Exhibit 10.2
 

Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act.  Omitted information, marked “[***]” in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.
 

 
TWELFTH AMENDMENT TO THIRD AMENDED AND RESTATED
 
CREDIT AND SECURITY AGREEMENT AND WAIVER OF DEFAULT
 

 
THIS AMENDMENT (this “Amendment”), dated August 13, 2013, is entered into by and
among WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”), and HESKA CORPORATION,
a Delaware corporation (“Heska”), Diamond Animal Health, Inc., an Iowa
corporation (“Diamond”), and HESKA IMAGING US, LLC,  a Delaware limited
liability company (“Heska Imaging”) (each of Heska, Diamond and Heska Imaging
may be referred to herein individually as a “Borrower” and collectively as the
“Borrowers”).
 
Recitals
 
Borrowers Heska and Diamond and Lender are parties to a Third Amended and
Restated Credit and Security Agreement dated as of December 30, 2005 (as amended
from time to time, the “Credit Agreement”).
 
Each Borrower has requested that certain amendments be made to the Credit
Agreement, including without limitation the addition of Heska Imaging, a
newly-acquired subsidiary of Heska, as a Borrower, which amendments Lender is
willing to make pursuant to the terms and conditions set forth herein.
 
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements herein contained, it is agreed as follows:
 
1. Defined Terms. Capitalized terms used in this Amendment which are defined in
the Credit Agreement shall have the same meanings as defined therein, unless
otherwise defined herein. In addition:
 
(a) Section 1.1 of the Credit Agreement is amended by adding or amending and
restating, as the case may be, the following definitions:
 
“Bankruptcy Code” means title 11 of the United States Code, as in effect from
time to time.
 
“Book Net Worth” of a Borrower means the aggregate of the common and preferred
stockholders' equity in such Borrower, determined in accordance with GAAP, but
excluding (a) the non-cash impact of expensing options, restricted stock or
other stock-based compensation under APB 25, SFAS 123, SFAS 123R and/or SFAS
148, (b) the non-cash impact of income or expense relating to deferred tax
assets and liabilities caused by the use of net loss carry-forwards, in each
case after December 31, 2004, and (c) deferred tax assets.
 
“Borrower” means Heska, Diamond or Heska Imaging, and “Borrowers” means Heska,
Diamond and Heska Imaging.
 
“Borrowing Base” for a Borrower means, at any time the lesser of:
 
 
 

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(a)  
the Maximum Line; or

 
(b)  
subject to change from time to time in the Lender's sole discretion:

 
(i)  
85% of Eligible Accounts of such Borrower, plus

 
(ii)  
the lesser of (A) the sum of (1) Eligible Inventory of such Borrower consisting
of raw materials multiplied by the Raw Materials Advance Rate plus (2) 55% of
Eligible Inventory of such Borrower consisting of finished goods, or (B) the
difference of (1) $6,500,000 less (2) the aggregate amount of Advances made to
all Borrowers other than such Borrower in reliance on Eligible Inventory.

 
“Capital Lease” means a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
 
“EBITDA” means, with respect to any fiscal period, the consolidated net income
(or loss), of Borrowers and their Subsidiaries, minus extraordinary gains,
interest income, non-operating income and income tax benefits and decreases in
any change in LIFO reserves, plus non-cash extraordinary losses, non-cash impact
of expensing options, restricted stock or other stock-based compensation under
APB 25, SFAS 123, SFAS 123R and/or SFAS 148, Interest Expense, income taxes,
depreciation and amortization and increases in any change in LIFO reserves for
such period, in each case determined on a consolidated basis in accordance with
GAAP.
 
“Fixed Charge Coverage Ratio” means, with respect to each Borrower and its
Subsidiaries for any period, the ratio of (i) EBITDA for such period, plus all
management, consulting, monitoring, and advisory fees paid during such period to
the extent deducted in the calculation of net income of such Borrower and its
Subsidiaries minus (a) Non-Financed Capital Expenditures made (to the extent not
already incurred in a prior period) or incurred during such period, (b) cash
taxes paid during such period, to the extent greater than zero, and (c) all
Restricted Junior Payments consisting of Pass-Through Tax Liabilities, to (ii)
Fixed Charges for such period.
 
“Fixed Charges” means, with respect to any fiscal period and with respect to
each Borrower determined on a consolidated basis in accordance with GAAP, the
sum, without duplication, of (a) cash Interest Expense paid during such period
(other than interest paid-in-kind, amortization of financing fees, and other
non-cash Interest Expense), (b) principal payments paid in cash in respect of
Indebtedness paid during such period, including cash payments with respect to
Capital Leases, but excluding principal payments made with respect to the
Revolving Note, (c) all management, consulting, monitoring, and advisory fees
 
 
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paid during such period, and (d) all Restricted Junior Payments (other than
Pass-Through Tax Liabilities) and other distributions paid in cash during such
period.
 
