-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WDSn/GFNOfC+iWu7jV/jTuQifOSFqkKfl+vWY9NHcDpN0UyCMMxZXO1ViaD5zwT+ AHnqeGt6ljZ+es4Z9LUpZQ== 0001038133-02-000021.txt : 20020523 0001038133-02-000021.hdr.sgml : 20020523 20020523132515 ACCESSION NUMBER: 0001038133-02-000021 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020523 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HESKA CORP CENTRAL INDEX KEY: 0001038133 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 770192527 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 333-72155 FILM NUMBER: 02660763 BUSINESS ADDRESS: STREET 1: 1613 PROSPECT PARKWAY CITY: FORT COLLINS STATE: CO ZIP: 80525 BUSINESS PHONE: 9704937272 MAIL ADDRESS: STREET 1: 1825 SHARP POINT DR CITY: FORT COLLINS STATE: CO ZIP: 80525 10-K/A 1 finala2.txt AMENDMENT NO. 2 TO FORM 10-K ============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM 10-K/A AMENDMENT NO. 2 (MARK ONE) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 Or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ______________ COMMISSION FILE NUMBER: 0-22427 HESKA CORPORATION - ----------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 77-0192527 - ------------------------------- ------------------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 1613 PROSPECT PARKWAY 80525 FORT COLLINS, COLORADO ------------------------------- - ------------------------------- (ADDRESS OF PRINCIPAL (ZIP CODE) EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (970) 493-7272 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, $.001 PAR VALUE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. The aggregate market value of voting stock held by non- affiliates of the Registrant was approximately $40,287,365 as of March 26, 2002 based upon the closing price on the Nasdaq National Market reported for such date. This calculation does not reflect a determination that certain persons are affiliates of the Registrant for any other purpose. 47,845,112 shares of the Registrant's Common Stock, $.001 par value, were outstanding at March 26, 2002. ---------------------- ===================================================================== EXPLANATORY NOTE This Amendment No. 2 to the Registrant's 2001 Annual Report on Form 10-K is being filed for the sole purpose of amending Part IV, Item 14(a)(3), Exhibits. No other changes were made. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) The following documents are filed as a part of this Form 10-K. (3) EXHIBITS: The exhibits listed below are required by Item 601 of Regulation S-K. Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K has been identified. EXHIBIT NUMBER NOTES DESCRIPTION OF DOCUMENT - -------- ------- ------------------------------------------------- 3(i)(d) (5) Restated Certificate of Incorporation of the Registrant. 3(ii) (8) Bylaws of the Registrant. 10.1H (1) Collaborative Agreement between Registrant and Eisai Co., Ltd., dated January 25, 1993. 10.3H Bovine Vaccine Distribution Agreement between Diamond Animal Health, Inc. and AGRI Laboratories, Ltd., dated February 13, 1998, as amended. 10.4H Exclusive Distribution Agreement between Registrant and Novartis Animal Health Canada, Inc. dated February 14, 2001, as amended. 10.5H (1) Screening and Development Agreement between Ciba- Geigy Limited and Registrant, dated as of April 12, 1996. 10.6 (1) Right of First Refusal Agreement between Ciba- Geigy Limited and Registrant, dated as of April 12, 1996. 10.7 (1) Marketing Agreement between Registrant and Ciba- Geigy Limited, dated as of April 12, 1996. 10.8H (1) Marketing Agreement between Registrant and Ciba- Geigy Corporation, dated as of April 12, 1996. 10.9 H (9) Amended and Restated Distribution Agreement between Registrant and i-STAT Corporation, dated as of February 9, 1999. 10.10* (1) Employment Agreement between Registrant and Robert B. Grieve, dated January 1, 1994, as amended March 4, 1997. 10.10(a)* (4) Amended and Restated Employment Agreement with Robert B. Grieve, dated as of February 22, 2000. 10.11H Distribution Contract between Praemix Wirkstoff GmbH and Registrant, dated April 1, 1998. 10.14H (2) Supply Agreement between Registrant and Quidel Corporation, dated July 3, 1997. 10.14(a)H (9) First Amendment to Product Supply Agreement between Registrant and Quidel Corporation, dated as of March 15, 1999. 10.18* (1) Form of Indemnification Agreement entered into between Registrant and its directors and certain officers. 10.19* (8) 1997 Incentive Stock Plan of Registrant, as amended and restated. 10.20* (1) Forms of Option Agreement. 10.21* (1) 1997 Employee Stock Purchase Plan of Registrant, as amended. 10.22 (1) Lease Agreement dated March 8, 1994 between Sharp Point Properties, LLC and Registrant. 10.23 (1) Lease Agreement dated as of June 27, 1996 between GB Ventures and Registrant. 10.24 (1) Lease Agreement dated as of July 11, 1996 between GB Ventures and Registrant. 10.25 (9) Lease Agreement dated as of August 24, 1999 between GB Ventures and Registrant. 10.26 (9) Lease Agreement dated as of October 6, 1999 between GB Ventures and Registrant. 10.28* (3) Employment Agreement between Registrant and Ronald L. Hendrick, dated December 1, 1998. 10.29* (3) Employment Agreement between Registrant and James H. Fuller, dated January 18, 1999. 10.34H (3) Exclusive Distribution Agreement between the Company and Novartis Agro K.K., dated as of August 18, 1998 10.35 (3) Right of First Refusal Agreement between the Company and Novartis Animal Health, Inc., dated as of August 18, 1998 10.39 (5) Second Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc., Center Laboratories, Inc. and Wells Fargo Business Credit, Inc., dated as of June 14, 2000. 10.40* (5) Employment agreement by and between Registrant and Dan T. Stinchcomb, dated as of May 1, 2000. 10.41* (5) Employment agreement by and between Registrant and Carol Talkington Verser, dated as of May 1, 2000. 10.42* (6) Management Incentive Compensation Plan. 10.43 (7) First Amendment to Second Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Business Credit, Inc., dated as of March 27, 2001. 10.44 (9) Second Amendment to Second Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Business Credit, Inc., dated as of March 13, 2002. 21.1 (6) Subsidiaries of the Company. 23.1 Consent of Arthur Andersen LLP. 24.1 (9) Power of Attorney (See page 68 of this Form 10-K) 99.1 (9) Letter concerning Arthur Andersen LLP. Notes * Indicates management contract or compensatory plan or arrangement. H Confidential treatment has been granted with respect to certain portions of these agreements. (1) Filed with Registrant's Registration Statement on Form S-1 (File No. 333-25767). (2) Filed with the Registrant's Form 10-Q for the quarter ended September 30, 1997. (3) Filed with the Registrant's Form 10-K for the year ended December 31, 1998. (4) Filed with the Registrant's Form 10-K for the year ended December 31, 1999. (5) Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2000. (6) Filed with the Registrant's Form 10-K for the year ended December 31, 2000. (7) Filed with the Registrant's Form 10-Q for the quarter ended March 31, 2001. (8) Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2001. (9) Filed with the Registrant's Form 10-K for the year ended December 31, 2001. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 23, 2002. HESKA CORPORATION By: /s/ ROBERT B. GRIEVE Robert B. Grieve Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE - --------------------------- -------------------------------- ------------ /s/ ROBERT B. GRIEVE Chairman of the Board and Chief May 23, 2002 - ------------------------- Executive Officer (Principal Robert B. Grieve Executive Officer) and Director /s/ JASON NAPOLITANO Executive Vice President, Chief May 23, 2002 - ------------------------- Financial Officer and Jason Napolitano Secretary (Principal Financial Officer) /s/ MICHAEL A. BENT Vice President, Controller May 23, 2002 - ------------------------- (Principal Accounting Officer) Michael A. Bent /s/ G. IRWIN GORDON* Director May 23, 2002 - ------------------------- G. Irwin Gordon /s/ A. BARR DOLAN* Director May 23, 2002 - ------------------------- A. Barr Dolan /s/ LYLE A. HOHNKE* Director May 23, 2002 - ------------------------- Lyle A. Hohnke /s/ EDITH W. MARTIN* Director May 23, 2002 - ------------------------- Edith W. Martin /s/ WILLIAM A. AYLESWORTH* Director May 23, 2002 - ------------------------- William A. Aylesworth /s/ LYNNOR B. STEVENSON* Director May 23, 2002 - ------------------------- Lynnor B. Stevenson /s/ JOHN F. SASEN, Sr.* Director May 23, 2002 - ------------------------- John F. Sasen, Sr. *By: /s/ ROBERT B. GRIEVE* Chairman of the Board and Chief May 23, 2002 - ------------------------- Executive Officer (Principal Robert B. Grieve Executive Officer) and Director (Attorney-in-Fact) EX-10 3 ex10agri.txt 10.3H BOVINE VACCINE DISTRIBUTION AGREEMENT [CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION] BOVINE VACCINE DISTRIBUTION AGREEMENT This Agreement is entered as of the 13th day of February, 1998 (the "Effective Date"), by and between DIAMOND ANIMAL HEALTH, INC., an Iowa corporation with offices at 2538 S.E. 43rd Street, Des Moines, Iowa, 50317, ("Diamond") and AGRI LABORATORIES, LTD., a Delaware corporation, with offices at 20927 State Route K, St. Joseph, Missouri, 64505 ("Distributor"). WHEREAS, Diamond has the right to certain bovine antigens described on Exhibit A attached hereto and certain USDA and other licenses (and applications therefor) for the manufacture of such antigens and the right to enter into this distribution agreement as to them; and WHEREAS, Distributor desires to purchase Products from Diamond, to be marketed under private label brand names as Distributor deems appropriate pursuant to the terms of this Agreement. NOW, THEREFORE, the parties agree as follows: SECTION 1. PRODUCTION, SALE AND DISTRIBUTION 1.01 Manufacture and Sale. Diamond agrees to manufacture and sell to Distributor, and Distributor agrees to purchase from Diamond, Products and additional products as referenced herein for distribution in the Territory pursuant to and in accordance with the terms and conditions of this Agreement. 1.02 Exclusivity. Distributor's distribution rights under this Agreement shall be exclusive worldwide for all Products identified on Exhibit A attached hereto and additional Products added pursuant to Section 2, except as set forth in this paragraph. Notwithstanding the foregoing, (i) Distributor's rights under this Agreement shall be non-exclusive for distribution in Canada for all Products; (ii) Distributor shall have no distribution rights outside the United States for any Products containing Biostar antigens listed on Exhibit C, without the prior written consent and agreement of Biostar (it being understood that Diamond does not have rights to such Biostar antigens outside the United States); (iii) Distributor shall not have any right to distribute Products consisting of the Biostar antigens listed on Exhibit C in combination with any antigens other than the viral antigens listed on Exhibit A, without the prior written consent and agreement of Biostar; (iv) Distributor acknowledges that Biostar has exclusive rights to distribute in Canada the product combinations (and lesser fallout products containing Biostar antigens) described in Exhibit C; (v) Diamond and its Affiliates may sell, have sold and otherwise distribute to Biostar without restriction the individual Biostar antigens listed in Exhibit C; (vi) Diamond and its Affiliates may sell, have sold and otherwise distribute to Boehringer Ingelheim without restriction the individual antigens and monovalent vaccines (i.e., a vaccine containing a single bovine antigen) listed on Exhibit B; and (vii) Diamond and its Affiliates may sell, have sold and otherwise distribute to BTI without any restriction biological veterinary products containing antigens specified in Exhibit D to be used in solid dose configurations or using [ *** ] technologies. From the beginning date of the second Contract Year, Distributor shall have twenty-four (24) months to submit an application to any foreign jurisdiction for the registration of any one or more Products or future products and twenty-four (24) months after obtaining approval of the registration to begin marketing the registered Product. If Distributor fails to submit a timely application for the registration of any one or more Products or additional Products, or if Distributor submits a timely application and obtains an approved registration but fails to timely market the Product, then Distributor shall forfeit its Exclusive License rights to foreign markets but shall maintain its Exclusive License rights in the United States. It is furthermore recognized by the parties hereto that parties will make good faith efforts to hereafter negotiate fair and equitable agreements as between them for the sale of bulk antigens to other vaccine companies which sales should be included in the Qualified Revenue requirements as set forth in Section 1.04(ii). If the parties hereto cannot agree for the sale of Bulk Antigens to other vaccine companies, then Diamond shall be prohibited from making any Bulk Sales, except as set forth in Section 1.02. 1.03 Territory. Distributor is authorized to sell, have sold and otherwise distribute Products and additional products added pursuant to Section 2 hereafter collectively referred to as "All Products" worldwide limited only as provided in Section 1.02. 1.04 Purchase of Requirements; Minimum Purchases. (i) Requirements. Distributor agrees to purchase its total requirements of Products from Diamond for bovine veterinary biologic products of the type described on Exhibit A but only to the extent Diamond has the Products reasonably available for Distributor's delivery directions that conform to Section 4 hereof. Distributor may purchase any additional requirement from any source, but only during such period that Diamond is unable to meet such requirements and the reasonable costs thereof shall be included in Minimum Qualified Revenues for purposes of Section 1.04(ii). *** Confidentail Treatment Requested (ii) Minimums. During the term of this Agreement Distributor shall cause the Qualified Revenues for each Contract Year to equal or exceed the following amounts (the "Minimum Qualified Revenue"). Minimum Contract Year Qualified as defined in 13.06 Revenues -------------------- ------------------- 1st [ *** ] 2nd $[ *** ] 3rd $[ *** ] 4th $[ *** ] 5th and thereafter $[ *** ] provided, however, that Distributor may permit the Qualified Revenues to be less than the Minimum Qualified Revenue in any Contract Year and in lieu thereof pay to Diamond an amount equal to the difference between such Minimum Qualified Revenue and the actual Qualified Revenues for such Contract Year (the "Additional Payment"). If an Additional Payment is due hereunder for any Contract Year, which payment shall be due and payable thirty (30) days after the end of such Contract Year, Distributor may elect by written notice to Diamond within thirty (30) days after the end of such Contract Year, in lieu of paying such Additional Payment, to terminate Distributor's exclusivity rights under Section 1.02 of this Agreement. Distributor's distribution rights shall continue on a nonexclusive basis subject to all the remaining terms of this Agreement not inconsistent therewith, which shall remain in full force and effect. 1.05 Responsibilities of Distributor; Diamond Technical Support. Distributor shall use reasonable efforts to market and sell Products in the *** Confidential Treatment Requested Territory and shall adhere to reasonable industry practice in connection therewith. Distributor shall be responsible, at its sole expense, for advertising and promotion, technical support and customer service. At Distributor's request, Diamond shall provide reasonable technical support for Distributor's marketing, sales and customer service efforts, and shall pay the support costs thereof. 1.06 Registration and Licensing. Diamond shall use reasonable efforts to obtain Licenses in the United States with respect to all Products and will pay all Registration Costs associated with obtaining and maintaining such Licenses, except as set forth in Section 2.02. Diamond will use reasonable efforts to assist Distributor in the registration of Products (bulk or packed form) outside the United States at Distributor's expense. Distributor shall pay all Registration Costs associated with obtaining and maintaining any Licenses required in the Territory outside the United States and said cost shall be included in the Qualified Revenue requirements as set forth in Section 1.04(ii). 1.07 Specifications. Diamond and Distributor agree that all Products will be manufactured in accordance with the Specifications and applicable USDA regulations. The Specifications may be changed at any time by mutual agreement of the parties, subject to applicable regulatory requirements, notices and approvals. Any disagreement concerning revisions to the Specifications shall be first addressed by mutual discussion and negotiation. Except to the extent the parties may otherwise agree in writing, any increases in costs resulting from Specification changes (including, but not limited to, those relating to packaging and raw materials) may be reflected in a direct cost increase to the Purchase. 1.08 Labeling; Trademarks. Diamond shall affix labeling to all Products, such labeling to bear one or more Distributor trademarks, as specified in writing by Distributor. Nothing contained herein shall give Diamond any right to use any Distributor trademark except on all Products manufactured and delivered for Distributor. Diamond shall not obtain any right; title or interest in any Distributor trademark by virtue of this Agreement Distributor shall not use, nor shall Distributor obtain any right, title or interest in, any Diamond trademark or any [ *** ] trademark, including without limitation "Pneumo-Star," "Somnu-Star" and "Somnu-Star PH." All Product labeling shall in addition to the Distributor trademark, contain the notation "Manufactured by Diamond Animal Health, Inc." with its address or such similar notation as may be necessary or advisable under applicable law, and shall contain the notation "Distributed by Agri Laboratories, Inc.," with its address. Distributor shall cause All Product labeling to contain only such claims as are permitted under applicable Licenses for such Products and to otherwise comply with applicable law. All labeling and packaging of All Products shall be subject to the prior written approval of both parties, which shall not be unreasonably withheld. Diamond will order quantities of labeling and packaging sufficient to perform its obligations hereunder in its reasonable discretion. Distributor shall be responsible for the costs of developing and changing packaging for All Products, including costs of obsolete labeling and packaging due to changes requested by Distributor but only those occurring after initial License for the same. Furthermore, Diamond shall be responsible for the cost occasioned by any changes required by a government agency. 