Document:

Exhibit 10.30

 

[***] — Certain information in
this exhibit have been omitted and filed separately with the Securities and
Exchange Commission.  Confidential
treatment has been requested with respect to the omitted portions.

 

SECOND AMENDMENT TO THIRD AMENDED AND RESTATED 

CREDIT AND SECURITY AGREEMENT

 

This Amendment, dated as of July 20, 2007, is
made by and between Heska Corporation, a Delaware corporation (“Heska”),
Diamond Animal Health, Inc., an Iowa corporation (“Diamond”) (each of
Heska and Diamond may be referred to herein individually as a “Borrower” and
collectively as the “Borrowers”), and Wells Fargo Bank, National Association,
operating through its Wells Fargo Business Credit operating division (the “Lender”).

 

Recitals

 

The Borrowers and the Lender are parties to a Third
Amended and Restated Credit and Security Agreement dated as of December 30,
2005 as amended by the terms of that certain First Amendment to Third Amended
and Restated Credit and Security Agreement dated as of December 5, 2006 (collectively,
and as amended from time to time in the future, the “Credit Agreement”).
Capitalized terms used in these recitals have the meanings given to them in the
Credit Agreement unless otherwise specified.

 

The Borrowers have requested that certain amendments
be made to the Credit Agreement, which the 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.     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 delivers 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:

 

 

	
  Prior Fiscal Year Net Income

  	
   

  	
  Spread

  	
   

  
	
   

  	
   

  	
   

  
	
  Less than $0

  	
  2.00

  	
  %

  
	
   

  	
   

  	
   

  
	
  Greater than or equal to $0 but less than $2,500,000

  	
  1.00

  	
  %

  
	
   

  	
   

  	
   

  
	
  Greater than or equal to $2,500,000

  	
  0.00

  	
  %”

  

 

2.     Audit Fees. Section 2.9(b) of the Credit
Agreement is hereby amended to read it its entirety as follows:

 

                “(b)         Audit Fees. The Borrower shall pay the
Lender fees in connection with any collateral exams, audits or inspections
conducted by or on behalf of the Lender of any Collateral or the Borrower’s
operations or business at the rates established from time to time by the Lender
as its collateral exam fees (which fees are currently $100 per hour
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 and average Availability (computed on a 90-day rolling
average basis, as reasonably determined by the Lender) exceeds $1,500,000 the
Lender will not conduct more than three such collateral exams in any calendar
year.”

 

3.     Projections. Sub-section (f) of Section 6.1 of
the Credit Agreement is hereby amended to read in its entirety as follows:

 

                “(f)  on or
before May 31 of each year, the projected balance sheets and income
statements for each of the subsequent twelve months, each in reasonable detail,
representing each Borrower’s good faith projections and certified by such
Borrower’s chief financial officer as being the most accurate projections
available and identical to the projections used by such Borrower for internal
planning purposes, together with such supporting schedules and information as
the Lender may in its discretion require;”

 

4.     Financial Covenants. 
Sections 6.12, 6.13 and 6.16 of the Credit Agreement are hereby amended
to read in their entireties as follows:

 

                “Section 6.12
Minimum Capital. Heska will maintain, on a consolidated basis, as of
each date listed below, its Capital at an amount not less than the amount set
forth opposite such date (amounts in parentheses denote negative numbers):

 

2

 

[***] — Certain information on this page have
been omitted and filed separately with the Securities and Exchange
Commission.  Confidential treatment has
been requested with respect to the omitted portions.

 

	
  Date

  	
   

  	
  Minimum Capital

  	
   

  
	
  July 31, 2007

  	
  [***]

  	
   

  
	
  August 31, 2007

  	
  [***]

  	
   

  
	
  September 30, 2007

  	
  [***]

  	
   

  
	
  October 31, 2007

  	
  [***]

  	
   

  
	
  November 30, 2007

  	
  [***]

  	
   

  
	
  December 31, 2007

  	
  [***]

  	
   

  
	
  January 31, 2008

  	
  [***]

  	
   

  
	
  February 29, 2008

  	
  [***]

  	
   

  
	
  March 31, 2008

  	
  [***]

  	
   

  
	
  April 30, 2008

  	
  [***]

  	
   

  
	
  May 31, 2008

  	
  [***]

  	
   

  
	
  June 30, 2008 and the last day of each month thereafter

  	
  [***]

  	
   

  

 

In addition to the foregoing, if Heska makes a purchase of intellectual
property rights by June 30, 2008, as contemplated by Section 7.4(a)(ix),
to the extent the purchase is expensed in accordance with GAAP, the Minimum
Capital amounts listed above occurring after the date of such purchase shall be
adjusted downward on a dollar-for-dollar basis by the amount of such expense,
not to exceed the Investment Cap.”