“Hedge Agreement” means a “swap agreement” as that term is defined in Section
101(53B)(A) of the Bankruptcy Code.
 
             “Heska Imaging Revolving Note” means the Revolving Note of Heska
Imaging and Heska in the form attached as Exhibit A to the Twelfth Amendment to
this Agreement.
 
“Indebtedness” as to any Person means, without duplication, (a) all obligations
of such Person for borrowed money, (b) all obligations of such Person evidenced
by bonds, debentures, notes, or other similar instruments and all reimbursement
or other obligations in respect of letters of credit, bankers acceptances, or
other financial products, (c) all obligations of such Person as a lessee under
Capital Leases, (d) all obligations or liabilities of others secured by a Lien
on any asset of such Person, irrespective of whether such obligation or
liability is assumed, (e) all obligations of such Person to pay the deferred
purchase price of assets (other than trade payables incurred in the ordinary
course of business and repayable in accordance with customary trade practices),
(f) all obligations of such Person owing under Hedge Agreements (which amount
shall be calculated based on the amount that would be payable by such Person if
the Hedge Agreement were terminated on the date of determination), (g) any
Prohibited Preferred Stock of such Person, and (h) any obligation of such Person
guaranteeing or intended to guarantee (whether directly or indirectly
guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation
of any other Person that constitutes Indebtedness under any of clauses (a)
through (g) above.  For purposes of this definition, (i) the amount of any
Indebtedness represented by a guaranty or other similar instrument shall be the
lesser of the principal amount of the obligations guaranteed and still
outstanding and the maximum amount for which the guaranteeing Person may be
liable pursuant to the terms of the instrument embodying such Indebtedness, and
(ii) the amount of any Indebtedness described in clause (d) above shall be the
lower of the amount of the obligation and the fair market value of the assets of
such Person securing such obligation.
 
“Interest Expense” means, for any period, the aggregate of the interest expense
of Borrowers and their Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.
 
“Maturity Date” means December 31, 2015.
 
“Non-Financed Capital Expenditures” means Capital Expenditures not financed by
the seller of the capital asset, by a third party lender or by means of any
extension of credit by Lender other than by means of a Revolving Advance.
 
 
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             “Pass-Through Tax Liabilities” means the amount of state and
federal income tax paid or to be paid by the owner of any Stock in a Borrower on
taxable income earned by a Borrower and attributable to such owner of Stock as a
result of such Borrower’s “pass-through” tax status, assuming the highest
marginal income tax rate for federal and state (for the state or states in which
any owner of Stock is liable for income taxes with respect to such income)
income tax purposes, after taking into account any deduction for state income
taxes in calculating the federal income tax liability and all other deductions,
credits, deferrals and other reductions available to such owners of Stock from
or through such Borrower.
 
“Preferred Stock” means, as applied to the Stock of any Person, the Stock of any
class or classes (however designated) that is preferred with respect to the
payment of dividends, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person, over shares of Stock of
any other class of such Person.
 
“Prepayment Factor” means zero percent (0.0%).
 
“Pre-Tax Net Income” for a Borrower means, for any period, pre-tax net income
from continuing operations (that is, not including extraordinary items, or gains
or losses from unusual items or discontinued operations), in each case for such
Borrower for such period, as determined in accordance with GAAP, but excluding
(a) the non-cash impact of expensing options, restricted stock or other
stock-based compensation under APB 25, SFAS 123, SFAS 123R and/or SFAS 148, and
(b) the non-cash impact of income or expense relating to deferred tax assets and
liabilities caused by the use of net loss carry-forwards.
 
“Prohibited Preferred Stock” means any Preferred Stock that by its terms is
mandatorily redeemable or subject to any other payment obligation (including any
obligation to pay dividends, other than dividends of shares of Preferred Stock
of the same class and series payable in kind or dividends of shares of common
stock) on or before a date that is less than 1 year after the Maturity Date, or,
on or before the date that is less than 1 year after the Maturity Date, is
redeemable at the option of the holder thereof for cash or assets or securities
(other than distributions in kind of shares of Preferred Stock of the same class
and series or of shares of common stock).
 
“Restricted Junior Payment” means (a) any declaration or payment of any dividend
or the making of any other payment or distribution on account of Stock issued by
any Borrower (including any payment in connection with any merger or
consolidation involving any Borrower) or to the direct or indirect holders of
Stock issued by any Borrower in its capacity as such (other than dividends or
distributions payable in Stock (other than Prohibited Preferred Stock)) issued
by any Borrower, or (b) any purchase, redemption, or other acquisition or
retirement  
 
 
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for value (including in connection with any merger or consolidation involving
any Borrower) of any Stock issued by any Borrower.
 
“Revolving Note” means the Heska Revolving Note, the Diamond Revolving Note or
the Heska Imaging Revolving Note.
 
