status as a general
partner.
(8) Does not include 2,304,63315,649 shares of common stock held by
Dr. Grieve's wife, with respect to which Dr. Grieve disclaims
beneficial ownership.
(10) Includes 2,304,633 shares held by Volendam Investeringen, N.V., with
respect to which Mr. Pomroy disclaims beneficial ownership except to the
extent of his proportionate interest therein, and 3,680 shares of common
stock subject to repurchase by the Company.
(11) Does not include 949 shares of common stock held by Mr. Schwarzer's wife,
with respect to which Mr. Schwarzer disclaims beneficial ownership.
(12) Represents shares held by Novartis, with respect to which Dr. Tebbit
disclaims beneficial ownership.
(13)(9) Includes an aggregate of 1,082,7921,338,606 shares of common stock
issuable upon exercise of stock options currently exercisable
within 60 days of March 27,
200026, 2002 as follows: Mr. Aylesworth,
64,000; Mr. Cicotello, 9,083; Mr. Dolan, 4,600,60,800; Mr. Gordon,
45,800; Dr. Grieve, 456,875;399,480; Dr. Hohnke, 23,734;
Mr. Pomroy, 6,400;79,834; Dr. Martin,
57,900; Mr. Sasen, 7,500; Mr. Schwarzer, 249,692;68,000; Dr. Stevenson, 6,300; Dr. Seward, 46,458;61,100; Mr. Hendrick,
35,416;98,020; Mr. Fuller, 116,667;123,957; Dr. Miozzari, 39,521; Mr. Hudnut, 39,066102,256;
Dr. Stinchcomb, 91,813; and Dr. Stinchcomb, 50,563.
(14)Verser, 76,563.
(10) Includes shares held by the entities referenced in footnotes 8, 10 and 12
whichfootnote 7
that are affiliated with certain directors.
7
10a director.
EXECUTIVE COMPENSATION
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information about our common stock that may
be issued upon exercise of options, warrants and rights under all of our equity
compensation plans as of December 31, 2001, including the 1988 Stock Option
Plan, the 1994 Executive Stock Plan, the 1997 Stock Incentive Plan and the 1997
Employee Stock Purchase Plan. Our stockholders have approved all of these
plans.
Number of Securities
Remaining Available for
Future Issuance Under
Number of Securities to Weighted Average Equity Compensation
be Issued Upon Exercise Exercise Price of Plans (excluding
of Outstanding Options, Outstanding Options, securities reflected in
Plan Category Warrants and Rights Warrants and Rights in column (a))
- ----------------------------- ----------------------- ------------------- -----------------------
Equity Compensation Plans
Approved by Stockholders 3,901,860 $2.57 2,814,434
Equity Compensation Plans Not
Approved by Stockholders None None None
Total 3,901,860 2,814,434
SUMMARY COMPENSATION TABLE
The following table sets forth compensation for services rendered in all
capacities to the Companyus for the past three fiscal years ended December 31 1999 of
(i) Robert B. Grieve, Vice Chairman of the Board and Chief Executive Officer and
(ii) the
Company'sour four other most highly compensated executive officers as of
December 31, 1999 (the "Named Executive Officers").2001, collectively referred to as the named executive officers.
Long Term
Annual Compensation
Compensation AwardsLONG TERM COMPENSATION AWARDS
ANNUAL COMPENSATION -------------------------------------
--------------------------------------------- RESTRICTED SECURITIES
BONUS OTHER ANNUAL STOCK AWARDS UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($)(1) ($)(2) COMPENSATION ($)(5)(6) OPTIONS (#)
- ---------------------------- ------- -------------- ----------- -------------- ----------------- ---------------------------------
Securities
Fiscal Underlying All Other
Name and Principal Position Year Salary($)(1) Options(#) Compensation($)
- --------------------------- ------- ------------ ---------- ---------------------------------
Robert B. Grieve 1999 $250,0002001 297,499 23,174 - 238,000 125,000
Chairman of the Board 2000 260,000 11,044 - - 200,000 --
Vice Chairman
and Chief Executive Officer 1998 195,000 150,000 --
1997 190,000 -- --1999 245,400 - - - 200,000(7)
James H. Fuller 1999 $229,000(2) 350,000 --2001 255,149 18,540 - 238,000 100,000
President and Chief Operating 2000 249,600 8,595 - - 150,000
Officer 1999 229,200(3) 68,730(4) - - 350,000(7)
Ronald L. Hendrick 1999 $180,000 --2001 196,799 9,734 - 68,000 100,000
Executive Vice President, and Chief 2000 187,720 4,725 - - 115,000
Financial Officer 1998 15,000(3) 100,000 --
R. Lee Sewardand Secretary 1999 $185,000(4) $174,208(5)180,000 - - - -
Dan T. Stinchcomb 2001 184,124 9,187 - 13,600 30,000
Executive Vice President, 1998 185,000 60,000 --
19972000 180,000 3,412 - - 30,000
Research and Development 1999 160,000 - - - 35,000
Carol Talkington Verser 2001 180,224 6,309 - 6,800 50,000
Executive Vice President, 2000 140,152 2,754 - - 15,000
Intellectual Property and 1999 122,400 - - - 20,000
--
Giuseppe Miozzari (6) 1999 $173,000 37,000 --
Chief Executive Officer of Heska Holding AG 1998 166,000 -- --
1997 140,000(7) 100,000 --Business Development
(1) Salary includes amounts, if any deferred pursuant to 401(k)
arrangements.
(2) Performance bonus based on financials goals established in the
Company's Management Incentive Compensation Plan.
(3) Mr. Fuller's employment with the Companyus commenced on January 19, 1999 and his
1999 salary reflects a partial year of employment.
(3) Mr. Hendrick's employment with(4) Includes a starting bonus of $60,000 and a moving expense
reimbursement of $8,730.
(5) Represents restricted stock issued in exchange for the Company commenced in December 1998 and
his 1998 salary reflects a partial yeartermination of
employment.
(4) Dr. Seward's employment terminated effective November 30, 1999. Amount
includes eleven months of salary and one month of separation pay. See note
5 below.
(5) Includes $169,584 in separation pay to be paid in eleven equal monthly
installments during 2000 and $4,624 for health insurance premiums for
health insurance coverage through November 30, 2000 or until Dr. Seward
obtains health insurance coverage from another employer. Does not include
the value from the continuation of vesting on allemployee stock options owned by
Dr. Seward through November 30, 2000.as described more fully below under "Restricted
Stock Exchange Program."
(6) Dr. Miozzari's salaryThe number and value of unvested restricted stock based upon the closing
market price per share of the common stock at December 31, 2001 ($1.00)
were: Grieve, 335,416 shares valued at $335,416; Fuller, 335,416 shares
valued at $335,416; Hendrick, 95,833 shares valued at $95,833; Stinchcomb,
19,166 shares valued at $19,166; and Verser, 9,583 shares valued at $9,583.
(7) These options were cancelled in exchange for the years 1998 and 1997 has been adjusted to
reflect the current rate of exchange.
(7) Dr. Miozzari's employment with the Company commencedrestricted stock as described
in March 1997 and his
1997 salary reflects a partial year of employment.
8
11more detail below under "Restricted Stock Exchange Program."
STOCK OPTIONS
The following tables summarize option grants to, and exercises by, the
Named Executive Officersnamed executive officers during 1999,2001, and the value of the options held by each
such person as of December 31, 1999.during 2001.