1.09 Location of Manufacture. All Products shall be manufactured by Diamond at its plant located in Des Moines, Iowa. SECTION 2. ADDITIONAL PRODUCTS 2.01 Additional Products. At Distributor's request, additional Products may be added to Exhibit A to this Agreement, providing for additional combinations of the antigens listed in Exhibit A and/or combinations of such antigens and new antigens specified by Distributor. Diamond shall have the right, in its discretion, to approve or disapprove any such additional Products and if approved, to establish reasonable Purchase Prices therefor. Any such approved additional Products and the Purchase Prices therefor shall be set forth in an amended Exhibit A signed by both parties to be collectively known as "All Products". Any such approved additional product shall be included in the requirements of Section 1.04(ii). 2.02 Registration Costs; Ownership. Distributor shall advance to Diamond the Registration Costs for any additional Products approved pursuant to Section 2.01, which are added at Distributor's request. Each of Distributor and Diamond shall retain ownership of any antigens it supplies for any such additional Products and the addition of additional Products to Exhibit A shall not be deemed to transfer any right, title, interest or license in or to the antigens supplied by either party to the other party for such Products, except as necessary to manufacture and sell Products under this Agreement. Each of Distributor and Diamond shall retain joint ownership of any jointly produced antigens developed by the parties hereto, and the addition of said Products to Exhibit A shall not be deemed to transfer any right, title, interest or license in or to the jointly developed antigens or Products, except as necessary to manufacture and sell Products under this Agreement. It is contemplated that a separate agreement would be entered into for the joint development of antigens or Products between the parties hereto. SECTION 3. PRICE; PAYMENT 3.01 Purchase Prices. Distributor agrees to purchase the Products at prices shown in Exhibit A hereto, subject to adjustment from time to time as specified below (the "Purchase Price"). All prices are F.O.B. Diamond's manufacturing plant and are exclusive of taxes, freight and insurance, if any, which shall be invoiced to and paid by Distributor. 3.02 Annual Price Adjustment. Purchase Prices for each Product set forth in Exhibit A shall be in effect for Products having specified delivery dates during the first Contract Year. Purchase Prices to be in effect for Products to be delivered in each subsequent Contract year shall be negotiated by the parties in good faith, taking into account factors including, but not limited to, cost changes, volume changes and plant utilization. In the event that Purchase Price changes are not agreed upon as a result of such good faith negotiations, then the Purchase Prices in effect for the preceding Contract Year shall remain in effect. 3.03 Cost Increases. Diamond may also notify Distributor in writing during any Contract Year of any cost increases for raw materials and packaging components for All Products to the extent such increases, individually or in the aggregate, would cause total finished cost of goods of such Product to increase by more than 2%. Upon Distributor's request, Diamond will furnish reasonable supporting documentation therefor. Upon such notification, the parties shall negotiate in good faith to adjust the applicable Purchase Prices to account for such increases. In the event that Purchase Price changes are not agreed upon as a result of such good faith negotiations, then the Purchase Prices then in effect shall remain in effect. 3.04 Payment Terms. Diamond shall notify Distributor of the date when Products are ready for shipment. Diamond shall invoice the Distributor for Products on the later of (i) the date Diamond notifies Distributor that the Products are ready for shipment or (ii) the delivery date specified in Distributor's purchase order accepted by Diamond. Diamond shall invoice Distributor for the Additional Payment, if any, within thirty (30) days after the end of any Contract Year for which it is due. Diamond shall invoice Distributor for Registration Costs, Support Costs and other amounts payable by Distributor under this Agreement, if applicable, monthly as incurred. Payment terms shall be net 30 days from the date of each such invoice. An interest charge of one and one-half percent (1 1/2 %) per month or portion of a month shall be charged for late payments. Diamond shall be entitled to place Distributor on shipment hold and otherwise suspend performance under this Agreement if Distributor shall be materially late or in default of its payment obligations. 3.05 Packaging. Purchase Prices include packaging for bulk palletized shipment for Distributor by common carrier for next-day delivery. Distributor shall pay to Diamond the additional charges for labor and materials costs for special or additional packaging or shipping requested by Distributor. SECTION 4. FORECASTS; ORDER PROCEDURES; DELIVERIES 4.01 Firm Orders. Except to the extent that the parties otherwise agree in writing with regard to a particular order, Distributor shall submit to Diamond a firm written purchase order or orders specifying the types, quantities and delivery dates and instructions of Products that it desires to purchase at least five (5) months prior to the requested delivery date(s). Diamond will review each purchase order within five (5) business days of receipt and either issue in writing its confirmation or its proposal for changes and modifications for delivery to accommodate, to the extent reasonable, Diamond's scheduling requirements. Diamond will use reasonable commercial efforts to accommodate and to minimize changes and modifications to the delivery dates requested by Distributor. Each purchase order shall be binding on Distributor upon written confirmation by Diamond or, if Diamond has made a proposal for changes or modifications to delivery, upon Distributor's written acceptance of such changes or modifications; provided, that no material modification or change will become effective after confirmation without the written approval of both parties. Diamond agrees that with respect to Products covered by a purchase order confirmed by it in writing, the Products shall be available for shipment on the specified delivery dates, except to the extent it is prevented from doing so due to conditions beyond its reasonable control as provided in Section 8. The applicable delivery schedules shall be suspended during any period that Products have been selected for testing by a regulatory authority. 4.02 Standard Batch Size. Distributor will order Products in standard batch sizes as shown on Exhibit A. If specified order amounts for Distributor would result in a batch which is thirty percent (30 %) or more below the applicable standard batch size set forth in Exhibit A, Diamond will so notify Distributor and at Distributor's option (i) the parties will mutually agree to an increased Purchase Price for such Products; (ii) Distributor will agree to accept and pay for the entire standard batch size of the ordered Products or (iii) Distributor may submit a revised purchase order for a quantity of Products within the permitted parameters. 4.03 Forecasts. Within 15 days after the date hereof Distributor will furnish Diamond a written forecast of the quantities and types of Products that the Distributor anticipates it will order from Diamond during each of the anticipated first twelve (12) months of this Agreement. Thereafter, within fifteen (15) days after the first day of each calendar quarter during the term of this Agreement, Distributor will also furnish to Diamond revised written estimates of the quantities it anticipates it will order during each month of the succeeding twelve (12) month period. Such forecasts will not be deemed binding commitments, but are for the purpose of enabling Diamond to more effectively schedule the use of its facilities. 4.04 Delivery; Title. Diamond shall ship the Products at the Distributor's expense and in accordance with Distributor's written instructions. Written shipping instructions shall be provided by Distributor in each purchase order or not later than two (2) days prior to the specified delivery date. Title and risk of loss of the Products shall pass to the Distributor upon receipt of the Products at the location directed by Distributor. 4.05 Warehousing . Diamond agrees to store the Products as required by the Distributor for a period of not to exceed thirty (30) days from the later of (i) the date Diamond notifies Distributor the Products are ready for shipment or (ii) the delivery date specified in Distributor's purchase order accepted by Diamond. With respect to Products that are not picked up by the common carrier designated by Distributor's shipping instructions within thirty (30) days from the date Diamond notifies Distributor the Products are ready for shipment, Diamond shall charge a warehousing fee of one and one-half percent (1 1/2%) of the invoice amount per month or portion thereof until such Products are shipped. 4.06 Order of Precedence. In the event of conflict between the typewritten terms of Distributor's purchase orders and the terms and conditions of this Agreement, the order of precedence shall be first, the typewritten terms of Distributor's accepted purchase orders and then this Agreement. All other terms and conditions contained in Distributor's and Diamond's standard form purchasing and selling documents shall be disregarded. SECTION 5. LABEL CODES: QUALITY ASSURANCE; DATING 5.01 Label Codes. Diamond shall code all labels affixed to each unit of the packaged Products to identify the Product batch. Distributor shall not remove or obliterate label codes or patent marking on any Products. 5.02 Product Analysis . Prior to shipping any Product for the Distributor, Diamond shall analyze the Product for the purpose of determining whether it conforms with the Specifications. 5.03 Audit. Once during each Contract Year, Diamond shall provide to Distributor reasonable access, during normal business hours, upon reasonable notice to Diamond's manufacturing facilities to permit Distributor to examine, audit and copy Diamond's records with respect to manufacture, quality control and regulatory compliance of the Products, at Distributor's sole expense. Such audit rights shall not extend to financial and other records of Diamond not pertinent hereto. 5.04 Dating. Unless otherwise approved by Distributor prior to shipment, Products will have a dating at time of shipment as follows; provided, that in the event that retesting is required for a Product, the minimum dating otherwise required shall be reduced by a period of sixty (60) days: (i) Products released for sale with twenty-four (24) months dating will be shipped for Distributor with a minimum of twenty (20) months dating remaining. (ii) Products released for sale with eighteen (18) months dating will be shipped for Distributor with a minimum of fourteen (14) months dating remaining. (iii) Products released for sale with twelve (12) months dating will be shipped for Distributor with a minimum of eight (8) months dating remaining. 5.05 Outdates. Should Product remain undistributed beyond the date permitted by regulation or other government agency requirement, Diamond will accept redelivery to it at Distributor's shipping costs, with Distributor to receive credit for same at the price paid to Diamond up to a maximum cumulative credit of 1 % of the aggregate Purchase Prices of the products ordered for shipment within a Contract Year, to be included in the calculation of the Qualified Revenue Requirement in Section 1.04 (ii). Diamond agrees to destroy said returned Product at its cost and in compliance with all regulatory requirements. SECTION 6. TERM; TERMINATION 6.01 Term. The initial term of this Agreement shall be for a period commencing on the Effective Date and ending on the fifth (5th) anniversary of the end of the first Contract Year. This Agreement shall automatically renew thereafter for additional renewal terms of one year each, unless either party gives at least twelve (12) months prior written notice to the other that it does not wish to renew this Agreement. 6.02 Termination for Breach. Subject to the provisions of Section 8, if either party shall breach any material obligation required under this Agreement the other party may give written notice of its intention to terminate this Agreement describing in reasonable detail the breach. If the breaching party fails to remedy such material breach within thirty (30) days (ninety (90) days in the case of any failure by Diamond to deliver any Product) following such written notice, or if such breach is not reasonably capable of cure within such thirty (30)-day or ninety (90)-day period, as the case may be, and the breaching party fails to commence cure procedures within such thirty (30)-day or ninety (90)-day period and diligently prosecute such procedures until the breach is cured, then the non-breaching party may, in addition to all other remedies available at law or in equity, terminate this Agreement forthwith upon written notice. 6.03 Performance on Termination. Upon termination of this Agreement, (i) Products manufactured pursuant to confirmed purchase orders shall be delivered no later than the requested delivery dates in the approved purchase order and Distributor shall pay Diamond therefor as provided in Section 3.04 (provided, that prepayment shall be required upon termination due to Distributor's payment default); (ii) all raw materials furnished by Distributor shall be returned at Distributor's expense; and (iii) all reasonable costs of unused raw materials, containers, labeling and packaging previously ordered by Diamond in its reasonable discretion and not reusable for other purposes by Diamond shall be paid by Distributor. SECTION 7. REPRESENTATIONS AND WARRANTIES; NOTIFICATIONS 7.01 Of Diamond. Diamond represents and warrants to Distributor that: (i) the Products delivered to Distributor hereunder shall conform to the Specifications and all other requirements and shall be free from material defects in workmanship and materials through their respective expiration dates; (ii) the execution and delivery of this Agreement by Diamond, and the performance of its obligations hereunder, do not require the consent of any third party and will not violate, with or without notice, the lapse of time or both, any agreement, contract, license or permit to which Diamond is a party or its organizational documents; and (iii)prior to delivery of any Product hereunder it will have, and will thereafter maintain, all required manufacturing establishment designations, permits and Licenses required to perform its obligations with respect to such Product under this Agreement. 7.02 Of Distributor. Distributor represents and warrants to Diamond that: (i) the execution and delivery of this Agreement by Distributor, and the performance of its obligations hereunder, do not require the consent of any third party and will not violate, with or without notice, the lapse of time or both, any agreement, contract, license or permit to which Distributor is a party or its organizational documents; and (ii) it has, and will maintain, all permits and licenses required to perform its obligations under this Agreement and Products distributed hereunder will bear labels conforming to the requirements of this Agreement. 7.03 Non-Conforming Products. The Distributor shall have 30 days after receipt of the Product to inspect the Product for gross visual defects and reject the same. If the Product is rejected, written notice must be given to Diamond no later than 30 days after receipt by the Distributor. The parties within 30 days after rejection will endeavor in good faith negotiations to determine whether or not the Product conforms to Diamond's warranties. If the parties conclude it does conform, it will be treated as conforming in all respects under this Agreement with time requirements to be adjusted to cover the time required by this process. If the parties conclude it does not conform with Diamonds warranties in Section 7.01 (i), at the Distributor's option, (i) Diamond shall be relieved of any obligation to deliver any Product with respect to the non-conforming shipment and in such case Diamond shall credit against future purchases by Distributor the purchase price of such non-conforming Product paid by Distributor together with any shipping costs paid by the Distributor for delivery of such non-conforming Product, or (ii) Diamond shall replace the non-conforming Product with substitute Product which conforms with said warranties, within the time agreed to by both parties, in which case the Distributor shall pay to Diamond amounts in accordance with Section 3 hereof based on the substitute shipment, net of the purchase price and shipping costs, if any, previously paid by Distributor for such non-conforming Products. The nonconforming Product shall become the property of and be returned to Diamond at Diamond's expense. Diamond shall dispose of such Product at its own expense according to all appropriate regulations. The Purchase Price of nonconforming product shall be treated as Minimum Qualified Revenue in the Contract Year the product is ordered for shipment. 7.04 Recall. Diamond shall replace Product at no cost to the Distributor to complete any Product recall or stop-sale required by a subsequent determination that the Product (i) was not produced in accordance with Specifications when released to the Distributor, (ii) failed to remain in compliance with Specifications through the dating period of such Product, (iii) contained any material defect in workmanship and materials not detectable by Distributor's inspection testing, or (iv) was not produced in compliance with applicable USDA regulations. The reasonable costs of any such recall or stop-sale shall be borne by Diamond. Any such recall or stop-sale shall be conducted in accordance with USDA Veterinary Services Memorandum No. 800.57 or any successor regulations. The Distributor shall be responsible for all other recalls related to marketing, handling or storage of Product by Distributor or its agents, including voluntary recalls made by Distributor. Minimum Qualified Revenue for any Contract Year shall include the Purchase Price for product recalled under the first sentence of this Section 7.04. 