Document:

Amendment to Credit and Security Agreement

  Exhibit 10.1
 [***] — 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. 
 FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED 
CREDIT AND SECURITY AGREEMENT 
 This
Amendment, dated as of March 28, 2003, 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 Business Credit, Inc., a Minnesota corporation (the “Lender”).
 Recitals
 The Borrowers and the Lender are parties to a Second Amended and Restated Credit and Security Agreement dated
as of June 14, 2000 (as amended to date and as the same may be hereafter amended from time to time, 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.
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:
 “Borrowing Base” for a Borrower means, at any time the lesser of:
 (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) 45% of Eligible Inventory of such Borrower consisting of raw materials plus (2) 55% of Eligible Inventory of such Borrower consisting of finished goods, or (B) the difference of (1) $4,000,000 less (2) the aggregate amount of Advances
made to all Borrowers other than such Borrower in reliance on Eligible Inventory, less
 (iii)
for any Borrower other than Heska, the principal sum of all outstanding Advances made to Heska in reliance on such Borrower’s Borrowing
Base.
 “Diamond Revolving Note” means the First Amended and Restated Revolving Note of Diamond and Heska in the form attached as
Exhibit B to the Fourth Amendment to this Agreement.
 “Heska Revolving Note” means the First Amended and Restated Revolving Note
of Heska in the form attached as Exhibit A to the Fourth Amendment to this Agreement.
 “Maturity Date” means May 31,
2006.
 “Maximum Line” means $11,000,000, unless said amount is reduced pursuant to Section 2.12, in which event it means the
amount to which said amount is reduced.
 2.
Prepayment Fee for Term Loan B Note. Subsection 2.13(c) of the Credit Agreement is amended by adding to the end the following new sentence:
 “With respect to Term Loan B Note only, so long as no Default Period then exists, the Borrowers will not be required to pay the prepayment fees otherwise due under Section 2.13(b) if (i) such
prepayment is made in connection with a refinancing of the Term Loan B Note on terms (with respect to interest rate, amortization, and maturity date) not substantially less favorable to the Borrowers than the terms under which the Term Loan B Note
exists and (ii) such prepayment is not in connection with a refinancing or prepayment of the Term Loan A Note, the Revolving Note, or any other Obligations other than the Term Loan B Note.”
 3.
Accounts Payable. The last two
sentences of Section 6.5 of the Credit Agreement are hereby amended to read as follows:
 “Each Borrower will, at all times,
immediately pay all of its accounts payable (other than accounts payable to Affiliates) that are 60 days or more past due; provided, however, that in the case of Heska during the fiscal year ending December 31, 2003, such
 
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  [***] — Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has
been requested with respect to the omitted portions.
 limit shall be 90 days or more past due. Each Borrower will at all times maintain its accounts payable in
accordance with the previous sentence.”
 4.
Minimum Capital. Section 6.12 of the Credit Agreement is hereby amended to read in its entirety 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:
  

	 Date
 	  
 	 Minimum Capital
 
	 
 	  
 	 
 
	 February 28, 2003
 	  
 	 $[ *** ]
 
	 March 31, 2003
 	  
 	 $[ *** ]
 
	 April 30, 2003
 	  
 	 $[ *** ]
 
	 May 31, 2003
 	  
 	 $[ *** ]
 
	 June 30, 2003
 	  
 	 $[ *** ]
 
	 July 31, 2003
 	  
 	 $[ *** ]
 
	 August 31, 2003
 	  
 	 $[ *** ]
 
	 September 30, 2003
 	  
 	 $[ *** ]
 
	 October 31, 2003
 	  
 	 $[ *** ]
 
	 November 30, 2003
 	  
 	 $[ *** ]
 
	 December 31, 2003, and 
 the last day of each
month thereafter
 	  
 	  $[ *** ]”
 

 
 5.
Minimum Net Income. Section
6.13 of the Credit Agreement is hereby amended to read in its entirety as follows:
 “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
 
	 
 	  