OPTION GRANTS IN 19992001
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term (4)
-------------------------------------------------------------------- ---------------------------------
Number of Percentage of
Securities Total Options
Underlying Granted to
Options Employees in Exercise Price Expiration
Name Granted(#)INDIVIDUAL GRANTS
---------------------------------------------------------
NUMBER OF PERCENTAGE OF POTENTIAL REALIZABLE VALUE
SECURITIES TOTAL OPTIONS AT ASSUMED ANNUAL RATES
UNDERLYING GRANTED TO OF STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES IN EXERCISE FOR OPTION TERM(4)
GRANTED FISCAL YEAR PRICE EXPIRATION -------------------------------
NAME (#)(1) Fiscal Year(%) ($/Sh)SH)(2) Date(3)DATE(3) 5%($) 10%($)
- ------------------------------ ----------- ------------- ------------ ---------- ------------- -------------- ---------- ----- ----------------------
Robert B. Grieve 20,449 1.22% $5.19125,000 11.72 1.25 02/08/09 $66,745 $ 169,144
179,551 10.73% $5.19 02/08/09 $586,048 $1,485,16005/11 98,265 249,022
James H. Fuller 81,775 4.89% $5.37100,000 9.37 1.25 02/03/09 $276,167 $ 699,862
268,225 16.03% $5.37 02/03/09 $905,839 $2,295,57605/11 78,612 199,218
Ronald L. Hendrick -- -- -- -- -- --
R. Lee Seward -- -- -- -- -- --
Giuseppe Miozzari -- -- -- -- -- --100,000 9.37 1.25 02/05/11 78,612 199,218
Dan T. Stinchcomb 30,000 2.81 1.25 02/05/11 23,584 59,765
Carol T. Verser 50,000 4.69 1.25 02/05/11 39,306 99,609
- ------------
(1) The right to exercise these stock options vests ratably on a monthly
basis over a four yearfour-year period. Under the terms of the Company'sour stock plans,
the
committee designated by the Board of Directors to administer such plansour Compensation Committee retains the discretion, subject to certain
limitations, to modify, extend, or renew outstanding options and to
reprice outstanding options. Options may currently 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. However, Proposal 3, on page 11 of this Proxy Statement, if
approved would restrict the ability to reprice. See Proposal 3 herein
for a more detailed discussion.
(2) The exercise price is equal to 100% of the fair market value on the
date of grant as determined by the Board of Directors.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
the Company'sour 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.
9
12
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Securities Underlying Value of Unexercised
Unexercised Options at Options In-the-Money Options at
at DecemberSECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1999(#) December2001(#) DECEMBER 31, 1999($2001($)(2)
------------------------------ -----------------------
Shares
Acquired on Value
Name Exercise(#) Realized($ACQUIRED ON VALUE ---------------------------------- ---------------------------------
NAME EXERCISE(#) REALIZED ($)(1) Exercisable Unexercisable Exercisable UnexercisableEXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------------- ----------- ------------- ----------- ------------------------------------- ------------ -------------------- ---------------- ---------------- ---------------- ----------------
Robert B. Grieve 8,000 $ 19,252 442,792 255,208 $531,812 $19,68719,600 10,936 342,709 207,291 50,750 -
James H. Fuller -- -- 80,208 269,792 -- --- - 89,583 160,417 - -
Ronald L. Hendrick -- -- 25,000 75,000 -- --
R. Lee Seward 49,198 $115,233 38,750 41,250 -- --
Giuseppe Miozzari -- -- 75,250 61,750 $ 74,437 $33,562- - 67,292 147,708 - -
Dan T. Stinchcomb - - 74,417 54,583 - -
Carol T. Verser - - 57,292 57,708 13,000 -
- ------------
(1) These values were calculated based 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, 19992001 ($2.25)1.00), minus the
applicable per share exercise price.
RESTRICTED STOCK EXCHANGE PROGRAM
On August 9, 2001, based upon management's review of the status of stock
options previously granted to employees, including executive officers, the Board
of Directors determined that the majority of such stock options had an exercise
price significantly in excess of the current market price of our common stock,
which was $1.099 per share as of August 9, 2001. Consequently, these options
did not provide the incentive to the recipient that was originally intended. In
order to provide a renewed financial incentive to current employees, including
executive officers, the Board of Directors approved an exchange program in which
we offered Heska's current employees the opportunity to exchange all options
outstanding with exercise prices greater than $3.90 per share under the 1997
Stock Incentive Plan for shares of restricted stock. The offer closed on
September 28, 2001 with options to purchase 1,044,900 shares of common stock
exchanged for 1,044,900 shares of restricted stock. The restricted stock vests
over 48 months from its issuance on October 1, 2001.
Under current interpretations issued by the Securities and Exchange
Commission, the cancellation of underwater or out-of-the-money stock options,
and the exchange of restricted stock therefor must be disclosed under Proxy
Statement rules as a repricing. Therefore, the following information discloses
the out-of-the money-stock options cancelled by executive officers and the
shares of restricted stock exchanged therefor.
TEN-YEAR OPTION/SAR REPRICINGS
SECURITIES
UNDERLYING MARKET PRICE EXERCISE LENGTH OF ORIGINAL
NUMBER OF OF STOCK AT PRICE OPTION TERM
OPTIONS TIME OF AT TIME OF NUMBER OF SHARES REMAINING AT DATE OF
NAME DATE REPRICED (#) REPRICING ($) REPRICING($) GRANTED(1) REPRICING OR AMENDMENT
- ----------------------------- ----------- ------------ ------------ ------------- ------------------ ----------------------
Robert B. Grieve 10/01/01 150,000 0.68 11.88 150,000 5.3
Chairman of the Board 10/01/01 200,000 0.68 5.19 200,000 6.2
and Chief Executive Officer
James H. Fuller 10/01/01 350,000 0.68 5.37 350,000 6.8
President and Chief
Operating Officer
Ronald L. Hendrick 10/01/01 100,000 0.68 5.25 100,000 5.2
Executive Vice President,
Chief Financial Officer and
Secretary
Dan T. Stinchcomb 10/01/01 20,000 0.68 11.88 20,000 5.3
Executive Vice President,
Research and Development
Carol T. Verser 10/01/01 10,000 0.68 11.88 10,000 5.3
Executive Vice President,
Intellectual Property and
Business Development
(1) Restricted stock grants were made in exchange for the cancellation of
options at a ratio of 1.0 shares of restricted stock per 1.0 option
share.
PENSION AND LONG-TERM INCENTIVE PLANS
The Company hasWe have no pension or long-term incentive plans.
EMPLOYMENT AGREEMENTS
During 1999, the Company was2001, we were a party to employment agreements with each of the Named Executive Officers.our
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 of the Company.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.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.arrangements. 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.salary. In the case of Dr. Miozzari,Stinchcomb, the payments (including amounts mandated by Swiss law) would be 12 months' salary if
he is terminated without cause priorset forth in
this employment agreement are equal to July 1, 2000, or six months' salary if he is terminated
without cause after that date.other than a change in control, or one year's salary if he is
terminated without cause due to a change in control. In November 1999, the Company and Dr. Seward agreed that his employment
would terminate effective November 30, 1999. In connection with the arrangement
with Dr. Seward, the Company and Dr. Seward entered into a Separation Agreement
and a Consultant Services and Confidentiality Agreement. Under the Separation
Agreement, Dr. Seward will be paid his 1999 base salary of $185,000 through
November 30, 2000 and will continue to vest under all outstanding stock options
and stock purchase agreements through November 30, 2000. The Company will pay
the health insurance premiumscase of Dr. Seward and his dependents through November
30, 2000Verser,
the payments set forth in this employment agreement are equal to six months'
salary if she is terminated without cause other than a change in control, or until he becomes covered under the health insurance plan of another
employer, whicheverone
year's salary if she is earlier. Under Dr. Seward's Consultant Services and
Confidentiality Agreement, Dr. Seward will provide ongoing, part time consulting
servicesterminated without cause due to the Company through November 30, 2000. In consideration for such
services, the Company will pay to Dr. Seward $1,200 per full day that Dr. Seward
provides consulting services (pro rated for partial days) and will reimburse Dr.
