UNITED STATES
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SECURITIES
AND EXCHANGE COMMISSION
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Washington,
D.C. 20549
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SCHEDULE 14A
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(RULE
14a-101)
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Proxy Statement
Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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HESKA CORPORATION
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(Name of Registrant
as Specified In Its Charter)
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(Name of Person(s)
Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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x
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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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):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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o
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Fee paid previously with preliminary materials.
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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.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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April 15,
2008
Dear Heska Stockholder:
I am pleased to invite
you to attend the Annual Meeting of Stockholders of Heska Corporation to be
held on Tuesday, May 6, 2008 at 3760 Rocky Mountain Avenue, Loveland,
Colorado 80538.
Details regarding the
meeting and the business to be conducted are more fully described in the
accompanying Notice of Annual Meeting and Proxy Statement.
Your vote is
important. Whether or not you plan to
attend the 2008 Annual Meeting, I hope you will vote as soon as possible. You may vote by mailing a proxy or in person
at the annual meeting. Please review the
instructions in the proxy statement and on the proxy card regarding your voting
options.
Thank you for your
ongoing support of and continued interest in Heska.
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Sincerely,
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Robert B. Grieve
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Chairman and Chief Executive
Officer,
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Heska Corporation
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Loveland, Colorado
YOUR
VOTE IS IMPORTANT
In order to ensure your
representation at the meeting, please complete, sign and date the enclosed
proxy as promptly as possible and return it in the enclosed envelope (to which
no postage need be affixed if mailed in the United States).
NOTICE
OF 2008 ANNUAL MEETING OF STOCKHOLDERS
TIME
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9:00 a.m. on
Tuesday, May 6, 2008
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PLACE
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Heska Corporation
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3760 Rocky Mountain
Avenue
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Loveland, Colorado
80538
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ITEMS OF BUSINESS
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1.
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To elect two Directors
to a three-year term.
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2.
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To ratify the
appointment of Ehrhardt Keefe Steiner & Hottman PC as Heska
Corporations independent registered public accountant.
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3.
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To consider such other
business as may properly come before the 2008 Annual Meeting.
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RECORD DATE
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You can vote if you
were a stockholder of record at the close of business on March 26, 2008.
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ANNUAL REPORT
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Our 2007 Annual Report,
which is not a part of the proxy soliciting material, is enclosed.
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VOTING BY PROXY
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Please submit a proxy
as soon as possible so that your shares can be voted at the 2008 Annual
Meeting in accordance with your instructions.
For specific instructions on voting, please refer to the instructions
on the proxy card.
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April 15, 2008
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By
Order of the Board of Directors
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John
R. Flanders
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Vice President, General Counsel
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and Corporate Secretary, Heska Corporation
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This
proxy statement and accompanying proxy card are being distributed on or about April 15,
2008.
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS
AND THE 2008 ANNUAL MEETING
Q:
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Why
am I receiving these materials?
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A:
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The Board of Directors
(the Board) of Heska Corporation, a Delaware corporation (Heska or the
Company), is providing these proxy materials for you in connection with
Heskas Annual Meeting of Stockholders (the Annual Meeting). The 2008 Annual Meeting will take place on
Tuesday, May 6, 2008. As a
stockholder, you are invited to attend the 2008 Annual Meeting and are
entitled to and requested to vote on the items of business described in this
proxy statement.
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Q:
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What
information is contained in these materials?
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A:
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The information
included in this proxy statement relates to the proposals to be voted on at
the 2008 Annual Meeting, the voting process, the compensation of our
Directors and most highly paid Executive Officers, and certain other required
information. Our 2007 Annual Report on
Form 10-K as filed with the Securities and Exchange Commission is also
enclosed.
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Q:
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What
items of business will be voted on at the 2008 Annual Meeting?
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A:
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The items of business
scheduled to be voted on at the 2008 Annual Meeting are:
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(1)
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The election of two
nominees to serve on our Board of Directors for a three-year term; and
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(2)
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The ratification of
independent registered public accountant for fiscal 2008.
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We will also consider other business that properly comes before the
2008 Annual Meeting.
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Q:
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How does the Board recommend I
vote on the proposals?
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A:
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The Board recommends a
vote FOR the election of each of the Director nominees
and FOR the ratification of Ehrhardt
Keefe Steiner & Hottman PC (EKS&H) as the Companys
independent registered public accountant.
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Q:
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Who
is entitled to vote?
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A:
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Stockholders as of the
close of business on March 26, 2008 (the Record Date) are entitled to
vote at the 2008 Annual Meeting. As of
the Record Date, 51,524,083 shares of our common stock were issued and
outstanding. Each stockholder is
entitled to one vote for each share of common stock held on the Record
Date. A list of stockholders entitled
to vote at the 2008 Annual Meeting will be available at the 2008 Annual
Meeting and for ten days prior to the meeting during normal business hours at
our offices at 3760 Rocky Mountain Avenue, Loveland, Colorado 80538, by
contacting our Corporate Secretary.
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Q:
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How
do I vote?
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A:
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There are two ways you
can vote:
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(1)
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Sign and date each
proxy card you receive and return it in the prepaid envelope.
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(2)
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Vote in-person at the
2008 Annual Meeting. If your shares
are held of record by a broker, bank or other nominee and you wish to vote
your shares at the 2008 Annual Meeting, you must contact your broker, bank or
other nominee to obtain the proper documentation and bring it with you to the
2008 Annual Meeting.
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1
Q:
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How can I change my vote or revoke my proxy?
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A:
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You have the
right to revoke your proxy and change your vote at any time before the
meeting by notifying our Corporate Secretary, or returning a later-dated
proxy card. You may also revoke your
proxy and change your vote by voting in person at the meeting.
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Q:
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Who can help answer my questions?
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A:
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If you have any
questions about the 2008 Annual Meeting or how to vote or revoke your proxy,
you should contact:
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Heska Corporation
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Attn:
Corporate Secretary
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3760 Rocky Mountain Avenue
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Loveland, Colorado 80538
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(970) 493-7272
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If you need
additional copies of this proxy statement or voting materials, please contact
our Corporate Secretary as described above.
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Q:
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What does it mean if I get more than one proxy card?
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A:
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It means that
you hold shares registered in more than one account. Sign and return all proxies to ensure that
all of your shares are voted.
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Q:
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Who will serve as inspector of elections?
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A:
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The inspector of
elections will be a representative of Computershare Trust Company, Inc.,
our transfer agent.
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Q:
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What are the quorum and voting requirements for the 2008 Annual
Meeting?
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A:
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The quorum
requirement for holding the 2008 Annual Meeting and transacting business is
that holders of a majority of the outstanding shares of our common stock
entitled to vote must be present in person at the meeting or represented by
proxy. Both abstentions and non-votes
are counted for the purposes of determining the presence of a quorum, but not
in determining the matter at hand. We will consider an abstention or a
non-vote on a given matter to be a forfeiture of the right to vote on that
matter and a forfeiture of the voting power present at the 2008 Annual
Meeting underlying the forfeited votes regarding that matter. Accordingly, if you abstain on a given
matter, your shares will not be voted for or against that matter and will
not be considered as present and entitled to vote on that matter. However, you may abstain on a given matter
for a certain portion of your shares and vote on the same matter with the
remaining portion of your shares without forfeiting the votes underlying the
shares you choose to vote. For
example, a stockholder who owns 100 shares may choose to abstain on a
proposal with 50 shares and vote for a proposal with the other 50
shares. In this case, the stockholder
would forfeit his right to vote 50 shares on the proposal and would have his
other 50 votes count for the proposal.
In addition, an abstention or a non-vote on any matter will not affect
your ability to vote on any other matter.
If you hold shares in street name through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion
with respect to certain matters to be acted upon. If you do not give your broker or nominee
specific instructions, your shares may not be voted on those matters and, if
so, will not be considered as present and entitled to vote with respect to
those matters.
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The holders of a
majority of the outstanding shares of our common stock, present in person or
by proxy, will constitute a quorum for the transaction of business at the
2008 Annual Meeting. Election of
Director(s) will be determined by a plurality of the votes of the shares
present in person or by proxy at the 2008 Annual Meeting and entitled to vote
on the election of Directors. The
other matters submitted for stockholder approval at the 2008 Annual Meeting,
including the ratification of our independent registered public accountant
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for fiscal 2008,
will be decided by the affirmative vote of a majority of the shares having
voting power present in person or by proxy at the 2008 Annual Meeting and
entitled to vote on the subject matter.
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Q:
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Who can attend the 2008 Annual Meeting?
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A:
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All stockholders
as of the Record Date can attend. If you wish to vote your shares at the 2008
Annual Meeting and your shares are held of record by a broker, bank or other
nominee, you must contact your broker, bank or other nominee to obtain the
proper documentation and bring it with you to the 2008 Annual Meeting.
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Q:
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What happens if additional matters are presented at the 2008 Annual
Meeting?
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A:
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Other than the
two items of business described in this proxy statement, we are not aware of
any other business to be acted upon at the 2008 Annual Meeting. If you grant
a proxy, the persons named as proxyholders - Robert B. Grieve, Ph.D. our Chairman
and Chief Executive Officer, Jason A. Napolitano, our Executive Vice
President and Chief Financial Officer and John R. Flanders, our Vice
President, General Counsel and Corporate Secretary - will have the discretion
to vote your shares on any additional matters presented for a vote at the
meeting. If for any unforeseen reason any of our nominees is not available as
a candidate for Director, the persons named as proxyholders, Dr. Grieve,
Mr. Napolitano and Mr. Flanders, will vote your proxy for such other
candidate or candidates who may be nominated by the Board.
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Q:
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Where can I find the voting results of the meeting?
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A:
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We intend to
announce preliminary voting results at the 2008 Annual Meeting and publish
final results in our quarterly report on Form 10-Q for our second fiscal
quarter of 2008.
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Q:
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May I propose actions for consideration at next years Annual
Meeting or nominate individuals to serve as Directors?
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A:
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You may submit
proposals, including Director nominations, for consideration at future
stockholder meetings. All proposals or nominations should be addressed to:
Corporate Secretary, Heska Corporation, 3760 Rocky Mountain Avenue, Loveland,
Colorado 80538.
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Stockholder
Proposals:
For a stockholder proposal to be considered
for inclusion in our proxy statement for the annual meeting next year, the
written proposal must be received by our Corporate Secretary at our principal
executive offices under either (1) Rule 14a-8 under the Securities
Exchange Act of 1934, as amended (a Rule 14 Proposal) or (2) the
bylaws of Heska (a Bylaws Proposal). A Rule 14 Proposal must be
received by our Corporate Secretary at our principal executive offices no
later than December 5, 2008. If the date of next years annual meeting
is moved more than 30 days before or after the anniversary date of this
years annual meeting, the deadline for inclusion of proposals in our proxy
statement is instead a reasonable period of time before we begin to print and
mail our proxy materials. Such proposals also will need to comply with
Rule 14a-8 under the Securities Exchange Act of 1934, as amended,
regarding the inclusion of stockholder proposals in company-sponsored proxy
materials. For a Bylaws Proposal, the stockholder must deliver a written
notice of intent to propose such action in accordance with our bylaws, which
in general require that the notice be received by us not less than 60 days
nor more than 90 days prior to the first anniversary of the date on which
notice of the prior years annual meeting was mailed to stockholders. For the
2009 Annual Meeting, this means that any such proposal must be received no
earlier than January 4, 2009 and no later than February 3, 2009.
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Director Nominees:
You may propose Director
candidates for consideration by the Boards Corporate Governance Committee. Any
such recommendations should be directed to our Corporate Secretary at our
principal executive offices. In addition, you may nominate a Director for consideration
by Heskas stockholders if you give timely notice to our Corporate Secretary of
your intention to make such nomination in accordance with our bylaws, which
require that the notice be received by the Corporate Secretary within the time
periods described above under Stockholder Proposals.
Copy of Bylaw Provisions:
You may contact our
Corporate Secretary at our principal executive offices for a copy of the
relevant bylaw provisions regarding the requirements for making stockholder
proposals and nominating Director candidates.
Q:
Who bears the costs of soliciting votes for the 2008 Annual Meeting?
A:
Heska
is making this solicitation and will pay the entire cost of preparing,
printing, assembling and mailing these proxy materials. In addition to the
mailing of these proxy materials, certain of our Directors and employees may
solicit proxies on our behalf in person, by telephone, electronic transmission
or facsimile. No additional compensation will be paid to these people for such
solicitation. Upon request, we will also reimburse brokerage houses and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for forwarding proxy and solicitation materials to stockholders.
4
BOARD STRUCTURE AND
COMMITTEES
Our
Board is divided into three classes serving staggered three-year terms. Our Board has three standing Committees, each
of which is chaired by an outside Director:
(1) Audit (the Audit Committee), (2) Compensation (the Compensation
Committee) and (3) Corporate Governance (the Corporate Governance
Committee). The membership during 2007
and the function of each Committee are described below. Our Board held five meetings during
2007. Our Board currently has seven Directors: Robert B. Grieve, Ph.D., Chairman, William A.
Aylesworth, A. Barr Dolan, Peter Eio, G. Irwin Gordon, Louise L. McCormick and
John F. Sasen, Sr. Elisabeth
DeMarse also served as a Director in 2007; Ms. DeMarse chose not to stand
for re-election to our Board and her service as a Director ended on May 4,
2007 the day of our 2007 Annual Meeting.
Our Board will consist of six rather than the current seven Directors
effective at our 2008 Annual Meeting on May 6, 2008. A. Barr Dolan has chosen not to stand for
re-election to our Board in 2008. All of our Directors in 2007, other than Ms. DeMarse,
attended our last annual meeting of stockholders and at least 75% of all Board
and applicable Committee meetings. Ms. McCormick
accepted appointment to our Board on January 1, 2008.