“Stock” means all shares, options, warrants, interests, participations, or other
equivalents (regardless of how designated) of or in a Person, whether voting or
nonvoting, including common stock, preferred stock, or any other “equity
security” (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the SEC under the Exchange Act).
 
(b)   Section 1.1 of the Credit Agreement is amended by deleting the terms
Eligible Foreign Accounts, Foreign Accounts Eligibility Period, and FREP
Sublimit and all references thereto in their entirety.
 
2.    Revolving Advances.  The second sentence of Section 2.2, is hereby amended
to read in its entirety as follows:
 
              “Lender shall have no obligation to make a Revolving Advance to a
Borrower if, after giving effect to such requested Revolving Advance, (a) the
sum of the outstanding and unpaid Revolving Advances to such Borrower exceeds
such Borrower's Borrowing Base, (b) the sum of the outstanding and unpaid
Revolving Advances would exceed the Aggregate Borrowing Base, or (c) the results
of a collateral exam conducted pursuant to Section 2.9(b) of this Agreement
within sixty (60) days after such Revolving Advance is requested are not
satisfactory to Lender.”; and
 
the first sentence of Section 2.2(a) is hereby amended to read in its entirety
as follows:
 
“(a) If no Revolving Advances are outstanding and no Letter of Credit has been
issued for such Borrower, and in the case of Heska Imaging’s initial request for
a Revolving Advance, such Borrower shall make each request for a Revolving
Advance to Lender before 11:00 a.m. (Denver time) of the day that is at least
sixty (60) days prior to the day of the Requested Revolving Advance; otherwise,
such Borrower shall make each request for a Revolving Advance to Lender before
11:00 a.m. (Denver time) of the day of the requested Revolving Advance.”
 
3.   Spread. Section 2.7 of the Credit Agreement is hereby amended to read it
its entirety as follows:
 
      “Section 2.7    Spread.  The spread (the “Spread”) means the percentage
set forth in the table below opposite the applicable prior-fiscal-year Net
Income of the Borrowers, which percentage shall change annually effective as of
the first day of the month following the month in which the Borrowers deliver to
the Lender their audited financial statements for the prior fiscal year;
provided, however, that in no case shall any decrease in the Spread occur during
a Default Period:
 
 
 
 
 
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Prior Fiscal Year Net Income
 
 
Spread
Less than $0
 
 
3.75%
Greater than or equal to $0 but less than $2,500,000
 
 
3.25%
Greater than or equal to $2,500,000 but less than $5,000,000
 
 
2.75%
Greater than or equal to $5,000,000
 
 
2.25%”

4.   Audit Fees.  Section 2.9(b) of the Credit Agreement is hereby amended to
read in its entirety as follows:
 
“(b)           Audit Fees.  Each Borrower shall pay Lender fees in connection
with any collateral exams, audits or inspections conducted by or on behalf of
Lender of any Collateral or such Borrower’s operations or business at the rates
established from time to time by Lender as its collateral exam fees (which fees
are currently $1,000 per day per collateral examiner), together with all actual
out-of-pocket costs and expenses incurred in conducting any such collateral
examination or inspection; provided, however, that so long as no Default Period
exists, Lender will not demand reimbursement for more than:  (i) two such
collateral exams in any calendar year during which any Revolving Advances are
outstanding or any Letter of Credit has been issued for such Borrower, and (ii)
one such collateral exam in any calendar year during which no Revolving Advances
are outstanding and no Letter of Credit has been issued for such Borrower.”
 
5.   Foreign Receivables Eligibility Program Fee.  Section 2.9(e) of the Credit
Agreement is hereby amended to read in its entirety as follows:
 
“(e)           Reserved.”
 
6.   Issuance of Letters of Credit.  Section 2.18(a) of the Credit Agreement is
hereby amended to read in its entirety as follows:
 
“(a)           Upon any Borrower's Request the Lender shall issue, from time to
time until the Termination Date, one or more documentary or standby letters of
credit (each, a "Letter of Credit") for such Borrower's account, provided that:
 
(i)           The Lender shall have no obligation to issue any Letter of Credit
for the benefit of a Borrower if (A) a Default Period exists, (B) the face
amount of the Letter of Credit to be issued would exceed the lesser of:
 
(1)           $200,000 less the Aggregate L/C Amount, or
 
(2)           such Borrower's Availability, or
 
 
 
 
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(C) the results of a collateral exam conducted pursuant to Section 2.9(b) of
this Agreement within sixty (60) days after such Letter of Credit is requested
are not satisfactory to Lender.
 
Each Letter of Credit, if any, shall be issued pursuant to a separate L/C
Application entered by the applicable Borrower and the Lender, completed in a
manner satisfactory to the Lender.  The terms and conditions set forth in each
such L/C Application shall supplement the terms and conditions hereof, but if
the terms of any such L/C Application and the terms of this Agreement are
inconsistent, the terms hereof shall control.”
 