Seward his reasonable out-of-pocket expenses incurreda change in providing consulting
services to the Company. The Company may pay Dr. Seward's consulting fee in a
combination of 50% cash and 50% in shares of Heska stock. If payment is made in
stock, the price for the stock issued will be the average closing price for the
shares during the month the services were rendered.
10
13control.
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 (the "Committee") to assist stockholders in understanding the
objectives and procedures used in establishing the compensation of the Company'sour executive
officers. ThreeFour 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. ItsOur
responsibilities include:
o* Establishing the Company's compensation philosophy for all employees,
including the CEOChief Executive Officer and other executive officers;
o* Reviewing the performance of the CEO;
oChief Executive Officer;
* Determining salary levels and stock grants for the CEOChief Executive
Officer and other executive officers; oand
* 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
The Committee believesWe 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, the Committee
believeswe believe that
the use of traditional performance standards, such as profit levels and return
on equity, areis 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, improving financial performance, 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,
theThe Company's compensation structure for executive
officers includes a combination of base salary, stock options, restricted stock
awards and a 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. The
Committee,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 the basis of itsour knowledge of executive
compensation in the industry and based on practices of comparable companies in
the Company's industry, believes that the Company's salary levels for the executive officers
are at a level that the Committee, at the time such salary determinations were
made, considered to be reasonable and necessary given the Company's financial
resources and the stage of its development.industry.
Stock Options. The Committee believesWe 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. The Committee isWe 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). TheThis Committee believes that these vesting provisions
help both to retain qualified employees and to motivate them to achieve long-termlong-
term increases in stock value, providing continuing benefits to the Company and
its stockholders beyond those in the year of grant.
CashRestricted Stock Exchange Program. As more fully discussed above, the
Company offered current employees of Heska the opportunity to exchange all
options outstanding with exercise prices greater than $3.90 per share under the
1997 Stock Incentive Plan for shares of restricted stock. The offer closed on
September 28, 2001 with options to purchase 1,044,900 shares of common stock
exchanged for 1,044,900 shares of restricted stock. The number of restricted
shares received by the named executive officers in connection with this exchange
is included in the Summary Compensation Table. The following named executive
officers participated in the exchange: Dr. Grieve exchanged 150,000 options with
exercise prices of $11.88 and 200,000 options with exercise prices of $5.19; Mr.
Fuller exchanged 350,000 options with exercise prices of $5.37; Mr. Hendrick
exchanged 100,000 options with exercise prices of $5.25; Dr. Stinchcomb
exchanged 20,000 options with exercise prices of $11.88; and Dr. Verser
exchanged 10,000 options with exercise prices of $11.88.
Management Incentive Compensation Plan. The Committee believesWe believe that cash performance
based incentives can also serve an important role in executive compensation.
On the
Committee's recommendation, the Board of Directors has adopted a cash bonusThe management incentive compensation plan to provideprovides incentives to the executives
of the Company to meet and exceed certain predetermined annual net income and
revenue goals. The Committee has
established these financial goals for the 2000 calendar year, and any such
bonuses with respect to the 2000 calendar year will only be paid after the
audited financial results for the year are available. While the Committee
believeswe believe that providing cash bonuses to the executives
of the Company is an essential part of creating a competitive executive
compensation package, the
Committee haswe 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. 11
14At
management's request this plan has been suspended in 2002 in an effort assist
the Company toward its goal of profitability.
CHIEF EXECUTIVE OFFICER COMPENSATION
The annual salary of Robert B. Grieve, the Company's Vice Chairman of the Board
and CEO,Chief Executive Officer, was increased to $250,000$310,000 in 1999,2001 and, at the
Committeerequest of Dr. Grieve will remain unchanged during 2002, and we awarded him a
stock option in February, 19992001 to purchase an additional 200,000125,000 shares of
common stock at the
time he was named Chief Executive Officer of the Company.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 statementProxy 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
Chairman
Lyle A. Hohnke
Ph.D.Edith W. Martin
John F. Sasen, Sr.
12
15, Chairman
AUDIT DISCLOSURE
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has served as our independent public accountants since
our inception in 1988. It has been selected to audit our financial statements
for the fiscal year beginning January 1, 2002. 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.
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 2001 were Directors Gordon, Aylesworth, Dolan and
Martin. In August 2001, the Audit Committee was reconstituted and Mr. Gordon
was appointed Chairman. All 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. 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.
We rely on the work and assurances of management, which has the primary
responsibility for preparing the Company's financial statements, and of the
independent auditors, who are responsible for auditing the financial statements.
The functions of the Audit Committee are not intended to duplicate or supersede
these activities. Except to the extent required by the Nasdaq Stock Market,
Committee members are not required to have professional training or expertise
associated with career professionals in the fields of accounting and auditing.
In addition, the independent auditors have more time and detailed information
about the Company than do Committee members. Consequently, the Committee is not
providing any professional certification as to the independent auditors' work or
any expert assurance as to the financial statements.
In this context, during the year 2001, 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, and concluded that, the non-
audit services by the auditors are compatible with maintaining the auditors'
independence with respect to the audit of the Company's financial statements.
In reliance on these reviews and discussions and the report of the
independent auditors, we have recommended to the Board of Directors, that the
audited financial statements be included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2001, for filing with the Securities
and Exchange Commission.
Respectfully submitted,
William A. Aylesworth
A. Barr Dolan
G. Irwin Gordon, Chairman
Edith W. Martin
AUDIT FEES, FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES AND ALL
OTHER FEES
The fees billed to us by Arthur Andersen LLP for 2001 are as follows:
Audit Fees. The aggregate fees billed by Arthur Andersen LLP for the audit
of our annual financial statements for 2001 and for the reviews of our quarterly
financial statements for 2001 were $110,000.
Financial Information Systems Design and Implementation Fees. No fees were
billed by Arthur Andersen LLP for the design or implementation of our financial
information systems during 2001.
All Other Fees. The aggregate fees for all other services provided by
Arthur Andersen LLP during 2001 were $131,870, including audit related fees of
$69,850 and other fees of $62,020. Audit related fees include statutory audits,
benefit plan audits, work associated with possible transactions, accounting
consultations, assistance with registration statements, comfort letters and
consents. Other fees were primarily for tax services.
The Audit Committee has considered whether and concluded that, the scope
and nature of the non-audit services provided by Arthur Andersen LLP as
described above are compatible with maintaining Arthur Andersen's independence
as our principal accountants with respect to the audit of our financial
statements.
