Exhibit 10.5

 

HESKA CORPORATION 2003 EQUITY INCENTIVE PLAN

 

STOCK OPTION AGREEMENT

(EMPLOYEES AND CONSULTANTS)

 

Tax Treatment

 

This option is intended to be an incentive stock option under section 422 of the
Internal Revenue Code or a nonstatutory option, as provided in the Notice of
Stock Option Grant. To the extent this option is designated an incentive stock
option and it does not qualify as an incentive stock option under applicable
laws, it will be treated as a nonstatutory option.

 

 

 

Vesting/Exercisability

 

This option vests and becomes exercisable in installments, as shown in the
Notice of Stock Option Grant. In addition, in the event your service as an
Employee, Director or Consultant terminates because of your death, your option
shall become fully vested and exercisable as to the total number of shares
subject thereto immediately upon the date of your death.

 

Except as otherwise provided below following a Change in Control, no additional
shares become vested after your Termination of Service and the option shall
terminate as to any shares that are unvested as of the end of business on the
date of your Termination of Service.

 

 

 

Term

 

This option expires in any event at the close of business at Company
headquarters on the day before the 10th anniversary of the Date of Grant, as
shown in the Notice of Stock Option Grant. (It will expire earlier if your
service terminates, as described below.)

 

 

 

Regular Termination

 

In the event of your Termination of Service for any reason except death or
Disability, then this option will expire as to unexercised vested option shares
at the close of business at Company headquarters on the date three months after
your termination date. The Company determines when your service terminates for
this purpose.

 

 

 

Death

 

In the event of your Termination of Service because of your death or your death
within three months after your Termination of Service, then this option will
expire as to unexercised vested option shares at the close of business at
Company headquarters on the date one year after your date of death.

 

 

 

Disability

 

In the event of your Termination of Service because of your Disability, then
this option will expire as to unexercised vested option shares at the close of
business at Company headquarters on the date one year after your termination
date.

 

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Leave of Absence

 

Vesting of this option shall be suspended during any unpaid leave of absence
unless continued vesting is required by the terms of the leave or by applicable
law.

 

 

 

Change in Control

 

This option shall vest and become exercisable in full if (i) the Company is
subject to a Change in Control, (ii) this option is not continued by the Company
and (iii) this option is not either assumed by the surviving corporation or its
parent or substituted for by the surviving corporation’s or its parent’s issuing
its own option in replacement of this option. This option shall vest and become
exercisable in full if (i) the Company is subject to a Change in Control and
(ii) within twelve months thereafter the surviving corporation or its parent
triggers a Termination of Service for you without your consent and without
Cause. If the surviving corporation or its parent demotes you to a lower
position, materially reduces your authority or responsibilities, materially
reduces your total compensation or announces its intention to relocate your
principal place of work by more than 20 miles, then that action shall be treated
as triggering a Termination of Service under this Agreement. For the avoidance
of doubt, a refusal by the surviving corporation or its parent to extend a
consulting engagement beyond its current term shall not be deemed to trigger any
option to vest and become immediately exercisable under this Agreement.

 

“Cause” shall mean (i)  your failure to perform your assigned duties or
responsibilities as an Employee, Director or Consultant (other than a failure
resulting from death or Disability) after notice thereof from the surviving
corporation or its parent describing your failure to perform such duties or
responsibilities; (ii) your material breach of any confidentiality agreement or
invention assignment agreement between you and the Company or a Subsidiary;
(iii) your engaging in any act of dishonesty, fraud, misrepresentation, moral
turpitude, or misappropriation of material property that was or is materially
injurious to the Company or its Affiliates; (iv) your violation of any federal
or state regulation applicable to the Company’s business; or (v) your being
convicted of, or entering a plea of nolo contendere to, any crime.

 

 

 

Restrictions on Exercise

 

The Company will not permit you to exercise this option if the issuance of
shares at that time would violate any law or regulation, and the Company will
have no liability for failure to issue or deliver any shares upon exercise of
this option if the issuance or delivery would violate any law or regulation as
determined by the Company in consultation with its legal counsel. This option
may not be exercised for a fraction of a share.