Board Independence
Our
Board has determined that each of the Directors standing for re-election has no
material relationship with the Company (either directly or as a partner,
stockholder or officer of an organization that has a relationship with the
Company) and meets the requirements of independence as set forth in the rules and
regulations promulgated by the Securities and Exchange Commission (the SEC)
and the Nasdaq Stock Market listing standards (the Nasdaq Listing Standards). Furthermore, the Board has determined that,
with the exception of Dr. Grieve, Heskas Chairman and Chief Executive
Officer, all current members of the Board meet the requirements of independence
as set forth in the rules and regulations promulgated by the SEC and the
Nasdaq Listing Standards.
Audit Committee
Our
Audit Committee has the following responsibilities:
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appoint and replace our independent auditors;
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compensate and oversee the work of our independent auditors;
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oversee and monitor the integrity of our annual and quarterly financial
statements;
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review and discuss with management and our independent auditors
significant financial reporting issues and critical accounting policies and
practices;
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oversee and monitor the qualifications, independence and performance of
our independent auditors;
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oversee and monitor our internal accounting and financial controls; and
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provide the results of examinations and recommendations derived
therefrom to the Board.
During 2007, our Audit Committee met six times. Our Audit Committee consisted of Mr. Aylesworth,
as Chairman, Ms. DeMarse and Mr. Eio prior to our 2007 Annual Meeting
on May 4, 2007 and has consisted of Mr. Aylesworth, as Chairman, Mr. Eio
and Mr. Gordon since our 2007 Annual Meeting.
5
Ms. McCormick
is to replace Mr. Gordon as a member of our Audit Committee immediately
following our 2008 Annual Meeting.
Our
Board has determined that each of the current members of our Audit Committee,
as well as the proposed nominee, meets the requirements of independence as
set forth in Section 10A(m)(3) of the Securities Exchange Act of
1934, the rules and regulations promulgated by the SEC and the Nasdaq
Listing Standards. Our Board has also
determined that William A. Aylesworth is an Audit Committee financial expert
within the meaning of the rules and regulations promulgated by the SEC and
he has accounting and related financial management expertise within the meaning
of the Nasdaq Listing Standards.
Our
Audit Committee has a written charter, which is available on our website at
www.heska.com.
The Companys website address
provided above is not intended to function as a hyperlink, and the information
on the Companys website is not and should not be considered part of this proxy
statement and is not incorporated by reference herein.
Compensation Committee
Our
Compensation Committee has the following responsibilities:
·
discharge the Boards responsibilities relating to compensation of our
Executive Officers, including our Chief Executive Officer;
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oversee all compensation programs involving the use of our stock; and
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produce an annual report on executive compensation for inclusion in our
proxy statement for our annual meeting of stockholders.
During 2007, our Compensation Committee met five
times. Our Compensation Committee has
consisted of Mr. Eio, as Chairman, Mr. Dolan and Mr. Gordon
since our 2005 Annual Meeting. Mr. Sasen
is to join our Compensation Committee immediately following our 2008 Annual
Meeting.
Our
Board has determined that each of the current members of our Compensation
Committee meets the requirements of independence as set forth in the rules and
regulations promulgated by the SEC and the Nasdaq Listing Standards.
In August 2002,
our Compensation Committee established a Committee designated as the Stock
Option Committee, which was authorized to grant new and existing employees
options to purchase shares of our common stock up to a specified limit without
prior written consent of our Compensation Committee. The establishment of our Stock Option
Committee was ratified by our Board in August 2002. In August 2003, the authority of our
Stock Option Committee was expanded to include grants of options to purchase
shares of our common stock up to a specified limit to consultants and
independent contractors who provide bona fide services to Heska. The sole member of our Stock Option Committee
since its inception was Dr. Grieve, our Chairman and Chief Executive
Officer. In March 2007, our
Compensation Committee dissolved our Stock Option Committee.
Our
Compensation Committee has a written charter, which is available on our website
at www.heska.com.
The Companys website address
provided above is not intended to function as a hyperlink, and the information
on the Companys website is not and should not be considered part of this proxy
statement and is not incorporated by reference herein.
6
Corporate Governance
Committee
Our Corporate Governance Committee has the following
responsibilities:
·
assist our Board by identifying qualified candidates for Director, and
select the Director nominees for each annual meeting of stockholders;
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lead our Board in its annual review of our Boards performance;
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recommend Director nominees to our Board for each Board Committee; and
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develop and recommend to our Board the corporate governance guidelines
applicable to the Company.
During 2007, our Corporate Governance Committee met
three times. Our Corporate Governance
Committee has consisted of Mr. Sasen, as Chairman, Mr. Aylesworth and
Mr. Gordon since our 2006 Annual Meeting.
Our Board has determined that each of the current members of our
Corporate Governance Committee meets the requirements of independence as set
forth in the rules and regulations promulgated by the SEC and the Nasdaq
Listing Standards.
Our
Corporate Governance Committee has a written charter, which is available on our
website at www.heska.com. In addition,
our Corporate Governance Committee prepared, and our full Board has approved,
Corporate Governance Guidelines outlining the qualifications, responsibilities
and other issues related to our Boards governance role and functions. The document is available on our website at
www.heska.com.
The Companys website address
provided above is not intended to function as a hyperlink, and the information
on the Companys website is not and should not be considered part of this proxy
statement and is not incorporated by reference herein.
Consideration of Director Nominees
Our Corporate Governance Committee considers candidates for Board
membership suggested by its members. Our
Corporate Governance Committee has also utilized a third-party executive search
firm in the past to identify candidates.
Our Corporate Governance Committee does not have an established policy
for minimum qualifications of Director nominees. However, pursuant to our Corporate Governance
Guidelines, our Corporate Governance Committee will consider, among other
things, diversity, skills and experience in such areas as operations, finance,
marketing and sales, manufacturing, technology and the general needs of our
Board.
Our Corporate Governance Committee will also consider nominees
recommended by stockholders provided such recommendations are made in
accordance with the procedures described in this proxy statement under Questions
and Answers About the Proxy Materials and the 2008 Annual Meeting. Although to date no stockholder has presented
any candidate for Board membership to us, it is expected that recommendations
from stockholders would generally be considered in the same manner as
recommendations by a Director or an Officer of the Company.
Louise L. McCormick was initially identified as a Board candidate by
Peter Eio, one of our non-management directors, and after an extensive
interview process, Ms. McCormick was unanimously nominated by our
Corporate Governance Committee.
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Stockholder Communication
with our Board
Stockholders can contact our Board, any Committee thereof, or any
Director in particular, by writing to them, c/o Heska Corporation, 3760 Rocky
Mountain Avenue, Loveland, Colorado 80538, Attn: Corporate Secretary. We will forward any correspondence sent in
the foregoing manner to the appropriate addressee without review by management.
8
DIRECTOR COMPENSATION
The form and amount of compensation paid to the
non-employee Directors is reviewed from time to time by our Corporate
Governance and our Compensation Committees.
Any revisions to our Director Compensation policy have been approved by
our Corporate Governance Committee, our Compensation Committee and our
Board. On March 5, 2007, we amended
our Director Compensation Policy with the amended policy to be effective July 1,
2007.
In 2007, no employee Director received any separate
compensation for their Board activities.
Non-employee Directors received the compensation described below.
On
each date of our Annual Meeting, each
continuing non-employee Director who was a Director immediately prior to the
Annual Meeting automatically receives options valued at $37,500 to purchase
shares of our common stock, subject to a maximum grant of options to purchase
50,000 shares of our common stock. These
grants are to be immediately exercisable and to vest in full on the earlier of (i) the
one year anniversary of the date of grant and (ii) the date immediately
preceding the date of the Annual Meeting for the year following the year of
grant for the award. Any new
non-employee Directors appointed or elected to our Board will be automatically
granted options valued at $37,500 to purchase shares of our common stock,
subject to a maximum grant of option to purchase 50,000 shares of our common
stock. Any such grant is to be
immediately exercisable and to vest over a period of four years in equal annual
installments. The value for options
granted pursuant to this paragraph is to be determined pursuant to our option
valuation policy at the time of issuance.
Each non-employee Director is also entitled to an
annual cash retainer in the amount of $20,000.
The Company pays the annual retainer in advance, in quarterly
installments on the first business day of each calendar quarter, subject to the
non-employee Directors continued service to the Company as a non-employee
Director on such date.
In addition, commencing July 1, 2007 each
non-employee Director who serves as Chairperson of a Board Committee is
entitled to an annual cash retainer in the amount of $5,000 (the Chair
Retainer). The Company pays the Chair
Retainer in advance, in quarterly installments on the first business day of
each calendar quarter, subject to the non-employee Directors continued service
as Chairperson of such Committee. Each
non-employee Director who serves on a Board Committee will be entitled to an
annual cash retainer of $2,500 (the Committee Retainer). A non-employee Director who is also the
Chairperson of a Committee shall be entitled to the Committee Retainer in
addition to the Chair Retainer. The
Company pays the Committee Retainer in advance, in quarterly installments on
the first business day of each calendar quarter, subject to the non-employee
Directors continued service as a member of such Committee. Nonemployee Directors will also continue to
be reimbursed for customary and usual travel expenses.
9
The following tables provide information for fiscal
2007 compensation for non-employee Directors who served during fiscal 2007.
Director Compensation (1)
Name
|
|
Fees
Earned
Or
Paid in
Cash
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($) (2) (3)
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
|
|
All Other
Compensation
($)
|
|
Total
($)
|
|
William A.
Aylesworth
|
|
25,000
|
|
|
|
33,570
|
|
|
|
|
|
|
|
58,570
|
|
Elisabeth
DeMarse
|
|
10,000
|
|
|
|
7,806
|
|
|
|
|
|
|
|
17,806
|
|
A. Barr Dolan
|
|
21,250
|
|
|
|
32,820
|
|
|
|
|
|
|
|
54,070
|
|
Peter Eio
|
|
25,000
|
|
|
|
33,570
|
|
|
|
|
|
|
|
58,570
|
|
G. Irwin Gordon
|
|
23,750
|
|
|
|
33,181
|
|
|
|
|
|
|
|
56,931
|
|
John F.
Sasen, Sr.
|
|
23,750
|
|
|
|
33,209
|
|
|
|
|
|
|
|
56,959
|
|
2007 Equity Grants to Directors
Name
|
|
Grant Date
|
|
Number of
Securities
Underlying
Options
|
|
Exercise
Price
($)
|
|
Grant Date
Fair Value of
Option Award
($) (3)
|
|
William A.
Aylesworth
|
|
05/04/07
|
|
40,167
|
|
2.250
|
|
37,500
|
|
A. Barr Dolan
|
|
05/04/07
|
|
40,167
|
|
2.250
|
|
37,500
|
|
Peter Eio
|
|
05/04/07
|
|
40,167
|
|
2.250
|
|
37,500
|
|
G. Irwin Gordon
|
|
05/04/07
|
|
40,167
|
|
2.250
|
|
37,500
|
|
John F. Sasen, Sr.
|
|
05/04/07
|
|
40,167
|
|
2.250
|
|
37,500
|
|
(1)
Reimbursed travel expenses incurred in
connection with Board and Board Committee meeting attendance are not included.
(2)
Represents cost recognized in 2007 for
financial reporting purposes.
(3)
Grant date fair value of option awards are
based on valuation techniques required by Statement of Financial Accounting
Standards No. 123 (revised 2004) Share-Based
Payment and applicable guidance which we use in preparing our financial
statements (Option Accounting Rules).
Like any estimate prepared in good faith, the underlying assumptions we
use under Option Accounting Rules may vary from our actual future
results. The option valuations used for
accounting and/or financial reporting purposes do not necessarily represent the
value any individual recipient would place on an option award. In addition, Option Accounting Rules prohibit
some valuation techniques which may be useful in certain circumstances. A more detailed description of our option
valuation techniques and assumptions can be found in our Annual Report on Form 10-K
for the year ended December 31, 2007 in our Note 7 of the Notes to
Consolidated Financial Statements.
10
PROPOSALS TO BE VOTED ON
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our
Board is divided into three classes serving staggered three-year terms. Our Certificate of Incorporation requires us
to ensure each class is as nearly equal in number as possible. Directors for each class are elected at the
Annual Meeting of Stockholders held in the year in which the term for their
class expires.
The
terms for two continuing Directors will expire at this 2008 Annual
Meeting. Directors elected at the 2008
Annual Meeting will hold office for a three-year term expiring at our 2011
Annual Meeting (or until their respective successors are elected and qualified,
or until their earlier death, resignation or removal).
Nominees for Three-Year Terms That Will Expire in 2011
Louise L.
McCormick
, age 65, has served us as a Director since January 2008. Ms. McCormick was with Aetna, Inc.
for over 25 years in various finance, strategic planning and legal positions,
including as Corporate Secretary and Securities Counsel, and Vice President,
Strategy, Finance and Administration. Ms. McCormick
retired from Aetna, Inc. in 2000.
Since June 2005, Ms. McCormick has served as an independent
Director, investment committee chair and member of the ethics and corporate
governance committee for Foresters, a Toronto-based insurance company. She also serves as a Director of several
non-profit and educational institutions.
Ms. McCormick holds a J.D. from the University of Connecticut Law
School and a M.S.T. and B.A. from the University of Florida.
John F.
Sasen, Sr.
, age 65, has served us as a Director since October 1998. Since April 1998, he has served as
Executive Vice President and Chief Marketing Officer of PSS/World Medical, Inc.
(PSS), a medical supply distributor, and has held various other senior
executive positions at PSS, including President and Chief Operating Officer,
since 1993. From July 1993 to April 1998,
Mr. Sasen served as a Director of PSS.