STOCK PRICE PERFORMANCE GRAPH
The following graph illustrates a comparison of the cumulative total
stockholder return (change in stock price plus reinvested dividends) of the
Company'sour
common stock with the Center for Research in Securities Prices ("CRSP") Total Return
Index for the Nasdaq Stock Market (US(U.S. and Foreign) and the CRSP Total Return
Index for Nasdaq Pharmaceutical Stocks assuming an investment of $100 in each on
June 30,December 31, 1997, the dateyear of the Company'sour 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 the Company'sour
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
Pharmaceutical Nasdaq US & Heska
Stocks Foreign Corporation
Jul-97 100.000 100.000 100.000
Sep-97 105.978 109.069 172.727
Dec-97 98.631 97.928 150.000
Mar-98 115.577 107.648 180.303
Jun-98 118.218 99.619 134.097
Sep-98 105.357 93.982 68.182
Dec-98 136.386 124.577 53.794
Mar-99 152.303 136.706 39.394
Jun-99 166.986 139.118 28.036
Sep-99 170.674 158.975 27.273
Dec-99 249.927 232.795 27.273
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
Jun-01 136.162 274.378 8.646
Dec-01 122.822 254.167 8.081
SECTION 16(a)16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Compliance with Section 16(a) of the Securities Exchange Act of 1934
requires the Company'sour directors, executive officers and persons who own more than 10% of
a registered class of the Company'sour equity securities ("10% Holders") to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and reports of changes in
ownership of common stock and other of our equity securities of
the Company.securities. Directors,
officers and 10% Holdersor greater stockholders are required by SEC regulations to
furnish the Companyus 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 the
Companyus and the
representations made by the reporting persons to the Company,
the Company believesus, we believe that during fiscal 1999 its2001
our directors, officers and 10% Holdersor greater stockholders complied with all filing
requirements under Section 16(a) of the Exchange Act, with the exceptions noted below. Dr. Stevenson failed to report
the exercise of certain stock options in February 1999. This exercise was
subsequently reported on a Form 4 in April 1999. Dr. Stinchcomb failed to report
the exercise of certain stock options and sale of the underlying shares in May
1999. The exercise and sale were subsequently reported on a Form 5 in February
2000. Mr. Fuller failed to report the open-market purchase of common stock in
December 1999. This purchase was subsequently reported on a Form 5 in February
2000.
13
16Act.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
In July 1998, the CompanyAGREEMENTS WITH NOVARTIS
We have entered into a Research and Licensing Agreementdistribution agreements with Ralston Purina. Pursuant to such agreement, Ralston Purina acquired
exclusive rights to license certainvarious subsidiaries
and/or divisions of the Company's discoveries, know-how and
technologies for innovative diets for dogs and cats, and the parties have agreed
to allocate certain resources to research, develop and commercialize pet food
products that are the subjectNovartis AG, one of the collaboration.our principal stockholders. In the event any products
that are the subject of the collaboration are commercialized by Ralston Purina,
they would owe certain royalties to the Company. In addition, Ralston Purina
acquired 1.165 million shares of the Company's 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 was $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
warrant was vested immediately as of July 30,August
1998, and expires in three years
with respect to any unexercised shares.
Novartis, a principal stockholder of the Company, has ongoing marketing
rights to certain of the Company's products under development and is a party to
a Screening and Development Agreement and Right of First Refusal Agreement with
the Company. Novartis obtained such rights in connection with its purchase of
the Company's preferred stock in April 1996 (which converted into common stock
upon the closing of the Company's initial public offering), but did not make any
separate payments for these rights.
Effective as of August 18, 1998, the Companywe entered into an Exclusive
Distribution Agreementagreement with Novartis Agro K.K., Tokyo ("Novartis Agro"), 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 products to be marketed under the agreement are Solo Step(TM)our exclusive
distributor for SOLO STEP CH and Solo Step(TM)SOLO STEP FH Heska's in-clinic heartworm diagnostic tests for
caninesproducts and
felines, the HESKA(TM)our feline Trivalent Intranasal/Intraocular Vaccine in Japan upon obtaining
regulatory approval in Japan for felines and the HESKA(TM) Bivalent Intranasal/Intraocular Vaccine for felines.such products. In consideration of these distribution rights, Novartis has entered into a Right
of First Refusal Agreement wherein Novartis granted the Company a right of first
refusal to evaluate for possible development and marketing worldwide certain new
product technologies for the veterinary market as they become available from
Novartis.
On February 9, 1999, the Company and Cascade Oncogenics, Inc. ("Cascade")2001, we entered
into an Evaluation and Option Agreement, pursuant to which the Company
obtained the right to evaluate for veterinary diagnostic applications certain
technologies and biological materials to which Cascade has rights. In addition,
the Company acquired an option to enter into a license agreement with respectNovartis Animal Health Canada, Inc. to such technologies. In consideration of such rights, the Company paid or will pay
to Cascade a fee and, if the option to enter into the license agreement is
exercised, the Company would pay to Cascade certain royalties and milestone
payments following the sale of any diagnostic product developed and sold by the
Company pursuant to such license. Dr. Lynnor Stevenson, a director and founder
of the Company, is a director, the chief executive officer and a significant
stockholder of Cascade.
In December 1994, Mr. Schwarzer executed a promissory notebe our exclusive
distributor for the benefit
of the CompanyFlu AVERT, I.N., our equine influenza vaccine in the principal amount of $61,950 as payment for 177,000 shares
of common stock. The note accrues interest at the rate of seven and one-half
percent per annum. As of December 31, 1999, the total amount due, principal and
accrued interest was $86,112.76. Mr. Schwarzer and the Company entered into a
Consultant Services and Confidentiality Agreement wherein, the Company agreed to
forgive all of the outstanding indebtedness for principal and interest under the
note on the earliest of (i) April 30, 2000, (ii) the annual meeting of
stockholders of the Company held in 2000, or (iii) the date on which the
agreement is terminated before its expiration by the Company for cause or by Mr.
Schwarzer without cause, in which case such indebtedness will not be forgiven.
(See "Employment Agreements").Canada.
LOAN TO EXECUTIVE OFFICER
In December 1999, the Compensation Committeewe approved a personal loan to Dr. Grieve in the amount offor $100,000.
This loan is evidenced by a promissory note whichthat is due and payable on
December 23, 2002. Interest on the outstanding principal balance accrues at the
rate of five and seventy-four one-hundredths
percent5.74% 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 Heskaus is terminated for any reason
other than Dr. Grieve's death or permanent disability.
14
17
PROPOSAL 2 - AMENDMENT TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has approved an amendment of Article IV of the
Company's Restated Certificate of Incorporation to increase the number of
authorized shares of common stock from 40,000,000 to 75,000,000. The Board of
Directors recommends that the Company's stockholders approve this amendment. The
rights of additional authorized shares will be identical to the shares now
authorized. Although the authorization would not, in itself, have any effect on
your rights as a stockholder, issuance of additional shares of common stock for
other than a stock split or dividend could have a dilutive effect on earnings
per share.
Of the 40,000,000 shares of common stock currently authorized for issuance
approximately 6,248,327 are unissued, however all but 409,643 are reserved for
issuance pursuant to the Company's stock option and employee stock purchase
plans and for issuance upon conversion of an outstanding warrant. The authorized
shares of common stock in excess of those issued will be available for issuance
at such times and for such corporate purposes as the Board of Directors may deem
advisable without further action by the stockholders, unless stockholder
approval is required by applicable laws or the rules of any stock exchange or
national securities association trading system.
We do not have any current plans to issue additional shares of common
stock, other than under previously authorized benefit and compensation plans;
however this amendment will enhance the Board's flexibility in possible future
actions, such as stock splits, stock dividends, acquisitions, and other
corporate activities involving the common stock.
The Company's Restated Certificate of Incorporation, attached to this Proxy
Statement in Annex A, illustrates how Article IV of the Company's Certificate
would read if the amendment is adopted.
REQUIRED APPROVAL
The affirmative vote of the holders of a majority of the Company's
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 Article IV will become
effective upon the filing of a Certificate of Amendment with the Secretary of
State of Delaware amending the Company's Restated Certificate of Incorporation,
which will occur as soon as reasonably practicable.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND ARTICLE
IV OF THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION.