7.   Reporting.  Section 6.1(d) of the Credit Agreement is hereby amended to
read in its entirety as follows:
 
“(d)           monthly, if there are no Revolving Advances or Letter of Credit
outstanding, sales journals, collection reports and credit memos of each
Borrower, otherwise weekly (or more frequently if Lender so requires).”
 
8.   Past Due Payables.  Section 6.5 of the Credit Agreement is hereby amended
to delete the last sentence thereof in its entirety.
 
9.   Minimum Capital Changed to Minimum Consolidated Book Net Worth.  Section
6.12 of the Credit Agreement is hereby amended to read in its entirety as
follows:
 
“Section 6.12 Minimum Consolidated Book Net Worth.  Heska shall maintain, on a
consolidated basis, Book Net Worth:  (a) of not less than $16,000,000 as of the
last day of each month during calendar year 2013, and (b) $15,000,000 as of the
last day of each month during calendar year 2014.  Effective January 31, 2015,
Heska no longer shall be required to test Book Net Worth on a consolidated basis
and this Section 6.12 shall become [Reserved].”
 
10.   Minimum Net Income Changed to Minimum Consolidated Pre-Tax Net
Income.  Section 6.13 of the Credit Agreement is hereby amended to read in its
entirety as follows:
 
“Section 6.13 Minimum Consolidated Pre-Tax Net Income.  Heska will achieve, on a
consolidated basis, during each period described below, Pre-Tax Net Income in an
amount not less than the amount set forth opposite such period (amounts in
parentheses denote negative numbers):
 
 
 
 
 
 
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Period
 
 
Minimum Pre-Tax Net Income
Nine months ending September 30, 2013
 
 
($4,600,000)
Twelve months ending December 31, 2013
 
 
($4,100,000)
Three months ending March 31, 2014
 
 
($1,100,000)
Six months ending June 30, 2014
 
 
($1,500,000)
Nine months ending September 30, 2014
 
 
($700,000)
Twelve months ending December 31, 2014
 
 
$250,000”

Effective January 31, 2015, Heska no longer shall be required to test Pre-Tax
Net Income on a consolidated basis and this Section 6.13 shall become
[Reserved].”
 
11.   Minimum Liquidity.  Section 6.14 of the Credit Agreement is hereby amended
to read in its entirety as follows:
 
                 “Section 6.14 [Reserved].”
 
12.   Minimum Individual Book Net Worth.  Section 6.15 of the Credit Agreement
is hereby amended to read in its entirety as follows:
 
         “Section 6.15 Minimum Individual Book Net Worth. Each Borrower shall at
all times maintain its Book Net Worth, calculated without regard to any
Subsidiary or other Affiliate, at an amount greater than $1.00.”
 
13.   Fixed Charge Coverage Ratio.  A new Section 6.16 is hereby added to the
Credit Agreement to read in its entirety as follows:
 
        “Section 6.16 Fixed Charge Coverage Ratio.  Borrowers shall maintain, on
a consolidated basis, a Fixed Charge Coverage Ratio, measured monthly on a
trailing twelve-month basis at the end of each month, commencing with the month
ended January 31, 2015, of not less than 1.50:1.00.”
 
14.   Permitted Liens.  Section 7.1(b) of the Credit Agreement is hereby amended
to read in its entirety as follows:
 
“(b)  Liens in existence on the date hereof, or in the case of Heska Imaging, on
the date it became a Borrower, and listed in Schedule 7.1 hereto;”
 
15.   Permitted Indebtedness.  Section 7.2(b) of the Credit Agreement is hereby
amended to read in its entirety as follows:
 
“(b)  indebtedness of such Borrower in existence on the date hereof, or in the
case of Heska Imaging, on the date it became a Borrower, and listed in Schedule
7.2 hereto;”
 
 
 
 
 
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16.   Investments and Subsidiaries.  Section 7.4 of the Credit Agreement is
hereby amended by amending clause (a)(v) thereof to read in its entirety as
follows:
 
 “(v)           unless a Default Period exists or would exist immediately after
or as a result of any such advance or contribution, advances or contributions by
Heska to any Subsidiary that is not a Borrower; provided, however, that (A) both
before and after such advance or contribution Heska's Tangible Net Worth must
equal or exceed $100,000 and (B) all contributions and advances made in reliance
on this subsection (v) shall not exceed $700,000 in the aggregate in any fiscal
year that ends prior to January 31, 2015;” and
 
Further, with respect to Section 7.4(a)(x), Lender hereby confirms its consent
to Heska’s investment that resulted in its new Subsidiary, Heska Imaging,
without requiring delivery of all items set forth in Section 7.4(b)(1)
concurrently with the closing of the investment.
 