 

                “Section 6.13
Minimum Net Income. Heska will achieve, on a consolidated basis, during
each period described below, Net Income in an amount not less than the amount
set forth opposite such period (amounts in parentheses denote negative
numbers):

 

	
  Period

  	
   

  	
  Minimum Net Income

  	
   

  
	
  Nine months ending September 30, 2007

  	
  [***]

  	
   

  
	
  Twelve months ending December 31, 2007

  	
  [***]

  	
   

  
	
  Three months ending March 31, 2008

  	
  [***]

  	
   

  
	
  Six months ending June 30, 2008

  	
  [***]

  	
   

  

 

In addition to the foregoing, if Heska makes a purchase of intellectual
property rights by June 30, 2008, as contemplated by Section 7.4(a)(ix),
to the extent the purchase is expensed in accordance with GAAP, the Minimum Net
Income amounts listed above occurring after the date of such purchase shall be
adjusted downward on a dollar-for-dollar basis by the amount of such expense,
not to exceed the Investment Cap.”

 

3

 

                “Section 6.16
New Covenants. Annually, on or before June 30, the Borrowers and
the Lender shall agree on new covenant levels for Sections 6.12, 6.13, 6.14,
7.4(a)(v) and 7.10 for periods after such date. The new covenant levels
will be based on (i) the Borrowers’ projections for such periods and (ii) the
year to date financial results of Heska, on a consolidated basis, and such new
covenant levels shall be no less stringent than the present levels.  An Event of Default shall occur if the new
covenants are not agreed to by the above date.”

 

5.     Investments. Clause (v) of Section 7.4(a) of
the Credit Agreement is hereby amended 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 during the fiscal year ending December 31, 2007, and the six
month period ending June 30, 2008, 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 during the twelve month period beginning July 1,
2007 and ending June 30, 2008;”

 

6.     Capital Expenditures. Section 7.10 of the Credit
Agreement is hereby amended to read in its entirety as follows:

 

                “Section 7.10
Capital Expenditures. The 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:

 

4

 

[***] — Certain information on this page have
been omitted and filed separately with the Securities and Exchange
Commission.  Confidential treatment has
been requested with respect to the omitted portions.

 

	
  Period

  	
   

  	
  Maximum Capital 

  Expenditures

  	
   

  
	
  July 31, 2007

  	
  [***]

  	
   

  
	
  August 31, 2007

  	
  [***]

  	
   

  
	
  September 30, 2007

  	
  [***]

  	
   

  
	
  October 31, 2007

  	
  [***]

  	
   

  
	
  November 30, 2007

  	
  [***]

  	
   

  
	
  December 31, 2007

  	
  [***]

  	
   

  
	
  January 31, 2008

  	
  [***]

  	
   

  
	
  February 29, 2008

  	
  [***]

  	
   

  
	
  March 31, 2008

  	
  [***]

  	
   

  
	
  April 30, 2008

  	
  [***]

  	
   

  
	
  May 31, 2008

  	
  [***]

  	
   

  
	
  June 30, 2008

  	
  [***]

  	
   

  

 

In addition to the foregoing, the amounts set forth above shall be
adjusted upward on a dollar-for-dollar basis by the amount allocated for such
purpose in accordance with Section 2.22.”

 

7.     Compliance Certificate. Exhibit B to the Credit
Agreement is replaced in its entirety by Exhibit A to this Amendment.

 

8.     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.

 

9.     Conditions Precedent. This Amendment shall be effective
when the Lender shall have received an executed original hereof, together with
the following, each in form and substance acceptable to the Lender in its sole
discretion:

 

(a)   A
Certificate of Authority of the Borrowers certifying as to the resolutions of
the boards of directors of the Borrowers approving the execution and delivery
of this Amendment.

 

(b)   Such other
matters as the Lender may require.

 

10.   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
to perform all of its obligations hereunder, and this Amendment has 

 

5

 

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 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.