PROPOSAL 3 - REPEAL OF MOST SUPERMAJORITY PROVISIONS OF THE
COMPANY'S CERTIFICATE OF INCORPORATION
SUMMARY OF PROPOSAL
As a condition to purchasing common stock in the Company's public offering
in December 1999, the State of Wisconsin Investment Board, required the Company
to propose an amendment to its Certificate of Incorporation to the stockholders
of the Company. This proposal provides that provisions requiring a supermajority
(66 2/3rds%) vote to amend or repeal certain articles of the Certificate of
Incorporation, other than those relating to the Company's classified board of
directors, are to be modified to require a simple majority vote. The Company is
seeking the approval of its stockholders to repeal the provisions of the
Company's Certificate of Incorporation that are described below. The provisions,
in their current form, limit the ability of the holders of the Company's common
stock to amend or repeal provisions of the Company's bylaws and Certificate of
Incorporation by requiring a supermajority vote. By making these amendments, the
stockholders of the Company will have the ability to amend or repeal most
provisions of the Company's bylaws and Certificate of Incorporation with a
majority vote.
The Company seeks to amend the following provisions of the Certificate of
Incorporation to reduce the vote required to amend or repeal these provisions
and in the case of Article VIII to amend or repeal the bylaws of the Company
from a supermajority vote to a majority vote:
15
18
(a) Article VII: Special meetings of the stockholders of the Company may
be called only at the request of the Chairman of the Board of
Directors, the Chief Executive Officer or President of the Company or
by a resolution duly adopted by the affirmative vote of a majority of
the Board of Directors;
(b) Article VIII: Stockholders have the authority to amend or repeal the
bylaws of the Company; however, Article 3.1 of the bylaws, relating to
the classified board of directors, will continue to retain the
previous requirement of sixty-six and two thirds (66 2/3%) stockholder
vote to amend or repeal; and
(c) Article XI: Limitation of liability of directors and indemnification
and insurance for directors and officers.
The repeal of the supermajority vote to amend these provisions will provide
the stockholders of the Company with greater power to control the Company's
affairs. In some instances this may work to the disadvantage of some
stockholders. For instance, the Board believes that under some circumstances, in
an acquisition context, a lack of supermajority voting may cause stockholders to
receive less than they otherwise would for their shares. Nevertheless, the
Company believes that the supermajority voting requirement for the amendment of
Articles VII, VIII and XI of the Company's Restated Certificate of Incorporation
should be repealed, with the exception of the supermajority voting provision
contained in Article VIII, relating to the classified board, which should be
retained.
The Company's Restated Certificate of Incorporation, attached to this Proxy
Statement in Annex A, illustrates how provisions of the Company's Certificate
would read if the Supermajority Provisions were repealed. Also included in Annex
A is a marked version, indicating the changes that would be made to the existing
provisions of the Company's Certificate if the Supermajority Provisions were
repealed.
REQUIRED APPROVAL
The affirmative vote of the holders of at least sixty-six and two-thirds
percent (66 2/3%) of the Company's 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
amendments to the Certificate of Incorporation will be filed with the Secretary
of State of the State of Delaware.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND MOST OF
THE SUPERMAJORITY PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION.
16
19
PROPOSAL 4 -AMENDMENT TO THE 1997 EMPLOYEE STOCK PURCHASE PLAN
SUMMARY OF 1997 EMPLOYEE STOCK PURCHASE PLAN
The 1997 Employee Stock Purchase Plan was approved by the Board of
Directors and stockholders in April 1997. The purpose of the Plan is to provide
eligible employees with an opportunity to increase their stake in the success of
the Company by buying common stock at a discount through periodic payroll
deductions.
Currently, all U.S. employees who work more than 20 hours per week for more
than five months per calendar year, and have been employed by Heska or a U.S.
subsidiary of Heska for more than 30 consecutive days are eligible to
participate in the Plan, unless the employee would own 5% or more of the total
combined voting of the Company at the end of an offering period. Participation
in the Plan is voluntary. We believe that this Plan is an important factor in
attracting and retaining skilled personnel.
Shares of stock are offered for purchase through a series of overlapping
24-month offering periods. New offering periods start on each January 1 and July
1. Each offering period is comprised of four successive six-month accumulation
periods. Employees may authorize payroll deductions in 1% multiples of cash
compensation for each accumulation period they complete within an offering
period, up to a maximum of 10%. The purchase price per share is 85% of the lower
of (a) the closing price of the stock on the last trading day of the
accumulation period or (b) the closing price per share on the last trading day
before the commencement of the applicable offering period.
PROPOSED AMENDMENT
Management recently reviewed the number of shares available for issuance
under the Plan. As of December 31, 1999 a total of 21,314 shares remained
available for purchase under the Plan. Based upon estimates of the number of
shares expected to be purchased during the coming years, management presented to
the Board of Directors a recommendation to increase the number of shares to the
pool reserved for issuance under the Plan from 250,000 to 750,000. The Plan was
amended, subject to stockholder approval, by the Board in February 2000.
The amendment, amends and restates Section 12 (a) of the Plan to read as
follows:
"(a) AUTHORIZED SHARES. The aggregate number of shares of Stock
available for purchase under the Plan shall be 750,000, subject to
adjustment pursuant to Section 12."
FEDERAL INCOME TAX CONSEQUENCES
The proposed amendment will have no effect upon the tax consequences to
participants or the Company.
REQUIRED APPROVAL
The affirmative vote of the holders of a majority of the Company's
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 1997 Employee Stock
Purchase Plan will become effective immediately.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE 1997
EMPLOYEE STOCK PURCHASE PLAN.
17
20
STOCKHOLDER PROPOSALS FOR THE 20012003 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 the Company's 2001our 2003 Annual Meeting of Stockholders must be received by
the Companyus not later than December 4, 200012, 2002 in order to be considered for inclusion in
the Company'sour proxy materials for that meeting.
The Company'sAlternatively, our 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 includedfor possible inclusion in the Proxy Statement writtenpursuant to Rule 14a-8,
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 Secretaryor mailed or sent by other means of the
Companywritten communication and
received by us 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 disclosurefirst
anniversary 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 meetingprior year's Annual Meeting was
mailed to stockholders. For the 2003 Annual Meeting, this means that any such
proposal or such public
disclosure made or (ii) two (2) days prior to the date of the scheduled meeting.nomination must be submitted no earlier than January 11, 2003 and no
later than February 10, 2003. 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 Companyus herein
shall have discretionary voting authority with respect to such matters at the
Annual Meeting.
OTHER MATTERS
The Company knowsWe are not aware of noany 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/ RONALDRonald L. HENDRICK
-------------------------------------Hendrick
Ronald L. Hendrick
Executive Vice President,
Chief Financial Officer and Secretary
Fort Collins, Colorado
April 3, 2000
18
21
ANNEX11, 2002
APPENDIX A
RESTATED CERTIFICATEPROPOSED AMENDMENT TO ARTICLE 8 OF INCORPORATION
OF
HESKA CORPORATION
HESKA CORPORATION, a corporation organizedTHE BYLAWS
The proposed amendment amends and existing under the lawsrestates Article 8 of the State of Delaware, hereby certifiesBylaws to read
as follows:
FIRST: The name of this corporation is Heska Corporation.
SECOND: The original Certificate of Incorporation of the
corporation was filed with the Secretary of State of the State of
Delaware on March 27, 1997"8.1 Stock Options and the original name of the corporation was
Heska Merger Corporation. A Restated Certificate of Incorporation of
the corporation was filed with the Secretary of State of the State of
Delaware on May 28, 1997. A Certificate of Merger whereby Heska
Corporation, a California corporation, was merged with and into this
corporation and this corporation's name was changed to Heska
Corporation was filed with the Secretary of State of the State of
Delaware on May 29, 1997. A Restated Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on July 7,
1997.