Prior to joining PSS, Mr. Sasen was Vice President Sales, Marketing
and Distributor Relations for a division of Becton Dickinson &
Company, a manufacturer of health care products. Mr. Sasen was with Becton Dickinson for
over 20 years. In addition, Mr. Sasen
serves as the Chairman of the Health Industry Distribution Association
Education Foundation, Executive Director of the Health Industry Distributor
Association, Director of Nova Vision, Inc. and Director of the Boys Home
Foundation.
Vote Required; Recommendation of our Board of
Directors
The
affirmative vote of a plurality of the votes of the shares present in person or
by proxy at the Annual Meeting and entitled to vote on the election of
Directors will be used to elect the nominees.
Our Board of Directors unanimously recommends a vote FOR the election of
Ms. McCormick and Mr. Sasen as our Directors.
Heskas
Directors listed below whose terms are not expiring this year will continue in
office for the remainder of their terms in accordance with our bylaws. Information regarding the business experience
and education of each of such Directors is provided below.
11
Directors Whose Terms Will Expire in 2010
Peter Eio
,
age 66, has served us as a Director since October 2002. Mr. Eio served as the President of LEGO
Systems, Inc., from 1989 to 2001 and was Managing Director of LEGO UK from
1982 to 1989. He also held various positions with International Playtex, Inc.,
in Scandinavia and the UK from 1971 to 1981. His previous experience includes
marketing, sales and general management positions. Mr. Eio holds an honorary degree from
Rensselaer Polytechnic Institute (Doctor of laws-honoris causa, 1996), attended
the IMD Business School in Lausanne, Switzerland and received the Prince Henrik
Medal of Honor for services to Danish industry in 1992. Mr. Eio is also a Director of several
private companies and serves on the Board of several charitable and educational
organizations.
G. Irwin
Gordon
, age 57, has served us as a Director since May 2001. Mr. Gordon is the founder and Managing
Partner of The Trion Group LP, a consulting and interim management firm. From July 2000 until August 2001, Mr. Gordon
served as President and Chief Executive Officer of Gruma Corporation, a food
manufacturer. He also served as
President and Chief Operating Officer of Suiza Foods Corporation, a food
manufacturer and distributor, 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. (PepsiCo),
including most recently as Senior Vice President Global Branding for Frito-Lay, Inc.,
from May 1996 to August 1997.
From 1983 to 1992, Mr. Gordon served as President and General
Manager of several international Frito-Lay companies before becoming Senior
Vice President Marketing, Sales and Technology for Frito-Lay International from
1992 to 1996. Prior to joining PepsiCo
in 1992, Mr. Gordon served in various capacities at the Kellogg
Company. Mr. Gordon holds an
Education degree from the University of British Columbia and a Management
Certificate from Stanford University.
Directors Whose Term Will Expire in 2009
William
A. Aylesworth
, age 65, has served us as a Director since June 2000. Mr. Aylesworth served as Senior Vice
President from 1988 to 2003 and Chief Financial Officer of Texas Instruments
Incorporated from 1984 to 2003. 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. He holds an M.S. in industrial administration
from Carnegie Mellon University and a B.E.E. in electrical engineering from
Cornell University.
Robert B.
Grieve, Ph.D.
, age 56, 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.
Director Whose Term Will Expire in 2008
A. Barr Dolan
,
age 57, has served us as a Director since March 1988, and was Chairman of
the Board of Directors from 1988 to January 1999. Mr. Dolan is a founding partner and former
President of Charter Venture Capital, a venture capital management firm, and
has been a general partner of Charter Ventures since 1982, a general partner of
Charter Ventures II, L.P. since 1994, a managing director of Charter Ventures
III, L.P. since 1998 and a managing director of Charter Life Sciences since
2004. 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.
12
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTANT
The Board of Directors of
the Company is submitting the appointment of Ehrhardt Keefe Steiner &
Hottman PC (EKS&H) as the Companys independent registered public
accountant for stockholder ratification at the 2008 Annual Meeting. EKS&H has served as our independent
registered public accountant since March 31, 2006. A representative of EKS&H plans to attend
the Annual Meeting and will have an opportunity to make a statement if the
representative desires to do so. Such
representative will also be available to answer questions at the meeting.
Vote Required; Recommendation of our Board of
Directors
Stockholder ratification of the appointment
of EKS&H as our independent
registered public accountant
is not
required by our bylaws or otherwise. Our
Board, however, is submitting the appointment of EKS&H to the stockholders
for ratification as a matter of good corporate governance practice. The affirmative vote of a majority of the
shares present in person or by proxy at our Annual Meeting which are entitled
to vote on the subject matter and have voted and chosen not to abstain is
required to ratify the appointment of EKS&H as our independent registered
public accountant for fiscal 2008. If the
stockholders fail to ratify the appointment, our Audit Committee will
reconsider whether or not to retain that firm.
Even if the appointment is ratified, our Audit Committee in its discretion
may direct the appointment of a different independent registered public
accountant
at any time during the year if it determines that such a change would be in the
best interests of the Company and its stockholders.
Our Board unanimously recommends a vote FOR
the approval of EKS&H as our independent
registered public
accountant
for fiscal 2008.
13
COMMON STOCK OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables show
the number of shares of our common stock beneficially owned as of March 15,
2008 by each of the Named Executive Officers listed in the Summary Compensation
Table, each of our Directors, all of our Directors and Named Executive Officers
as a group, and each person who is known by us to be the beneficial owner of
more than 5% of our common stock. We had
51,514,083 shares outstanding on March 15, 2008.
Ownership
Table
Name and Address of Beneficial Owner
|
|
Shares
Beneficially
Owned (1)
|
|
Percentage
Beneficially
Owned (1)
|
|
State of
Wisconsin Investment Board (2)
P.O. Box 7842
Madison, WI 53707
|
|
9,365,182
|
|
18.2
|
%
|
Zesiger Capital
Group LLC (3)
320 Park Avenue, 30th Floor
New York, NY 10022
|
|
8,308,200
|
|
16.1
|
%
|
Entities associated
with Charter Ventures (4)
525 University Avenue, Suite 1500
Palo Alto, CA 94301
|
|
6,014,717
|
|
11.7
|
%
|
Ashford Capital
Management, Inc. (5)
1 Walkers Mill Road
Wilmington, DE 19807-2317
|
|
3,197,500
|
|
6.2
|
%
|
William A. Aylesworth (6)
|
|
353,577
|
|
*
|
|
A. Barr Dolan (6)(7)
|
|
6,399,809
|
|
12.3
|
%
|
Peter Eio (6)
|
|
299,936
|
|
*
|
|
G. Irwin Gordon (6)
|
|
341,605
|
|
*
|
|
Robert B. Grieve, Ph.D. (6)(8)
|
|
2,669,029
|
|
5.0
|
%
|
Louise L. McCormick (6)
|
|
50,268
|
|
*
|
|
John F. Sasen, Sr. (6)
|
|
383,737
|
|
*
|
|
Michael A. Bent (6)
|
|
446,236
|
|
*
|
|
John R. Flanders (6)
|
|
210,000
|
|
*
|
|
Michael J. McGinley, Ph.D. (6)
|
|
481,637
|
|
*
|
|
Jason A. Napolitano (6)(9)
|
|
1,859,915
|
|
3.5
|
%
|
Joseph H. Ritter, D.V.M. (6)(10)
|
|
421,247
|
|
*
|
|
G. Lynn Snodgrass (6)
|
|
131,137
|
|
*
|
|
Nancy Wisnewski, Ph.D. (6)
|
|
460,575
|
|
*
|
|
All Directors
and Executive Officers as a group
(14 persons)(6)(7)(8)(9)(10)
|
|
14,508,708
|
|
24.7
|
%
|
*
Amount represents less than 1% of our common stock.
(1)
To our knowledge and unless
otherwise noted, 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 SEC and includes voting and investment power with respect to
securities. Shares of common stock
issuable upon exercise of stock options exercisable within 60 days of March 15,
2008 are deemed outstanding and beneficially owned by the person holding such
option for purposes of computing such persons 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 8, 2008 for holdings on December 31,
2007 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 9,365,182
shares.
(3)
Based upon information derived
from a Schedule 13G filed February 11, 2008 for holdings on December 31,
2007 by Zesiger Capital Group LLC pursuant to Section 13G of the Exchange
Act reporting its beneficial ownership of our common stock. According to the Schedule 13G, Zesiger
Capital Group LLC has the sole power to vote 5,401,700 shares and the sole
power to dispose of 8,308,200 shares.
14
(4)
Based upon
information derived from a Schedule 13G filed February 14, 2008 for
holdings on December 31, 2007 by Charter Ventures, L.P. and Charter
Ventures II, L.P. pursuant to Section 13G of the Exchange Act reporting
its beneficial ownership of our common stock.
According to the Schedule 13G, Charter Ventures L.P. has the sole power
to vote and dispose of 987,510 shares and Charter Ventures II, L.P. has the
sole power to vote and dispose of 5,027,207 shares. Based on this and 2,000 shares of common
stock issuable upon exercise of stock options held by entities associated with
Charter Ventures on December 31, 2007, entities associated with Charter
Ventures held 6,012,717 shares on December 31, 2007.
(5)
Based upon
information derived from a Schedule 13G filed February 14, 2008 for
holdings on December 31, 2007 by Ashford Capital Management, Inc.
pursuant to Section 13G of the Exchange Act reporting its beneficial
ownership of our common stock. According
to the Schedule 13G, Ashford Capital Management, Inc. has sole power to
vote and dispose of 3,197,500 shares.
(6)
Includes
Shares Owned and Exercisable Options from Exercisable Option Table below
for each Director and Named Executive Officer, as well as for all Directors and
Executive Officers as a group.
(7)
Includes 6,012,717 shares and 2,000 shares of common stock issuable upon
exercise of stock options held by entities associated with Charter Ventures as
discussed in footnote 4 above, with respect to which Mr. Dolan disclaims
beneficial ownership except to the extent of his proportionate share
therein. Mr. Dolan is a general
partner of Charter Ventures and Charter Ventures II, L.P., and thus may be
deemed a beneficial owner of the shares held by these or affiliated
entities. Mr. Dolans business
address is c/o Charter Ventures, 525 University Avenue, Suite 1400, Palo
Alto, CA 94301.
(8)
Includes 61,550 shares of common stock held for the benefit of Dr. Grieves
children and 15,649 shares of common stock held by Dr. Grieves wife, all
of with respect to which Dr. Grieve disclaims beneficial ownership. Dr. Grieves business address is c/o the
Company at 3760 Rocky Mountain Avenue, Loveland, CO 80538.
(9)
Includes
6,020 shares of common stock held by Mr. Napolitanos wife, with respect
to which Mr. Napolitano disclaims beneficial ownership.
(10)
Dr. Ritter voluntarily left the Company effective April 4,
2008.
Exercisable Option Table
Name
|
|
Shares
Owned (1)
|
|
Exercisable
Options (2)
|
|
Exercisable
Option Price
Range (3)
|
|
Exercisable
Option
Average
Price (4)
|
|
Weighted
Average
Remaining
Contractual
Life (5)
|
|
Exercisable
In-the
money
Options (6)
|
|
Net Shares
from
Exercisable
Options (7)
|
|
William A.
Aylesworth
|
|
20,000
|
|
333,577
|
|
$
|
0.38-4.12
|
|
$
|
1.35
|
|
5.90
|
|
191,765
|
|
61,150
|
|
A. Barr Dolan
(8)
|
|
6,012,717
|
|
387,092
|
|
$
|
0.38-13.75
|
|
$
|
1.42
|
|
6.18
|
|
225,982
|
|
70,599
|
|
Peter Eio
|
|
20,000
|
|
279,936
|
|
$
|
0.48-2.73
|
|
$
|
1.33
|
|
6.69
|
|
139,296
|
|
58,992
|
|
G. Irwin Gordon
|
|
27,000
|
|
314,605
|
|
$
|
0.38-2.687
|
|
$
|
1.31
|
|
6.05
|
|
183,965
|
|
62,805
|
|
Robert B.
Grieve, Ph.D. (9)
|
|
442,033
|
|
2,226,996
|
|
$
|
0.34-3.69
|
|
$
|
1.57
|
|
6.05
|
|
1,426,996
|
|
410,591
|
|
Louise L.
McCormick
|
|
5,000
|
|
45,268
|
|
$
|
1.83-1.83
|
|
$
|
1.83
|
|
9.80
|
|
|
|
|
|
John F.
Sasen, Sr.
|
|
20,297
|
|
363,440
|
|
$
|
0.41-7.62
|
|
$
|
1.52
|
|
5.97
|
|
215,975
|
|
67,457
|
|
Michael A. Bent
|
|
33,736
|
|
412,500
|
|
$
|
0.34-2.37
|
|
$
|
1.26
|
|
6.21
|
|
300,000
|
|
104,762
|
|
Jason A.
Napolitano (10)
|
|
591,394
|
|
1,268,521
|
|
$
|
0.70-2.30
|
|
$
|
1.09
|
|
6.19
|
|
1,039,354
|
|
399,195
|
|
Joseph H.
Ritter, D.V.M. (11)
|
|
15,414
|
|
404,375
|
|
$
|
0.38-2.30
|
|
$
|
1.43
|
|
7.35
|
|
220,000
|
|
73,112
|
|
John R. Flanders
|
|
7,500
|
|
202,500
|
|
$
|
1.65-1.83
|
|
$
|
1.65
|
|
8.88
|
|
|
|
|
|
Michael J.