7.05 Exclusive Remedy. THE REMEDIES DESCRIBED IN THIS AGREEMENT ARE EXCLUSIVE AND IN LIEU OF ANY 0THER REMEDY DISTRIBUTOR WOULD OTHERWISE HAVE AGAINST DIAMOND WITH RESPECT TO DEFECTIVE PRODUCTS OR ANY BREACH OF DIAMOND'S LIMITED WARRANTY UNDER SECTION 7.01 (i) OF THIS AGREEMENT; PROVIDED, THAT THIS SECTION SHALL NOT LIMIT DIAMOND'S INDEMNITY OBLIGATION SET FORTH IN SECTION 11 WITH RESPECT TO THIRD PARTY CLAIMS. 7.06 Limitations. (i) EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 7, DIAMOND MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, CONCERNING TECHNOLOGY, GOODS, SERVICES, RIGHTS OR THE MANUFACTURE AND SALE OF PRODUCTS, AND HEREBY DISCLAIMS ALL WARRANTIES, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR USE OR PURPOSE OR NONINFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE FOREGOING. (ii) IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY FOR LOST PROFITS, LOSS OF GOODWILL, OR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES, HOWEVER CAUSED, ARISING UNDER ANY THEORY OF LIABILITY. THIS LIMITATION SHALL APPLY EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. (iii) THE WARRANTY IN SECTION 7. 01 (i) WILL NOT APPLY TO THE EXTENT OF ANY DEFECTS CAUSED BY IMPROPER OR INADEQUATE HANDLING OR STORAGE OF PRODUCTS AFTER SHIPMENT BY DIAMOND OR FAILURE OF ANY RAW MATERIALS SUPPLIED BY DISTRIBUTOR. 7.07 Notifications. (i) Of Diamond. Diamond agrees that it will promptly notify the Distributor in writing of any contact, claim or other communication by any entity or agency that relates to, or may relate to, Diamond's ability to perform its responsibilities herein. Any communication (other than routine regulatory filings, notices and reports and other non-adverse communications), either initiated by Diamond or by the USDA, that references a Product in this Agreement or the submission of any such Product will immediately be brought in writing to the attention of the Distributor. (ii) Of Distributor. Distributor agrees that it will promptly notify Diamond in writing of any contact, claim or other communication by any entity or agency that relates to, or may relate to, Distributor's ability to perform its responsibilities herein. Any communication (other than routine regulatory filings, notices and reports and other non-adverse communications), either initiated by Distributor or by the USDA, that references a Product in this Agreement or the submission of any such Product will immediately be brought in writing to the attention of Diamond. SECTION 8. FORCE MAJEURE 8.01 Force Majeure. No party shall be held liable or responsible for failure or delay in fulfilling or performing any obligation of this Agreement in case such failure or delay is due to Acts of God, strikes or other labor disputes, governmental regulations or actions (not otherwise the responsibility of the parties), inability to obtain material, labor, equipment or transportation, or any other condition beyond the reasonable control of the affected party, provided such party has taken reasonable steps to avert such causes or conditions. Each party agrees to give the other party prompt written notice of the occurrence and the nature of any such condition or act,, and the extent to which the affected party will be unable to fully perform its obligation hereunder. Each party further agrees to use all reasonable efforts to correct the condition as quickly as possible. 8.02 Right to Terminate. If, as a result of causes or conditions described in this Section, either party is unable to perform substantially all of its material obligations hereunder for any consecutive period of three (3) months, the other party shall have the right to terminate this Agreement upon at least thirty (30) days prior written notice. SECTION 9. CONFIDENTIAL INFORMATION 9.01 Non-Disclosure. All Confidential Information disclosed hereunder shall remain the property of the disclosing party and shall be maintained in confidence and not disclosed by the receiving party to any person except to officers, employees, and consultants to whom it is necessary to disclose the information for the purpose of performing and enforcing this Agreement. Each party shall take all steps it would normally take to protect its own Confidential Information to ensure that the received Confidential Information shall be maintained in confidence and not disclosed, but in no event less than reasonable care. 9.02 Use. Unless otherwise agreed in writing, all Confidential Information disclosed hereunder shall be used by the parties only pursuant to and in accordance with this Agreement. 9.03 Exceptions. The obligations of Diamond and Distributor under this paragraph shall not apply to: (i) Information which, at the time of disclosure, is in the public domain or thereafter comes within the public domain other than as a result of breach of this Agreement; or (ii) Information which either party can establish was in its possession at the time of disclosure; or (iii) Information which was received from a third party not under an obligation of confidentiality; or (iv) Information which either party can establish was independently developed without reference to the information received hereunder. 9.04 Termination; Survival. Upon termination of this Agreement, Diamond and Distributor agree upon written request to return to the other all written or other physical embodiments of the other's Confidential Information, except for one record copy. The obligations under this paragraph shall be binding on any affiliate, parent, subsidiary, successor or assign of Diamond or Distributor as if a party to the Agreement. The obligations of confidentiality and non-use of the Confidential Information under this Agreement shall, continue throughout the term of this Agreement and for a period of two (2) years following the termination or expiration of this Agreement. 9.05 Confidentially of Agreement. Except to the extent required by law, neither party shall disclose to third parties the terms of this Agreement or the negotiations giving rise to this Agreement. SECTION 10. OWNERSHIP OF INTELLECTUAL PROPERTY Any and all design, patent, copyright and other relevant ownership and other rights in and to the intellectual property aspects of the Products which are the subject of this Agreement and all modifications, adjustments, changes and derivatives thereto and thereof (collectively, the "Rights") shall belong exclusively to Diamond, except as otherwise agreed in writing with respect to additional Products added to this Agreement pursuant to Section 2. Distributor agrees that it does not have, and will not claim, any Rights in any Product delivered pursuant to this Agreement or aspect thereof, except as so agreed in writing. Diamond. shall own the raw materials and Products, subject to any security interest, until title passes pursuant to Section 4.04. SECTION 11. INDEMNIFICATION 11.01 By Diamond. Diamond hereby agrees to defend, indemnify and hold Distributor, its directors, officers, employees, agents and Affiliates harmless from and against any loss, claim, action, damage, expense or liability (including defense costs and attorneys' fees) resulting from any third party claim or suit arising out of or relating to Diamond's failure to manufacture a Product in compliance with its Specifications; provided, however, that the foregoing indemnity obligations shall not apply where such claim is the result of the willful misconduct or negligent act of Distributor or its Affiliates, and there shall be apportionment in accordance with responsibility when such obligation derives in part from such acts of Diamond and in part from such acts of Distributor and its Affiliates. 11.02 By Distributor. Distributor hereby agrees to defend, indemnify and hold Diamond, its directors, officers, employees, agents and Affiliates harmless from and against any loss, claim, action, damage, expense or liability (including defense costs and attorneys' fees) resulting from any third party claim or suit arising out of or relating to the use, sale or distribution of any of the Product manufactured in conformity with the Specifications, including, but not limited to any warranty for the Products extended by Distributor other than the warranties given by Diamond in Section 7.01(i) above and any of the claims identified in Section 7.06(i) above; provided, however, that the foregoing indemnity obligation shall not apply where such claim is solely the result of the willful misconduct or negligent act of Diamond or its Affiliates and there shall be apportionment in accordance with responsibility when such obligation derives in part from acts of Distributor and in part from such acts of Diamond and its Affiliates. 11.03 Procedures. In the event that a third-party claim is made or third-party suit is filed for which either party intends to seek indemnification from the other party pursuant to this Section 11, the party seeking indemnification (the "Indemnitee" shall promptly notify the other party (the "Indemnitor")of said claim or suit. The Indemnitor shall have the right to control, through counsel of its choosing, the defense of such third-party claim or suit, but may compromise or settle the same only with the consent of the Indemnitee, which consent shall not be unreasonably withheld. The Indemnitee shall promptly consult in good faith with the Indemnitor with respect to any proposed settlement. The Indemnitee shall cooperate fully with the Indemnitor and its counsel in the defense of any such claim or suit and shall make available to the Indemnitor any books, records or other documents necessary or appropriate for such defense. The Indemnitee shall have the right to participate at the Indemnitee's expense in the defense of any such claim or suit through counsel chosen by the Indemnitee. 11. 04 Insurance. Diamond and Distributor will each Maintain product liability insurance covering their individual performance of their obligations hereunder with a minimum limit of liability of Two Million Dollars ($2,000,000) in the aggregate. Each party will maintain insurance to protect themselves and the other from claims under any workers compensation acts and from any other damages from personal injury including death, which may be sustained by the said parties, their agents, servants or employees and the general public and/or claims of property damage which might be sustained from any one of them due to the negligence of the parties. Each party shall furnish the other with a certificate of insurance. 11.05 Survival. The provision of Sections 11.01 through 11.03 shall survive the expiration or termination of this Agreement. SECTION 12. MISCELLANEOUS 12.01 Notices. All notices or other communications provided for in this Agreement shall be in writing and shall be considered delivered upon the earliest of actual receipt, or personal or courier delivery, or sending by facsimile with confirmation of receipt in good order requested and received, or on the fourth business day after they are deposited in the United States mail, certified first class or air mail postage prepaid, return receipt requested, addressed to the respective parties as follows: (i) If to Diamond: (ii) If to Distributor: Diamond A al Health, Inc. AGRI Laboratories, ltd. 2538 S.E. 43rd Street 20927 State Route K Des Moines, Iowa 50317 St. Joseph, MO 64505 ATTN: President ATTN: President Fax: (515) 263-8661 Fax: (816) 233-9546 Copy to: Copy to: Heska Corporation Edward S. Sloan Legal Department Niewald, Waldeck & Brown 1825 Sharp Point Drive 120 W. 12th Street Fort Collins, CO 80525 Kansas City, MO 64105 Fax: (816) 474-0872 The parties may, at any time, change their addresses or other information in this section by written notice under this section. 12.02 Independent Contractors. The parties are and shall always remain independent contractors as to the other in their performances of this Agreement. The provisions of this Agreement shall not be construed as authorizing or reserving to either party any right to exercise any control or direction over the operations, activities, employees, or agents of the other in connection with this Agreement except to the extent required by law, it being understood and agreed that the control and direction of such operations, activities, employees, or agents shall otherwise remain with each party. Neither party to this Agreement shall have any authority to employ any person as an employee or agent for or on behalf of the other party to this Agreement, nor shall any person performing any duties or engaging in any work at the request of such party, be deemed to be an employee or agent of the other party to this Agreement. 12.03 Governing Law. The validity, interpretation and performance of this Agreement shall be governed and construed in accordance with the internal laws of the State of Iowa. 12.04 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision hereof shall be prohibited by or be invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 12.05 Modification. No modification or waiver of any provision of this Agreement shall be effective unless the modification is made in writing and signed by the party sought to be charged, and the same shall then be effective only for a period and on the conditions and for the specific instances and purposes specified in such writing. No course of dealing between Diamond and the Distributor or delay or failure to exercise any rights hereunder shall operate as a waiver of such rights or preclude the exercise of any other rights hereunder. 12.06 Survival. Termination or expiration of this Agreement shall not relieve either party from any obligation under this Agreement which may have accrued prior thereto or which survives by its terms. 12.07 Captions. The captions set forth in this Agreement are for convenience only and shall not be used in any way to construe or interpret this Agreement. 12.08 Assignment. Neither party to this Agreement may assign this Agreement or its rights or obligations hereunder without the prior written consent of the other party; except that either party may assign its right and delegate its obligations hereunder without prior consent of the other party to any successor entity by way of merger, consolidation, or reorganization or to the purchaser of all or substantially all of its assets. Any permitted assignee shall assume all obligations of its assignor under this Agreement. No assignment shall relieve either party of responsibility for the performance of any accrued obligation which it has hereunder. Any consent required shall not be unreasonably withheld. 12.09 Entire Agreement. This Agreement (including the Exhibits hereto) constitutes the entire understanding of the parties with respect to the subject matter hereof and supersede all prior negotiations or communications, however given, regarding the subject matter hereof. There are no other understandings, representations or warranties of any kind, express or implied. 12.10 Arbitration. Should the parties hereto be unable to amicably resolve between themselves any disagreements relating to or arising from any one or more of the provisions of this Agreement, which does not involve injunctive or equitable relief, both parties shall submit such disagreement to arbitration under the Commercial Rules of the American Arbitration Association in Kansas City, Missouri, with any hearing to be held in St. Joseph, Missouri. Neither party shall have the right to further appeal or redress an arbitration award in any other court or tribunal except solely for the purpose of obtaining execution of the judgment rendered by the American Arbitration Association. SECTION 13. DEFINITIONS 13.01 "Affiliate" shall mean with respect to any person or entity (i) any other person or entity that controls, is controlled by or is under common control with such first person or entity, with "control" meaning direct or indirect beneficial ownership of more than fifty percent (50%) of the equity interest of an entity or more than a fifty percent (50%) interest in the decision making authority of an entity, and (ii) an entity in which the maximum equity interest permitted by law to be held by another entity is held by such other entity. 13.02 "BTI" shall mean Ballistic Technologies, Inc. 13.03 "Biostar" shall mean Biostar, Inc., a corporation organized under the laws of Canada. 13.04 "Boehringer Ingelheim" shall mean Boehringer Ingelheim Animal Health, Inc., a Delaware corporation. 13.05 "Confidential Information" shall, mean all information disclosed in writing, or by oral communication if reduced to writing and confirmed as confidential within (30) days of disclosure, by either party to the other relating to raw materials, product specifications, formulations and compositions, scientific know-how, chemical compound and composition data, manufacturing processes, analytical methodology, product applications, including safety and efficacy data, current and future product and marketing plans and projections, and other information of a technical or economic nature related to the Products and/or Diamond's manufacture of the Products. 13.06 "Contract Year" shall mean (i) for Contract Year one (1) the period commencing on the Effective Date and ending on the date Diamond has obtained licenses in the United States for all of the viral antigens listed on Exhibit A, and (ii) for each Contract Year thereafter, each succeeding twelve-month period thereafter. 13.07 "License" shall mean a veterinary biologic license issued to Diamond by the United States Department of Agriculture or other regulatory agency with jurisdiction in the Territory for a Product to be manufactured by Diamond pursuant to this Agreement. 13.08 "Minimum Qualified Revenue" shall mean the minimum amounts of Qualified Revenue per Contract Year, as specified in Section 1.04 (ii) above. 13.09 "Product" shall mean the antigens set forth on Exhibit A attached hereto, together with any additional antigens added to this Agreement pursuant to Section 2 hereof, individually or in any combination permitted by this Agreement, in bulk or packaged as set forth in Exhibit A. 13. 10 "Qualified Revenue" shall mean, for any Contract Year, an amount equal to (i) the Purchase Price of Products ordered for shipment in such Contract Year by Distributor, plus (ii) any amounts paid by Distributor to Diamond in such Contract Year for Registration Costs and Support Costs, plus (iii) any other amounts paid or advanced by Distributor to Diamond in such Contact Year for research and development or other services not contemplated by this Agreement, as adjusted for (iv) all other adjustments to Minimum Qualified Revenue expressly as provided in this Agreement. 