 

11.   No Waiver. The execution of this
Amendment and acceptance of any documents related hereto shall not be deemed to
be a waiver of any Default or Event of
Default under the Credit Agreement or breach, default or event of
default under any Security 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.

 

12.   Release. The Borrowers hereby
absolutely and unconditionally release and forever discharge the Lender, and
any and all participants, parent corporations, subsidiary corporations,
affiliated corporations, insurers, indemnitors, successors and assigns thereof,
together with all of the present and former directors, officers, agents 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 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.

 

13.   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.

 

6

 

14.   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.

 

IN WITNESS
WHEREOF, the parties hereto have caused this Amendment to be duly executed as
of the date first written above.

 

	
  HESKA CORPORATION  

  	
  DIAMOND ANIMAL HEALTH,
  INC.  

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
  /s/ Jason Napolitano

  	
   

  	
  By 

  	
  /s/ Jason Napolitano

  
	
   

  	
  Its

  	
  Chief Financial Officer

  	
   

  	
  Its 

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
  WELLS FARGO BANK,
  NATIONAL ASSOCIATION 

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By 

  	
  /s/ Tim Ulrich 

  	
   

  	
   

  
	
   

  	
  Tim Ulrich, Vice
  President

  	
   

  
							

 

7

 

Exhibit A to Second Amendment

 

Compliance Certificate

 

	
  To:

  	
   

  	
   

  
	
   

  	
  Wells Fargo Business Credit

  
	
   

  	
   

  
	
  Date:

  	
   

  	
  , 200

  	
   

  	 

	
   

  	
   

  
	
  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 .

 

                                                                                                Financial Covenants. I further hereby certify as follows:

 

                1.             Accounts Payable. 
Pursuant to Section 6.5 of the Credit Agreement, as of the
Reporting Date, Past Due Payables on a consolidated basis was $                                  ,
which o satisfies o does not satisfy the requirement that the Borrowers
have no Past Due Payables.

 

 

                2.             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.  Heska o has o has not raised at least $1,500,000 in
Additional Capital as of the Reporting Date, leading to an o increase o
decrease from the base Spread of             %,
so that the applicable Spread is equal to             %.

 

	
  Prior Fiscal Year Net Income

  	
   

  	
  Spread

  	
   

  
	
   

  	
   

  	
   

  
	
  Less than $0

  	
  2.00

  	
  %

  
	
   

  	
   

  	
   

  
	
  Greater than or equal to $0 but less than $2,500,000

  	
  1.00

  	
  %

  
	
   

  	
   

  	
   

  
	
  Greater than or equal to $2,500,000

  	
  0.00

  	
  %

  

 

                3.             Minimum Capital. Pursuant to Section 6.12 of
the Credit Agreement, as of the Reporting Date, Heska’s Capital was, on a
consolidated basis, $                                  ,
which o satisfies o does not satisfy the requirement that such amount be
not less than $                          
on the Reporting Date, as set forth in the table below and adjusted, if applicable,
in accordance with Section 6.12:

 

2

 

 

[***] — Certain information on
this page have been omitted and filed separately with the Securities and
Exchange Commission.  Confidential
treatment has been requested with respect to the omitted portions.

 

	
  Date

  	
   

  	
  Minimum Capital

  	
   

  
	
   

  	
   

  	
   

  
	
  July 31, 2007

  	
  [***]

  	
   

  
	
  August 31, 2007

  	
  [***]

  	
   

  
	
  September 30, 2007

  	
  [***]

  	
   

  
	
  October 31, 2007

  	
  [***]

  	
   

  
	
  November 30, 2007

  	
  [***]

  	
   

  
	
  December 31, 2007

  	
  [***]

  	
   

  
	
  January 31, 2008

  	
  [***]

  	
   

  
	
  February 29, 2008

  	
  [***]

  	
   

  
	
  March 31, 2008

  	
  [***]

  	
   

  
	
  April 30, 2008

  	
  [***]

  	
   

  
	
  May 31, 2008

  	
  [***]

  	
   

  
	
  June 30, 2008 and the last day of each month thereafter

  	
  [***]

  	
   

  

 

                4.             Minimum Net Income.  Pursuant to Section 6.13 of the Credit
Agreement, as of the Reporting Date, Heska’s 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 and adjusted, if
applicable, in accordance with Section 6.13:

 