McGinley, Ph.D.
|
|
20,804
|
|
460,833
|
|
$
|
0.34-10.25
|
|
$
|
1.35
|
|
6.71
|
|
319,000
|
|
107,524
|
|
G. Lynn
Snodgrass
|
|
1,904
|
|
129,233
|
|
$
|
0.95-2.37
|
|
$
|
1.51
|
|
7.83
|
|
54,500
|
|
9,192
|
|
Nancy Wisnewski,
Ph.D.
|
|
54,742
|
|
405,833
|
|
$
|
0.34-3.06
|
|
$
|
1.27
|
|
7.03
|
|
295,000
|
|
74,021
|
|
All Directors
and Executive Officers as a group (14 persons) (8)(9)(10)(11)
|
|
7,272,541
|
|
7,236,167
|
|
$
|
0.34-13.75
|
|
$
|
1.39
|
|
6.41
|
|
4,611,833
|
|
1,499,400
|
|
(1)
To our knowledge and unless otherwise noted, the persons named in the
table have sole voting and investment power with respect to all shares of
common stock shown in the column, subject to community property laws where
applicable and the information contained in the footnotes of this table.
(2)
Represents shares of common stock issuable upon exercise of stock
options exercisable within 60 days of March 15, 2008.
(3)
Represents the lowest and highest strike price for stock options
exercisable within 60 days of March 15, 2008.
(4)
Represents the average strike price for stock options exercisable within
60 days of March 15, 2008.
(5)
Represents the weighted average remaining contractual life, in years,
for stock options exercisable within 60 days of March 15, 2008.
(6)
Represents shares of common stock issuable upon exercise of stock
options exercisable within 60 days of March 15, 2008 that have a strike
price less than $1.43, the closing market price per share of Heska stock on March 15,
2008.
(7)
Represents net shares under the Treasury Stock method assuming a market
price per share of $1.43, the closing market price per share of Heska stock on March 15,
2008, for shares of common stock issuable upon exercise of stock options
exercisable within 60 days of March 15, 2008 that have a strike price less
than $1.43.
15
(8)
Includes 6,012,717 shares and 2,000 shares of common stock issuable upon
exercise of stock options held by entities associated with Charter Ventures, as
discussed in footnote 4 to Ownership Table above, with respect to which Mr. Dolan
disclaims beneficial ownership except to the extent of his proportionate share
therein. Mr. Dolan is a general
partner of Charter Ventures and Charter Ventures II. L.P., and thus may be
deemed a beneficial owner of the shares held by these or affiliated entities.
(9)
Includes 61,550 shares of common stock held for the benefit of Dr. Grieves
children and 15,649 shares of common stock held by Dr. Grieves wife, all
of with respect to which Dr. Grieve disclaims beneficial ownership.
(10)
Includes 6,020 shares of common stock held by Mr. Napolitanos
wife, with respect to which Mr. Napolitano disclaims beneficial ownership.
(11)
Dr. Ritter voluntarily left the Company effective April 4,
2008.
Outstanding Option Table
Name
|
|
Shares
Owned (1)
|
|
Outstanding
Options (2)
|
|
Outstanding
Option Price
Range (3)
|
|
Outstanding
Option
Average
Price (4)
|
|
Weighted
Average
Remaining
Contractual
Life (5)
|
|
Outstanding
In-the-
money
Options (6)
|
|
Net Shares
from
Outstanding
Options (7)
|
|
William A.
Aylesworth
|
|
20,000
|
|
333,577
|
|
$
|
0.38-4.12
|
|
$
|
1.35
|
|
5.90
|
|
191,765
|
|
61,150
|
|
A. Barr Dolan
(8)
|
|
6,012,717
|
|
387,092
|
|
$
|
0.38-13.75
|
|
$
|
1.42
|
|
6.18
|
|
225,982
|
|
70,599
|
|
Peter Eio
|
|
20,000
|
|
279,936
|
|
$
|
0.48-2.73
|
|
$
|
1.33
|
|
6.69
|
|
139,296
|
|
58,992
|
|
G. Irwin Gordon
|
|
27,000
|
|
314,605
|
|
$
|
0.38-2.687
|
|
$
|
1.31
|
|
6.05
|
|
183,965
|
|
62,805
|
|
Robert B.
Grieve, Ph.D. (9)
|
|
442,033
|
|
2,501,996
|
|
$
|
0.34-3.69
|
|
$
|
1.61
|
|
6.05
|
|
1,426,996
|
|
410,591
|
|
Louise L.
McCormick
|
|
5,000
|
|
45,268
|
|
$
|
1.83-1.83
|
|
$
|
1.83
|
|
9.80
|
|
|
|
|
|
John F.
Sasen, Sr.
|
|
20,297
|
|
363,440
|
|
$
|
0.41-7.62
|
|
$
|
1.52
|
|
5.97
|
|
215,975
|
|
67,457
|
|
Michael A. Bent
|
|
33,736
|
|
440,000
|
|
$
|
0.34-2.37
|
|
$
|
1.30
|
|
6.21
|
|
300,000
|
|
104,762
|
|
Jason A.
Napolitano (10)
|
|
591,394
|
|
1,369,354
|
|
$
|
0.70-2.30
|
|
$
|
1.15
|
|
6.19
|
|
1,039,354
|
|
399,195
|
|
Joseph H.
Ritter, D.V.M. (11)
|
|
15,414
|
|
470,000
|
|
$
|
0.38-2.30
|
|
$
|
1.49
|
|
7.35
|
|
220,000
|
|
73,112
|
|
John R. Flanders
|
|
7,500
|
|
230,000
|
|
$
|
1.65-1.83
|
|
$
|
1.67
|
|
8.88
|
|
|
|
|
|
Michael J.
McGinley, Ph.D.
|
|
20,804
|
|
525,000
|
|
$
|
0.34-10.25
|
|
$
|
1.41
|
|
6.71
|
|
319,000
|
|
107,524
|
|
G. Lynn
Snodgrass
|
|
1,904
|
|
165,900
|
|
$
|
0.95-2.37
|
|
$
|
1.58
|
|
7.83
|
|
54,500
|
|
9,192
|
|
Nancy Wisnewski,
Ph.D.
|
|
54,742
|
|
470,000
|
|
$
|
0.34-3.06
|
|
$
|
1.35
|
|
7.03
|
|
295,000
|
|
74,021
|
|
All Directors
and Executive Officers as a group (14 persons)(8)(9)(10)(11)
|
|
7,272,541
|
|
7,896,168
|
|
$
|
0.34-13.75
|
|
$
|
1.42
|
|
6.41
|
|
4,611,833
|
|
1,499,400
|
|
(1)
To our knowledge and unless otherwise noted, the persons named in the
table have sole voting and investment power with respect to all shares of
common stock shown in the column, subject to community property laws where
applicable and the information contained in the footnotes of this table.
(2)
Represents shares of common stock issuable upon exercise of stock
options outstanding on March 15, 2008.
(3)
Represents the lowest and highest strike price for stock options
outstanding on March 15, 2008.
(4)
Represents the average strike price for stock options outstanding on March 15,
2008.
(5)
Represents the weighted average remaining contractual life, in years,
for stock options outstanding on March 15, 2008.
(6)
Represents shares of common stock issuable upon exercise of stock options
outstanding on March 15, 2008 that have a strike price less than $1.43,
the closing market price per share of Heska stock on March 15, 2008.
(7)
Represents net shares under the Treasury Stock method assuming a market
price per share of $1.43, the closing market price per share of Heska stock on March 15,
2008, for shares of common stock issuable upon exercise of stock options
outstanding on March 15, 2008 that have a strike price less than $1.43.
(8)
Includes 6,012,717 shares and 2,000 shares of common stock issuable upon
exercise of stock options held by entities associated with Charter Ventures, as
discussed in footnote 4 to Ownership Table above, with respect to which Mr. Dolan
disclaims beneficial ownership except to the extent of his proportionate share
therein. Mr. Dolan is a general
partner of Charter Ventures and Charter Ventures II. L.P., and thus may be
deemed a beneficial owner of the shares held by these or affiliated entities.
(9)
Includes 61,550 shares of common stock held for the benefit of Dr. Grieves
children and 15,649 shares of common stock held by Dr. Grieves wife, all
of with respect to which Dr. Grieve disclaims beneficial ownership.
(10)
Includes 6,020 shares of common stock held by Mr. Napolitanos
wife, with respect to which Mr. Napolitano disclaims beneficial ownership.
(11)
Dr. Ritter voluntarily left the Company effective April 4,
2008.
16
SECTION 16(A) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Compliance with Section 16(a) of
the Securities Exchange Act of 1934 requires our Directors, Executive Officers
and persons who own more than 10% of a registered class of our equity
securities to file reports of holdings and transactions of Heska common stock
and other equity securities with the SEC.
Directors, Executive Officers and 10% or greater stockholders are
required by SEC regulations to furnish us with copies of all of the Section 16(a) reports
they file. Based solely upon a review of
the copies of the forms furnished to us and the representations made by the
reporting persons to us, we believe that during 2007 our Directors, Executive
Officers and 10% or greater stockholders complied with all filing requirements
under Section 16(a) of the Exchange Act except as follows. Due to an administrative error, Mr. Sasen
filed a late Form 4 on January 16, 2007, covering one transaction
occurring on January 4, 2007.
EQUITY COMPENSATION PLAN
INFORMATION
The following table sets
forth information about our common stock that may be issued upon exercise of
options and rights under all of our equity compensation plans as of December 31,
2007, including the 1988 Stock Option Plan, the 1997 Stock Incentive Plan, the
1997 Employee Stock Purchase Plan and the 2003 Equity Incentive Plan. Our stockholders have approved all of these
plans.
Plan Category
|
|
Number of Securities to be
Issued Upon Exercise of
Outstanding Options and
Rights
|
|
Weighted-Average Exercise
Price of Outstanding
Options and Rights
|
|
Number of Securities
Remaining Available for
Future Issuance Under Equity
Compensation Plans
(excluding securities reflected
in column (a))
|
|
Equity
Compensation Plans Approved by Stockholders
|
|
12,118,417
|
|
$
|
1.40
|
|
4,478,553
|
|
Equity
Compensation Plans Not Approved by Stockholders
|
|
None
|
|
None
|
|
None
|
|
Total
|
|
12,118,417
|
|
$
|
1.40
|
|
4,478,553
|
|
SIGNIFICANT RELATIONSHIPS
AND TRANSACTIONS WITH DIRECTORS, OFFICERS OR PRINCIPAL STOCKHOLDERS
Related Party Transactions
Pursuant to our code of ethics for senior executives and financial
officers, a copy of which is available on Heskas website at www.heska.com, and
our Corporate Governance Committee charter, our Audit Committee or our
Corporate Governance Committee must review and approve any transaction that the
Company proposes to enter into that would be required to be disclosed under
Item 404(a) of Regulation S-K. Item 404(a) of Regulation S-K requires
the Company to disclose in its proxy statement any transaction involving more
than $120,000 in which the Company is a participant and in which any related
person has or will have a direct or indirect material interest. A related
person is any executive officer, director, nominee for director, or holder of
5% or more of the Companys common stock, or an immediate family member of any
of those persons.
Since January 1, 2007, the Company has not been a participant in
any transaction with a related person other than the indemnification agreements
described below.
17
Indemnification agreements with
officers and directors
Our amended and restated certificate of incorporation and our bylaws
provide that we will indemnify each of our Directors and Executive Officers to
the fullest extent permitted by the Delaware General Corporation Law. Further,
we have entered into indemnification agreements with each of our Directors and
Executive Officers.
18
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Executive Compensation
Objective and Philosophy
The Compensation Committee
of Heska Corporations Board of Directors (the Committee) administers our
executive compensation program and establishes the salaries of our Executive
Officers. The ultimate objective of our
executive compensation program is to attract, retain and reward executives who
will enhance the value and profitability of Heska Corporation (Heska or the Company)
and increase stockholder value. The
Committee strives to provide competitive compensation opportunities with the
ultimate amount of compensation received tied significantly to short-term and
long-term Company performance. Inherent
in our approach is the philosophy that compensation can align behavior and
actions with stockholder interests, attract and retain stronger executives and
thus create value for stockholders over time.
The Committees goal in executive compensation is to design and
administer programs that best serve these ends.
What is Heskas Executive
Compensation Program Designed to Reward?
The Committee develops our
executive compensation programs to reward Executive Officers for their
contribution to Heskas financial performance and to recognize individual
initiative, leadership, achievement and other contributions. An effective compensation program will reward
executives for working well collectively as well as for strong individual
performance.
What
are the Elements of Heskas Executive Compensation?
Our
compensation program is designed to reward four interlocking aspects of
executive performance:
·
Continued service to the Company; rewarded
primarily through base salary, equity award requirements and vesting and
competitive benefits levels;
·
Individual contribution: rewarded primarily
through the setting of base salary and annual Management Incentive Plan (MIP)
targets;
·
Annual financial performance: rewarded
primarily through the awards paid under the MIP; and
·
Long-term gains in stockholder value:
rewarded primarily through the equity incentive program.
Why Does Heska Choose to Pay Each Element of Executive Compensation?
Base salary.
Base
salaries are set on an annual or other periodic basis and designed to reflect
competitive market salaries for each position.
They are also used in determining the basis for bonus targets in our
Management Incentive Plan (MIP) discussed below.
Performance-based
incentive compensation.
This form of compensation is based on the
achievement of predetermined financial, project, research or other designated
objectives. This form of compensation is
paid to reward near-term performance (i.e., no longer than the coming year) and
encourage Executive Officers to optimize immediate opportunities. In recent years, an MIP has been offered to
Executive Officers and other managers to provide a performance-based incentive.
19
Long-term equity
compensation.
This form of compensation is designed to
encourage the achievement of superior financial results over an extended period
of time and align the interests of stockholders and Executive Officers. It is intended to ensure that Executive
Officers make thoughtful decisions about the Companys future and long-term
prospects.
Other benefits, compensation
or arrangements.
Other than broad-based programs open to all
employees, such as participation in our 401(k) program and employee stock
purchase plan, this category tends to be used rarely. Most of our Executive Officers have
employment agreements. An Executive
Officers extraordinary performance or participation in an unanticipated
endeavor may occasionally trigger such an award in this category.