13.11 "Registration Costs" shall mean all costs and expenses associated with obtaining Licenses, including without limitation clinical trial costs, assay development and validation, development of seed stocks, production processes scale-up, formulation development, production of pre-licensing serials, conduct of field safety trials, application fees and other costs and expenses reasonably incidents thereto. As between the parties, Registration Costs shall include labor and service charges at Diamond's standard hourly rates, as amended from time to time, direct cost of materials, and out-of-pocket and third-party expenditures. 13.12 "Specifications" shall mean, as the context may require, either one or both of the following, which have been mutually agreed upon by the parties: (i) vendor-certified appropriate quantitative and qualitative particulars for all raw materials including active and non-active excipients that are used to prepare all components represented in and by final Products, and (ii) a filed and approved USDA Outline of Production describing in detail the manufacturing process applicable for each Product and the testing and release criteria applicable to each Product. 13.13 "Support Costs" shall mean all costs and expenses of Diamond associated with providing technical support to Distributor under this Agreement, including without limitation labor and service charges at Diamond's standard hourly rates, as amended from time to time, direct cost of materials, and out-of-pocket and third-party expenditures. 13.14 " Territory" shall mean the territory specified in Section 1.03. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of the date first written above. DIAMOND ANIMAL HEALTH, INC. AGRI LABORATORIES, LTD. By: /s/ LOUIS VAN DAELE By: /s/ STEVE SCHRAM --------------------- --------------------- Title: President Title: President EXHIBITS A - Products and Prices B - Boehringer Ingelheim Rights Rights C - BioStar Antigens D - Ballistic Technologies Inc. Exhibit A (Modified Live) Products and Pricing Trade Name Antigens 1Ods 50ds 5ds Titanium BRSV (BRSV) [***] [***] [***] Titanium BRSV Vac3 (BRSV-PI3-IBR) [***] [***] [***] Titanium 5 (BRSV-PI3-IBR-BVD1,BVD2) [***] [***] [***] Titanium 5-L5 (BRSV-PI3-IBR-BVD1,BVD2-Lepto 5) [***] [***] [***] Titanium 3 + BRSV LP (BRSV-IBR-BVD1,BVD2-Lepto Pomona) [***] [***] [***] Titanium IBR (IBR) [***] [***] [***] Titanium IBR LP (IBR-Lepto Pomona) [***] [***] [***] Titanium 3 (IBR-BVD1,BVD2) [***] [***] [***] Titanium 4 (IBR-PI3-BVD1,BVD2) [***] [***] [***] Titanium 4 L5 (IBR-PI3-BVD1,BVD2-Lepto 5) [***] [***] [***] Diamond Animal Health, Inc Agri Laboratories, LTD By: /s/ CONNIE PHILLIPS By: /s/ STEVE SCHRAM --------------------- ------------------ Title: V. P. Ops Title: President Date: 11-6-00 Date: 11-3-00 Standard Batch Size Large Freeze Dryer Small Freeze Dryer 5 dose [ *** ] units [ *** ]ds [ *** ] units [ *** ] ds 10 dose [ *** ] units [ *** ]ds [ *** ] units [ *** ] ds 50 dose [ *** ] units [ *** ]ds [ *** ] units [ *** ] ds NOTE: THESE PRICES ARE IN EFFECT FOR DELIVERIES MADE BETWEEN 1/1/2001 AND 12/31/2001 INCLUDING PURCHASE ORDERS PLACED AFTER 8/1/2000 Those products that are no longer carried are not included in this price restructure. Should any of these be ordered after this agreement, new pricing will be established. Handscribed: Note: 5ds pricing subject to reduction if forecasting/batches (larger) are obtainable. SDS 11/3/00 *** Confidential Treatment Requested Exhibit A DAH World Wide Products Single Bovine Antigens or Bovine Combinations Modified Live Virus Antigens (Signature Line) Infectious Bovine Rhinotracheitis (IBR) Bovine Virus Diarrhea Virus-Type I (BVD) Bovine Virus Diarrhea Virus-Type 11 (BVD) Parainfluenza (P13) Bovine Respiratory Syncytial Virus (BRSV) Inactivated Virus Antigens (Signature Line) Infectious Bovine Rhinotracheitis (IBR) Bovine Virus Diarrhea - Type I (BVD) Bovine Virus Diarrhea - Type II (BVD) Lepto 5-way Lepto Pomona [ *** ] BioStar product (US Only) [ *** ] BioStar product (US Only) Camplylobacter (Vibrio) Bayer product [ *** ] [ *** ] [ *** ] [ *** ] [ *** ] [ *** ] [ *** ] [ *** ] *** Confidential Treatment Requested Exhibit B Boehringer Ingelheim Animal Health, Inc. [ *** ] Antigens or [ *** ] Vaccine Infectious Bovine [ *** ] Bovine [ *** ] > [ *** ] > [ *** ] Bovine [ *** ] [ *** ] [ *** ] (Master Cell Stock) Exhibit C BIOSTAR ANTIGENS Generic Names Antigens - -------------------------- ----------------------- 1. [ *** ] [ *** ] [ *** ] [ *** ] 2. [ *** ] [ *** ] [ *** ] 3. [ *** ] [ *** ] [ *** ] [ *** ] [ *** ] [ *** ] *** Confidential Treatment Requested Exhibit C, continued BioStar, Inc. Exclusive BioStar Product Combinations (Canada Only) [ *** ] [ *** ] [ *** ] Any other Signature Line antigen in combination with the BioStar antigen. Note: Non-exclusive on any other Signature Line product in Canada that does not contain the BioStar antigen. *** Confidential Treatment Requested Exhibit D Ballistic Technologies, Inc. Diamond antigens to be incorporated into the [ *** ] or Solid Dose Technologies: [ *** ] [ *** ] [ *** ] [ *** ] [ *** ] Note: [ *** ] component contains both Type I and Type II *** Confidential Treatment Requested AMENDMENT NO. 1 TO BOVINE VACCINE DISTRIBUTION AGREEMENT This Amendment No. 1 ("Amendment") is entered into as of the 13th day of July, 1998, by and between DIAMOND ANIMAL HEALTH, INC., an Iowa corporation with offices at 2538 Southeast 43rd Street, Des Moines, Iowa 50317 ("Diamond") and AGRI LABORATORIES, LTD., a Delaware corporation, with offices at 20927 State Route K, St. Joseph, Missouri 64505 ("Distributor") as an amendment to that certain Bovine Vaccine Distribution Agreement between Diamond and Distributor dated as of February 13, 1998, (the "Distribution Agreement"). WHEREAS, Diamond and Distributor are parties to the Distribution Agreement providing for the distribution of certain bovine antigens; and WHEREAS, Section 2.01 of the Distribution Agreement contemplates that additional products may be added to the Products subject to the Distribution Agreement; and WHEREAS, Distributor and [ *** ] are parties to a separate agreement providing for an exclusive worldwide license of [ *** ] rights in the Additional Product to Distributor and providing for compensation to [ *** ] from Distributor on account of Distributor's sales of such Additional Product; and WHEREAS, Diamond and Distributor desire to add the Additional Product as a Product under the Distribution Agreement in the event that the Additional Product is successfully developed and licensed. NOW, THEREFORE, the parties agree as follows: 1 . Definitions. a. In General. Capitalized terms used herein shall have the meanings ascribed to them in the Distribution Agreement, unless otherwise defined herein. b. "Additional Product" shall mean the Product described on Exhibit A, attached hereto. c. "[ *** ] Antigens" shall mean the [ *** ] and [ *** ] antigens owned by [ *** ] and more particularly described in Exhibit A hereto. d. "[ *** ] Technology" means all patents, patent applications, copyrights, trademarks, know-how, trade secrets and other intellectual property rights relating to the [ *** ] Antigens and the Additional Product other than the Diamond Antigens and Diamond Technology. *** Confidential Treatment Requested e. "Diamond Antigens" shall mean the [ *** ] and [ *** [ *** ] antigens owned by Diamond and more particularly described in Exhibit A hereto. f. "Diamond Technology " shall mean all patents, patent applications, copyrights, trademarks, know-how, trade secrets and other intellectual property rights of Diamond relating to the Diamond Antigens and the Additional Product. 2. Additional Product Subject to Distribution Agreement. If a License is issued to Diamond for the Additional Product by the United States Department of Agriculture, and effective upon the date of such issuance (the "License Date"), the Additional Product shall be added as a "Product" under the Distribution Agreement. All provisions of the Distribution Agreement relating to Products shall apply to the Additional Product, except as expressly provided in this Amendment. 3. [ *** ] Rights. The provisions of Sections 1.01 (Manufacture and Sale), 1.02 (Exclusivity), 1.03 (Territory), 1.05 (Responsibility of Distributor; Diamond Technical Support), and 1.06 (Registration and Licensing) shall NOT apply with respect to the Additional Product, except to the extent of the Diamond Antigens included therein. Distributor represents and warrants to Diamond that Distributor has all necessary rights in and to the [ *** ] Antigens and [ *** ] Technology for the development, manufacture and sale of the Additional Product pursuant to the Distribution Agreement and this Amendment ("[ *** ] Rights"). Distributor hereby grants to Diamond exclusive manufacturing rights to Additional Product and to have sold the Additional Product exclusively to Distributor pursuant to the Distribution Agreement and this Amendment. Diamond shall exercise such rights only for the purpose of performing its obligations to Distributor under the Distribution Agreement and this Amendment. 4. Purchase Price; Batch Sizes. The Purchase Price for the Additional Product shall be $[ *** ] per dose for and during the first three (3) Contract Years, as defined in Paragraph 5 below, subject to a price adjustment beginning with the fourth Contract Year and thereafter pursuant to the terms of Sections 3.02 and 3.03 of the Distribution Agreement. 5. Term. With respect to the Additional Product (but not other Products, with respect to which Section 6.01 of the Distribution Agreement shall control: (i) the initial Term of this Amendment shall be for a period commencing on the License Date and ending on the fifth (5th) anniversary of the end of the Contract Year during which the License Date occurs and (ii) this Amendment shall automatically renew thereafter for additional renewal terms of one year each, unless either party gives at least twelve (12) months prior written notice to the other that it does not wish to renew this Amendment. 6. Registration and Licensing. Diamond will use reasonable efforts to assist Distributor in the registration of Additional Product (bulk or packed form) outside the United States at Distributor's expense. Distributor shall pay all registration costs associated with obtaining and maintaining any License required outside the United States and said costs shall be included in Qualified Revenue requirements as set forth in Section 1.04(ii) of the Distribution Agreement. *** Confidential Treatment Requested 7. Effect of Amendment. This Amendment is hereby incorporated by reference into the Distribution Agreement as if fully set forth therein, and the Distribution Agreement as amended by this Amendment shall continue in full force and effect following execution and delivery hereof. In the event of any conflict between the terms and conditions of the Distribution Agreement and this Amendment, the terms and conditions of this Amendment shall control. 8. Indemnification. In addition to the indemnification contained in Section 11 of the Distribution Agreement, Distributor agrees to defend, indemnify and hold Diamond, its directors, officers, employees, agents and affiliates harmless with respect to any third-party claim or suit arising out of any claim that [ *** ] Antigens or [ *** ] Technology infringes the patent, copyright or other intellectual property right of any third-party. IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be executed by their duly authorized representatives as of the date first written above. DIAMOND ANIMAL HEALTH, INC. By: /s/ LOUIS VAN DAELE Its: President AGRI LABORATORIEES, LTD. By: /s/ STEVE SCHRAM Its: President *** Confidential Treatment Requested EXHIBIT A TO AMENDMENT NO. I TO BOVINE DISTRIBUTION AGREEMENT Additional Product, Pricing and Batch Sizes Additional Product Purchase Price Standard Batch Size -------------------- ---------------- -------------------- [ *** ] $[ *** ] [ *** ] units (est.) [ *** ] [ *** ] [ *** ] [ *** ] [ *** ] IN WITNESS WHEREOF, the parties have caused this revised Exhibit A to be executed by their duly authorized representatives as of July 13, 1998. DIAMOND ANIMAL HEALTH, INC. By: /s/ LOUIS VAN DAELE Its: President AGRI LABORATORIES, LTD. By: /s/ STEVE SCHRAM Its: President *** Confidential Treatment Requested AMENDMENT NO. 2 TO BOVINE VACCINE DISTRIBUTION AGREEMENT This Amendment No. 2 ("Amendment") is entered into as of the 13th day of December, 1999, ("Effective Date") by and between DIAMOND ANIMAL HEALTH, INC., an Iowa corporation with offices at 2538 Southeast 43rd Street, Des Moines, Iowa 50317 ("Diamond") and AGRI LABORATOREES, LTD., a Delaware corporation, with offices at 20927 State Route K, St. Joseph, Missouri 64505 ("Distributor") as an amendment to that certain Bovine Vaccine Distribution Agreement between Diamond and Distributor dated as of February 13, 1998 (the "Distribution Agreement"). WHEREAS, Diamond and Distributor are parties to the Distribution Agreement providing for the distribution of certain bovine antigens; and WHEREAS, Diamond, Distributor and Bayer have entered into a "Bovine Testing Agreement" for the Product Titanium 5 + Once PMH. WHEREAS, Section 2.01 of the Distribution Agreement contemplates that additional products may be added to the Products subject to the Distribution Agreement; and WHEREAS, Diamond and Distributor desire to provide for the development and licensure of certain Additional Cattle Products (defined below) and if licensed, to add them as Products under the Distribution Agreement. NOW, THEREFORE, the parties agrees as follows: 1. Definitions. (1) In General. Capitalized terms used herein shall have the meanings ascribed to them in the Distribution Agreement, unless otherwise defined herein, (2) "Additional Cattle Products" shall mean the products described in Exhibit A, attached hereto. 2. Development and Registration of Additional Cattle Products. In consideration of Distributor's payment of the fees provided in the Bovine Vaccine Testing Agreement, Diamond agrees to and hereby grants to Distributor exclusive world wide marketing rights to the product identified on Exhibit A attached hereto and incorporated herein for a period of five (5) years from the License Date by United States Department of Agriculture ("USDA"). Diamond shall use reasonable efforts to assist Distributor in the registration of such Additional Cattle Products (bulk or packed form) outside the United States at Distributor's expense. Distributor shall pay all Registration Costs associated with obtaining and maintaining any Licenses required in the Territory outside the United States and said Registration Costs shall be included in the Qualified Revenue requirements as set forth in Section 1.04(ii) of the Distribution Agreement. This Section 2 of this Amendment shall supersede any and all inconsistent provisions of Section 1.06, and the first sentence of Section 2.02, of the Distribution Agreement. 3. Development and Registration Fees. Amounts paid by Distributor under the Bovine Testing Agreement to Diamond shall constitute Qualified Revenue under the Distribution Agreement, be credited to Distributor's Minimum Qualified Revenue obligations under the Distribution Agreement, beginning with the Second Contract Year's Minimum Qualified Revenue, under the Distribution Agreement. 4. Additional Product Subject to Distribution Agreement. If a License is issued to Diamond, Bayer, Distributor or any combination of the three (3) named parties for the Additional Cattle Product as identified in Exhibit A by the United States Department of Agriculture, and effective upon the date of such issuance (the "License Date"), such Additional Cattle Products shall be added as a "Product" under the Distribution Agreement. All provisions of the Distribution Agreement relating to Products shall apply to the Additional Product, except as expressly provided in this Amendment. 5. Ownership. Section 2.02 of the Distribution Agreement shall not apply to the Additional Cattle Products. Diamond shall retain ownership of (i) the Additional Cattle Products developed pursuant to this Amendment and (ii) any antigens it supplies for such Additional Cattle Products, and the addition of the Additional Cattle Products as Products under the Distribution Agreement shall not be deemed to transfer any right, title, interest or license in or to such Additional Cattle Products and/or antigens to Distributor, except for the distribution rights expressly granted in the Distribution Agreement and this Amendment. 6. Purchase Price: Batch Sizes. The initial Purchase Prices and batch sizes for the Additional Cattle Products are set forth in Exhibit A attached hereto. 7. Term. In General. With respect to all Additional Cattle Products (but not other Products, with respect to which Section 6.01 of the Distribution Agreement shall control): (i) the initial term of this Amendment shall be for a period commencing on the License Date and ending on the fifth (5th) anniversary of the end of the Contract Year during which the License Date occurs and (ii) this Amendment shall automatically renew thereafter for additional renewal terms of one year each, unless either party gives at least twelve (12) months prior written notice to the other that it does not wish to renew this Amendment with respect to such Additional Cattle Product. 8. Effect of Amendment. This Amendment is hereby incorporated by reference into the Distribution Agreement as if fully set forth therein, and the Distribution Agreement as amended by this Amendment shall continue in full force and effect following execution and delivery hereof. In the event of any conflict between the terms and conditions of the Distribution Agreement and this Amendment, the terms and conditions of this Amendment shall control. IN WITNESS WHEREOF, the parties have caused this Amendment No. 2 to be executed by their duly authorized representatives as of the date first written above. DIAMOND ANIMAL HEALTH, INC. By: /s/ LOUIS VAN DAELE ---------------------- Its: President AGRI LABORATORIES, INC, By: /s/ STEVE SCHRAM ----------------------- Its: President EXHIBIT A AMENDMENT NO. 2 BOVINE VACCINE DISTRIBUTION AGREEMENT ADDITIONAL CATTLE PRODUCTS, PRICING, AND BATCH SIZES Additional Products: Titanium 5 + Once PMH (MLV IBR, BRSV, P13, BVD I and II + Live avirulent P.haemolytica/multocida). Standard Batch Size: 5 dose [ *** ] units 10 dose [ *** ] units 50 dose [ *** ] units Purchase Price: 5 dose 10 dose 50 dose - ------------------------- -------- --------- -------- Bayer (unlabeled) [ *** ] [ *** ] [ *** ] AgriLabs (final packaged) [ *** ] [ *** ] [ *** ] 1) All prices include viricidal testing performed at Diamond. 