THIRD: The Restated Certificate of Incorporation of said
corporation shall be amended and restated to read in full as follows:
ARTICLE I
The name of this corporation is HESKA CORPORATION.
ARTICLE II
The registered office of the corporation within the State of Delaware
is located at 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
-1-
22
ARTICLE IV
A. Authorized Stock. This corporation is authorized to issue two
classes of shares, to be designated Common Stock and Preferred Stock,
respectively. This corporation is authorized to issue seventy-five million
(75,000,000) shares of Common Stock, $.001 par value per share, and twenty-five
million (25,000,000) shares of Preferred Stock, $.001 par value per share.
B. Preferred Stock. The Preferred Stock may be issued in any number of
series, as determinedToxic Securities
Unless approved by the Board of Directors. The Board of Directors may by
resolution fix the designation and number of shares of any such series, and may
determine, alter, or revoke the rights, preferences, privileges and restrictions
granted to or imposed upon any wholly unissued series. The Board of Directors
may thereafter in the same manner, within the limits and restrictions stated in
any resolution or resolutions of the Board of Directors originally fixing the
number of shares constituting any series, increase or decrease the number of
shares of any such series (but not below the number of shares of that series
then outstanding). In case the number of shares of any series shall be
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
C. Common Stock.
1. Relative Rights of Preferred Stock and Common Stock. All
preferences, voting powers, relative, participating, optional or other
special rights and privileges, and qualifications, limitations or
restrictions of the Common Stock are expressly made subject and
subordinate to those that may be fixed with respect to any shares of
the Preferred Stock.
2. Voting Rights. Except as otherwise required by law or this
Restated Certificate of Incorporation, each holder of Common Stock
shall have one vote in respect of each share of stock held by such
holder of record on the books of the corporation for the election of
directors and on all matters submitted to a vote of stockholders of the
corporation.
3. Dividends. Subject to the preferential rights of the
Preferred Stock, if any, the holders of shares of Common Stock shall be
entitled to receive, when and if declared by the Board of Directors,
out of the assets of the corporation which are by law available
therefor, dividends payable either in cash, in property or in shares of
capital stock.
4. Liquidation, Dissolution or Winding Up. In the event of any
dissolution, liquidation or winding up of the affairs of the
corporation, after distribution in full of the preferential amounts, if
any, to be distributed to the holders of shares of the Preferred Stock,
holders of Common Stock shall be entitled, unless otherwise provided by
law or this
-2-
23
Restated Certificate of Incorporation, to receive all of the remaining
assets of the corporation of whatever kind available for distribution
to stockholders ratably in proportion to the number of shares of Common
Stock held by them respectively.
ARTICLE V
The corporation is to have perpetual existence.
ARTICLE VI
A. Classified Board. The Board of Directors shall be divided into three
classes, designated Class I, Class II and Class III, as nearly equal in number
as possible, and the term of office of directors of one class shall expire at
each annual meeting of stockholders, and in all cases as to each director when
such director's successor shall be elected and shall qualify or upon such
director's earlier resignation, removal from office, death or incapacity.
Additional directorships resulting from an increase in number of directors shall
be apportioned among the classes as equally as possible. The initial term of
office of directors of Class I shall expire at the annual meeting of
stockholders in 1998; that of Class II shall expire at the annual meeting in
1999; and that of Class III shall expire at the annual meeting in 2000; and in
all cases as to each director when such director's successor shall be elected
and shall qualify or upon such director's earlier resignation, removal from
office, death or incapacity. At each annual meeting of stockholders, beginning
with the annual meeting of stockholders in 1998, the number of directors equal
to the number of directors of the class whose term expires at the time of such
meeting (or, if less, the number of directors properly nominated and qualified
for election) shall be elected to hold office until the third succeeding annual
meeting of stockholders after their election.
B. Changes. The Board of Directors of this corporation, by amendment
to the corporation's bylaws, is expressly authorized to change the number of
directors in any or all of the classes of directors without the consent of the
stockholders.
C. Elections. Elections of directors need not be by written ballot
unless the Bylaws of the corporation shall so provide.
D. Vote Required to Amend or Repeal. The affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then outstanding shares of the stock of the corporation
entitled to vote generally in the election of directors, voting together as a
single class, shall be required to amend in any respect or repeal this Article
VI.
-3-
24
ARTICLE VII
A. Special Meetings of Stockholders. Special meetings of the
stockholders of the corporation may be called for any purpose or purposes,
unless otherwise prescribed by statute or by this Restated Certificate of
Incorporation, only at the request of the Chairman of the Board of Directors,
the Chief Executive Officer or President of the corporation or by a resolution
duly adopted by the affirmative vote of a majority of the Boardshares entitled to vote
at a duly convened meeting of Directors.
ARTICLE VIII
A. Amendstockholders, the corporation shall not:
(i) Grant any stock option, including stock appreciation right, with an
exercise price that is less than 100% of the fair market value of the underlying
stock on the date of grant;
(ii) Reduce the exercise price of any stock option, including stock
appreciation right, outstanding or Repeal Bylaws.to be granted in the future; cancel and
re-grant options at a lower exercise price (including entering into any "6 month
and 1 day" cancellation and re-grant scheme), whether or not the cancelled
options are put back into the available pool for grant; replace underwater
options with restricted stock in an exchange, buy-back or other scheme; or
replace any options with new options having a lower exercise price or
accelerated vesting schedule in an exchange, buy-back or other scheme;
(iii) Sell or issue any security of the corporation convertible,
exercisable or exchangeable into shares of common stock, having a conversion,
exercise or exchange price per share which is subject to downward adjustment
based on the market price of the common stock at the time of conversion,
exercise or exchange of such security into common stock (except for appropriate
adjustments made to give effect to any stock splits or stock dividends); or
(iv) Enter into (a) any equity line or similar agreement; or (b) any
agreement to sell common stock (or any security convertible, exercisable or
exchangeable into shares of common stock ("Common Stock Equivalent")) at a
per share price (or, with respect to a Common Stock Equivalent, at a conversion,
exercise or exchange price, as the case may be ("Equivalent Price")) that is
fixed after the execution date of the agreement, whether or not based on
any predetermined price-setting formula or calculation method.
Notwithstanding the foregoing, however, a price protection clause shall be
permitted in an agreement for sale of common stock or Common Stock Equivalent,
if such clause provides for an adjustment to the price per share of
common stock or, with respect to a Common Stock Equivalent, to the Equivalent
Price (provided that such price or Equivalent Price is fixed on or before the
execution date of the agreement) (the "Fixed Price") in the event that the
corporation, during the period beginning on the date of the agreement and
ending no later than ninety (90) days after the closing date of the
transaction, sells shares of common stock or Common Stock Equivalent to
another investor at a price or Equivalent Price, as the case may be, below
the Fixed Price.
8.2 Amendments
The Board of Directors is expressly empowered to adopt, amend or repeal
thethese Bylaws, of the corporation; provided, however, that any adoption, amendment or repeal of thethese
Bylaws of the corporation by the Board of Directors shall require the approval of at least sixty-sixsixty-
six and two-thirds percent (66 2/(66-2/3%) of the total number of authorized directors
(whether or not there exist any vacancies in previously authorized directorships
at the time any resolution providing for adoption, amendment or repeal is
presented to the Board of Directors)board). The stockholders shall also have the power to adopt, amend
or repeal thethese Bylaws, of the corporation, provided, however, that in addition to any vote of the
holders of any class or series of stock of thethis corporation required by law or
by the Restated Certificate of Incorporation of this corporation, the
affirmative vote of the holders of more than fifty percent (50%) of the voting
power of all of the then outstanding shares of the stock of the corporation
entitled to vote generally in the election of directors, voting together as a
single class, shall be required for such adoption, amendment or repeal by the
stockholders of any provisions of the
Bylaws of the corporation.these Bylaws. Notwithstanding the foregoing
sentence, the affirmative vote of the holders of at least sixty-six and two-thirdstwo-
thirds percent (66 2/3%) of the voting power of all of the then outstanding
shares of the stock of the corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required for
the amendment or repeal of Article 3.1 of these Bylaws.