Perspective on Executive
Compensation at Heska
Heska was founded in 1988 and completed its initial public offering in
1997 but only achieved its first profitable year in 2005. We believe the Companys historical liquidity
concerns and efforts to achieve profitability have influenced the Committees
decisions regarding executive compensation, as outlined below.
Profitability has been an important goal for Heska to ensure the
sustainability of the business.
Profitability has also been critical, not only for its own sake, but
also for employee morale, attracting talented individuals to join the Company
and commercial perceptions. At the
request of Heskas Executive Officers to help achieve profitability, the
Committee froze base salaries for all Executive Officers in 2005 and 2006. Similarly, the 2005 MIP called for a
performance in excess of the Companys internal budget before any bonus
payments were made and no payouts were ultimately made under the 2004 MIP or
the 2005 MIP (with the foregoing base salary and MIP information defined as Historical
Cash Compensation).
Stock options have historically had the advantage of allowing the
Company to address both liquidity and profitability concerns
simultaneously. First, stock options
allowed the Committee to compensate employees without a corresponding cash
outlay, and, in fact, provided the Company with cash upon exercise in most
instances. Secondly, stock options
granted have not historically been required to be expensed for financial
reporting purposes. Accordingly, the
Committee tended to emphasize stock options as a tool for executive
compensation. Since 2006, the Company
has been required to recognize a cost for certain stock options in its
financial statements, as detailed in the Summary Compensation Table below;
the estimated fair value of stock options granted, rather than the
corresponding intrinsic value, is amortized ratably over the vesting periods of
the related options. After considering
the significant impact that the use of fair values, rather than intrinsic
values, would have on our future results of operations, as well as factors including
Historical Cash Compensation to Executive Officers and similar cash
compensation issues to other employees, the Company accelerated stock option
vesting in December 2004 and March 2005 as well as issuing all
options with immediate vesting on and between March 30, 2005 and December 31,
2005. This is why virtually all options
held by Executive Officers are vested, and exercisable, as of December 31,
2007 in the table labeled Outstanding Equity Awards at Fiscal Year-End below.
The Committee is also sensitive
to, and tries to optimize, tax implications.
It is our policy generally to qualify compensation paid to Executive
Officers for deductibility under Section 162(m) of the Internal
Revenue Code. The Committee has
structured the Management Incentive Plan Master Document, the 2006 MIP, the
2007 MIP and the 2008 MIP to qualify as awards under such plans as
performance-based compensation and to maximize the tax deductibility of such
awards. However, the Committee reserves
the discretion to pay compensation to its Executive Officers that may not be
deductible.
20
Determination of
Compensation Elements
In reviewing the
compensation of our Executive Officers, the Committee reviews the nature and
scope of each Executive Officers responsibilities as well as his or her
effectiveness in that role as well as in supporting the Companys long-term
goals. Heskas Board of Directors (the Board)
formally evaluates the Chief Executive Officer (our CEO). Our CEO communicates his view of the
performance of other Executive Officers to the Committee and makes
recommendations regarding salary, incentive-based performance compensation and
long-term compensation grants for the Committees consideration. The Company has a performance appraisal
system it uses to evaluate its employees, including Executive Officers, which Dr. Grieve
considers along with other information, such as third-party interviews of
Company employees who interact with the Companys Executive Officers. As more detailed oversight of items such as
short-term sales performance by product is considered more important, our CEO
takes a more active role in determining the cash performance-based incentive
compensation of our Vice President of Sales than for our other Executive
Officers. Our CEO approves cash
performance-based incentive compensation for our Vice President of Sales and
makes the resulting compensation information available to the Committee. Decisions regarding base salary, long-term
equity incentive compensation and other benefits, compensation or arrangements
are made in the same manner for our Vice President of Sales as for our other
Executive Officers. In the past few
years, Heskas Vice President of Human Resources has compiled and presented
data discussed below for the Committees consideration of the different
compensation elements discussed below.
The Chief Financial Officer (our CFO) has also met with the Committee
to communicate on issues of interest to the Committee, including the accounting
implications of various compensation alternatives and information on our
financial plans, expectations and historical results for the Committees
consideration.
The Committee has considered
it appropriate, and in the best interests of Heskas stockholders, to endeavor
to set our overall Executive Officer compensation near the mid-point of the
range of companies in the comparison group it reviewed (Comparable Companies). The Committee also reviews the relative mix
of compensation paid by Comparable Companies for use as a guideline. It is the sense of the Committee that
performance-based incentive compensation has been relatively lower and
long-term equity compensation relatively higher than for Comparable
Companies. We anticipate the Committee
will continue to exercise its discretion regarding the relative mix of
compensation, although the relative mix may become more similar to that of
Comparable Companies over time. The
Committee views the difference between the compensation of our CEO and our
other Named Executive Officers as largely a reflection of competitive market
practices and the CEOs responsibility for all Company operations and not any
compensation philosophy specific to Heska.
In compensation matters, the Committee reviews relevant information and
makes a case-by-case determination relying on its collective judgment and
experience.
In 2005 and 2006, the
process to determine executive compensation culminated at our Board meeting
held in the fourth quarter. At that time
a Committee meeting was held and final determinations were made regarding any
base salary increases, MIP Plan adoption and/or long-term compensation equity
grants for the coming year. Accordingly,
all option grants to Executive Officers were granted after the market close on
the day the Committee met during the Companys fourth quarter Board
meeting. We expect this to be our
standard practice going forward.
At our regularly scheduled
Board meeting in November 2007, the Committee met with an outside
compensation consultant (the Consultant) and decided to engage the Consultant
for an assessment of executive compensation strategy and programs and to
provide data on competitive compensation practices. Accordingly, the process to determine
executive compensation was delayed. The
Committee asked the Consultant to conduct a compensation survey of companies
similar to Heska and to review the current total and equity compensation of the
Companys Executive Officers. The
Consultant reported to the Committee, only, and was prohibited from doing any
work for management unless it was specifically requested by the
21
Chairman of the
Committee. The Committee viewed the
Consultant as an advisor only, and the Committee retained the discretion to
implement or not implement the Consultants suggestions. In subsequent dialogue with the Consultant,
alternative long-term compensation approaches were discussed, including the use
of restricted stock and performance-based vesting. The Committee held a series of meetings in December 2007
to review information and suggestions from the Consultant and to debate, and
ultimately approve, the form and scale of long-term equity compensation for
2008. Base salaries and 2008
performance-based incentive compensation were agreed upon at a Committee
meeting during our regularly scheduled Board meeting in February 2008. Even though it was formally approved in February 2008,
we believe there was conceptual agreement on the 2008 MIP in 2007 and we have
included it in the table named Grants of Plan-Based Awards below.
The Committee considers
compensation data from companies in medical, biotechnology and general industry
groups that have similar revenues, veterinary focus and/or are in a similar stage
of development to Heska. In 2006, the
Committee reviewed compensation data for the following companies as part of its
review of Executive Compensation: Abaxis, Abgenix, Arqule, Array Biopharma,
Digene, Embrex, Hi Tech Pharmaceuticals, IDEXX Laboratories, Meridian
Bioscience, MGI Pharma, Quidel and Savient Pharmaceuticals. In 2007, the Committee reviewed compensation
data for the following companies as part of its review of Executive
Compensation: Abaxis, Array Biopharma, Auxilium Pharmaceuticals, Cardiac
Science, Cyberonics, Hi Tech Pharmaceuticals, IDEXX Laboratories, Immucor,
Meridian Bioscience, MGI Pharma, Noven Pharmaceuticals, Quidel, Santarus,
Savient Pharmaceuticals and Zoll Medical.
The Committee also reviewed summary compensation data based on company
size for both years. The Committee also
reviewed benchmark data resulting from a study of 120 life sciences companies
carried out by the Consultant in 2007.
Base Salary.
The
Committee reviews each Executive Officers base salary annually. When reviewing base salaries, the Committee
considers compensation data from companies in medical, biotechnology and
general industry groups that have similar revenues, veterinary focus and/or are
in a similar stage of development to Heska.
Consideration is also given to prior performance, relevant experience,
level of responsibility and skills, and abilities of each Executive
Officer. The Committee believes that
salary levels for our Executive Officers are set at a level that, at the time
such salary determinations were made, were reasonable and necessary given the
Companys financial resources and stage of development. The Committee reviews relevant information
and makes a case-by-case determination relying on its collective judgment and
experience.
In 2006, the Committee was
concerned regarding the effect of the three year salary freeze on Executive
Officer base salaries versus market levels.
The information in the base salary table below was approved for the
Named Executive Officers by the Committee.
The Committee also agreed to consider a mid-2007 review of base salaries
if necessary to bring them more in line with desired rates.
Name
|
|
Annual Salary
|
|
Percent Increase
|
|
Robert B. Grieve
|
|
$
|
375,000
|
|
10.0
|
%
|
Jason A. Napolitano
|
|
$
|
232,575
|
|
5.0
|
%
|
Joseph H. Ritter
|
|
$
|
200,070
|
|
5.3
|
%
|
John R. Flanders
|
|
$
|
200,000
|
|
N/A
|
(1)
|
G. Lynn Snodgrass
|
|
$
|
154,500
|
|
3.0
|
%
|
(1)
Mr. Flanders joined the Company as of December 11, 2006.
In 2007, after reviewing and
considering Comparable Company data and the recent performance of both Dr. Grieve
and the Company, our Board of Directors decided to increase Dr. Grieves
base salary by approximately 6.7% to $400,000 effective September 2007. In February 2008, after reviewing and
22
considering relevant data,
including input from Dr. Grieve, the Committee agreed to the following
base salaries, effective March 2008.
Name
|
|
Annual Salary
|
|
Percent Increase
|
|
Robert B. Grieve
|
|
$
|
420,000
|
|
5.0
|
%
|
Jason A. Napolitano
|
|
$
|
243,000
|
|
4.5
|
%
|
Joseph H. Ritter
|
|
$
|
208,000
|
|
4.0
|
%
|
John R. Flanders
|
|
$
|
206,000
|
|
3.0
|
%
|
G. Lynn Snodgrass
|
|
$
|
158,000
|
|
2.3
|
%
|
Performance-Based Incentive
Compensation.
The Company first adopted an MIP in 1999 to
provide incentives to our Executive Officers, other managers and key employees
to meet and exceed certain predetermined annual goals. Target annual incentives and specific
performance criteria are established each year by the Committee, with the
actual payout based on the extent to which the specified performance criteria
are met. We believe this approach
provides a strong incentive for our management to achieve the stated annual
goals. An example of the incentive can
be seen when comparing the cash levels of the 2006 MIP Payouts to the 2007 MIP
Payouts in the Summary Compensation Table below. In late 2005, the Committee adopted the
Management Incentive Plan Master Document (the Master Document). A goal of the Master Document is self-funding
status for the MIP in any given year. A
given years MIP can be implemented by the Committee agreeing on four
parameters: 1) the percent of salary that is an individuals targeted bonus
compensation; 2) the relative weighting of company wide and individual
performance, 3) the key parameter(s) the MIP Payouts are to be based upon
and 4) the Payout Structure by which the MIP is funded. Typically there has been a cap on the MIP of
approximately 150% of target payout to all employees, although this is not
required in any given year. Each
individual has a targeted MIP Payout and this is intended as a
guideline. Our CEO will generally make
recommendations to the Committee regarding MIP Payouts to other MIP Plan
participants; all awards under the MIP Plan are at the discretion of the
Committee. Any MIP Payouts are to be
made in the first quarter of the following year. All Executive Officers, with the exception of
Mr. Snodgrass, our Vice President of Sales, are eligible for the MIP. Performance-based incentive compensation for Mr. Snodgrass
consists of commissions earned based on achieving certain sales volume targets
(his Commissions) and, beginning in 2007, a bonus paid at the discretion of Dr. Grieve
based on Company financial performance and individual performance that is
similar to the MIP (his Bonus). Mr. Snodgrasss
performance-based incentive compensation is discussed below.
In considering the 2006 MIP,
the Committee was aware that the Executive Officers were entering their third
consecutive year with the same salary and that the Executive Officers had not
received any bonus payments in the prior two years. The Committee adopted a plan with relatively
low payout thresholds, as detailed below.
At the Committee meeting in the fourth quarter of 2005, the Committee
adopted the 2006 MIP with the following parameters:
Parameter
|
|
Result
|
%
Salary Target
|
|
Chief
Executive Officer 50%
All other eligible Executive
Officers 35%
|
Relative
Weighting
|
|
75%
Company Performance / 25% Individual Performance
|
Key
Parameter
|
|
Pre-MIP
Net Income Goal
|
Payout
Structure
|
|
Funding
starts at $1 of Pre-MIP Net Income Goal
50% Share of every $1 in
additional Pre-MIP Net Income
MIP Capped at $1.5 million (150% of
targeted payout)
|
As an example, if Heska had
$1.2 million in Pre-MIP Net Income, there would be $600 thousand available for
the MIP for the Committee to distribute among plan participants. This represents a plan funded
23
at 60% of target. Dr. Grieves 2006 salary was $341,000
and his targeted payout was $170,500 (50% of $341,000). In a 60% MIP-funded plan, his funded targeted
payout would be $102,300 (60% of $170,500).
The Committee could then adjust his pay upward for strong individual
performance or downward for poor individual performance using a 25% weighting
as a guideline for the adjustment. This
is a guideline only, however, as the Committee retains discretion to adjust
this number as circumstances dictate.
At a meeting in March 2007,
the Committee approved a recommendation that all plan participants be paid an
MIP Payout nearly 50% greater than target in accordance with performance
achievement in excess of the individual MIP cap. The Committee also decided Dr. Grieves
MIP Payout would similarly be nearly 50% greater than target. The MIP Payouts to MIP-eligible Named
Executive Officers are listed as Non-Equity Incentive Plan Compensation in
the Summary Compensation Table below.