	
  Period

  	
   

  	
  Minimum Net 

  Income

  	
   

  
	
  Nine months ending September 30, 2007

  	
  [***]

  	
   

  
	
  Twelve months ending December 31, 2007

  	
  [***]

  	
   

  
	
  Three months ending March 31, 2008

  	
  [***]

  	
   

  
	
  Six months ending June 30, 2008

  	
  [***]

  	
   

  

 

                5.             Minimum Liquidity.  Pursuant to Section 6.14 of the Credit
Agreement, as of the Reporting Date, Heska’s Liquidity was, on a consolidated
basis, $                                  ,
which o satisfies o does not satisfy the requirement that such amount be
no less than $1,500,000 on the Reporting Date.

 

3

 

                6.             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 $                                  
and Diamond’s Book Net Worth was $                                  ,
which o satisfies o does not satisfy the requirement that such amounts be
no less than zero on the Reporting Date.

 

                7.             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.

 

                8.             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:

 

4

 

[***] — Certain information on this page have
been omitted and filed separately with the Securities and Exchange
Commission.  Confidential treatment has
been requested with respect to the omitted portions.

 

	
  Date

  	
   

  	
  Maximum Capital 

  Expenditures

  	
   

  
	
  July 31, 2007

  	
  [***]

  	
   

  
	
  August 31, 2007

  	
  [***]

  	
   

  
	
  September 30, 2007

  	
  [***]

  	
   

  
	
  October 31, 2007

  	
  [***]

  	
   

  
	
  November 30, 2007

  	
  [***]

  	
   

  
	
  December 31, 2007

  	
  [***]

  	
   

  
	
  January 31, 2008

  	
  [***]

  	
   

  
	
  February 29, 2008

  	
  [***]

  	
   

  
	
  March 31, 2008

  	
  [***]

  	
   

  
	
  April 30, 2008

  	
  [***]

  	
   

  
	
  May 31, 2008

  	
  [***]

  	
   

  
	
  June 30, 2008

  	
  [***]

  	
   

  

 

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

  	
   

  

 

5Exhibit 10.31

 

THIRD AMENDMENT TO THIRD AMENDED AND RESTATED 

CREDIT AND SECURITY AGREEMENT

 

This Amendment, dated as of December 21, 2007, is
made by and between Heska Corporation, a Delaware corporation (“Heska”),
Diamond Animal Health, Inc., an Iowa corporation (“Diamond”) (each of
Heska and Diamond may be referred to herein individually as a “Borrower” and
collectively as the “Borrowers”), and Wells Fargo Bank, National Association,
operating through its Wells Fargo Business Credit operating division (the “Lender”).

 

Recitals

 

The Borrowers and the Lender are parties to a Third
Amended and Restated Credit and Security Agreement dated as of December 30,
2005, (as amended to date and as the same may be hereafter amended from time to
time, the “Credit Agreement”).

 

The Borrowers have requested that certain amendments
be made to the Credit Agreement, which the 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, Section 1.1 of the Credit
Agreement is amended by adding or amending, as the case may be, the following
definitions:

 

“Diamond Revolving Note” means the Third Amended and
Restated Revolving Note of Diamond and Heska in the form attached as Exhibit B
to the Third Amendment to this Agreement.

 

“Heska Revolving Note” means the Third Amended and
Restated Revolving Note of Heska in the form attached as Exhibit A to the
Third Amendment to this Agreement.

 

“Maximum Line” means $15,000,000, unless said amount
is reduced pursuant to Section 2.12, in which event it means the amount to
which said amount is reduced.

 

2.     Inventory Cap. The figure “$4,750,000” in clause (iii) of
the definition of “Borrowing Base” is replaced by the figure “$7,500,000”.

 

3.     Schedules. 
Schedule 5.4 and Schedule 5.6 to the Credit Agreement are replaced by
Schedule 5.4 and Schedule 5.6 to this Amendment.

 

 

 

 

4.     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.

 

5.     Origination Fee. The Borrowers shall
pay the Lender as of the date hereof a fully earned, non-refundable fee in the
amount of $15,000 in consideration of the Lender’s execution and delivery of
this Amendment.

 

6.     Conditions Precedent. This Amendment shall be effective
when the Lender shall have received an executed original hereof, together with
the following, each in form and substance acceptable to the Lender in its sole
discretion:

 

(a)   The
replacement Revolving Notes (the “Replacement Notes”) in the form set forth in
Exhibits A and B to this Amendment.