Notwithstanding the Bylawsforegoing paragraph or any provision of the corporation.
ARTICLE IX
The books of the corporation may be kept at such place within or
without the State of Delaware as the bylaws of the corporation may provide or as
may be designated from time to time by the board of directors of the
corporation.
-4-
25
ARTICLE X
Whenever a compromise or arrangement is proposed between the
corporation and its creditors or any class of them and/or between the
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the corporation or of any creditor or stockholder thereof or on the
application of any receivers appointed for the corporation under the provisions
of section 291 of Title 8 of the Delaware Code or on the application of trustees
in dissolution or of any receiver or receivers appointed for the corporation
under the provisions of section 279 of Title 8 of the Delaware Code order a
meeting of the creditors or class of creditors, and/or the stockholders or class
of stockholders of the corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority, in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall if sanctioned by the
court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the corporation, as the case may be, and also on the
corporation.
ARTICLE XI
A. Limitation on Liability. A director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (1) for any
breach of the director's duty of loyalty to the corporation and its
stockholders; (2) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of law; (3) under Section 174 of
the Delaware General Corporation Law; or (4) for any transaction from which the
director derived an improper personal benefit.
If the Delaware General Corporation Law hereafter is amended to further
eliminate or limit the liability of directors, then the liability of a director
of the corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended Delaware
General Corporation Law.
B. Indemnification. The corporation is authorized to indemnify the
directors and officers of this corporation to the fullest extent permissible
under Delaware law.
C. Insurance. The corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense,
-5-
26
liability or loss, whether or not the corporation would have the power to
indemnify such person against such expense, liability or loss under the Delaware
General Corporation Law.
D. Repeal and Modification. Any repeal or modification of the foregoing
provisions of this Article XI shall not adversely affect any right or protection
of any director, officer, employee or agent of the corporation existing at the
time of such repeal or modification.
ARTICLE XII
The corporation reserves the right to amend or repeal any provision
contained in this Restated
Certificate of Incorporation, in the manner nowSection 8.1 of these Bylaws may only be amended or
hereafter prescribed by statute, and all rights conferred upon a stockholder
herein are granted subject to this reservation.
* * * * *
Four: This Restated Certificate of Incorporation was duly
adoptedrepealed by the Board of Directors of this corporation.
Five: This Restated Certificate of Incorporation was duly
adopted by written consent of the stockholders of the corporation in
accordance with Sections 228, 242 and 245 of the General Corporation
Law of the State of Delaware and written notice of such action has been
given as provided in Section 228.
IN WITNESS WHEREOF, Heska Corporation has caused this certificate to be
signed by the undersigned officer, thereunto duly authorized, this ____day of
_____, 2000.
By:
-----------------------------
Name:
Title:
-6-
27
ANNEX A
MARKED COPY
RESTATED CERTIFICATE OF INCORPORATION
OF
HESKA CORPORATION
HESKA CORPORATION, a corporation organized and existing under the laws
of the State of Delaware, hereby certifies as follows:
FIRST: The name of this corporation is Heska Corporation.
SECOND: The original Certificate of Incorporation of the
corporation was filed with the Secretary of State of the State of
Delaware on March 27, 1997 and the original name of the corporation was
Heska Merger Corporation. A Restated Certificate of Incorporation of
the corporation was filed with the Secretary of State of the State of
Delaware on May 28, 1997. A Certificate of Merger whereby Heska
Corporation, a California corporation, was merged with and into this
corporation and this corporation's name was changed to Heska
Corporation was filed with the Secretary of State of the State of
Delaware on May 29, 1997. A Restated Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on July 7,
1997.
THIRD: The Restated Certificate of Incorporation of said
corporation shall be amended and restated to read in full as follows:
ARTICLE I
The name of this corporation is HESKA CORPORATION.
ARTICLE II
The registered office of the corporation within the State of Delaware
is located at 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
-1-
28
ARTICLE IV
A. Authorized Stock. This corporation is authorized to issue two
classes of shares, to be designated Common Stock and Preferred Stock,
respectively. This corporation is authorized to issue seventy-five million
(75,000,000) shares of Common Stock, $.001 par value per share, and twenty-five
million (25,000,000) shares of Preferred Stock, $.001 par value per share.
B. Preferred Stock. The Preferred Stock may be issued in any number of
series, as determined by the Board of Directors. The Board of Directors may by
resolution fix the designation and number of shares of any such series, and may
determine, alter, or revoke the rights, preferences, privileges and restrictions
granted to or imposed upon any wholly unissued series. The Board of Directors
may thereafter in the same manner, within the limits and restrictions stated in
any resolution or resolutions of the Board of Directors originally fixing the
number of shares constituting any series, increase or decrease the number of
shares of any such series (but not below the number of shares of that series
then outstanding). In case the number of shares of any series shall be
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
C. Common Stock.
1. Relative Rights of Preferred Stock and Common Stock. All
preferences, voting powers, relative, participating, optional or other
special rights and privileges, and qualifications, limitations or
restrictions of the Common Stock are expressly made subject and
subordinate to those that may be fixed with respect to any shares of
the Preferred Stock.
2. Voting Rights. Except as otherwise required by law or this
Restated Certificate of Incorporation, each holder of Common Stock
shall have one vote in respect of each share of stock held by such
holder of record on the books of the corporation for the election of
directors and on all matters submitted to a vote of stockholders of the
corporation.
3. Dividends. Subject to the preferential rights of the
Preferred Stock, if any, the holders of shares of Common Stock shall be
entitled to receive, when and if declared by the Board of Directors,
out of the assets of the corporation which are by law available
therefor, dividends payable either in cash, in property or in shares of
capital stock.
4. Liquidation, Dissolution or Winding Up. In the event of any
dissolution, liquidation or winding up of the affairs of the
corporation, after distribution in full of the preferential amounts, if
any, to be distributed to the holders of shares of the Preferred Stock,
holders of Common Stock shall be entitled, unless otherwise provided by
law or this
-2-
29
Restated Certificate of Incorporation, to receive all of the remaining
assets of the corporation of whatever kind available for distribution
to stockholders ratably in proportion to the number of shares of Common
Stock held by them respectively.
ARTICLE V
The corporation is to have perpetual existence.
ARTICLE VI
A. Classified Board. The Board of Directors shall be divided into three
classes, designated Class I, Class II and Class III, as nearly equal in number
as possible, and the term of office of directors of one class shall expire at
each annual meeting of stockholders, and in all cases as to each director when
such director's successor shall be elected and shall qualify or upon such
director's earlier resignation, removal from office, death or incapacity.
Additional directorships resulting from an increase in number of directors shall
be apportioned among the classes as equally as possible. The initial term of
office of directors of Class I shall expire at the annual meeting of
stockholders in 1998; that of Class II shall expire at the annual meeting in
1999; and that of Class III shall expire at the annual meeting in 2000; and in
all cases as to each director when such director's successor shall be elected
and shall qualify or upon such director's earlier resignation, removal from
office, death or incapacity. At each annual meeting of stockholders, beginning
with the annual meeting of stockholders in 1998, the number of directors equal
to the number of directors of the class whose term expires at the time of such
meeting (or, if less, the number of directors properly nominated and qualified
for election) shall be elected to hold office until the third succeeding annual
meeting of stockholders after their election.