In considering the 2007 MIP,
the Committee was aware that the Executive Officers were to receive base salary
increases in the coming year and were likely to receive maximum MIP Payouts
under the 2006 MIP as the 2006 MIP was expected to reach its capped level due
to the Companys financial performance.
The Committee adopted a plan with more aggressive payout thresholds than
had been set for the 2006 MIP, as detailed below. At the Committee meeting in the fourth
quarter of 2006, the Committee adopted the 2007 MIP with the following
parameters:
Parameter
|
|
Result
|
%
Salary Target
|
|
Chief
Executive Officer 50%
All other eligible Executive
Officers 35%
|
Relative
Weighting
|
|
75%
Company Performance / 25% Individual Performance
|
Key
Parameter
|
|
Pre-MIP
Operating Income Goal
|
Payout
Structure
|
|
Funding
starts at $4.5 million of Pre-MIP
Operating Income Goal, as
defined
25.14% Share of every additional $1
in Pre-MIP Operating Income Above Goal
MIP
Capped at $1.65 million (150% of targeted payout)
|
At a Committee meeting in February 2008,
the Committee approved MIP plan participants MIP Payouts recommendations and
decided Dr. Grieves MIP Payout would be equal to his individual funded
target. Each of the Named Executive
Officers eligible for the MIP received an MIP Payout in line with his
individual funded target, with the exception of Dr. Ritter, who received
an MIP Payout higher than his individual funded target due to what Dr. Grieve
considered to be particularly strong individual performance. The MIP Payouts to MIP-eligible Named
Executive Officers are listed as Non-Equity Incentive Plan Compensation in
the Summary Compensation Table below.
MIP Payouts were lower for 2007 than for 2006 due to a relatively lower
funded status (roughly 30% of target for 2007 versus 150% of target for 2006)
for 2007, which lowered the funded target MIP Payout for each MIP-eligible
Named Executive Officer. The 2007 MIP
achieved lower funded status than the 2006 MIP due to the more aggressive
payout thresholds in the 2007 MIP.
24
In considering the 2008 MIP,
the Committee considered the Companys 2007 performance and 2008 outlook in
setting the payout structure. At the
Committee meeting in the first quarter of 2008, the Committee adopted the 2008
MIP with the following parameters:
Parameter
|
|
Result
|
%
Salary Target
|
|
Chief
Executive Officer 50%
All other eligible Executive
Officers 35%
|
Relative
Weighting
|
|
75%
Company Performance / 25% Individual Performance
|
Key
Parameter
|
|
Pre-MIP
Operating Income Goal
|
Payout
Structure
|
|
Funding
starts at $5.862 million of Pre-MIP
Operating Income Goal, as
defined
32.22% Share of every additional $1
in Pre-MIP Operating Income Above Goal
MIP Capped at $1.732 million (150% of
targeted payout)
|
All of Mr. Snodgrasss performance-based
incentive compensation for 2006 was from Commissions. For 2007, approximately $45 thousand of Mr. Snodgrasss
performance-based incentive compensation was from Commissions, with the balance
resulting from his Bonus. Relatively
lower performance versus target was the reason for the decline in Commissions
from 2006 to 2007. Mr. Snodgrasss
Commissions and Bonus are listed as Non-Equity Incentive Plan Compensation in
the Summary Compensation Table below.
In the table named Grants of Plan-Based Awards
below, we list potential payouts under the 2008 MIP to Named Executive Officers
other than Mr. Snodgrass, who is not eligible for the MIP, under Estimated
Future Payouts Under Non-Equity Incentive Plan Awards. All Threshold MIP Payouts are listed at $0
as the MIP Plan will not fund if Pre-MIP Operating Income is at (or below) the
threshold level of $5.862 million.
All Target MIP Payouts are as defined above. The Maximum MIP Payouts are 50% greater
than the Target MIP Payouts to reflect that the 2008 MIP Plan is capped at
150% of its targeted funding level. It
is possible the Committee may decide to pay a Named Executive Officer greater
than this amount, although this did not occur in 2006 when the 2006 MIP Plan
reached its capped funding level.
Long-term Equity Compensation
. Historically, we have used
stock options to provide long-term equity compensation to our Executive
Officers. The Committee is responsible
for determining the number and terms of options, or other forms of long-term
equity compensation, 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. Options granted to Executive Officers have
exercise prices equal to fair market value (closing price) at the time of grant
and expire in ten years from the date of grant.
Any vesting ceases and the vested portion of options must be exercised
within a certain period should an Executive Officer leave Heskas service
(subject to any rights to partial acceleration of vesting upon termination
without cause under employment agreements).
Accordingly, option grants will provide a return to an Executive Officer
only if said Executive Officer continues to work for the benefit of the Company
and only if Heskas market price per share appreciates over the option
term. We believe that these provisions
help both to retain qualified employees and to motivate them to achieve
long-term increases in stock value, providing continuing benefits to the Company
and its stockholders beyond those in the year of grant. There has been agreement among Committee
members that long-term equity compensation will involve fewer Company shares
than it has in years prior to Heskas achieving profitability as challenges
facing the Company and the best approach to meeting them are expected to
change. This is an area where there has
been considerable discussion among Committee members regarding the proper
value, number of shares of Company common stock, vesting provisions and form of
future long-term equity compensation.
The Committee had discussions regarding the use of restricted stock and
performance-based vesting in December 2007, but decided not to pursue
these alternatives. This was due to
potential tax implications for employees
25
in using restricted stock and the likely increase in
complexity and administrative costs, as well as potential duplicative
incentives to the MIP, in using performance-based vesting. While it appears stock options will remain the
core component of long-term equity compensation in the near future, it is
possible the Committee will choose to use restricted stock, restricted stock
units, some other form of long-term equity compensation or some combination of
the foregoing with or without stock options in the future.
In
the fourth quarter of 2006, after significant discussion and considering
factors including the Historical Compensation to Executive Officers, the fact
that the 2006 MIP was expected to be capped,
our expected financial results in the fourth quarter of 2006, the
significant impact that the use of fair values for options granted would have
on our future results of operations and the total number of options previously
granted in 2006, the Committee decided to grant fully-vested stock options in
an amount approximately 60% of the size of the prior years grant and approved
a grant of fully-vested stock options to Mr. Flanders upon his formally
joining the Company. These options were
granted at the close of business on November 17, 2006 the date of the
Committee meeting, with the exception of options granted to Mr. Flanders
which were granted upon his joining the Company on December 11, 2006.
In
December 2007, after receiving input from the Consultant, reviewing relevant
data, including data requested to follow-up on certain questions, and engaging
in significant discussion and debate, the Committee approved a grant of stock
options to certain Officers of the Company.
Due to this process, including hiring and considering the input of the
Consultant, the option grant occurred on December 31, 2007 later in the
year than in 2006. In contrast to recent
stock option grants, this stock option grant was subject to monthly vesting
over a four year period as a result of the concern of some of our Board members
that fully-vested options may not provide as great a retention incentive as
desired. We anticipate granting stock
options with 4-year monthly vesting will be our standard practice in the
future. The Committee granted Dr. Grieve
a significantly larger stock option grant than in the prior year, reflective of
the Committees view of the market and the Committees evaluation of Dr. Grieves
performance. The Committee considered Dr. Grieves
input in addition to market data in determining stock option grants to the
other Named Executive Officers, all of which increased or were at the same
level as the prior year, except for Mr. Flanders who joined the Company in
December 2006. Related option
grants to Named Executive Officers are reflected in the Grants of Plan-Based
Awards table below in the column labeled All Other Option Awards; Number of
Securities Underlying Options (#).
Option
Awards in the Summary Compensation Table below represent the cost of options
recognized for financial reporting purposes for each of our Named Executive
Officers. The majority of the value in
each case is related to the fully vested option grants in the fourth quarter of
2006 discussed above. For all other
Named Executive Officers other than Mr. Napolitano, the only other option
cost included is for options granted with a four year vesting schedule in January 2003
with monthly vesting in 2006 and January 2007. In addition to such options granted in January 2003,
Mr. Napolitanos total also includes option cost from his initial grant of
options upon joining the Company in May 2002, which vested monthly ending
in May 2006 after an initial six-month cliff vest in November 2002. Options granted on December 31, 2007 did
not impact the Summary Compensation Table because the affiliated cost will be
recognized over the four year vesting period and these options were granted at
year end. The significant decline in
value in 2007 versus 2006 for each Named Executive Officer is due to the fact
that 2007 includes at most one month of stock option vesting for each
individual. We expect the value
recognized under Option Awards will increase in future years as the December 2007
option grant vests and future options are issued.
Other Benefits, Compensation or Arrangements
All
Other Compensation in the Summary Compensation Table below represent
matching funds received by each of our Named Executive Officers under our 401(k) plan,
which is open to all employees, as well as life insurance and short-term and
long-term disability premiums.
26
All
of our Named Executive Officers, with the exception of Mr. Snodgrass, had
employment contracts in 2006 and 2007.
They entitle Named Executive Officers to payments based on salary,
continuing medical benefits for a given period and immediate vesting of
unvested options in certain circumstances.
Payments based on salary are typically paid monthly. The Committee believes these are common, in
line with the experience of the Committee for executives at other companies and
are intended to provide Executive Officers with additional resources to seek a
comparable job - which is unlikely to be a rapid process given the level of
employment - in these certain circumstances, such as an acquisition. Dr. Grieve is also entitled to payout
based on bonus targets in certain circumstances, such as termination without
cause, as well. These employment
contracts are intended to provide the Named Executive Officers with protections
appropriate for, and in line with, those received by comparable executives at
companies similar to Heska.
Periodically, we review these agreements versus market benchmarks.
In summary, Heska
Corporation is changing, having just experienced its third consecutive
profitable year and with the current outlook for strong revenue growth
following our first quarter results in 2008.
Heskas Executive Compensation is changing along with the Company. The Committee endeavors to find the proper
level and balance of base salary, performance-based incentive compensation,
long-term equity incentive compensation and other forms of compensation.
27
Summary Compensation Table
The following table sets
forth compensation for services rendered in all capacities to us during 2006
and 2007 by Robert B. Grieve, our Chairman of the Board and Chief Executive
Officer, Jason A. Napolitano, our Chief Financial Officer, and our three other
most highly compensated Executive Officers for the fiscal year ended December 31,
2007 (the Named Executive Officers).
Summary Compensation Table
Name and Principal Position
|
|
Year
|
|
Salary
($) (1)
|
|
Bonus
|
|
Stock
Awards
|
|
Option
Awards
($)
(2)(3)
|
|
Non-Equity
Incentive Plan
Compensation
($) (4)
|
|
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
All Other
Compensation
($) (5)
|
|
Total
($)
|
|
Robert B. Grieve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman of the
Board
|
|
2007
|
|
377,667
|
|
|
|
|
|
1,126
|
|
60,242
|
|
|
|
10,077
|
|
449,112
|
|
and Chief Executive
Officer
|
|
2006
|
|
341,000
|
|
|
|
|
|
88,393
|
|
251,378
|
|
|
|
8,689
|
|
689,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jason A.
Napolitano
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice
President,
|
|
2007
|
|
230,729
|
|
|
|
|
|
239
|
|
24,519
|
|
|
|
4,146
|
|
259,633
|
|
Chief Financial
Officer
|
|
2006
|
|
221,500
|
|
|
|
|
|
95,123
|
|
114,300
|
|
|
|
927
|
|
431,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph H. Ritter
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice
President,
|
|
2007
|
|
198,392
|
|
|
|
|
|
13
|
|
23,000
|
|
|
|
6,447
|
|
227,852
|
|
Global Business
Operations
|
|
2006
|
|
190,000
|
|
|
|
|
|
47,500
|
|
98,045
|
|
|
|
3,668
|
|
339,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John R. Flanders
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vice President,
General
|
|
2007
|
|
200,000
|
|
|
|
|
|
|
|
21,000
|
|
|
|
3,730
|
|
224,730
|
|
Counsel and Corporate
Secretary
|
|
2006
|
|
6,146
|
|
|
|
|
|
142,260
|
|
|
|
|
|
|
|
148,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G. Lynn
Snodgrass
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vice President,
Sales
|
|
2007
|
|
153,750
|
|
|
|
|
|
|
|
52,119
|
|
|
|
1,113
|
|
206,982
|
|
|
|
2006
|
|
150,000
|
|
|
|
|
|
30,052
|
|
93,610
|
|
|
|
3,281
|
|
246,891
|
|
(1)
Salary includes amounts, if any, deferred
pursuant to 401(k) arrangements.
(2)
Represents cost recognized in
each year for financial reporting purposes.
(3)
Grant date fair value of option awards are based on valuation techniques
required by Option Accounting Rules.
Like any estimate prepared in good faith, the underlying assumptions we
use under Option Accounting Rules may vary from our actual future
results. The option valuation used for
accounting and/or financial reporting purposes does not necessarily represent
the value any individual recipient would place on an option award. In addition, Option Accounting Rules prohibits
some valuation techniques which may be useful in certain circumstances. A more
detailed description of our option valuation techniques and assumptions can be
found in our Annual Report on Form 10-K for the year ended December 31,
2007 in our Note 7 of the Notes to Consolidated Financial Statements.
(4)
Amounts earned pursuant to our
Management Incentive Plans except for Mr. Snodgrass whose amounts were
Commissions earned based on achieving certain sales volume targets and a Bonus
earned based on Company financial performance and individual performance that
is similar to our Management Incentive Plans.
Amounts indicated are for year in which compensation was earned.
(5)
Includes life insurance premiums, short-term and long-term disability
premiums and 401(k) match.
(6)
Dr. Ritter voluntarily left the Company effective April 4,
2008.
(7)
Mr. Flanders joined the Company as of December 11, 2006.
28
Grants of Plan-Based Awards in
Last Fiscal Year
The following
table shows all grants of options to acquire shares of our common stock granted
in the fiscal year ended December 31, 2007 to the Named Executive
Officers.
