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EXHIBIT 10.2
HESKA CORPORATION
1988 STOCK PLAN
EXHIBIT A TO NOTICE OF GRANT
STOCK OPTION AGREEMENT
1. GRANT OF OPTION. HESKA CORPORATION, a California
corporation (the "Company"), hereby grants to the Optionee (the "Optionee")
named in the Notice of Grant, an option (the "Option") to purchase a number of
Shares, as set forth in the Notice of Grant, at the exercise price per share
set forth in the Notice of Grant (the "Exercise Price"), subject to the terms,
conditions and definitions of the 1988 Stock Plan (the "Plan") adopted by the
Company, which is incorporated herein by reference. In the event of a conflict
between the terms and conditions of the Plan and the terms and conditions of
this Option Agreement, which conflict is due to terms and conditions in this
Option that are broader (but not narrower) than the terms and conditions set
out in the Plan, the terms and conditions set out in the Plan shall govern.
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option Agreement.
If designated in the Notice of Grant as an Incentive Stock
Option, this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code.
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option is exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant and
the applicable provisions of the Plan and this Option Agreement. In the event
of Optionee's death, Disability or other termination of Optionee's employment
or consulting relationship, the exercisability of the Option is governed by the
applicable provisions of the Plan and this Option Agreement.
(b) METHOD OF EXERCISE. This Option is exercisable by
delivery of an exercise notice, in the form provided by the Company (the
"Exercise Notice"), which shall state the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised (the
"Exercised Shares"), and such other representations and agreements as to the
holder's investment intent with respect to the Exercised Shares as may be
required by the Company pursuant to the provisions of the Plan. The Exercise
Notice shall be signed by the Optionee and, if the Optionee is married, by the
Optionee's spouse, and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by payment
of the aggregate Exercise Price as to all Exercised Shares. This Option shall
be deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with all relevant provisions
of law and the requirements of any
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stock exchange upon which the Shares are then listed. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
3. METHOD OF PAYMENT. Payment of the aggregate Exercise
Price shall be by any of the following, or a combination thereof, at the
election of the Optionee:
(a) cash; or
(b) check; or
(c) such other consideration as is indicated on the Notice of
Grant.
4. OPTIONEE'S REPRESENTATIONS. In the event the Shares
purchasable pursuant to the exercise of this Option have not been registered
under the Securities Act of 1933, as amended, at the time this Option is
exercised, Optionee shall, if required by the Company, concurrently with the
exercise of all or any portion of this Option, deliver to the Company an
Investment Representation Statement in the form attached hereto as Exhibit B.
5. RESTRICTIONS ON EXERCISE. This Option may not be
exercised until such time as the Plan has been approved by the shareholders of
the Company, or if the issuance of such Shares upon such exercise or the method
of payment of consideration for such shares would constitute a violation of any
applicable federal or state securities or other law or regulation, including
any rule under Part 207 of Title 12 of the Code of Federal Regulations
("Regulation G") as promulgated by the Federal Reserve Board. As a condition
to the exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any applicable
law or regulation.
6. TERMINATION OF RELATIONSHIP. In the event of termination
of Optionee's consulting relationship or Continuous Status as an Employee,
Optionee may, to the extent otherwise so entitled at the date of such
termination (the "Termination Date"), exercise this Option during the
Termination Period set out in the Notice of Grant. To the extent that Optionee
was not entitled to exercise this Option at the date of such termination, or if
Optionee does not exercise this Option within the time specified herein, the
Option shall terminate.
7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of
Section 6 above, in the event of termination of Optionee's Continuous Status as
an Employee as a result of total and permanent disability (as defined in
Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months
from the date of termination of the consulting or employment relationship (but
in no event later than the date of expiration of the term of this Option as set
forth in Section 10 below), exercise the Option to the extent otherwise so
entitled at the date of such termination. To the extent that Optionee was not
entitled to
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exercise the Option at the date of termination, or if Optionee does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
8. DEATH OF OPTIONEE. In the event of the death of Optionee,
the Option may be exercised at any time within twelve (12) months following the
date of death (but in no event later than the date of expiration of the term of
this Option as set forth in Section 10 below), by Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent the Optionee could exercise the Option at the date of
death.
9. NON-TRANSFERABILITY OF OPTION. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by the
Optionee. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
10. TERM OF OPTION. This Option may be exercised only within
the term set out in the Notice of Grant, and may be exercised during such term
only in accordance with the Plan and the terms of this Option. If Optionee is
more than a ten percent (10%) shareholder, the limitations set out in Section 7
of the Plan regarding Option terms and Options granted to more than ten percent
(10%) shareholders shall apply to this Option.
11. TAX CONSEQUENCES. Some of the federal and state tax
consequences relating to this Option, as of the date of this Option, are set
forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) EXERCISING THE OPTION.
(i) NONQUALIFIED STOCK OPTION ("NSO"). If this Option does
not qualify as an ISO, the Optionee may incur regular federal income tax and
state income tax liability upon exercise. The Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates)
equal to the excess, if any, of the fair market value of the Exercised Shares
on the date of exercise over their aggregate Exercise Price. If the Optionee
is an employee, the Company will be required to withhold from his or her
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.
(ii) INCENTIVE STOCK OPTION ("ISO"). If this Option
qualifies as an ISO, the Optionee will have no regular federal income tax or
state income tax liability upon its exercise, although the excess, if any, of
the fair market value of the Exercised Shares on the
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date of exercise over their aggregate Exercise Price will be treated as an
adjustment to the alternative minimum tax for federal tax purposes and may
subject the Optionee to alternative minimum tax in the year of exercise.
(b) DISPOSITION OF SHARES.
(i) NSO. If the Optionee holds NSO Shares for at least one
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one
year after exercise AND two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the LESSER OF (A) the difference
between the FAIR MARKET VALUE OF THE SHARES ACQUIRED ON THE DATE OF EXERCISE
and the aggregate Exercise Price, or (B) the difference between the SALE PRICE
of such Shares and the aggregate Exercise Price.
(c) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If
the Optionee sells or otherwise disposes of any of the Shares acquired pursuant
to an ISO on or before the later of (i) the date two years after the grant
date, or (ii) the date one year after the exercise date, the Optionee shall
immediately notify the Company in writing of such disposition. The Optionee
agrees that he or she may be subject to income tax withholding by the Company
on the compensation income recognized from such early disposition of ISO Shares
by payment in cash or out of the current earnings paid to the Optionee.
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