2) Bactericidal testing is performed by Bayer and is incorporated into the Once PMH cost to Agrilabs. 3) Bayer will bill Agrilabs directly for the Once PMH component and Agilabs will provide the Once PMH component to Diamond for labeling and final packaging at no cost to Diamond. Diamond Animal Health Agri Laboratories, Inc. By: /s/ LOUIS VAN DAELE By: /s/ STEVE SCHRAM ---------------------- ----------------------- Its: President Its: President Date: 6-29-00 Date: 6-30-00 Note: Prices will be effective with the first shipment of product after licensing and will be in effect for 12 months following the first shipment. *** Confidential Treatment Requested AMENDMENT NO. 3 TO BOVINE VACCINE DISTRIBUTION AGREEMENT This Amendment No. 3 modifies the Bovine Vaccine Distribution Agreement dated February 13, 1998, between Diamond Animal Health, Inc. and Agri Laboratories, Ltd. ("Original Agreement"). 1. Purchase of Requirements: Minimum Purchases: Section 1.04 (ii) of the Original Agreement is hereby modified to delete and replace a certain year and monetary amount under "Contract Year as defined in 13.06" and "Minimum Qualified Revenues" as follows: Delete in total: ---------------- 5th and thereafter $[ *** ] Replace with: ---------------- 5th $[ *** ] 6th and thereafter $[ *** ] 2. No Other Changes. Except as expressly modified by this Amendment, Amendment No. 1 dated July 13, 1998 and Amendment No. 2 dated December 13, 1999, all provisions of the Original Agreement shall remain in full force and effect. IN WITNESS WHEREOF, this Amendment has been executed by the duly authorized representatives of the parties. SIGNED: Diamond Animal Health, Inc. Agri Laboratories By: /s/ CAROL TALKINGTON VERSER By: /s/ STEVE SCHRAM ------------------------------ --------------------------------- Name: Carol Talkington Verser, Ph.D. Name: Steve Schram Title: Executive Vice President Title: CEO Date: 7-12-01 Date: 7-05-01 *** Confidential Treatment Requested EX-10 4 ex10nvca.txt 10.4H NOVARTIS ANIMAL HEALTH CANADA, [CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION] THIS EXCLUSIVE DISTRIBUTION AGREEMENT (THE "AGREEMENT") is entered into as of February 14, 2001 (the "EFFECTIVE DATE") between HESKA CORPORATION ("Heska"), a Delaware corporation and NOVARTIS ANIMAL HEALTH CANADA, INC. ("Novartis"). WHEREAS, Novartis wishes to purchase certain veterinary products from Heska for the purpose of distribution for resale in Canada. THE PARTIES AGREE AS FOLLOWS: 1. DEFINITIONS. In this Agreement, including the Schedules hereto, the following words and expressions shall have the following meanings: "AFFILIATE" means, with respect to any entity, any other entity which is controlled by, in control of, or under common control with, such entity. For the purpose of this definition, "control" of an entity shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise. "BASE RATE" initially means for the FluAvert I.N. Vaccine. $[***] US per $ [***] Cdn, and for additional Products pursuant to SECTION 6.2, the average exchange rate of Canadian Dollar to United States Dollar for the [ *** ] by Novartis in Canada. The Base Rate shall be adjusted pursuant to SECTION 4.2. "COMMERCIAL RELEASE" means, with respect to a Product, that such Product has been approved for marketing in Canada by all applicable regulatory authorities. "COMPETITIVE PRODUCT" means any product (other than a Product) which has any of the same diagnostic or therapeutic applications as any Product. "INITIAL PERIOD" has the meaning given to such term in SECTION 2.4(A). "MARKETING PLAN" has the meaning given to such term in SECTION 2.4(A). "MINIMUM EXPIRATION DATE" means, for each Product, the minimum amount of time from the scheduled shipment date of any such Product unit to the stated expiration date of such unit which Heska agrees to provide under SECTION 3.4. The Minimum Expiration Date for each Product shall be specified pursuant to SECTION 3.4. "MINIMUM PURCHASE REQUIREMENT" means, for each Product, the number of units as set forth on Schedule A, which Novartis is required to purchase in each Calendar Year. This shall be prorated for partial year periods. "PARTY" means Heska and/or Novartis. "PERIOD" means each of the Initial Period and each calendar year thereafter. "PRICE" has the meaning given to such term in SECTION 4.1. "PRODUCT SCHEDULE" has the meaning given to such term in SECTION 2.4(A). "PRODUCTS" means Heska's Flu Avert(TM) I.N. Vaccine. The Parties may revise (definition of Products pursuant to SECTIONS 6 AND 12.2. *** Confidential Treatment Requested "TERM" means the period commencing on the date hereof and, unless terminated in accordance with SECTION 12, continuing to December 31, 2006 and shall be automatically renewed for additional successive one (1) year terms unless either Party provides written notification to the other Party of its intention not to renew at least six (6) months prior to the termination date. 2. DISTRIBUTOR APPOINTMENT. 2.1 Appointment. Subject to the terms and conditions set out in this Agreement, Heska hereby appoints Novartis as its exclusive distributor in Canada during the Term to promote, market and sell the Products for use by veterinarians. 2.2 No Sales Outside Canada. Other than pursuant to other distribution agreements for other territories with Heska, Novartis shall not (a) seek customers outside of Canada, (b) establish distribution points outside of Canada, nor (c) sell the Products to any distributor or reseller which Novartis reasonably understands will sell the Products outside of Canada. 2.3 No Limit on Price. Notwithstanding SECTION 2.4, Novartis has the unrestricted right to unilaterally determine the prices at which it resells the Products which it purchases hereunder. No Heska representative has the authority to require or suggest that Novartis charge a particular resale price for the Products which it purchases hereunder. 2.4 Initial Marketing Plan; Product Schedule. (a) Initial Period. At least six months prior to the projected Commercial Release of each Product (or, if later, on or prior to the date on which such Product becomes a Product hereunder), Novartis will provide to Heska. a draft marketing plan (the "MARKETING PLAN") for such Product for the remainder of the initial calendar year and, if less than nine months remains in such calendar year, the next succeeding calendar year (the "INITIAL PERIOD"). The Marketing Plan shall specify in reasonable detail Novartis' marketing plans for such Product and shall include for the Initial Period Novartis' anticipated sales price of the Product and goals for the Product based on its good faith sales estimates. In addition, the Parties will finalize any remaining terms for such Product on SCHEDULE A (a "PRODUCT SCHEDULE"). (b) Subsequent Periods. For each Period after the Initial Period, Novartis will provide to Heska a revised Marketing Plan. Each such plan shall be delivered by November 1 of the year prior to the start of such Period. 2.5 Competitive Products. Novartis hereby represents and agrees that neither it nor any of its Affiliates sell nor will sell during the Term, any Competitive Products in Canada. This representation will be deemed restated as of the date any item becomes a Product as provided in SECTION 6.2. 3. SALES. 3.1 Orders. Novartis shall place orders for Products consistent with the binding portion of the forecasts as set forth in SECTION 5.4. All orders shall be initiated by written purchase order to Heska. Orders shall not be binding upon Heska unless and until expressly accepted by Heska in writing or by shipping Product in accordance with the order. Heska shall endeavor to accept or reject all orders within five (5) business days of receipt. No partial shipment of an order shall constitute the acceptance of the entire order, absent the written acceptance of such entire order. 3.2 Shipping. Anticipated shipment dates shall be as specified in Heska's written acceptance of the order. Heska shall use its commercially reasonable efforts to meet acknowledged shipment dates; however, Heska shall not be liable for any damages resulting from its failure to meet such shipment dates, even if Heska has been advised of the possibility of such damages. Novartis shall select the common carrier and method of shipment. Novartis shall be responsible for arranging the exporting and importing of all Products ordered under this Agreement. Risk of loss or damage shall pass to Novartis on delivery of the Products by Heska to a common carrier. All Products in each order may be shipped only to a single destination. 3.3 Cancellation/Rescheduling. Novartis may not cancel purchase orders for Products which have been formally accepted by Heska. Novartis shall be entitled to reschedule an accepted purchase order one time without penalty; provided that such rescheduling is requested at least fifteen (15) days prior to the scheduled shipment date and the purchase order is rescheduled to a date no more than thirty (30) days beyond the originally scheduled shipment date. 3.4 Minimum Expiration Date. Heska agrees that the stated expiration date of each Product shall be at least the respective Minimum Expiration Date after the scheduled shipment date of the related order. The Minimum Expiration Date for each Product is indicated in Schedule A. If any order is rescheduled by Novartis such commitment regarding the Minimum Expiration Date shall be based on the original scheduled shipment date, not the rescheduled date. Heska shall use its best efforts to ship the most recent lot of Product to Novartis. 3.5 Rejection of Products. A Product shall be deemed accepted if not rejected within thirty (30) days after receipt by Novartis or, if earlier, shipment by Novartis to its customer. The sole basis for rejection shall be the failure of the product to conform to the Technical Specifications as set forth in Schedule A. Heska shall replace such a defective product, at Heska's cost, with equivalent unit(s) of the same Product and shall reimburse Novartis for reasonable costs realized by Novartis for destroying defective product. 4. PRICES AND PAYMENT. 4.1 Prices. Prices for each Product shall be as set forth in Schedule A. 4.2 Adjustments. (a) With respect to any Product, if at any time after the first full calendar year of sales of the Product in Canada, the Average Rate (defined below) differs from the then current Base Rate by more than 10 % then the Price for such Product shall be adjusted. Under such adjustment, the Price shall be the Original Dollar Price (defined below) for such Product converted into Canadian Dollars using such Average Rate. Following such adjustment, such Average Rate shall become the Base Rate for all future calculations and all Product Schedules will be appropriately adjusted. "AVERAGE RATE" means the exchange rate of Canadian dollars to United States dollars averaged over a 3 month period. "ORIGINAL DOLLAR PRICE" shall mean the Price for such Product (prior to adjustment) expressed in United States dollars using the Base Rate (prior to adjustment) as the rate of exchange. (b) With respect to any Product, after the first full calendar year of sales of the Product in Canada, Heska can implement an annual price increase/decrease equal to the percentage increase/decrease in its documented manufacturing costs over then prevailing prices. Heska shall provide notice to Novartis of such price increase/decrease no later than November 30 with respect to an increase/decrease for the following year. In no case shall price increases be higher than the Canadian Consumer Price Index (CPI). 4.3 Prices. The Prices are FOB, Diamond Animal Health, Des Moines, Iowa. The Prices do not include the costs of shipping and insurance and sales, use, VAT, excise, withholding or similar taxes, all of which shall be the obligation of Novartis. 4.4 Payment. Payment for Products shall be due in full thirty (30) days from the receipt of goods by Novartis. All payments hereunder shall be made in immediately available funds in Canadian dollars by wire transfer to the account from time to time specified by Heska. Amounts not paid when due are subject to a monthly charge at the rate of one and one-half percent (1-1/2%) per month, or the maximum rate permitted by law whichever is less. 5. NOVARTIS OBLIGATIONS. 5.1 Sales and Product Support. Novartis agrees to use reasonable commercial efforts to develop, promote, support and sell the Products in Canada. Such activities shall include, but are not limited to, (a) development of marketing support materials such as sales brochures, journal advertisements, sales aids, technical bulletins, slide presentations and other related supportive documentation, Heska to provide to Novartis one printed and one electronic copy of all USA advertising and support materials including slides, CD Roms , films etc. (b) ensuring sales personnel detail the Products to distributors, veterinarians and other interested parties, (c) organizing and sponsoring seminars and meetings with distributors, veterinarians and other interested parties, (d) actively participating in trade shows, including prominently displaying and promoting the Products, and (e) other activities deemed appropriate for the commercial success of the Products. Heska will provide Novartis personnel, at no charge, reasonable amounts of training regarding the Products at Novartis's Sales meeting at one location in Canada. Novartis will maintain throughout Canada customer service phone support for the Products for its distributors and veterinarians. Heska will provide back-up telephone customer support only to Novartis. Novartis shall contact Heska immediately regarding any material complaints or reports of material adverse experiences regarding use of the Products. 5.2 Approvals. No later than promptly following the Effective Date, Novartis will inform Heska of any legal, administrative or regulatory requirements in Canada with which Heska or Novartis must or should comply in connection with this Agreement or the performance by Novartis of the marketing or distribution of any Product (collectively, the "APPROVALS"). Novartis will comply with all applicable laws in connection with performing its rights and obligations under this Agreement, including obtaining, prior to offering and reselling any Product, all applicable Approvals required for import, storage, distribution, and sales (Application for permit to import Veterinary Biologics into Canada, CFIA-1493). Novartis will maintain the Import Approvals throughout the Term at its own expense. Heska will provide, at no cost to Novartis, reasonable assistance in connection with obtaining the Approvals, including providing Novartis such data, samples and other information and materials as are in Heska's possession. Novartis will periodically, and in any event promptly following Heska's request, provide Heska reasonable information regarding the status of all Approvals. Heska will be responsible for providing to the Canadian Food Inspection Agency all information required from the manufacturer of the products including labeling provided by Novartis (Veterinary Biologics Information Form, CFIA-1503). Heska shall notify Novartis of any U.S. regulatory changes that significantly impact any of the Products. 5.3 Inventory and Sales Reports. Novartis will furnish to Heska inventory and sales reports by the 10th day of the month following each calendar quarter. Such inventory reports will include, at a minimum, with respect to all inventory on hand at the end of the prior calendar quarter: Product number, quantity, and expiration dates. Such sales reports will include, at a minimum, with respect to sales made during the prior calendar quarter: Product number, quantity and Novartis' weighted average sales price and the range of sales prices. 5.4 Forecasts. At least six months prior to the calendar quarter in which Commercial Release of the first Product is projected to occur and, thereafter, at least sixty days prior to the beginning of each calendar quarter, Novartis will furnish Heska with a forecast of Novartis' projected Product requirements for the next succeeding 4 calendar quarters. Each such forecast shall be binding on Novartis only if covered by the applicable purchase order (Section 3) for the first calendar quarter of such forecasted period. Each such forecast will specify the projected requirements for each Product by month, except that it shall be broken out by requested shipping dates for the first calendar quarter of such forecast. 5.5 Approval of Promotional Materials. Novartis will submit to Heska for approval prior to use copies (with translations) of all new advertisements and other promotional materials, including catalog descriptions, involving the Products prepared by or for Novartis in connection with the Products. If Heska fails to reject such materials within two weeks of receipt, then Heska will be deemed to have approved such materials. 5.6 Certain Practices. Novartis agrees to not directly or indirectly offer, pay, promise to pay, or authorize the payment of money or anything of value to any governmental official or representative for the purpose of influencing such persons' decisions or actions regarding the Products. 5.7 No Modifications to Product. Unless otherwise agreed by Heska in writing, Novartis will not (a) sell Products other than in original, unmodified, and unused condition, (b) remove, obscure or modify any label or other indication of patent, any trademark or other intellectual property rights on the Products, (c) add any label or mark to any Product, nor (d) promote any Product under any name or mark other than the names and trademarks provided by Heska. 5.8 Minimum Purchase Requirement. Novartis shall purchase the Minimum Purchase Requirement with respect to each Product for each applicable period as set out in Schedule A which may be modified at least thirty (30) days prior to the upcoming calendar year upon mutual agreement of the Parties. 6. PRODUCT DISCONTINUANCE; NEW PRODUCTS. 6.1 Product Discontinuance. Heska shall have the right, without liability to Novartis, to discontinue the manufacture or sale in Canada of any Product covered by this Agreement. Heska shall endeavor to notify Novartis as soon as practicable prior to such discontinuance no later than sixty (60) days prior to discontinuance. 