 

 

 

Notice of Exercise

 

When you wish to exercise this option, you must notify the Company by filing the
proper “Notice of Exercise” form at the address given on the form. Your notice
must specify how many shares you wish to purchase. The exercise will be
effective when the Company receives the Notice of Exercise with the option
exercise payment described herein.

 

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If someone else wants to exercise this option after your death, that person must
prove to the Company’s satisfaction that he or she is entitled to do so.

 

 

 

Form of Payment

 

When you submit your notice of exercise, you must include payment of the option
exercise price for the shares you are purchasing. Payment may be made in one (or
a combination of two or more) of the following forms:

 

 

 

 

 

·      Cash, check or wire transfer.

 

 

 

 

 

·      Certificates for shares of Company stock that you own, along with any
forms needed to affect a transfer of those shares to the Company. The value of
the shares, determined as of the effective date of the option exercise, will be
applied to the option exercise price. However, the Company may restrict your
ability to surrender shares of Company stock (including your ability to
surrender any particular shares of Company Stock held by you) in payment of the
exercise price if your doing so would result in the Company’s recognizing
additional compensation expense with respect to this option for financial
reporting purposes.

 

 

 

 

 

·      Irrevocable directions to a securities broker approved by the Company to
sell all or part of your option shares and to deliver to the Company proceeds
from the sale in an amount sufficient to pay the option exercise price and any
withholding taxes. (The balance of the sale proceeds, if any, will be delivered
to you.) The directions must be given by signing a special “Notice of Exercise”
form provided by the Company.

 

 

 

Withholding Taxes and Stock Withholding

 

You will not be allowed to exercise this option unless you make arrangements
acceptable to the Company to pay any withholding taxes that may be due as a
result of the option exercise. These arrangements may include (with the
Company’s approval) withholding shares of Company stock that otherwise would be
issued to you when you exercise this option. The value of these shares,
determined as of the effective date of the option exercise, will be applied to
the withholding taxes.

 

 

 

Restrictions on Resale

 

By signing this Agreement, you agree not to sell any option shares at a time
when applicable laws, Company policies or an agreement between the Company and
its underwriters prohibit a sale. This restriction will apply as long as you are
an Employee, Consultant or Director of the Company or a Subsidiary.

 

 

 

Transfer of Option

 

Prior to your death, only you may exercise this option. You cannot sell,
transfer, pledge or assign this option. For instance, you may not sell this
option or use it as security for a loan. You may, however, dispose of this
option in your will, by the laws of descent and distribution or through a
beneficiary designation.

 

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Regardless of any marital property settlement agreement, the Company is not
obligated to honor a notice of exercise from your former spouse, nor is the
Company obligated to recognize your former spouse’s interest in your option in
any other way.

 

 

 

Retention Rights

 

Neither your option nor this Agreement give you the right to be employed or
otherwise retained by the Company in any capacity. The Company reserves the
right to terminate your service at any time, with or without cause.

 

 

 

Stockholder Rights

 

You, or your estate or heirs, have no rights as a stockholder of the Company
until you have exercised this option by giving the required notice to the
Company and paying the exercise price.

 

 

 

Applicable Law

 

This Agreement will be interpreted and enforced under the laws of the State of
Delaware (without giving effect to its conflict of laws provisions).

 

 

 

The Plan and Other Agreements

 

The Amended and Restated 2003 Equity Incentive Plan is incorporated in this
Agreement by reference. Unless otherwise defined herein, all capitalized terms
herein have the same defined meanings as in the Amended and Restated 2003 Equity
Incentive Plan. In the event of any conflict between the terms and provisions of
the Plan and this Agreement, the Plan terms and provisions shall govern.

 

This Agreement and the Plan constitute the entire understanding between you and
the Company regarding this option. Any prior agreements, commitments or
negotiations concerning this option are superseded. This Agreement may be
amended only by another written agreement, signed by both parties.

 

BY SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL OF THE TERMS AND
CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

 

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