FOR ANY REASON, AND
WITHOUT DIMINUTION, EXECUTIVE WILL BE ENTITLED TO PAYMENT OF ALL ACCRUED BUT
UNPAID COMPENSATION, VACATION, EXPENSE REIMBURSEMENTS, AND OTHER BENEFITS DUE TO
EXECUTIVE THROUGH HIS TERMINATION DATE UNDER ANY COMPANY-PROVIDED OR PAID PLANS,
POLICIES, AND ARRANGEMENTS. EXECUTIVE AGREES TO RESIGN FROM ALL POSITIONS THAT
HE HOLDS WITH HESKA, INCLUDING, WITHOUT LIMITATION, HIS POSITION AS A MEMBER OF
THE BOARD, IMMEDIATELY FOLLOWING THE TERMINATION OF HIS EMPLOYMENT IF THE BOARD
SO REQUESTS.
3.
TERM OF AGREEMENT. THIS AGREEMENT WILL HAVE AN INITIAL TERM OF
THREE YEARS COMMENCING ON THE EFFECTIVE DATE. ON THE THIRD ANNIVERSARY OF THE
EFFECTIVE DATE, AND ON EACH ANNUAL ANNIVERSARY OF THE EFFECTIVE DATE THEREAFTER,
THIS AGREEMENT AUTOMATICALLY WILL RENEW FOR AN ADDITIONAL ONE-YEAR TERM UNLESS
HESKA PROVIDES EXECUTIVE WITH NOTICE OF NON-RENEWAL AT LEAST 180 DAYS PRIOR TO
THE DATE OF AUTOMATIC RENEWAL.
4.
CASH COMPENSATION; VACATION.
(A)
BASE SALARY. DURING FISCAL YEAR 2006, HESKA WILL PAY EXECUTIVE AN
ANNUAL SALARY OF $341,000 AS COMPENSATION FOR HIS SERVICES (THE "BASE SALARY").
THE BASE SALARY WILL BE PAID PERIODICALLY IN ACCORDANCE WITH HESKA'S NORMAL
PAYROLL PRACTICES AND BE SUBJECT TO THE USUAL, REQUIRED WITHHOLDING. EXECUTIVE'S
SALARY WILL BE SUBJECT TO REVIEW, AND ADJUSTMENTS WILL BE MADE BY THE
COMPENSATION COMMITTEE OF THE BOARD (THE "COMMITTEE") BASED UPON HESKA'S
STANDARD PRACTICES.
(B)
ANNUAL BONUS. DURING THE TERM OF AGREEMENT, EXECUTIVE WILL BE
ELIGIBLE TO PARTICIPATE IN THE MANAGEMENT INCENTIVE PLAN (THE "BONUS PLAN"), OR
SUCH OTHER BONUS PROGRAMS AS ESTABLISHED BY THE COMMITTEE, AT A TARGET
PERCENTAGE THAT IS NO LESS THAN 50% OF EXECUTIVE'S ANNUAL BASE SALARY THEN IN
EFFECT (THE "TARGET BONUS"). THE ACTUAL BONUS PAID MAY BE HIGHER OR LOWER THAN
THE TARGET BONUS FOR OVER OR UNDER-ACHIEVEMENT OF EXECUTIVE'S PERFORMANCE GOALS,
AS DETERMINED BY THE COMMITTEE. BONUSES, IF ANY, WILL ACCRUE AND BECOME PAYABLE
IN ACCORDANCE WITH THE COMMITTEE'S STANDARD PRACTICES FOR PAYING EXECUTIVE
INCENTIVE COMPENSATION, PROVIDED HOWEVER THAT ANY BONUS PAYABLE UNDER THIS
SECTION 4(B) WILL BE PAYABLE WITHIN TWO-AND-ONE-HALF MONTHS AFTER THE END OF THE
TAXABLE YEAR TO WHICH IT RELATES OR SUCH LONGER PERIOD AS MAY BE PERMITTED BY
TREASURY REGULATIONS IN ORDER TO AVOID APPLICATION OF SECTION 409A OF THE
INTERNAL REVENUE CODE TO SUCH BONUSES.
(C)
VACATION. EXECUTIVE SHALL CONTINUE TO ACCRUE VACATION AND/OR PAID
TIME OFF AT THE SAME RATE AND ON THE SAME COMPENSATION BASIS THAT HE ACCRUED
VACATION AND/OR PAID TIME OFF AS OF JANUARY 1, 2006 (OR AT SUCH GREATER RATE
THAT MAY, UNDER HESKA POLICY ADOPTED FROM TIME TO TIME, APPLY TO HESKA'S
EXECUTIVE OFFICERS).
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5.
EXPENSES. IN ADDITION TO THE FOREGOING, HESKA WILL REIMBURSE
EXECUTIVE FOR HIS REASONABLE OUT-OF-POCKET TRAVEL, ENTERTAINMENT, AND OTHER
EXPENSES, IN ACCORDANCE WITH HESKA'S EXPENSE REIMBURSEMENT POLICIES AS IN EFFECT
FROM TIME TO TIME.
6.
EMPLOYEE BENEFITS. DURING THE TERM OF AGREEMENT, EXECUTIVE WILL
BE ELIGIBLE TO PARTICIPATE IN ACCORDANCE WITH THE TERMS OF ALL HESKA EMPLOYEE
BENEFIT PLANS, POLICIES, AND ARRANGEMENTS THAT ARE APPLICABLE TO OTHER SENIOR
EXECUTIVES OF HESKA, AS SUCH