Grants of
Plan-Based Awards
|
|
|
|
|
|
|
|
All Other
Stock
Awards:
|
|
All Other
Option
Awards:
|
|
Exercise
|
|
Grant
Date
Fair
|
|
|
|
|
|
Estimated Future Payouts
|
|
Estimated Future Payouts
|
|
Number
|
|
Number of
|
|
or Base
|
|
Stock
|
|
|
|
|
|
Under Non-Equity Incentive
|
|
Under Equity Incentive Plan
|
|
of Shares
|
|
Securities
|
|
Price of
|
|
and
|
|
|
|
|
|
Plan Awards (1)
|
|
Awards
|
|
of Stock
|
|
Underlying
|
|
Option
|
|
Option
|
|
Name
|
|
Grant
Date
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($) (2)
|
|
Threshold
(#)
|
|
Target
(#)
|
|
Maximum(#)
|
|
or Units
(#)
|
|
Options
(#) (3)
|
|
Awards
($/Sh)
|
|
Awards
($) (4)
|
|
Robert B. Grieve
|
|
12/31/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
1.830
|
|
236,460
|
|
|
|
N/A
|
|
|
|
210,000
|
|
315,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jason A.
Napolitano
|
|
12/31/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110,000
|
|
1.830
|
|
86,702
|
|
|
|
N/A
|
|
|
|
85,050
|
|
127,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph H. Ritter
(5)
|
|
12/31/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,000
|
|
1.830
|
|
55,174
|
|
|
|
N/A
|
|
|
|
72,800
|
|
109,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John R. Flanders
|
|
12/31/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
1.830
|
|
23,646
|
|
|
|
N/A
|
|
|
|
72,100
|
|
108,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G. Lynn Snodgrass
(6)
|
|
12/31/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
1.830
|
|
23,646
|
|
|
|
N/A
|
|
25,000
|
|
80,000
|
|
120,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Although there was conceptual agreement on the 2008 MIP in 2007, our
2008 MIP was not formally approved until February 2008. The 2008 MIP is the source of all estimated
payouts to Named Executive Officers with the exception of Mr. Snodgrass,
in the columns below.
(2)
Based on targeted bonus multiplied by the percentage cap in our 2008
Management Incentive Plan (MIP) for Named Executive Officers other than for Mr. Snodgrass,
who is not eligible for the MIP. Our
2008 MIP is designed with a cap of approximately $1.732 million on total
payouts, or 150% of projected targeted bonuses.
Our 2008 MIP gives our Compensation Committee discretion as to how any
payouts will be distributed and the ability to make total payouts above the cap
level. Accordingly, although our
Compensation Committee has never awarded an MIP Payout to an employee greater
than the employees targeted bonus multiplied by the applicable percentage cap,
our Compensation Committee has the ability to make 2008 MIP Payouts to
Executive Officers in excess of that amount, which is reported as maximum in
this column.
(3)
One-forty-eighth (1/48
th
) of the total shares granted shall
become vested and exercisable each month from the grant date until the total
shares granted shall have vested in full on the four-year anniversary of the
grant date. The option was granted with
an exercise price equal to 100% of the fair market value of our stock on the
date of grant as determined by our Compensation Committee, and with a term of
ten years, subject to earlier termination in certain events related to
termination of employment.
(4)
Grant date fair value of option awards are
based on valuation techniques required by Option Accounting Rules. Like any estimate prepared in good faith, the
underlying assumptions we use under Option Accounting Rules may vary from
our actual future results. The option
valuations used for accounting and/or financial reporting purposes do not
necessarily represent the value any individual recipient would place on an
option award. In addition, Option
Accounting Rules prohibit some valuation techniques which may be useful in
certain circumstances. A more detailed
description of our option valuation techniques and assumptions can be found in
our Annual Report on Form 10-K for the year ended December 31, 2007
in our Note 7 of the Notes to Consolidated Financial Statements.
(5)
Dr. Ritter voluntarily
left the Company effective April 4, 2008.
(6)
Mr. Snodgrass earns
Commissions based on achieving certain sales volume targets, and a Bonus paid
at the discretion of Dr. Grieve based on Company financial performance and
individual performance that is similar to the MIP.
29
Outstanding
Equity Awards at Fiscal Year-End
The
following table shows unexercised stock options held at the end of fiscal year
ended December 31, 2007 by the executive officers named in the Summary
Compensation Table.
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
(1)
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
|
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested
(#)
|
|
Equity
Incentive
Plan Awards
Market or
Payout Value
Of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)
|
|
Robert B. Grieve
|
|
|
|
300,000
|
|
|
|
1.830
|
|
12/31/2017
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
1.717
|
|
11/17/2016
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
|
|
|
|
1.250
|
|
12/15/2015
|
|
|
|
|
|
|
|
|
|
|
|
282,000
|
|
|
|
|
|
0.880
|
|
3/30/2015
|
|
|
|
|
|
|
|
|
|
|
|
475,000
|
|
|
|
|
|
2.300
|
|
1/5/2014
|
|
|
|
|
|
|
|
|
|
|
|
275,000
|
|
|
|
|
|
0.700
|
|
1/31/2013
|
|
|
|
|
|
|
|
|
|
|
|
69,996
|
|
|
|
|
|
0.340
|
|
1/6/2013
|
|
|
|
|
|
|
|
|
|
|
|
275,000
|
|
|
|
|
|
1.210
|
|
1/12/2012
|
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
|
|
1.250
|
|
2/5/2011
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
|
|
3.690
|
|
2/23/2010
|
|
|
|
|
|
|
|
|
|
Jason A.
Napolitano
|
|
|
|
110,000
|
|
|
|
1.830
|
|
12/31/2017
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
|
|
|
|
1.717
|
|
11/17/2016
|
|
|
|
|
|
|
|
|
|
|
|
260,000
|
|
|
|
|
|
1.250
|
|
12/15/2015
|
|
|
|
|
|
|
|
|
|
|
|
195,000
|
|
|
|
|
|
0.880
|
|
3/30/2015
|
|
|
|
|
|
|
|
|
|
|
|
130,000
|
|
|
|
|
|
2.300
|
|
1/5/2014
|
|
|
|
|
|
|
|
|
|
|
|
29,166
|
|
|
|
|
|
0.700
|
|
1/31/2013
|
|
|
|
|
|
|
|
|
|
|
|
476,086
|
|
|
|
|
|
0.700
|
|
5/31/2012
|
|
|
|
|
|
|
|
|
|
|
|
70,802
|
|
|
|
|
|
0.810
|
|
4/30/2012
|
|
|
|
|
|
|
|
|
|
|
|
431
|
|
|
|
|
|
0.940
|
|
8/31/2011
|
|
|
|
|
|
|
|
|
|
|
|
7,869
|
|
|
|
|
|
0.940
|
|
8/24/2011
|
|
|
|
|
|
|
|
|
|
Joseph H. Ritter
(2)
|
|
|
|
70,000
|
|
|
|
1.830
|
|
12/31/2017
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
1.717
|
|
11/17/2016
|
|
|
|
|
|
|
|
|
|
|
|
85,000
|
|
|
|
|
|
1.250
|
|
12/15/2015
|
|
|
|
|
|
|
|
|
|
|
|
105,000
|
|
|
|
|
|
0.880
|
|
3/30/2015
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
|
|
1.820
|
|
5/13/2014
|
|
|
|
|
|
|
|
|
|
|
|
55,000
|
|
|
|
|
|
2.300
|
|
1/5/2014
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
2.220
|
|
11/5/2013
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
0.380
|
|
1/2/2013
|
|
|
|
|
|
|
|
|
|
John R. Flanders
|
|
|
|
30,000
|
|
|
|
1.830
|
|
12/31/2017
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
|
|
1.650
|
|
12/11/2016
|
|
|
|
|
|
|
|
|
|
G. Lynn Snodgrass
|
|
|
|
40,000
|
|
|
|
1.830
|
|
12/31/2017
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
1.717
|
|
11/17/2016
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
1.250
|
|
12/15/2015
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
1.590
|
|
5/18/2014
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
1.840
|
|
4/30/2014
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
|
|
0.950
|
|
4/10/2013
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
|
|
1.060
|
|
2/5/2012
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
1.140
|
|
4/26/2011
|
|
|
|
|
|
|
|
|
|
|
|
400
|
|
|
|
|
|
2.000
|
|
11/17/2009
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
2.370
|
|
10/6/2009
|
|
|
|
|
|
|
|
|
|
(1)
Options are subject to earlier termination in
certain events related to termination of service.
(2)
Dr. Ritter voluntarily left the Company
effective April 4, 2008.
30
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
The following
table shows aggregate exercises of options to purchase our common stock in the
fiscal year ended December 31, 2007 by the Named Executive Officers.
Option Exercises and Stock Vested
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number of
Shares
Acquired
on Exercise
(#)
|
|
Value Realized
on Exercise
($)
|
|
Number of
Shares
Acquired
on Vesting
(#)
|
|
Value Realized
On Vesting
($)
|
|
Robert B. Grieve
|
|
|
|
|
|
|
|
|
|
Jason A.
Napolitano
|
|
|
|
|
|
|
|
|
|
Joseph H. Ritter
|
|
|
|
|
|
|
|
|
|
John R. Flanders
|
|
|
|
|
|
|
|
|
|
G. Lynn
Snodgrass
|
|
59,000
|
|
78,850
|
|
|
|
|
|
Potential
Payments Upon Termination or Change of Control
The following table
summarizes the potential payments and benefits payable to each of the Named
Executive Officers upon termination of employment or a change in our control
under each situation listed below, assuming, in each situation, that our Named
Executive Officers were terminated on December 31, 2007.
Payments
Upon Termination (Without a Change-in-Control).
Pursuant to an employment agreement with each of Dr. Grieve
and Messrs. Napolitano, Ritter and Flanders, in the event he is
involuntarily terminated, he is entitled to receive amounts earned during his
term of employment. Such amounts
include: base salary and the cost of health insurance premiums as set forth in
the table below. Pursuant to his
employment agreement, upon an involuntary termination not for cause, Dr. Grieve
is entitled to accelerated vesting of all stock options, an extension of the
term of all outstanding stock options and a bonus payment as set forth in the
table below. Further, pursuant to his
employment agreement, upon termination for good reason Dr. Grieve is
entitled to the payments set forth below.
Payments
Upon Change-in-Control.
Pursuant
to an employment agreement with each of Dr. Grieve and Messrs. Napolitano,
Ritter and Flanders, in the event he is terminated upon a change-in-control he
is entitled to receive amounts earned during the term of his employment. Such amounts include: base salary and the
cost of health insurance premiums as set forth in the table below. Pursuant to his employment agreement, each of
Dr. Grieve and Mr. Napolitano are entitled to accelerated vesting of
all stock options and Dr. Grieve is entitled to an extension of the term
of all outstanding stock options in certain circumstances. Further, pursuant to his employment
agreement, upon an involuntary termination not for cause, Dr. Grieve is
entitled to a bonus payment as set forth in the table below. Further, upon termination for good reason, Dr. Grieve
is entitled to the payments set forth below.
Payments
Upon Death or Disability.
In
the event of death or disability, Dr. Grieve is entitled to the same
benefits as in the event of termination without a change in control and is also
entitled to receive the death benefits under our life insurance plan or the
disability benefits under our disability plan, as appropriate, as set forth
below.
In
the event of death or disability, Messrs. Napolitano, Ritter, Flanders and
Snodgrass, are each entitled to receive the death benefits under our life
insurance plan or the disability benefits under our disability plan, as
appropriate, as set forth below.
31
Potential
Payments Upon Termination or Change of Control (1)
|
|
|
|
Other Than in
Connection With a
Change of Control
|
|
In Connection With a
Change of Control
|
|
|
|
|
|
Executive Benefits and
Payments Upon Termination
|
|
Voluntary
Termination or
Termination
for Cause
($)
|
|
Involuntary
Termination
not for
Cause
($)
|
|
Termination
for Good
Reason
($)
|
|
Involuntary
Termination
not for
Cause
($)
|
|
Termination
for Good
Reason
($)
|
|
Death
($)
|
|
Disability
($)
|
|
Robert
B. Grieve
Base
Salary
Bonus
Medical
continuation
Death
benefits
Monthly
disability benefits
Value
of accelerated stock options (2)
|
|
|
|
400,000
60,242
12,716
|
|
400,000
60,242
12,716
|
|
800,000
502,756
25,433
|
|
800,000
502,756
25,433
|
|
400,000
60,242
12,716
300,000
|
|
400,000
60,242
12,716
11,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jason
A. Napolitano
Base
Salary
Bonus
Medical
continuation
Death
benefits
Monthly
disability benefits
Value
of accelerated stock options (2)
|
|
|
|
116,288
4,407
|
|
|
|
232,575
8,814
|
|
|
|
300,000
|
|
4,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
H. Ritter (3)
Base
Salary
Bonus
Medical
continuation
Death
benefits
Monthly
disability benefits
Value
of accelerated stock options (2)
|
|
|
|
100,035
4,407
|
|
|
|
200,070
8,814
|
|
|
|
300,000
|
|
5,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John R.
Flanders
Base
Salary
Bonus
Medical
continuation
Death
benefits
Monthly
disability benefits
Value
of accelerated stock options (2)
|
|
|
|
100,000
6,358
|
|
|
|
200,000
12,716
|
|
|
|
300,000
|
|
4,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G. Lynn
Snodgrass
Base
Salary
Bonus
Medical
continuation
Death
benefits
Monthly
disability benefits
Value
of accelerated stock options (2)
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
5,900
|
|
(1)
Based on 2007 salary and cost
information.
(2)
Calculated based on December 31,
2007 closing price of $1.83 per share.
(3)
Dr. Ritter voluntarily left the Company
effective April 4, 2008.