 	 
 
	 Three months ending March 31, 2003
 	  
 	 ($[ *** ])
 
	 Six month ending June 30, 2003
 	  
 	 ($[ *** ])
 
	 Nine months ending September 30, 2003
 	  
 	 ($[ *** ])
 
	 Twelve months ending December 31, 2003
 	  
 	  ($[ *** ])”
 

 6.
Minimum Liquidity. Section 6.14 of the Credit Agreement is hereby amended to read in its
entirety as follows:
 
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  “Section 6.14 Minimum Liquidity. Heska will maintain, on a
consolidated basis, as of each date listed below, its Liquidity at an amount not less than the amount set forth opposite such date:
  

	 Date
 	  
 	 Minimum Liquidity
 
	 
 	  
 	 
 
	 April 30, 2003
 	  
 	 $1,750,000
 
	 May 31, 2003
 	  
 	 $1,750,000
 
	 June 30, 2003
 	  
 	 $1,750,000
 
	 July 31, 2003
 	  
 	 $1,000,000
 
	 August 31, 2003
 	  
 	 $1,000,000
 
	 September 30, 2003
 	  
 	 $1,000,000
 
	 October 31, 2003
 	  
 	 $1,000,000
 
	 November 30, 2003
 	  
 	 $1,000,000
 
	 December 31, 2003, and
 the last day of each month
thereafter
 	  
 	  $1,500,000”
 

 
 7.
New Covenants. Section 6.16 of
the Credit Agreement is hereby amended to read in its entirety as follows:
 “Section 6.16 New
Covenants. On or before December 31, 2003, 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.”
 8.
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 of more than $1,700,000 in the aggregate during the fiscal year ending December 31, 2003.”
 9.
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.
 10.
Waiver of Default. The
Borrowers are in default of Section 6.16 of the Credit Agreement as a result of financial covenants for the 2003 fiscal year not being in place on or before December 31, 2002 (the “Existing Default”). Upon the terms and subject to the

 
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  [***] — Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has
been requested with respect to the omitted portions. 
 conditions set forth in this Amendment, the 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 the Borrowers to any other or further waiver in any similar or other circumstances.
 11.
 Consent to Real Estate Refinance; Agreement to
Release Collateral. So long as no Default Period then exists, the Lender consents to the Borrowers’ incurrence of indebtedness not to exceed $5,000,000 to the grant of a security interest in the Farm Mortgaged Property
and the Factory Mortgaged Property to secure such indebtedness, and to the guaranty of such indebtedness by Heska, each in connection with a refinancing of the Term Loan B Note, provided that (a) the proceeds of such indebtedness are sufficient to
repay, and in fact are used to repay, the Term Loan B Note in its entirety, with the balance of such proceeds (if any) being deposited in Diamond’s Collateral Account for repayment of Revolving Advances, and (b) the terms of such indebtedness
are not substantially less favorable to the Borrowers than the terms under which the Term Loan B Note exists. In the case of such a refinancing, the Lender agrees that it will release its security interest in the Farm Mortgaged Property and the
Factory Mortgaged Property upon receipt of the proceeds of such permitted refinancing. This consent shall be effective only in this specific instance and for the specific purpose for which it is given, and this consent shall not entitle the
Borrowers to any other or further consent in any similar or other circumstances.
 12.
Amendment Fee. The Borrowers shall pay the Lender as of the date hereof a fully earned, non-refundable fee in the
amount of $[ *** ] in consideration of the Lender’s execution and delivery of this Amendment.
 13.
 Conditions Precedent. This Amendment, including the waiver set forth in paragraph 10 and the consent set forth in
paragraph 11, shall be effective when the Lender shall have received an executed original hereof, together with each of the following, each in substance and form 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)
A Patent and Trademark Security Agreement, executed by each Borrower, for the benefit of the Lender.
 (c)
 Payment of the fee described in paragraph
12.
 (d)
Amendments to the Farm Mortgage
and the Factory Mortgage to reflect the extension of the Maturity Date and increase in the Maximum Line as set forth in this Amendment.
 