17.   Capital Expenditures.  Section 7.10 of the Credit Agreement is hereby
amended to read in its entirety as follows:
 
“Section 7.10 Capital Expenditures.  Borrowers, together with any Affiliates,
will not incur or contract to incur, in the aggregate, Capital Expenditures in
the aggregate during the fiscal year-to-date period ending on any date described
below in excess of the amount set forth opposite such period:
 
Date
 
Maximum Capital Expenditures
August 31, 2013
 
$2,000,000
September 30, 2013
 
$2,000,000
October 31, 2013
 
$2,000,000
November 30, 2013
 
$2,000,000
December 31, 2013
 
$2,000,000
January 1, 2014
 
$1,350,000
February 28, 2014
 
$1,350,000
March 31, 2014
 
$1,350,000
April 30, 2014
 
$1,350,000
May 31, 2014
 
$1,350,000
June 30, 2014
 
$1,350,000
July 31, 2014
 
$1,350,000
August 31, 2014
 
$1,350,000
September 30, 2014
 
$1,350,000
October 31, 2014
 
$1,350,000
November 30, 2014
 
$1,350,000
December 31, 2014
 
$1,350,000

Effective January 31, 2015, Borrowers no longer shall be required to test
Capital Expenditures and this Section 7.10 shall become [Reserved].”
 
 
 
 
 
 
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Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked “[***]” in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.
 
 
 
18.   Address for Notices, Etc.  Section 9.5 of the Credit Agreement is hereby
amended to read in its entirety as follows:
 
“Section 9.5  Addresses for Notices, Etc.  Except as otherwise expressly
provided herein, all notices, requests, demands and other communications
provided for under the Loan Documents shall be in writing and shall be (a)
personally delivered, (b) sent by first class United States mail, (c) sent by
overnight courier of national reputation, or (d) transmitted by telecopy, in
each case addressed or telecopied to the party to whom notice is being given at
its address or telecopier number as set forth below:
 
If to the Borrowers:
 
Heska Corporation
3760 Rocky Mountain Avenue
Loveland, Colorado 80538
Telecopier:  970-619-6003
Attention:  Chief Financial Officer
 
Diamond Animal Health, Inc.
c/o Heska Corporation
3760 Rocky Mountain Avenue
Loveland, Colorado 80538
Telecopier:  970-619-6003
Attention:  Chief Financial Officer
 
Heska Imaging US, LLC
c/o Heska Corporation
3760 Rocky Mountain Avenue
Loveland, Colorado 80538
Telecopier:  970-619-6003
Attention:  Chief Financial Officer
 
If to the Lender:
 
Wells Fargo Bank, National Association
[***]
[***]
[***]
Telecopier:  [***]
Attention:  [***]
 
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if
 
 
 
 
 
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delivered by telecopy, except that notices or requests to the Lender pursuant to
any of the provisions of Article II shall not be effective until received by the
Lender.
 
19.   Compliance Certificate.  Exhibit B to the Credit Agreement is replaced in
its entirety by Exhibit B to this Amendment.
 
20.   Schedule 7.1.  Schedule 7.1 to the Credit Agreement is replaced in its
entirety by Exhibit C to this Amendment.
 
21.   Schedule 7.2.  Schedule 7.2 to the Credit Agreement is replaced in its
entirety by Exhibit D to this Amendment.
 
22.   No Other Changes.  Except as explicitly amended by this Amendment, all of
the terms and conditions of the Credit Agreement shall remain in full force and
effect and shall apply to any advance or letter of credit thereunder.
 
23.   Waiver of Default.  Each of Heska and Diamond is in default of  the
following provision of the Credit Agreement (the “Existing Default”):
 
Section/Covenant
Required Performance
Actual Performance
6.13/Minimum Net Income
($1,250,000)
              ($3,690,000)

Upon the terms and subject to the conditions set forth in this Amendment, Lender
hereby waives the Existing Default.  This waiver shall be effective only in this
specific instance and for the specific purpose for which it is given, and this
waiver shall not entitle any Borrower to any other or further waiver in any
similar or other circumstances.
 
24.   Amendment Fee.  Each Borrower agrees, jointly and severally, to pay Lender
as of the date hereof a fully earned, non-refundable fee in the amount of
$30,000 in consideration of Lender’s execution and delivery of this Amendment.
 
25.   Conditions Precedent.  This Amendment, and the waiver set forth in
Paragraph 23 hereof, shall be effective when Lender shall have received an
executed original hereof, together with each of the following, each in substance
and form acceptable to Lender:
 
(a)   The Heska Imaging Revolving Note.
 
(b)   A Second Amendment to Patent and Trademark Security Agreement.
 
(c)    A Certificate of Authority of Heska Imaging certifying as to the
resolutions of its governing body approving Heska Imaging becoming a Borrower
and pledging its assets as Collateral.
 