 

(b)   Payment of
the fee described in paragraph 5.

 

(c)   A
Certificate of Authority of the Borrowers certifying as to the resolutions of
the boards of directors of the Borrowers approving the execution and delivery
of this Amendment.

 

(d)   Such other
matters as the Lender may require.

 

7.     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 the Replacement
Notes and to perform all of its obligations hereunder, and this Amendment and
the Replacement Notes 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 the Replacement
Notes 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.

 

 

2

 

 

8.     No Waiver. The execution of this Amendment and acceptance
of the Replacement Notes and any documents related hereto shall not be deemed
to be a waiver of any Default or Event
of Default under the Credit Agreement or breach, default or event of
default under any Security 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.

 

9.     Release. The Borrowers hereby absolutely and
unconditionally release and forever discharge the Lender, and any and all
participants, parent corporations, subsidiary corporations, affiliated
corporations, insurers, indemnitors, successors and assigns thereof, together
with all of the present and former directors, officers, agents 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 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.

 

10.   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.

 

11.   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.

 

 

3

 

 

IN WITNESS WHEREOF,
the parties hereto have caused this Amendment to be duly executed as of the
date first written above.

 

	
  HESKA CORPORATION

   

   

  	
  DIAMOND ANIMAL HEALTH,
  INC.

   

   

  
	
  By

  	
  /s/ Jason Napolitano

  	
   

  	
  By

  	
  /s/ Jason Napolitano

  
	
   

  	
  Its     Chief
  Financial Officer

  	
   

  	
  Its     Chief
  Financial Officer

  
	
   

  	
   

  	
   

  	
   

  
	
  WELLS FARGO BANK,
  NATIONAL

  ASSOCIATION

   

   

  	
   

  
	
  By

  	
  /s/ Tim Ulrich

  	
   

  	
   

  	
   

  
	
   

  	
   Tim Ulrich, Vice President

  	
   

  	
   

  
						

 

 

4

 

 

Exhibit A to Third Amendment

 

THIRD AMENDED AND RESTATED REVOLVING
NOTE

(Heska)

 

	
  $15,000,000

  	
   

  	
  Denver, Colorado

  

December         ,
2007

 

                For
value received, the undersigned, HESKA CORPORATION, a Delaware corporation (the
“Borrower”), hereby promises 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 the Borrower 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 Borrower 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 issued in
substitution for and replacement of, but not in repayment of, the Borrower’s
Second Amended and Restated Revolving Note dated as of March 26, 2004, in
the original principal amount of $12,000,000. 
This Note is the Heska 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.

 

                The
Borrower hereby agrees 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 CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
   

  
	
   

  	
   

  	
  Its

  	
   

  

 

 

 

 

Exhibit B to Third Amendment

 

THIRD AMENDED AND RESTATED REVOLVING
NOTE

(Diamond Animal
Health)

 

	
  $15,000,000

  	
   

  	
  Denver, Colorado

  
	
   

  	
   

  	
  December           ,
  2007

   

  

 

                For
value received, the undersigned, DIAMOND ANIMAL HEALTH, INC., an Iowa
corporation (“Diamond”), and HESKA CORPORATION, a Delaware corporation (collectively,
the “Borrowers”), hereby 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 Diamond 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 and the Borrowers. 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 issued in
substitution for and replacement of, but not in repayment of, the Borrowers’
Second Amended and Restated Revolving Note dated as of March 26, 2004, in
the original principal amount of $12,000,000. 
This Note is the Diamond 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.

 

                The
Borrower hereby agrees 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.

 

	
  DIAMOND ANIMAL HEALTH, INC. 

  	
  HESKA CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  	
  By

  	
   

  
	
  Its

  	
   

  	
  Its

  	
   

  
					

 

 

2

 

 

Schedule 5.4

 

Subsidiaries

 

Heska Corporation Subsidiaries:

Diamond Animal Health, Inc. (Iowa)

Heska AG (Switzerland)

Sensor Devices, Inc. (Wisconsin; - inactive)

 

Diamond Animal Health, Inc. Subsidiaries:

None

 

Heska AG Subsidiaries:

None

 

 

3

 

 

Schedule 5.6

 

Litigation Matters

 

 

None

 

 

4

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