6.2 New Products. Heska agrees that from time to time it may offer Novartis the first right to purchase for resale in Canada, other Heska drug, vaccine and point of care diagnostic products, except for any such product(s) for which Heska has identified a worldwide (with the possible exception of the United States) partner. Such purchase right shall be on the terms set forth in this Agreement as modified in writing by the Parties. Upon agreement, the affected product shall become a Product hereunder and the Parties shall complete and execute a Product Schedule for such Product. Heska and Novartis further agree to complete and execute a Product Schedule for Solo Step(TM) CH Cassettes, Solo Step(TM) CH Batch Test Strips, and Heska's IgE point of care screen ("Pending New Products") within one hundred twenty (120) days of the Effective Date of this Agreement. Should such a Product Schedule for any of these Pending New Products not be executed within such one hundred twenty (120) day period then Heska shall have the right to offer any such Pending New Product to any third party, but at substantially no better terms than were offered to Novartis, unless Novartis declines such terms. 7. INTELLECTUAL PROPERTY INFRINGEMENT INDEMNIFICATION. 7.1 Indemnity. Heska will defend, at its own expense, any claim, suit or proceeding brought against Novartis to the extent it is based upon a claim that any Product sold pursuant to this Agreement infringes upon any presently issued patent, or misappropriates any trade secret, of any third party. Novartis agrees that it shall promptly notify Heska in writing of any such claim or action and give Heska full information and assistance in connection therewith. Heska shall have the sole right to control the defense of any such claim or action and the sole right to settle or compromise any such claim or action. If Novartis complies with the provisions hereof, Heska will pay all damages, costs and expenses finally awarded to third parties against Novartis in such action. If a Product is, or in Heska's opinion might be, held to infringe as set forth above, Heska may, at its option replace or modify such Product so as to avoid infringement, or procure the right for Novartis to continue the use and resale of such Product. If neither of such alternatives is, in Heska's opinion, commercially reasonable, the infringing Product shall be returned to Heska and Heska's sole liability, in addition to its obligation to reimburse awarded damages, costs and expenses as set forth above, shall be to refund the amounts paid to Heska for such Products by Novartis. 7.2 Limitations. Heska will have no liability for any claim of infringement arising as a result of Novartis' use or sale of a Product in combination with any items not supplied by Heska or any modification of a Product by Novartis or third parties. 7.3 Entire Liability. THE FOREGOING STATES THE ENTIRE LIABILITY OF HESKA TO NOVARTIS OR ANY PURCHASER OF PRODUCTS CONCERNING INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS, INCLUDING BUT NOT LIMITED TO, PATENT, COPYRIGHT, TRADEMARK AND TRADE SECRET RIGHTS. 8. SUITABILITY/LIABILITY. 8.1 Express Remedies. The express remedies set forth in this Agreement are in lieu of all obligations or liabilities on the part of Heska for damages resulting from breach of warranty, breach of contract, negligence or on any other legal theory. 8.2 No Consequential Damages, Etc. IN NO EVENT SHALL HESKA BE LIABLE FOR COSTS OF PROCUREMENT OF SUBSTITUTE PRODUCTS OR SERVICES, NOR WILL EITHER PARTY BE LIABLE FOR LOST PROFITS, OR ANY OTHER SPECIAL, INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY REPRESENTATION OR WARRANTY HEREUNDER, OR RESULTING FROM THE SALE OF PRODUCTS OR SERVICES BY NOVARTIS OR RESALE OR USE BY ANY DISTRIBUTOR, END-USER OR TRANSFEREE OF SUCH PRODUCTS. THIS LIMITATION SHALL APPLY EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. The limitations in this section shall not limit the obligations of the Parties under Sections 7, 8.4, 8.5 AND 11 of this Agreement. 8.3 No Prospective Profits. Each of Heska and Novartis acknowledges that it is acting independently in connection with any actions taken in connection with this Agreement, including any investments in personnel, facilities, and marketing activities undertaken hereunder, and is not relying on any express or implied representation or promise from the other that this Agreement will continue beyond the Term or will not be terminated in accordance with its terms. As a result, neither Heska nor Novartis shall, by reason of the termination of this Agreement under any circumstances be liable to the other for compensation, reimbursement or damages on account of the loss of prospective profits on anticipated sales, or on account of expenditures, investments, leases or commitments, in connection with the business or goodwill of Heska or Novartis, or otherwise. 8.4 General Indemnity by Heska. Heska will defend, at its own expense, any claim, suit or proceeding brought against Novartis to the extent it is based upon a claim that any Product sold pursuant to this Agreement is defective. Novartis agrees that it shall promptly notify Heska in writing of any such claim or action and give Heska full information and assistance in connection therewith. Heska shall have the sole right to control the defense of any such claim or action and the sole right to settle or compromise any such claim or action. If Novartis complies with the provisions hereof, Heska will pay all damages, costs and expenses finally awarded to third parties against Novartis in such action. If any Product unit is, or in Heska's opinion might be, defective, Heska may, at its option, replace such unit or request the return of such unit and refund the amount paid for such unit by Novartis. Heska shall have no liability hereunder to the extent any such defect was caused by Novartis' or its employees' acts or omissions. 8.5 General Indemnity by Novartis. Novartis agrees to indemnify and hold Heska harmless from and against all damages, costs and expenses arising with respect to the sale, distribution or use of any Product, to the extent caused by any act or omission by Novartis. Without limiting the generality of the foregoing, Novartis agrees to indemnify and hold Heska harmless from and against all damages, costs and expenses to the extent caused by Novartis' sale of any Product in violation of any regulatory requirements in Canada or into any jurisdiction outside of Canada. 9. TRADEMARKS. 9.1 Limited Trademark License. Subject to the next succeeding sentence, Heska grants to Novartis a limited license to use during the Term, for proper purposes in connection with the promotion and sale of the Products on a non-exclusive basis, Heska's name and logo and the other trademarks used by Heska from time to time with respect to the Products (collectively, the "TRADEMARKS"). 9.2 Novartis's Use. Novartis's use of the Trademarks shall be in accordance with applicable trademark law and Heska's policies regarding advertising and trademark usage as established and amended from time to time. Novartis shall include all applicable Trademarks in any literature, promotional materials or advertising which it produces or distributes concerning the Products. Novartis will not use any such Trademarks other than with respect to the direct promotion of the Products. 9.3 Ownership of Trademarks. Novartis agrees that the Trademarks are and will remain the sole property of Heska and agrees not to do anything inconsistent with that ownership or to contest ownership of the Trademarks. Novartis agrees to always identify the Trademarks as being the property of Heska. Novartis also agrees that all use of the Trademarks by Novartis will inure to the benefit of, and be on behalf of, Heska. 10. PRODUCT MATERIALS; WARRANTY; MANUFACTURING QUALITY; DEFECTIVE BATCH. 10.1 Product Materials. Novartis may not make any representations or warranties regarding a Product in addition to or different from those specified by Heska in the applicable Product documentation and any representations or warranties made by Novartis with respect to the Products shall contain the same limitations and disclaimers as are included by Heska in such documentation. 10.2 Exclusive Warranty. HESKA HEREBY REPRESENTS AND WARRANTS THAT EACH PRODUCT WILL MEET ITS RESPECTIVE SPECIFICATIONS SET FORTH IN THE APPLICABLE PRODUCT SCHEDULE IN ALL MATERIAL RESPECTS. SUCH WARRANTY IS IN LIEU OF, AND HESKA DISCLAIMS, ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT, OR ARISING FROM THE COURSE OF DEALING BETWEEN THE PARTIES OR USAGE OF TRADE. 10.3 Manufacturing Quality; Defective Batch. The Products sold to Novartis will be manufactured by Heska using the same quality assurance procedures as it uses for Product units sold directly by Heska outside of Canada. If Heska confirms that any Product unit contains any material defect which, based on the nature of the defect, is reasonably likely to be present in other Product units from the same batch, then Heska shall exchange such defective units at Heska's expense, for other units of the same Product and shall reimburse Novartis for reasonable costs realized by Novartis for destroying defective product. 11. CONFIDENTIAL INFORMATION. Neither Party shall use for any purpose, other than as contemplated by this Agreement, or divulge to any third party, any trade secrets, processes, techniques, designs, know how or other confidential information provided to such Party by the other. Notwithstanding the foregoing, these confidentiality provisions shall not apply to any information: (a) which is independently developed by the receiving Party or its Affiliates or lawfully received free of restriction from another source having the right to so furnish such information; (b) after it has become generally available to the public without breach of this Agreement by the receiving Party or its Affiliates; (c) which at the time of disclosure to the receiving Party was known to such Party or its Affiliates free of restriction; or (d) which and to the extent the receiving Party is required to disclose pursuant to law, regulations, or an order of a court of competent jurisdiction, provided that the disclosing Party shall have been afforded a reasonable opportunity to limit such disclosure. In addition to the above, subject to disclosure as required under the foregoing CLAUSE (D), the Parties shall maintain in confidence and not divulge to any third party the terms of this Agreement or any Product Schedule. 12. TERMINATION PROVISIONS. 12.1 Termination for Cause. Either Party shall have the right to terminate this Agreement prior to the end of the Term by notice immediately if: (a) Breach. The other Party commits any material breach of this Agreement which has not been remedied, or remedy has not been commenced, within ninety (90) days of notice thereof; or (b) Insolvency. The other Party enters into liquidation or reorganization, whether compulsory or voluntary, or has a receiver appointed as to all or a substantial part of its assets, or takes or suffers any similar action in consequence of debt. 12.2 Termination Due to Failure to Make Minimum Purchases. Heska shall have the right to terminate this Agreement with respect to any Product if Novartis fails in any Period to achieve the Minimum Purchase Requirement for such Product in such Period (unless such failure is due to Heska's failure to deliver Products in accordance with accepted purchase orders). 12.3 Effect of Termination as to Any Product. Upon termination of this Agreement as to any Product as provided in SECTION 12.2: (a) Termination of Licenses. Except as expressly provided in this SECTION 12, all rights and licenses granted to Novartis under this Agreement for such Product and the related Trademarks shall immediately terminate; provided, that, subject to Heska's rights under CLAUSE (B) below, Novartis may sell on a nonexclusive basis but otherwise on the terms set forth in this Agreement its remaining inventory of such Product for a period of up to ninety (90) days following the date of termination; and (b) Right to Purchase Inventory. Heska shall have the right (but not the obligation) on notice to Novartis from time to time to purchase from Novartis all or any portion of such Product in its inventory at the time of such termination for credit against outstanding invoices, or for cash refund to the extent there are no invoices then outstanding. Any credit or refund due Novartis for such Product shall be equal to the purchase price of the Product, less any discounts or credits previously received. 12.4 Termination Due to Acquisition. Heska shall have the right to terminate this agreement upon three (3) months written notice to Novartis should Heska be acquired by a third party, in which case Heska will honor all purchase orders accepted as of the notice date which have not been filled, and Novartis shall be able to sell any Products in inventory or the subject of such purchase orders for a ninety (90) day period following such termination, provided, however, that Novartis shall pay royalties and render reports to Heska thereon in the manner specified herein. 12.5 Effect of Termination of Agreement. Upon expiration or termination of this Agreement for any reason: (a) Termination of Licenses. Except as expressly provided in this SECTION 12, all rights and licenses granted to Novartis under this Agreement shall immediately terminate; provided, that, unless this Agreement is terminated by Heska, (i) Heska shall honor all accepted purchase orders providing for delivery within 30 days of the date of termination and for which Novartis pays in full prior to shipment, and (ii) Novartis may sell on a nonexclusive basis but otherwise on the terms set forth in this Agreement its remaining inventory of Products for a period of up to one hundred and eighty (180) days following the date of termination, subject to Heska's rights under CLAUSE (B) below; (b) Right to Purchase Inventory. Heska shall have the right (but not the obligation) on notice to Novartis from time to time to purchase from Novartis all or any portion of the Products in its inventory at the time of such expiration or termination for credit against outstanding invoices, or for cash refund to the extent there are no invoices then outstanding. Any credit or refund due Novartis for such Product shall be equal to the purchase price of the Product, less any discounts or credits previously received; and (c) Confidential Information. Each Party shall return all copies of the other Party's confidential information which remain in such Party's possession or under its control. 12.6 Survival. The provisions of SECTIONS 1, 4, 7, 8, 10, 11, 12 AND 13 shall survive any termination or expiration of this Agreement. 13. GENERAL. 13.1 No Other Agreements. All previous agreements and arrangements (if any) made by Heska and Novartis and relating to the subject matter hereof are hereby superseded. This Agreement embodies the entire understanding of the Parties. There are no promises, terms, conditions or obligations, oral or written, express or implied, other than those contained in this Agreement. This Agreement shall supersede any provision of any purchase order submitted by Novartis for Products during the Term, notwithstanding any provision in such purchase order to the contrary. This Agreement may only be amended by a writing signed by the Parties. 13.2 Notices. Any notice required to be given hereunder shall be in writing and may be given by facsimile transmission (confirmed by mail), personal delivery (including by professional courier), or mailing (by first class receipted prepaid mail) to the respective address or facsimile number set forth below, or to such other address or facsimile number as such Party may have notified the other pursuant to this Section. In the case of facsimile transmission or personal delivery, such notice shall be deemed to have been given upon the date of such transmission or delivery if delivered during normal business hours, otherwise it shall be deemed received the next business day. In the case of mailing, such notice shall be deemed to have been given seven days after such mailing. Heska: Novartis: Heska Corporation Novartis Animal Health Canada Inc 1613 Prospect Parkway 2233 Argentia Road, Suite 200 East Fort Collins, CO 80525 Mississauga, Ontario L5N 2X7 Attn: Chief Executive Officer Canada Telephone: 970-493-7272 Attn: President Telecopier: 970-484-9505 cc: Executive Vice President, Intellectual Property and Business Development Telecopier: 970-491-9976 13.3 Governing Law. The Parties hereby agree that their rights and obligations under this Agreement will not be governed by the United Nations Conventions on Contracts for the International Sale of Goods, the application of which is expressly excluded. Rather, this Agreement shall be governed by and construed in accordance with the laws of the State of Colorado, without regard to its provisions concerning the applicability of the laws of other jurisdictions. 13.4 No Agency. Nothing in this Agreement or any other document or agreement between the Parties shall constitute or be deemed to constitute a partnership between the Parties. The relationship between Heska and Novartis shall be that of seller and buyer. Novartis, its officers, agents and employees, shall under no circumstances be considered the agents, employees or representatives of Heska. Neither Party shall have the right to enter into any contracts or binding commitments in the name of or on behalf of the other Party in any respect whatsoever. 13.5 Assignment. Neither party may assign any of its rights or obligations hereunder, whether voluntarily or by operation of law, without the prior written consent of the other party (which may not be withheld unreasonably, except that either Party may make such assignment to a partner, subsidiary or entity otherwise controlling, controlled by or under control with such Party, or to an entity acquiring all or substantially all relevant assets of a Party to which this Agreement pertains. Subject to the foregoing, this Agreement will inure to the benefit of and be binding upon the successors and assigns of the Parties. 13.6 Construction. This Agreement is the result of negotiations among, and has been reviewed by, Heska and Novartis and their respective counsel. Accordingly, this Agreement shall be deemed to be the product of each Party hereto, and no ambiguity shall be construed in favor of or against Heska or Novartis. 