 
 
 
 
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(d)    A Certificate of Authority of each Borrower certifying as to the
resolutions of such Borrower’s board of directors or other governing body,
approving the execution and delivery of this Amendment.
 
(e)   Payment of the fee described in paragraph 24.
 
(f)   Such other matters as the Lender may require.
 
26.   Representations and Warranties. The Borrowers hereby represent and warrant
to the Lender as follows:
 
(a)   The Borrowers have all requisite power and authority to execute this
Amendment and any other agreements or instruments required hereunder, and to
perform all of its obligations hereunder and thereunder, and this Amendment and
such other agreements and instruments have been duly executed and delivered by
the Borrowers and constitute the legal, valid and binding obligation of the
Borrowers, enforceable in accordance with their terms.
 
(b)   The execution, delivery and performance by the Borrowers of this Amendment
and any other agreements or instruments required hereunder, have been duly
authorized by all necessary corporate action and do not (i) require any
authorization, consent or approval by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, (ii) violate any
provision of any law, rule or regulation or of any order, writ, injunction or
decree presently in effect, having applicability to the Borrowers, or the
articles of incorporation or by-laws of the Borrowers, or (iii) result in a
breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which any Borrower is a
party or by which it or its properties may be bound or affected.
        
(c)   All of the representations and warranties contained in Article V of the
Credit Agreement are correct on and as of the date hereof as though made on and
as of such date, except to the extent that such representations and warranties
relate solely to an earlier date.
 
27.   No Other Waiver.  Except as otherwise provided in Paragraph 23 hereof, the
execution of this Amendment and the acceptance of all other agreements and
instruments related hereto shall not be deemed to be a waiver of any Default or
Event of Default under the Credit Agreement or a waiver of any breach, default
or event of default under any Loan Document or other document held by the
Lender, whether or not known to the Lender and whether or not existing on the
date of this Amendment.
 
28.   Release. The Borrowers hereby absolutely and unconditionally release and
forever discharge the Lender, and any and all participants, parent entities,
subsidiary entities, affiliated entities, insurers, indemnitors, successors and
assigns thereof, together with all of the present and former directors,
officers, agents, attorneys and employees of any of the foregoing, from any and
all claims, demands or causes of action of any kind, nature or description,
whether arising in law
 
 
 
 
 
12

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or equity or upon contract or tort or under any state or federal law or
otherwise, which any Borrower has had, now has or has made claim to have against
any such Person for or by reason of any act, omission, matter, cause or thing
whatsoever arising from the beginning of time to and including the date of this
Amendment, whether such claims, demands and causes of action are matured or
unmatured or known or unknown.
 
29.   Costs and Expenses. The Borrowers hereby reaffirm their agreement under
the Credit Agreement to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Loan Documents, including
without limitation all reasonable fees and disbursements of legal counsel.
Without limiting the generality of the foregoing, the Borrowers specifically
agree to pay all fees and disbursements of counsel to the Lender for the
services performed by such counsel in connection with the preparation of this
Amendment and the documents and instruments incidental hereto. The Borrowers
hereby agree that the Lender may, at any time or from time to time in its sole
discretion and without further authorization by the Borrowers, make a loan to
the Borrowers under the Credit Agreement, or apply the proceeds of any loan, for
the purpose of paying any such fees, disbursements, costs and expenses and the
fee required under Paragraph 24 of this Amendment.
 
30.   Miscellaneous. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
 

 

 
13

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Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked “[***]” in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.
 

 
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first written above.
 
HESKA CORPORATION
 
 
By    /s/ Jason Napolitano                                                
 
          Its   Chief Financial Officer                
 
 
                                      
DIAMOND ANIMAL HEALTH, INC.
 
 
By     /s/ Jason Napolitano                                                 
     
 
          Its   Chief Financial Officer
HESKA IMAGING US, LLC
 
 
By     /s/ Jason Napolitano                                                  
 
Its   Chief Financial
Officer                                                     
 
 

 
WELLS FARGO BANK, NATIONAL ASSOCIATION

 
By  [***]               
    [***], Authorized Signatory
 

           

   
 
 
 
 
 
 
 

 
 
 

--------------------------------------------------------------------------------

 

Exhibit A to Twelfth Amendment
 
REVOLVING NOTE
 
(Heska Imaging)
 