32
The following Compensation
Committee Report and related disclosure shall not be deemed incorporated by
reference by any general statement incorporating this proxy statement into any
filing under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
COMPENSATION COMMITTEE REPORT
The
Compensation Committee of the Company has reviewed and discussed the
Compensation Discussion and Analysis required by Item 402(b) of Regulation
S-K and, based on such review and discussions, the Compensation Committee recommended
to the Board that the Compensation Discussion and Analysis be included in this
Proxy Statement.
|
THE
COMPENSATION COMMITTEE
|
|
|
|
|
|
Peter
Eio,
Chairman
|
|
A.
Barr Dolan
|
|
G.
Irwin Gordon
|
April 10,
2008
33
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
Our Compensation
Committee consists of non-employee Directors only. No interlocking relationship existed during
2007 between our Executive Officers, members of our Board of Directors or
members of our Compensation Committee, and the Executive Officers, members of
the Board of Directors or members of the Compensation Committee of the Board of
Directors of any other company.
AUDITOR
FEES AND SERVICES
EKS&H was our
independent registered public accountant for fiscal 2006 and 2007. KPMG LLP (KPMG) was our independent
registered public accountant for fiscal 2005 and as such, continued to bill us
for services related to its historical audit opinions, such as actions required
to obtain consent to include these opinions in our SEC filings. In 2007, our Audit Committee engaged
EKS&H to conduct an audit of fiscal 2005 so that we did not have to obtain
KPMGs consent to include KPMGs audit opinion for that year in our Annual
Report on Form 10-K for the year ended December 31, 2007 and any
future SEC filings. The following table
sets forth the aggregate fees billed by KPMG and EKS&H for audit services
rendered in connection with the consolidated financial statements and reports
for fiscal years 2006 and 2007, respectively, and for other services rendered
during 2006 and 2007 on behalf of Heska and its subsidiaries, as well as all
out-of-pocket costs incurred in connection with these services which have been
billed to Heska and its subsidiaries.
Our Audit Committee has approved all of the below fees.
|
|
KPMG
|
|
EKS&H
|
|
|
|
2006
|
|
2007
|
|
2006
|
|
2007
|
|
Audit Fees (1)
|
|
$
|
25,000
|
|
$
|
|
|
$
|
186,575
|
|
$
|
369,286
|
|
Audit Related
Fees (2)
|
|
|
|
|
|
14,000
|
|
15,500
|
|
Tax Fees (3)
|
|
88,147
|
|
97,984
|
|
|
|
|
|
All Other Fees
(4)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
113,147
|
|
$
|
97,984
|
|
$
|
200,575
|
|
$
|
384,786
|
|
(1)
Audit fees represent fees for the audit of our
annual financial statements, review of financial statements included in
our Form 10-Q Quarterly
Reports and services that are normally provided by the independent auditors in
connection with statutory and regulatory filings including consents for
historical audit opinions. EKS&H
2007 fees include an audit of fiscal 2005 and an audit of the Companys
internal control over financial reporting.
An audit of the Companys internal control over financial reporting was
not required by the SEC in 2006 and thus was not conducted in 2006.
(2)
Audit related fees are fees for the assurance
and related services by the independent auditors that are reasonably related to
the performance of the audit or review of our financial statements and are not
reported above under Audit Fees. The
services for fees disclosed under this category include the annual audit of our
401(k) Retirement Plan.
(3)
Tax fees generally consist of professional
services rendered by the independent auditors for tax compliance and tax
advice. The tax fees for fiscal 2006
include $67,300 in fees for tax compliance and return preparation services and
$20,847 for other tax services. Tax fees
for fiscal 2007 include $73,000 for tax compliance and return preparation
services and $24,984 for other tax services.
(4)
Heska did not engage EKS&H or KPMG for any
other services in fiscal year 2006 and 2007.
Pre-Approval Policy.
Our Audit Committee pre-approves
all auditing services and non-audit services not prohibited by law to be
performed by our independent registered public accountant. Our Audit Committee also pre-approves all
associated fees, except for
de minimus
amounts
for non-audit services, which are approved by our Audit Committee prior to the
completion of the audit.
34
The following Report of our
Audit Committee and related disclosure shall not be deemed incorporated by
reference by any general statement incorporating this proxy statement into any
filing under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts
.
REPORT OF OUR AUDIT
COMMITTEE
The ultimate
responsibility for good corporate governance rests with Heska Corporations
Board of Directors (the Board), whose primary roles are oversight, counseling
and direction to Heska Corporations management in the best long-term interests
of Heska Corporation (Heska or the Company) and its stockholders. The Audit Committee of the Board (the Audit
Committee) has been established for the purpose of overseeing the accounting
and financial reporting processes of the Company and audits of Heskas
financial statements.
The Audit Committee
operates under a written charter, a copy of which is available on Heskas website
at www.heska.com. As described more
fully in its charter, the purpose of the Audit Committee is to assist the Board
in its oversight and monitoring of Heskas financial reporting, internal
controls and audit function. Management
is responsible for the preparation, presentation and integrity of Heskas
financial statements; accounting and financial reporting principles; internal
controls; and procedures designed to ensure compliance with accounting
standards, applicable laws and regulations.
The Audit Committee has hired an independent registered public
accountant, who is responsible for performing an independent audit of the
Companys consolidated financial statements in accordance with generally
accepted auditing standards. In
accordance with the Sarbanes-Oxley Act of 2002, the Audit Committee has
ultimate authority and responsibility to select, direct, compensate, evaluate
and, when appropriate, replace Heskas independent registered public
accountant.
The Audit Committee
members are not professional accountants or auditors, and their functions are
not intended to duplicate or to certify the activities of management and the
independent registered public accountant, nor can the Audit Committee certify
that the independent registered public accountant is independent under
applicable rules. The Audit Committee
serves a board-level oversight role, in which it provides advice, counsel and
direction to management on the basis of the information it receives,
discussions with management and the independent registered public accountant,
and the experience of the Audit Committees members in business, financial and
accounting matters. The Audit Committee
has the authority to engage its own outside advisers, including experts in
particular areas of accounting, as it determines appropriate, apart from
counsel or advisers hired by management.
In this context, during
the year 2007, we met and held discussions with management and Ehrhardt Keefe
Steiner & Hottman PC (EKS&H), Heskas independent registered public
accountant. Management represented to us
that Heskas consolidated financial statements were prepared in accordance with
generally accepted accounting principles, and we have reviewed and discussed
the consolidated financial statements with management and EKS&H. In Audit Committee meetings with EKS&H,
we discussed matters as required by Statement of Auditing Standards No. 61
(Communication with Audit Committees).
Our review included a discussion with management of the quality, not
merely the acceptability, of Heskas accounting principles, the reasonableness
of significant estimates and judgments and the disclosure in Heskas
consolidated financial statements.
We received from EKS&H the written disclosures required by
Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees) and discussed with EKS&H its independence. In reliance on the reviews and discussions
noted above, and the report of the independent registered public accountant, we
recommended to the Board that the Companys audited financial statements
35
be
included in its Annual Report on Form 10-K for the year ended December 31,
2007 (the Companys 2007 10-K), and be filed with the Securities and Exchange
Commission.
On March 31, 2006, we dismissed KPMG LLP (KPMG) as Heskas
independent registered public accountant and engaged EKS&H as Heskas
independent registered public accountant.
An extensive search was conducted to evaluate Heskas alternatives regarding
independent registered public accountants, including face-to-face interviews
conducted by the Chairman of the Audit Committee. We believe EKS&H is compatible with a
company Heskas size and we believe EKS&H conducted a high quality,
cost-effective audit for fiscal 2006 and fiscal 2007. In 2007, we engaged EKS&H to conduct an
audit (the 2005 Re-audit) for fiscal 2005, so that we did not have to obtain
KPMGs consent to include KPMGs audit opinion for that year in the Companys
2007 10-K and any future SEC filings. We
believe it was wise to incur the additional fees affiliated with the 2005
Re-audit due to the significant management time and distraction associated with
obtaining KPMGs consent to include KPMGs audit opinion in the Companys SEC filings
in the past and our concern over this recurring.
KPMG served as Heskas independent auditors
from July 30, 2002 to March 31, 2006.
In connection with the audit of the fiscal year ended December 31,
2005, and during the subsequent interim period through March 31, 2006, the
Company did not have any disagreements with KPMG on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures, which disagreements, if not resolved to their satisfaction would
have caused them to make reference in connection with their opinion to the
subject matter of the disagreement. In addition, during the fiscal year
ended December 31, 2005 and through March 31, 2006, the Company had
no reportable events (as defined in Item 304(a)(1)(v) of Regulation
S-K).
During the year ended December 31, 2005
and the subsequent period through
March 31
, 2006,
neither the Company nor anyone acting on the Companys behalf consulted
EKS&H regarding: (1) the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Companys financial statements; or (2) any
matter that was either the subject of a disagreement as defined in Item
304(a)(1)(iv) of Regulation S-K or a reportable event described in Item
304(a)(1)(v) of Regulation S-K.
Submitted by the Audit Committee of Heskas
Board of Directors:
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William
A. Aylesworth,
Chairman
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Peter
Eio
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Irwin
Gordon
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April 10,
2008
36
ADDITIONAL INFORMATION
Householding
of Proxy Materials
The SEC has
adopted rules that permit companies and intermediaries such as brokers to
satisfy delivery requirements for proxy statements with respect to two or more
stockholders sharing the same address by delivering a single proxy statement
addressed to those stockholders. This
process, which is commonly referred to as householding, potentially provides
extra convenience for stockholders and cost savings for companies. Heska and some brokers household proxy
materials, delivering a single proxy statement to multiple stockholders sharing
an address unless contrary instructions have been received from the affected
stockholders. Once you have received
notice from your broker or us that they or we will be householding materials to
your address, householding will continue until you are notified otherwise or
until you revoke your consent. If, at
any time, you no longer wish to participate in householding and would prefer to
receive a separate proxy statement, or if you are receiving multiple copies of
the proxy statement and wish to receive only one, please notify your broker if
your shares are held in a brokerage account or us if you hold registered
shares. You can notify us by sending a
written request to Investor Relations, Heska Corporation, 3760 Rocky Mountain
Avenue, Loveland, Colorado 80538.
OTHER MATTERS
Our Board knows of no
other matters to be presented for stockholder action at our 2008 Annual
Meeting. However, if other matters do
properly come before our Annual Meeting or any adjournments or postponements
thereof, our Board intends that the persons named in the proxies will vote upon
such matters in accordance with their best judgment.
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BY
ORDER OF THE BOARD OF DIRECTORS
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John
R. Flanders
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Vice President, General Counsel and Corporate
Secretary,
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Heska Corporation
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Loveland, Colorado
April 15, 2008
37
Heska Corporation
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Holder
Account Number
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C 1234567890 J N T
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o
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Mark this box with an X
if you have made changes to your name or address details above.
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2008 Annual Meeting Proxy Card
A
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Election of Directors
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The Board of Directors
recommends a vote
FOR
the
listed nominees.
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1.
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Election of two
Directors to serve for a three-year term that expires at the 2011 Annual
Meeting or until their respective successors have been elected and qualified.
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For
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Withhold
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01Louise L. McCormick
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02John F.
Sasen, Sr.
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B
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Issues
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The Board of Directors
recommends a vote
FOR
the
following:
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For
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Against
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Abstain
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2.
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To ratify the
appointment of Ehrhardt Keefe Steiner & Hottman PC as Heska
Corporations independent registered public accountant.
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3.
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To consider such other
business as may properly come before the 2008 Annual Meeting.
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C
Authorized Signatures - Sign Here - This section must be completed for
your instructions to be executed.
Please date and sign
exactly as your name or names appear herein.
Corporate or partnership proxies should be signed in full corporate or
partnership name by an authorized person.
Persons signing in a fiduciary capacity should indicate their full title
in such capacity.
Signature 1Please keep
signature within the box Signature 2Please keep signature within the box Date
(mm/dd/yyyy)
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/
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/
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1 U P X
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H H H
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P P P P
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001808
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ProxyHeska
Corporation
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby
appoints Robert B. Grieve, Ph.D., Jason A. Napolitano and John R. Flanders, and
each of them, as proxies, with full power of substitution, and hereby
authorizes them to represent and vote, as designated below, all shares of the
Common Stock of Heska Corporation, a Delaware corporation (the
Company
), held of record by the
undersigned on March 26, 2008, at the 2008 Annual Meeting of Stockholders
(the
Annual Meeting
) to be held
at the corporate offices of the Company located at 3760 Rocky Mountain Avenue,
Loveland, Colorado 80538 at 9:00 a.m., local time, on Tuesday, May 6,
2008, or at any adjournment or postponement thereof, with all the powers that
the undersigned would have if personally present at the meeting.
The undersigned hereby
acknowledges receipt of the Notice of Annual Meeting and Proxy Statement, dated
April 15, 2008, and a copy of Heska Corporations 2007 Annual Report on Form 10-K
as filed with the Securities and Exchange Commission. The undersigned hereby expressly revokes any
and all proxies heretofore given or executed by the undersigned with respect to
the shares of stock represented by this proxy and, by filing this proxy with
the Corporate Secretary of Heska Corporation, gives notice of such
revocation. This proxy when properly
executed will be voted in accordance with the specifications made by the
undersigned stockholder.
IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES
FOR DIRECTOR, FOR THE RATIFICATION OF EHRHARDT KEEFE STEINER & HOTTMAN
PC AS THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTANT AND AT THE
DISCRETION OF THE PROXIES ON ANY OTHER BUSINESS THAT MAY PROPERLY COME
BEFORE THE ANNUAL MEETING. THIS PROXY MAY BE REVOKED AT ANY TIME PRIOR TO
THE TIME IT IS VOTED.
PLEASE
COMPLETE, DATE AND SIGN THIS PROXY AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
2
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