B. Changes. The Board of Directors of this corporation, by amendment
to the corporation's bylaws, is expressly authorized to change the number of
directors in any or all of the classes of directors without the consent of the
stockholders.
C. Elections. Elections of directors need not be by written ballot
unless the Bylaws of the corporation shall so provide.
D. Vote Required to Amend or Repeal. The affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%)a majority of the voting
power of all of the then outstanding shares of
the stock of the corporation entitled to vote generally in the election of directors, voting together asat a single class, shall be required to amend in any respect or repeal this Article
VI.
-3-
30
ARTICLE VII
A. Special Meetings of Stockholders. Special meetings of the
stockholders of the corporation may be called for any purpose or purposes,
unless otherwise prescribed by statute or by this Restated Certificate of
Incorporation, only at the request of the Chairman of the Board of Directors,
the Chief Executive Officer or President of the corporation or by a resolution
duly adopted by the affirmative vote of a majority of the Board of Directors.
ARTICLE VIII
A. Amend or Repeal Bylaws. The Board of Directors is expressly
empowered to adopt, amend or repeal the Bylaws of the corporation; provided,
however, that any adoption, amendment or repeal of the Bylaws of the corporation
by the Board of Directors shall require the approval of at least sixty-six and
two-thirds percent (66 2/3%) of the total number of authorized directors
(whether or not there exist any vacancies in previously authorized directorships
at the time any resolution providing for adoption, amendment or repeal is
presented to the Board of Directors). The stockholders shall also have the power
to adopt, amend or repeal the Bylaws of the corporation, provided, however, that
in addition to any vote of the holders of any class or series of stock of the
corporation required by law, the affirmative vote of the holders of more than
fifty percent (50%) of the voting power of all of the then outstanding shares of
the stock of the corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required for such
adoption, amendment or repeal by the stockholders of any provisions of the
Bylaws of the corporation. Notwithstanding the foregoing sentence, the
affirmative vote of the holders of at least sixty-six and two-thirds percent (66
2/3%) of the voting power of all of the then outstanding shares of the stock of
the corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required for the amendment or repeal of
Article 3.1 of the Bylaws of the corporation.
ARTICLE IX
The books of the corporation may be kept at such place within or
without the State of Delaware as the bylaws of the corporation may provide or as
may be designated from time to time by the board of directors of the
corporation.
-4-
31
ARTICLE X
Whenever a compromise or arrangement is proposed between the
corporation and its creditors or any class of them and/or between the
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the corporation or of any creditor or stockholder thereof or on the
application of any receivers appointed for the corporation under the provisions
of section 291 of Title 8 of the Delaware Code or on the application of trustees
in dissolution or of any receiver or receivers appointed for the corporation
under the provisions of section 279 of Title 8 of the Delaware Code order aconvened meeting of
the creditors or class of creditors, and/or the stockholders or class
of stockholders of the corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority, in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall if sanctioned by the
court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the corporation, as the case may be, and also on the
corporation.
ARTICLE XI
A. Limitation on Liability. A director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (1) for any
breach of the director's duty of loyalty to the corporation and its
stockholders; (2) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of law; (3) under Section 174 of
the Delaware General Corporation Law; or (4) for any transaction from which the
director derived an improper personal benefit.
If the Delaware General Corporation Law hereafter is amended to further
eliminate or limit the liability of directors, then the liability of a director
of the corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended Delaware
General Corporation Law.
B. Indemnification. The corporation is authorized to indemnify the
directors and officers of this corporation to the fullest extent permissible
under Delaware law.
C. Insurance. The corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense,
-5-
32
liability or loss, whether or not the corporation would have the power to
indemnify such person against such expense, liability or loss under the Delaware
General Corporation Law.
D. Repeal and Modification. Any repeal or modification of the foregoing
provisions of this Article XI shall not adversely affect any right or protection
of any director, officer, employee or agent of the corporation existing at the
time of such repeal or modification.
ARTICLE XII
The corporation reserves the right to amend or repeal any provision
contained in this Restated Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon a stockholder
herein are granted subject to this reservation.
* * * * *
Four: This Restated Certificate of Incorporation was duly
adopted by the Board of Directors of this corporation.
Five: This Restated Certificate of Incorporation was duly
adopted by written consent of the stockholders of the corporation in
accordance with Sections 228, 242 and 245 of the General Corporation
Law of the State of Delaware and written notice of such action has been
given as provided in Section 228.
IN WITNESS WHEREOF, Heska Corporation has caused this certificate to be
signed by the undersigned officer, thereunto duly authorized, this ____day of
_____, 2000.
By:
-----------------------------
Name:
Title:
-6-
33stockholders."
PROXY HESKA CORPORATION[GRAPHIC] PROXY
1613 Prospect Parkway
Fort Collins, Colorado 80525
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 24, 200016, 2002 at 9:00 a.m., and at any adjournment thereof, to vote
as designated below:
------------------------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR proposals 1 through 4.
-------------------------------------------------------------------
For all
For Withhold Except
1. To1,2 and 3.
-----------------------------------------------------------------
1.To elect three directors, Lyle A. FOR ALL
Barr Dolan, Robert B. Grieve and John FOR WITHHOLD EXCEPT
F. Sasen, Sr. to serve until the 2005 [ ] [ ] [ ]
Hohnke, Denis H. Pomroy, and Lynnor
B. Stevenson, to the Board of
Directors to serve until the 2003
Annual Meeting of Stockholders or
until their successors have been duly
elected and qualified and:
----------------------------------------------------qualified.
- ------------------------------------
Write exception(s) here
For Against Abstain
2. To amend2.To approve an amendment to the
Company's Certificate1997 Employee Stock Purchase Plan to FOR AGAINST ABSTAIN
increase the number of shares [ ] [ ] [ ]
of Incorporation to increase the
number of authorized shares of
Common Stock of the Company from 40
million to 75 million;
3. To amend the Company's Certificate [ ] [ ] [ ]
of Incorporation to modify and
delete certain of the supermajority
provisions therein;
4. To approve an amendment to the [ ] [ ] [ ]
Company's 1997 Employee Stock
Purchase Plan to increase the
number of shares
reserved for issuance under the Plan
by 500,000.
Date1,000,000 shares.
3.To ratify and approve an
amendment to Article 8 of Heska's
Bylaws. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Date: , 2000
-----------------------------
---------------------------------------2002
----------------------------
- --------------------------------- ----------------------------------
Signature
Stockholder Name and address here
--------------------------------------- Signature if held jointly
Please sign exactly as name(s) appears hereon. When shares are held by joint tenants hold shares,
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.
- ----------------------------- FOLD---------------------------FOLD AND DETACH HERE -----------------------------
----------------------------HERE---------------------------
-------------------------------
VOTE BY INTERNET
QUICK *** EASY *** IMMEDIATE
-----------------------------------------------------------
YOUR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN THE SAME
MANNER AS IF YOU'VEYOU HAVE MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
---------------------------------------------------------------------------
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/WEBSITE for voting is www.proxyvoting.com/heska
---------------------------------------------------------------------------
IF YOU VOTE BY INTERNET DO NOT MAIL IN THE PROXY CARD.
THANK YOU FOR VOTING!
----------------------------------
CONTROL NUMBER
123 456 7890
--------------For Internet voting
--------------------