$15,000,000 
Denver, Colorado
August  ____, 2013
 
           For value received, each of the undersigned, HESKA IMAGING US, LLC, a
Delaware limited liability company, and HESKA CORPORATION, a Delaware
corporation (collectively, the "Borrowers"), hereby jointly and severally
promise to pay on the Termination Date under the Credit Agreement (defined
below), to the order of WELLS FARGO BUSINESS CREDIT, INC., a Minnesota
corporation (the "Lender"), at its main office in Denver, Colorado, or at any
other place designated at any time by the holder hereof, in lawful money of the
United States of America and in immediately available funds, the principal sum
of Fifteen Million Dollars ($15,000,000) or, if less, the aggregate unpaid
principal amount of all Revolving Advances made by the Lender to Heska Imaging
under the Credit Agreement (defined below) together with interest on the
principal amount hereunder remaining unpaid from time to time, computed on the
basis of the actual number of days elapsed and a 360-day year, from the date
hereof until this Note is fully paid at the rate from time to time in effect
under the Third Amended and Restated Credit and Security Agreement dated as of
December 30, 2005 (as the same may hereafter be amended, supplemented or
restated from time to time, the "Credit Agreement") by and among the Lender, the
Borrowers and Diamond Animal Health, Inc. The principal hereof and interest
accruing thereon shall be due and payable as provided in the Credit Agreement.
This Note may be prepaid only in accordance with the Credit Agreement.
 
           This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof. This
Note is the Heska Imaging Revolving Note referred to in the Credit Agreement.
This Note is secured, among other things, pursuant to the Credit Agreement and
the Security Documents as therein defined, and may now or hereafter be secured
by one or more other security agreements, mortgages, deeds of trust, assignments
or other instruments or agreements.
 
           Borrowers hereby, jointly and severally, agree to pay all costs of
collection, including attorneys’ fees and legal expenses in the event this Note
is not paid when due, whether or not legal proceedings are commenced.
 
           Presentment or other demand for payment, notice of dishonor and
protest are expressly waived.
 
HESKA IMAGING US, LLC
 
 
By                                             
 
     Its _________________________________
HESKA CORPORATION
 
 
By                                               
 
     Its _________________________________

 
A-1

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Exhibit B to Twelfth Amendment
 
Compliance Certificate
 
To:
______________________

 
Wells Fargo Capital Finance

Date:
__________________, 20__

 

Subject:
Heska Corporation

 
Financial Statements

In accordance with our Third Amended and Restated Credit and Security Agreement
dated as of December 30, 2005 (the “Credit Agreement”), attached are the
financial statements of Heska Corporation (“Heska”) as of and for
________________, 20___ (the “Reporting Date”) and the year-to-date period then
ended (the “Current Financials”). All terms used in this certificate have the
meanings given in the Credit Agreement.
 
I certify that, to the best of my knowledge, the Current Financials have been
prepared in accordance with GAAP, subject to year-end audit adjustments, and
fairly present the Borrowers’ financial condition and the results of its
operations as of the date thereof.
                       

 
Events of Default. (Check one):
 
o
The undersigned does not have knowledge of the occurrence of a Default or Event
of Default under the Credit Agreement.
 
o
The undersigned has knowledge of the occurrence of a Default or Event of Default
under the Credit Agreement and attached hereto is a statement of the facts with
respect to thereto.
 
 
I hereby certify to the Lender as follows:
 
o
The Reporting Date does not mark the end of one of the Borrowers’ fiscal
quarters, hence I am completing all paragraphs below except paragraph 4.
 
o
The Reporting Date marks the end of one of the Borrowers’ fiscal quarters, hence
I am completing all paragraphs below.
 

 
 
 
                      
 
 
 
 

 

 
B-1

--------------------------------------------------------------------------------

 

Financial Covenants. I further hereby certify as follows:
 
1.   Spread. Pursuant to Section 2.7 of the Credit Agreement, as of the
Reporting Date, Heska's prior-fiscal-year Net Income was, on a consolidated
basis, $_________________, which determines a base Spread of ______% pursuant to
the table below (amounts in parentheses denote negative numbers).
 
Prior Fiscal Year Net Income
 
 
Spread
Less than $0
 
 
3.75%
Greater than or equal to $0
but less than $2,500,000
 
 
3.25%
Greater than or equal to $2,500,000
but less than $5,000,000
 
 
2.75%
Greater than or equal to $5,000,000
 
2.25%

 
2.           Minimum Consolidated Book Net Worth. Pursuant to Section 6.12 of
the Credit Agreement, as of the Reporting Date, Heska's Book Net Worth was, on a
consolidated basis, $_________________, which  o  satisfies  o  does not satisfy
the requirement that such amount be (a) not less than $16,000,000 as of the last
day of each month during calendar year 2013, and (b) $15,000,000 as of the last
day of each month during calendar year 2014.  Effective January 31, 2015, Heska
no longer shall be required to test Book Net Worth on a consolidated basis or to
complete this Section 2 of the Compliance Certificate.
 