13.7 Headings; Plural Terms; Other Interpretive Provisions. Headings and captions used to introduce Sections of this Agreement are only for convenience and have no legal significance. All terms defined in this Agreement or any exhibit in the singular form shall have comparable meanings when used in the plural form and vice versa. References in this Agreement to "Recitals," "Sections" and "Schedules" are to recitals, sections and schedules herein and hereto unless otherwise indicated. The words "include" and "including" and words of similar import when used in this Agreement or in any exhibit shall not be construed to be limiting or exclusive. The word "or" when used in this Agreement or in any schedule shall mean either or both. 13.8 Force Maieure Events. Neither Party shall be liable for any failure to perform any of its obligations hereunder (other than the payment of money) which results from an act of God, the elements, fire, flood, component shortages, a force majeure event, riot, insurrection, industrial dispute, accident, war, embargoes, legal restrictions or any other cause beyond the control of the Party. 13.9 Attorneys' Fees. In any litigation, arbitration or court proceeding between the Parties with respect to this Agreement, the prevailing Party shall be entitled to recover, in addition to any other amounts awarded, attorneys' fees and all costs of proceedings incurred in enforcing this Agreement. 13.10 Arbitration. If a dispute or disagreement (a "DISPUTE") arises between the Parties in connection with this Agreement, then the Dispute will be finally settled by binding arbitration to be conducted in English in not sure why this is proposed ... suggest Chicago under the International Chamber of Commerce Rules of Conciliation and Arbitration then prevailing by one arbitrator appointed in accordance with those rules. The arbitrator shall be chosen from a panel of arbitrators knowledgeable in the companion animal health care industry. The arbitrator will apply the law specified in SECTION 13.3 to the merits of the Dispute. The decision of the arbitrator shall be final, conclusive and binding on the Parties to the arbitration. Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator may grant permanent injunctions or other relief in such dispute or claim; provided that the arbitrator may not grant licenses to any intellectual property owned by either Party nor may the arbitrator award punitive damages. Notwithstanding the foregoing, without breach of this arbitration provision either Party may apply to any appropriate court for temporary injunctive relief. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date. HESKA CORPORATION NOVARTIS ANIMAL HEALTH CANADA, INC. By: /s/ CAROL TALKINGTON VERSER By: /s/ BYRON E. BEELER ------------------------------- ----------------------- Name: Carol Talkington Verser, Ph.D. Name: Byron E. Beeler Title: Executive Vice President, Title: President Intellectual Property and Business Development By: /s/ DR. VIC PARKS ----------------------- Name: Dr. Vic Parks Title: VP, Companion Animal Business SCHEDULE A TO EXCLUSIVE DISTRIBUTION AGREEMENT PRODUCT SCHEDULE This Product Schedule shall apply to the Period commencing February 14, 2001. Heska and Novartis hereby agree that until revised, the following terms shall apply to the specified Product and shall supercede all prior Product Schedules for such Product: A. PRODUCT: Flu Avert(TM) I.N. Vaccine PRICE: $[***] CANADIAN FOR 1OX PACKAGE ("UNIT"), FOB, DIAMOND ANIMAL HEALTH, DES MOINES, IOWA ORIGINAL US $ PRICE (SEE 4.2): $ [*** ] US MIN. PURCHASE REQUIREMENT: FIRST (1ST) YEAR [*** ] UNITS SECOND (2ND) AND SUBSEQUENT YEARS [*** ] UNITS PRODUCT INFORMATION: Technical Specifications: Clear plastic tray with ten (10) one-dose (1-dose) vials of lyophilized Equine Influenza Vaccine; ten (10) one-dose (1-dose) vials containing one milliliter (1 ml) of liquid diluent and 10 nasal applicators. Tray will have clear plastic lid with printed card label. Product Packaging: Finished trays are shrink-wrapped. All trays are placed in corregated overshippers and will be shipped within coolers or refrigerated trucks. Minimum Expiration Date: Twelve (12) months from shipment date; eighteen (18) months from manufacture date. *** Confidential Treatment Requested AMENDMENT NO. 1 TO EXCLUSIVE DISTRIBUTION AGREEMENT This Amendment No. I modifies the Exclusive Distribution Agreement dated February 14, 2001, between Heska Corporation and Novartis Animal Health Canada, Inc. ("Original Agreement"). 1. Product Discontinuance; New Products: Section 6.2 New Products, of the Original Agreement is hereby modified to extend the date to complete and execute a Product Schedule for Solo Step CH Cassettes, Solo Step(TM) CH Batch Test Strips and Heska's IgE point of care screen ("Pending New Products") from June 14, 2001 to October 14, 2001. 2. No Other Changes. Except as expressly modified by this Amendment, all provisions of the Original Agreement shall remain in full force and effect. IN WITNESS WHEREOF, this Amendment has been executed by the duly authorized representatives of the parties. SIGNED: Heska Corporation Novartis Animal Health Canada, Inc. By: /s/ CAROL TALKINGTON VERSER By: /s/ BYRON E. BEELER ----------------------------- -------------------------- Name: Carol Talkington Verser, Ph.D. Name: Byron E. Beeler Title: Executive Vice President, Intellectual Title: President Property and Business Development Date: July 5, 2001 Date: June 25, 2001 By: /s/ DR. VIC PARKS ------------------------- Name: Dr. Vic Parks Title: VP, Companion Animal Business EX-10 5 ex10scil.txt 10.11H PRAEMIX WIRKSTOFF [CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PROTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION] DISTRIBUTION CONTRACT between Praemix Wirkstoff GmbH, Sandhoferstraae 116, D-68305 Mannheim represented by the Managing Directors Ulrich Frank and Dr. Peter Rudloff -hereafter referred to as Praemix- and Heska Corporation, 1825 Sharp Point Drive, Fort Collins, USA-Colorado 80525 represented by the Chief Executive Officer Fred Schwarzer -hereafter referred to as Heska- Preface Praemix sells products from various manufacturers on the veterinary medical market, but in particular products made by the Boehringer Mannheim Group. In order to support their sales activities on the international market they work together with various authorized dealers. The clauses within this contract govern the basic relationship between the parties. If there is a conflict between the terms of this contract and the typewritten terms of any purchase order, the order of precedence shall be first, the typewritten terms of the purchase order and then this contract. All other terms and conditions contained in the standard form purchasing and selling documents of Pramix and Heska shall be disregarded. 1 Purpose of the contract ------------------------- (1) Praemix transfers the exclusive right to sell those products laid down in 2 (hereafter referred to as Contract Products) of this contract to Heska for the area described in detail in 3 of this contract; provided, that Heska`s rights shall be non-exclusive through August 31, 1998. (2) The Contract Products are intended exclusively for the veterinary medical market. It is strictly forbidden to sell, directly or indirectly, the Contract Products on the human medical market. (3) Heska buys and sells the Contract Products and provides the necessary customer service exclusively under his own name, under his own invoicing and his own responsibility. 1 2 Contract Products ------------------- (1) The Contract Products are described in the attached enclosure 1. (2) Praemix hereby grants to Heska a right of first refusal to distribute exclusively for the veterinary market in the United States and Canada all new or improved veterinary laboratory products and equipment developed or acquired by Praemix or which Praemix has the rigth to distribute, during the term of the contract, which shall be added as contract products in an ammendment to the attached enclosure 1. Praemix shall give Heska written notice of any such product or equipment developed or acquired by Praemix, and Heska may exercise its right of first refusal by written notice to Praemix within ninety (90) days after receipt of such notice from Praemix. Praemix shall provide Heska prompt opportunity to conduct reasonable due diligence of any such product or equipment prior to expiration of its 90- day right of first refusal period. If Heska exercises its right of first refusal the prices for the new Contract Products have to be discussed. It is the intention of the Parties that pricing shall be in accordance with the margin expectations set forth in 6 (1) (b). (3) In the case of economic problems with separate Contract Products arising, Praemix reserves the right to cancel these products within a period of notice of six months. Examples of economic problems are as follows: * Praemix`s manufacturers stop producing such products * selling them to Heska at the agreed transfer price is no longer economically acceptable for Praemix (because of the increased wholesale price) or * the weakening of the US-$ against the German Mark (DM) * selling new or improved Contract Products at the transfer prices specified in 6 is not economically acceptable for Praemix and Heska is unwilling to adjust pricing to compensate for this economic problem so Praemix shall be free to distribute those products by other partners. (4) Praemix will supply Heska`s requirements for contract products other than refur- bished Reflotron(R) equipment. Praemix shall use its best efforts to supply Heska`s requirements of refurbished Reflotron(R) equipment, subject to availability, and will notify Heska monthly of such availability. 3 Contract Territory -------------------- The area covered by this contract (hereafter referred to as Contract Territory) is the United States and Canada. 4 Exclusivity ------------- (1) Heska agrees to purchase the Contract Products exclusively from Praemix or any other source expressly approved by Praemix. (2) Heska is allowed to act for third parties only with the prior written consent of Praemix. 2 (3) Heska may sell Competitive Products in the Contract Territory, after informing Praemix. Competitive Products are all products that offer the same or comparable uses and which will be sold to the same customers; provided, that in the case of Reflotron equipment, Competitive Product means a blood chemistry instrument which only analyzes a single analyte and does not include immunoassays and lateral flow strip readers or instruments manufactured or distributed by [***************]. 5 Delivery ---------- (1) Orders placed by Heska will be carried out within ten days of receipt of such orders at the Praemix offices unless Praemix is unable to do so due to circumstances beyond their control, e.g. if there is an important reason such as delivery problems, strikes, force majeure. If the orders should not be carried out within the said ten days under normal cirmcumstances, Heska shall be entitled to claim compensation for any loss occasioned by delay. (2) The products ordered shall be delivered by a common carrier carriage and insurance paid to a United States facility designated by Heska (,CIP" ICC Incoterms 1990 - German version). (3) Within thirty (30) days prior to the beginning of each calender year during the term of the contract, Heska will furnish Praemix with a non-binding written forecast of the quantities and types of contract products that Heska anticipates it will order from Praemix during such calendar year. Heska shall submit to Praemix firm written purchase orders specifying the types, quantities and delivery dates of contract products that it desires to purchase at least six months prior to the requested delivery dates. Each purchase order shall be binding on Heska upon written confirmation by Praemix or, if Praemix has made a proposal for modifications to delivery dates, upon Heska`s written acceptance of such modifications. (4) The value of the order shall not basically be less than [***********],- (in words [*********** ************]). Heska shall have a stockpile for a duration of approximately [**********]. A monthly ordering cycle is to be aimed for. (5) Heska agrees to inspect incoming goods for obvious defects within ten (10) days of receipt of a shipment of Contract Products and to notify Praemix in writing of any defects indicating the lot, time of delivery, defective nature or failure of dating of the Contract Products. Failure to notify Praemix within the said period shall constitute a waiver of any rights Heska may have with respect to any breach of warranties for obvious defects. Heska shall have no duty to test any such Contract Products or to inspect for any matter other than obvious defects that would be revealed by a visual inspection of packaged Contract Products. Heska agrees to hold any such defective Contract Products for inspection by Praemix representatives or at Praemix`s demand to return such merchandise to Praemix, at Praemix`s expense. (6) At the request of Heska Praemix is entitled to deliver directly to customers. An obligation to do so does not exist. Costs arising shall be borne by Heska. 6 Price and Payment Conditions between the Contract Parties ----------------------------------------------------------- * Confidential Treatment Requested 3 (1) (a) The prices for the Contract Products are fixed in enclosure 1 attached to this contract. Two years after this contract has come into force these prices have to be discussed again if one party so requests, and any price changes will become effective when both parties sign an ammendment to enclosure 1. (b) For Contract Products set forth on enclosure 1 other than equipment or instruments, Heska shall pay an ,initial" transfer price which is intended to provide for a [******-************ (**%)] gross margin on sales (based on a mutually-agreed target market price) up to and including the Base Sales for such Contract Products. For new or improved Contract Products added to enclosure 1, and for sales of Contract Products listed on enclosure 1 in excess of Base Sales, it is intended that Heska shall pay a ,subsequent" transfer price providing for a [************* (**%)] gross margin on sales (based on a mutually- agreed target market price). The initial and subsequent transfer prices established pursuant to the foregoing sentence are set forth on enclosure 1 and such prices shall be in effect for the first two (2) years of the term of the contract. (c) Price increases shall not be made for these Contract Products if Heska sales in the previous year were less than Base Sales. (2) Invoiced amounts shall be paid within thirty days of receipt of the invoice or within ten days, should a [*** (*) ********] rebate on the original invoice amount be desired, so long as Heska takes delivery of the ordered products or, in the case of a direct delivery, the customer takes delivery. (3) Praemix retains title of delivered Contract Products until the purchase price has been paid. Heska is entitled to sell these products in the ordinary course of business. (4) Notwithstanding the foregoing, until Heska`s rights under this contract have become exclusive pursuant to 1 (1) above, Heska shall pay the ,subsequent" transfer price for all Contract Products ordered by Heska, without regard to whether Base Sales have been achieved. 7 Conditions for Prices, Delivery and Payment between Heska ----------------------------------------------------------- Heska is entitled to organize its conditions for delivery and payment vis a vis third parties as Heska thinks fit. Heska shall use its best efforts to prevent the Contract Products from being sold for uses other than veterinary diagnosis, including appropriate marketing materials and packaging where feasible that the Contract Product is not distributed for use in humans. Praemix shall inform Heska of prevailing prices in human market and promptly notify Heska if it becomes aware of any Contract Products being used outside the veterinary market. 8 Distribution Activities ------------------------- (1) Heska is entitled to sell the Contract Products under its name and trademark so long as the manufacturer is shown in a sufficient manner. (2) Heska undertakes to promote the Contract Products by positive advertising so long as this remains within the framework of the law. Heska shall inform Praemix in good time, at the latest, however, three months before the beginning of a calendar year, of the marketing plan drawn up for this calendar year. The marketing plan and proposed * Confidential Treatment Requested 4 advertising activities have to be discussed with Praemix. The marketing plan will also establish the non-binding forecast required by 5 (3) as well as the estimated turnover for the coming calendar year based on the sales figures of the current calendar year. The advertising costs shall be borne by Heska, and the proposed expenditures for each calender year shall be detailed in the marketing plan and discussed by the parties. 9 Information ------------- (1) Heska shall inform Praemix at the end of every calendar year of the present market trend and the selling situation for the products and spare parts within the Contract Territory. (2) Praemix shall inform Heska immediately of any intended alterations to the prices and product structure. (3) The parties undertake to inform each other everytime if they learn of any infringement of trademarks as well as unfair trade practices by competitors and to work together in order to file a complaint in court to prevent an occurrence. 10 Support ---------- (1) Praemix shall support Heska to a reasonable extent by presenting Heska with models for advertising material. Over and above that Praemix will provide Heska with broschures, booklets, prospectuses, examples etc., as far as Pramix has these at its disposal. This advertising material remains the property of Praemix and shall be given back at the end of this contract except in the case where such material has been fully used up for advertising. (2) As introductory support Praemix shall (a) provide, at [****}] [****], new Reflotron(R) machines and [****] refurbished Reflotron(R) machines to Heska upon execution and delivery of this contract, in lieu of marketing support; (b) sell up to [******] new Reflotron(R) machines to Heska at a discounted price of [**********.- (in words *************************)] per unit, payable within sixty days of shipment, for demonstration use by Heska`s sales personnel; (c) sell [******] new Reflotron(R) machines to Heska upon execution and delivery of this contract at a price of [**********.- (in words ************************************)] per unit, payable within sixty days of shipment, for initial inventory and (d) provide such sales force training as Heska shall reasonably request, at no charge. 