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EXHIBIT 10.38
HESKA CORPORATION
EXECUTIVE BONUS PLAN
DECEMBER 3, 1999
This bonus plan is intended to provide incentives and rewards for the
senior management of Heska Corporation. The formulas set forth below are to be
applied to the year 2000 and subsequent years, unless changed by the Board of
Directors or the Compensation Committee of the Board of Directors, in their
discretion, with respect to such years. It is expected that the actual dollar
target for each such subsequent year will be agreed upon by the entire Board of
Directors or the Compensation Committee prior to, or shortly after, the
beginning of such year.
As this has been a year of significant transition for Heska, it was
impractical to put in place an executive bonus plan for 1999 prior to this time.
As the bonus plan can not be applied retroactively to the portion of 1999
already completed, it will be applied exclusively to the 4th Quarter of 1999.
All of the potential percentage awards for the Heska management with respect to
1999 will be 1/2 the amount that would be granted with respect to an entire
year. So, for example, as the bonus percentage to be awarded to the CEO for a
full year if all objectives are met is 60% of base salary, for the 4th Quarter
of 1999 that percentage would be 30%.
The components on which total bonuses will be determined and the percentage
of total bonus that they represent are as follows:
Net Income (Loss) 50%
Total Revenue 25%
Discretionary 25%
These components will be subject to various qualifications from time to
time. Included in these qualifications will be a requirement that the Net Income
target not be met by reducing Research and Development Expenses below a
specified number or a specified percentage of revenue. In addition, the Net
Revenue target will be subject to a minimum total gross margin percentage.
Finally, the Discretionary component will be subject to a limitation that the
total percentage awarded as a Discretionary award can not exceed 15% (as opposed
to 25%) if the Net Income and Net Revenue targets are not both met.
The total bonus payout for meeting all of these targets at the 100% level
will be a cash payment equal to the percentage of the recipients' base salary
set forth below:
CEO 60%
COO 50%
CFO 35%
EVP's 35%
VP's 30%
Directors 25%
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Any bonus amounts will be paid out only after the Compensation Committee
has reviewed the Management's calculations of such bonus amounts in conjunction
with the audited financial statements for the year in question.
In addition to these percentage bonuses, for every $1M by which the Net
Income target is exceeded, the Net Income bonus percentages shall go up by 10%.
For example, if the Net Income target is exceeded by $1M, the Net Income bonus
percentage for the CEO would increase by 10%, from 30% (50% of 60%) to 33%.
Similarly, if the Net Income target is exceeded by $1M, the Net Income bonus
percentage for the COO would increase by 10%, from 25% (50% of 50%) to 27.5%.
Exceeding the Total Revenue target will not result in any increase in that bonus
percentage (25% of 60% in the case of the CEO) and the Discretionary bonus
percentage can never be increased beyond 25% of the original bonus allocation
(25% of 60% in the case of the CEO).
For the 4th Quarter of 1999 the specific targets will be as follows:
Net Income: The Company must achieve an operating loss of
less than $6M in the 4th Quarter, exclusive of
any restructuring charges, gains and/or losses on
sales of businesses and interest income
(expense). This must be achieved with Research
and Development expense in the 4th Quarter of not
less than $3.8M.
Net Revenue: The Company must achieve total product and
research revenue of at least $15M. This must be
achieved with a minimum gross margin on product
revenue of at least 33%.
The specific targets for 2000 will be decided upon in December of 1999 or
early in 2000.