     

 
 

 
B-2

--------------------------------------------------------------------------------

 

3.           Minimum Consolidated Pre-Tax Net Income.  Pursuant to Section 6.13
of the Credit Agreement, as of the Reporting Date, Heska's Pre-Tax Net Income
was, on a consolidated basis, $_________________, which o satisfies o does not
satisfy the requirement that such amount be no less than $______________ on the
Reporting Date, as set forth in the table below:
 

     
Period
 
 
Minimum Pre-Tax Net Income
Nine months ending September 30, 2013
 
 
($4,600,000)
Twelve months ending December 31, 2013
 
 
($4,100,000)
Three months ending March 31, 2014
 
 
($1,100,000)
Six months ending June 30, 2014
 
 
($1,500,000)
Nine months ending September 30, 2014
 
 
($700,000)
Twelve months ending December 31, 2014
 
$250,000

 
Effective January 31, 2015, Heska no longer shall be required to test Pre-Tax
Net Income on a consolidated basis or to complete this Section 3 of the
Compliance Certificate.
 
4.           Minimum Individual Book Net Worth.  Pursuant to Section 6.15 of the
Credit Agreement, as of the Reporting Date, Heska's Book Net Worth was
$_________________, Diamond's Book Net Worth was $_________________, and Heska
Imaging’s Book Net Worth was $_________________, which o satisfies o does not
satisfy the requirement that such amounts be no less than $1.00 on the Reporting
Date.
 
5.           Fixed Charge Coverage Ratio.  Pursuant to Section 6.16 of the
Credit Agreement, commencing with the month ended January 31, 2015, as of the
Reporting Date, Borrowers’ Fixed Charge Coverage ratio was, on a consolidated
basis, ___:1.00, which o satisfies o does not satisfy the requirement that such
ratio be not less than 1.50:1.00.
 
6.           Maximum Contributions.  Pursuant to Section 7.4(a)(v) of the Credit
Agreement, as of the Reporting Date, Heska's fiscal year-to-date aggregate
contributions to non-Borrower Subsidiaries was $_________________, which o
satisfies o does not satisfy the requirement that such amounts be no more than
$700,000 during any fiscal year that ends prior to January 31, 2015.
 
 
 

 
B-3

--------------------------------------------------------------------------------

 

7.           Capital Expenditures.  Pursuant to Section 7.10 of the Credit
Agreement, for the fiscal year-to-date period ending on the Reporting Date,
Heska's Capital Expenditures were, in the aggregate and on a consolidated basis,
$_______________ which o satisfies o does not satisfy the requirement that such
amount be not more than $_______________ during the period ending on the
Reporting Date, as set forth in the table below and adjusted, if applicable, in
accordance with Section 7.10:
 
Period
 
Maximum Capital Expenditures
August 31, 2013
 
$2,000,000
September 30, 2013
 
$2,000,000
October 31, 2013
 
$2,000,000
November 30, 2013
 
$2,000,000
December 31, 2013
 
$2,000,000
January 1, 2014
 
$1,350,000
February 28, 2014
 
$1,350,000
March 31, 2014
 
$1,350,000
April 30, 2014
 
$1,350,000
May 31, 2014
 
$1,350,000
June 30, 2014
 
$1,350,000
July 31, 2014
 
$1,350,000
August 31, 2014
 
$1,350,000
September 30, 2014
 
$1,350,000
October 31, 2014
 
$1,350,000
November 30, 2014
 
$1,350,000
December 31, 2014
 
$1,350,000
     

Effective January 31, 2015, Borrowers no longer shall be required to test
Capital Expenditures or to complete this Section 7 of the Compliance
Certificate.
 
Attached hereto are all relevant facts in reasonable detail to evidence the
computations of the financial covenants referred to above. These computations
were made in accordance with GAAP.
 
 
HESKA CORPORATION

 
By _____________________________________

 
     Its ___________________________________

 
B-4

--------------------------------------------------------------------------------

 

Exhibit C to Twelfth Amendment
 

 
Schedule 7.1 to Third Amended and Restated Credit and Security Agreement
 
Permitted Liens
 
Borrower:  Heska Imaging US, LLC
 

Creditor
 
Collateral
Jurisdiction
Filing Date
Filing No.
De Lage Landen Financial Services, Inc.
 
Various Demo/Inventory per Ex. A to UCC-1
Delaware
06/27/2012
22484907
Esaote North America, Inc.
Various Inventory per UCC-1 Filing
Illinois
9/20/12
17612301

Other Borrowers:
 
None
 

 
C-1

--------------------------------------------------------------------------------

 

Exhibit D to Twelfth Amendment
 
Schedule 7.2 to Third Amended and Restated Credit and Security Agreement
 
Permitted Indebtedness and Guaranties

Indebtedness

Heska Imaging US, LLC

 
Lender
Final Pmt Due
Type
Amt Due
Assets Secured
De Lage Landen Financial Services, Inc.
6/2017
Loan
$563,890
Demo/Inventory
De Lage Landen Financial Services, Inc.
Demand
ST Loan
$348,000
Specified Inventory
Esaote North America, Inc.
Demand
Loan
$509,372
Specified Inventory

Guaranties

Primary Obligor
Amount and Description of Obligation Guaranteed
Beneficiary of Guaranty
           

None

 

 
D-1