11 Quality Assurance -------------------- (1) It is the intention of the Parties that Boehringer Mannheim Group office in Indianapolis provide technical service for the Contract Products during the term of the contract. In the * Confidential Treatment Requested 5 event that such support agreement cannot be obtained, Heska will arrange for technical service and maintenance by a service provider to be approved by Praemix, which approval will not be unreasonably withheld. Such service provider may be an independent organization or affiliated with Heska. During the term of the contract, Praemix shall provide or cause to be provided any and all spare parts necessary for maintenance, service and warranty work. In order to carry out warranty work, Praemix shall deliver spare parts to Heska free of charge and carriage paid; this obligation remains in effect even after the contract runs out. Praemix shall bear the costs of parts and reasonable and customary wages which accrue in connection with the warranty work; these costs have to be paid within sixty (60) days of receipt of invoice therefor. Praemix will provide a reasonable number of instruments to be used as replacements in servicing the Contract Products. (2) Praemix warrants that the Contract Products meet the specifications and are free from defects in material and workmanship through their respective expiration dates; the foregoing warranties will not apply to the extent of any defects caused by improper handling, storage or use of contract products by Heska or its customers. Heska agrees that all other warranties, express or implied, including without limitations, any warranty of merchantability or fitness for any specific purpose with respect to the contract products are expressly excluded from this agreement or any sale pursuant. Praemix warrants to Heska that Praemix has the rights to enter into and perform this agreement and to grant Heska distribution rights on the terms and conditions set forth herein. (3) Praemix agrees to indemnify, hold harmless and defend Heska, its agents and affiliates from and against any claim, liability or expense (including attorneys`fees) resulting from or relating to * Praemix`s breach of any warranty set forth in the agreement or * any claims that a Contract Product, or Praemix`s modification thereof infringes any intellectual property rights of any third party. Heska agrees to indemnify, hold harmless and defend Praemix, its agents and affiliates from and against any claim, liability or expense (including court costs and attorney`s fees) resulting from or relating to * Heska`s breach of any warranty set forth in this contract or * the marketing or sale of any Contract Product manufactured in conformity with Praemix`s warranties. (4) Heska acknowledges that the Reflotron (R) machine has been manufactured for human diagnosis and that Heska will distribute such machine only in the veterinary market. Heska warrants that it will not sell other Contract Products without first obtaining * any necessary registration or license from the U.S. Department of Agriculture and any other governmental authority and * the consent of Praemix, which shall not be unreasonably withheld. Heska will use reasonable efforts to inform its customers that the products obtained from Praemix have been designed for human diagnosis. (5) Heska may use only those spare parts provided or recommended by Praemix in order to carry out warranty work. Should Heska use spare parts of other manufacturers then Heska undertakes to inform its customers of this fact. In the event Praemix does not supply spare parts pursuant to 11 (1) Heska may use parts from other parties. 6 Praemix shall bear these costs as long as they are reasonable and do not exceed the cost of a replacement instrument. (6) Heska undertakes to maintain a warehouse for spare parts and to keep the spare parts in their original packaging. (7) All Contract Products shall meet the quality standards agreed to by the Parties from time to time. Each Contract Product other than equipment and instruments shall conform to the dating requirements set forth in enclosure 1 or otherwise agreed to by the Parties from time to time. If Contract Products meeting the dating requirements set forth in enclosure 1 are not available for timely shipment for any Heska order, Praemix shall so notify Heska and Heska shall have the option of accepting shorter-dated Contract Products or back ordering such Contract Products. If Heska accepts shorter- dated Contract Products, Heska shall have the right to return any such Contract Products that remain unsold by Heska or its distributors upon expiration of dating, and shall receive a credit of the full purchase price therefore. 12 Code of Secrecy ------------------ (1) The parties to this contract undertake neither to reveal any part of the contents of this contract whatsoever nor to disclose any information concerning their business policies as well as business and commercial secrets. (2) The disclosure of any information by a contract party to third parties is admissible only with the prior consent of the other contract parties. The contract party shall see to it that any information disclosed by him to third parties shall not be revealed by said third parties. (3) The foregoing obligations of non-disclosure and confidentiality shall not apply to the extent that any of the foregoing information (a) is or becomes part of the public domain through no act or emission of the receiving party; (b) was in the receiving party`s lawful possession prior to the disclosure and had not been obtained by the receiving party from the disclosing party; (c) is lawfully disclosed to the receiving party by a third party without restriction on disclosure; (d) is independently developed by the receiving party by personnel not having access to such information or (e) is required to be disclosed by applicable law or legal process. 13 Transference and Pledge -------------------------- 7 Heska shall not be entitled to transfer or pledge to any third party any claims or demands made against Praemix without Praemix`s prior written consent. 14 Duration of Contract ----------------------- (1) The contract will come into force on 1st of April 1998 and run for a duration of 5 years. Either party shall have the right to terminate the contract upon written notice to the other party if the other party commits a material breach of the contract (including but not limited to failure by Praemix to provide the exclusive rights to Heska in accordance with 1 (1) above) which has not been remedied within thirty (30) days of written notice thereof. (2) The right to terminate the contract for important reasons without adhering to the usual notice remains unaffected. An important reason can be justified (a) for Praemix if despite being cautioned it can be shown that Heska has been distributing directly or indirectly again and again or has continued to do so, outside the Contract Territory or on the human medical market; (b) for Praemix if Heska sells Competitive Products without Praemix`s approval and Praemix believes that sales of such Competitive Products will substantially reduce its opportunity below the current market forecast provided by Heska, then Praemix may terminate the contract upon 1 month`s written notice; (c) for Praemix if the actual turnover and sale of Contract Products falls short of the estimation in 8 (2) by [***]; (d) for Heska if Praemix has canceled a Contract Product pursuant to 2 (2) above and * such canceled product accounted for [******************* (***)] or more of Heska`s total profits on Contract Products during the year preceding Praemix`s notice of cancellation, or * in Heska`s good faith evaluation, such cancellation makes it economically infeasible to continue this agreement; the onus of proof lies with Heska; (e) if a petition for bankruptcy is filed against the property of the other contract partner or insolvency proceedings are initiated or the other contract partner is unable to pay; (f) if any person or entity other than the shareholders of either Parties on the date of this contract acquires a majority of the shares of such Party. (3) Heska has no claim for compensation when the contract runs out. 15 Obligations of the Parties after Termination of the Contract --------------------------------------------------------------- (1) Heska shall present Praemix with a list of all customers who have taken delivery of Contract Products, on termination of this contract provided that Heska may continue to sell products and services to such customers, other than Contract Products. * Confidential Treatment Requested 8 (2) Heska shall return to Praemix all those documents received from Praemix, so long as these have not been required for the carrying out of warranty work on Contract Products for his customers. In this case copies of these documents shall be sent to Praemix. Heska has no right of retention on documents sent to him by Praemix. (3) Praemix undertakes to deliver spare parts to Heska where necessary in sufficient quantity under the previous contract conditions, thus enabling him to fulfill his warranty obligations vis a vis his customers and also to carry out totally the customer service within the duration of the warranty. (4) Praemix undertakes, at the request of Heska, to buy back any remaining stock of Contract Products for the price paid by Heska, including spare parts and accessories, as long as such items are in good working order and have not been used or removed from original packaging. Notwithstanding the foregoing, if Heska terminates the agreement due to Praemix`s failure to provide exclusive rights to Heska in accordance with 1 (1) above, Praemix shall repurchase at the prices paid by Heska all equipment and inventory (including demonstration units) purchased by Heska, even if such items have been removed from the original packaging and/or used as demonstration units. In addition, Praemix shall pay to Heska a termination fee in an amount equal to [****** ******* (***)] of Heska`s gross revenues from sales of Contract Products to veterinarians prior to Heska`s termination of the Agreement; provided, that Heska delivers notice of termination to Praemix after September 1, 1998 and on or before December 31, 1998. In the event of a breach by Heska, Praemix may insist on buying back such items from Heska at the transfer price to Heska. Praemix has to pay the shipping costs. The ownership of the Contract Products shall be transferred back to Praemix without any rights of third parties applying, step by step on payment of the redemption value. (5) Heska undertakes on termination of the contract not to make use of any name, mark or any other trade marks belonging to Praemix. 16 Legal Heir ------------- The legal heir enforced by act of law or contractual agreement is obliged to fulfill all conditions outlined in this contract. The contract parties undertake to inform their legal heir by contractual agreement of the legal obligations under this contract. 17 Arbitration Clause --------------------- The Parties expressly agree to submit any dispute between them arising out of or relating to this contract or their relationship under this contract (,Dispute") to arbitration as set forth below. A Party may seek arbitration of an unresolved Dispute in accordance with the rules of the London Court of International Arbitration governing commercial transactions, except that the terms of this 17 shall control in the event of any conflict. The arbitration panel shall consist of three (3) arbitrators, each of whom shall have experience in the veterinary products market (or comparable industry experience) and the law of the Federal Republic of Germany and not be affiliated with either Party. The Party initiating arbitration shall nominate one arbitrator in the request for arbitration and the other Party shall nominate a second arbitrator in the answer thereto, not later than thirty (30) days after receiving such request. The two (2) arbitrators so named will then jointly appoint the third arbitrator as chair of the arbitration panel, not later than thirty (30) days after the second arbitrator is named. If either *Confidential Treatment Requested 9 Party fails to nominate its arbitrator, or if the arbitrators named by the Parties fail to agree on the person to be named as chair within thirty (30) days, the London Court of International Arbitration shall make the necessary appointments of an arbitrator or the chair of the arbitration panel. The Parties hereby expressly waive any rights they may have to trial by jury with respect to any dispute subject to arbitration pursuant to this 17. The decision and award of the arbitrators in any arbitration proceeding shall * be in writing, stating the grounds for the decision in reasonable detail, specifying findings of fact and conclusions of law * be based solely on the terms and conditions of this contract and applicable law * and shall be final and binding upon the Parties. Judgement upon such decision and award may be entered in any competent court or application may be made to any competent court for judicial acceptance of such decision and award and an order of enforcement. All proceedings pursuant to any arbitration and confidential information disclosed therein shall constitute confidential information of each Party, and shall be subject to the protections afforded in 12 of this Agreement. 18 Applicable Law ----------------- Any breach of this contract and any consequent points of dispute therefrom are subject to the law of the Federal Republic of Germany. The application of the UN-Convention on Contracts for the International Sale of Goods and the German Private International Law is expressly excluded. 19 Place of Jurisdiction ------------------------ The Parties expressly agree that the arbitration provisions of 17 are their exclusive remedy for any Dispute; provided, that if the arbitrators in any arbitration proceeding have not entered a decision and award within one (1) year following appointment of the arbitration panel, either Party may bring a legal action with respect to such Dispute in any court of competent jurisdiction upon thirty (30) days prior written notice to the other Party and the arbitration panel unless the arbitrators determine, during such thirty-day period, that the failure of the arbitrators to enter a decision and award within such one-year period is attributable in substantial part to the actions of the Party proposing to commence such legal action. 20 Complete Contract and Written Form ------------------------------------- This contract contains all agreements made between the parties with reference to the transfer of the rights of delivery and marketing and replaces all prior agreements or undertakings whether written or oral which the parties have previously made in this connection. Any changes or amendments to this contract shall be in written form; this also applies to the cancellation of the written form clause. 21 Salvatorian Clause --------------------- 10 If any provision in this Agreement is found or held to be invalid or unenforceable, then the meaning of said provision shall be construed, to the extent feasible, so as to render the provision enforceable, and if no feasible interpretation would save such provision, it shall be severed from the remainder of this Agreement which shall remain in full force and effect unless the severed provision is essential or material to the rights or benefits received by either Party. In such event, the Parties shall use their best efforts to negotiate, in good faiths a substitute valid and enforceable provision or agreement which most nearly effects their intent in entering into this contract. Mannheim, 16 June 1998 /S/ ---------------- ------------------------- Praemix Wirkstoff GmbH Fort Collins, June 16, 1998 /S/ Paul Hudnut ---------------- ------------------------- Heska Corporation Paul Hudnut Vice President, Business Development 11 ENCLOSURE 1 Product, Pricing and Dating I. Equipment Unit Price --------- ---------- New Reflotron(R) machine [******] Refurbished Reflotron(R) machine [******] ABC Hematology machine [******] II. Product Other Than Equipment A. Base Sales for Reflotron(R) strips shall be calculated on purchase price by Heska for the year and are set at the following levels: [************] in 1998 (prorated from date exclusive right to sell these products in the territory is obtained) [************] in 1999 [************] in 2000 [************] in 2001 [************] in 2002 [************] in 2003 and thereafter Initial Transfer Price shall be the price for reagent strips prior to reaching the Base Sales in that year; subsequent Transfer Price shall apply once Base Sales are reached, and during the period of non- exclusivity. Initial Subsequent Units/ Transfer Transfer [****** B. Reagent Strips Package Price Price ************] - ------------------ ------- -------- ------------ -------------- Amylase [***] [******] [******] [********] Bilirubin [***] [******] [******] [********] Cholesterol [***] [******] [******] [********] CK [***] [******] [******] [********] Creatinine [***] [******] [******] [********] GGT [***] [******] [******] [********] Glucose [***] [******] [******] [********] GOT [***] [******] [******] [********] GPT [***] [******] [******] [********] Hemolglobin K [***] [******] [******] [********] Triglycerides [***] [******] [******] [********] Urea/BUN [***] [******] [******] [********] Uric Acid [***] [******] [******] [********] Alkaline [***] [******] [******] [********] Potassium [***] [******] [******] [********] Clean + Check [***] [******] [******] [********] * Confidential Treatment Requested C. Base Sales for Urine Strips shall be calculated on purchase price by Heska for the year and are set at the following levels: [********] in 1998 (prorated from date exclusive right to sell these products in the territory in obtained) [********] in 1999 [********] in 2000 [********] in 2001 [********] in 2002 [********] in 2003 [********] in 2004 [********] in 2005 [********] in 2006 [********] in 2007 [********] in 2008 Initial Transfer Price shall be the price for reagent strips prior to reaching the Base Sales in that year; Subsequent Transfer Price shall apply once Base Sales are reached, and during the period of non- exclusivity. C. Urine Strips Combur 8 of [***] [******] [******] on Chemstrip discussion Combur 9 or [***] [******] [******] on Chemstrip discussion D. Reagent Pack for ABC [******] each, [***] each if over [***] packs ordered and shipped by sea. E. Accessories Clinipette Tubes [***] [*******] Li.Hep. Tubes 1,3 [***] [*******] Li Hep. Tubes 0,6 [***] [*******] Li Hip. Tubes 0,3 [***] [*******] Precinorm U [***] [*******] All prices include manufacturing, common carriage costs and insurance paid to a U.S. facility designated by Heska. All prices in U.S. dollars. * Confidential Treatment Requested -----END PRIVACY-ENHANCED MESSAGE-----