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  (e)
Such other
matters as the Lender may require.
 14.
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.
 15.
 No Other
Waiver. Except as set forth in paragraph 10, the execution of this Amendment and acceptance of the Replacement Notes and any other 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.
 16.
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 
 
 - 6 -

  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.
 17.
 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 12 hereof.
 18.
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 BUSINESS CREDIT, INC.
 f/k/a Norwest Business Credit,
Inc.
 	  
 	  
 
	 By 
 	 
 /s/ CHRISTOPHER K. PORTER
 	  
 	  
 	  
 
	  
 	 
 	  
 	  
 	  
 
	  
 	 Its Vice President
 	  
 	  
 	  
 

  
 
 - 7 -

  Exhibit A to Fourth Amendment
 AMENDED AND
RESTATED REVOLVING NOTE
(Heska)
  

	 $11,000,000
 	  
 	 Denver, Colorado
 March 28, 2003
 

 
   
 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 Eleven Million Dollars ($11,000,000) 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 Second Amended and Restated Credit and Security Agreement dated as of June 14, 2000 (as the same may hereafter be amended,
supplemented or restated from time to time, the “Credit Agreement”) by and among the Lender, the Borrower, Diamond Animal Health, Inc., and Center Laboratories, 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 Revolving Note dated as of June 14, 2000, in the
original principal amount of $10,000,000. 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.
 
 - 8 -

  Presentment or other demand for payment, notice of dishonor and protest are expressly waived.
  

	  
 	  
 	 HESKA CORPORATION
 
	 
 
 
 	  
 	 By 
 	 
 /s/ JASON NAPOLITANO
 
	  
 	  
 	  
 	 
 
	  
 	  
 	  
 	 Its Chief Financial Officer
 

  
 
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  Exhibit B to Fourth Amendment
 AMENDED AND
RESTATED REVOLVING NOTE
(Diamond Animal Health)
  

	 $11,000,000
 	  
 	 Denver, Colorado
 March 28, 2003
 

  
 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 Eleven Million
Dollars ($11,000,000) 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 Second Amended and Restated Credit and Security
Agreement dated as of June 14, 2000 (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 Center Laboratories, 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 Borrowers’
promissory note dated as of June 14, 2000, payable to the order of the Lender in the original principal amount of $10,000,000. 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.
 
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 	 DIAMOND ANIMAL HEALTH, INC.
 	  
 	 HESKA CORPORATION
 
	  
 	 By 
 	 
 /s/ JASON NAPOLITANO
 	  
 	 By 
 	 
 /s/ JASON NAPOLITANO
 
	  
 	  
 	 
 	  
 	  
 	 
 
	  
 	  
 	 Its Chief Financial Officer
 	  
 	  
 	 Its Chief Financial Officer
 

  
  
  
 - 11 -License Agreement between Heska and Synbiotics

Exhibit 10.2 
 
[***] —Certain information in this exhibit has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions. 
 
LICENSE AGREEMENT 
 
This LICENSE AGREEMENT (“Agreement”) is made and entered into this 28th day of March, 2003, by and between Synbiotics Corporation, a California corporation (“Synbiotics”), on the one hand, and Heska
Corporation, a Delaware corporation (“Heska”), on the other hand. 
 
RECITALS 
 
A.    Synbiotics is in the business of developing, manufacturing and marketing veterinary diagnostics, vaccines and other animal health related products worldwide. 
 
B.    Heska is in the business of
developing, manufacturing and marketing innovative health products for dogs, cats and horses. 
 
C.    Synbiotics is the owner of United States Patent No. 4,789,631 issued on December 6, 1988 to Edward T. Maggio, entitled “Immunoassay for Anti-Dirofilaria Immitis
Antibody” (the “‘631 Patent”). 
 
D.    Heska is the owner of United States Patent No. 6,391,569 B1 issued on May 21, 2002 to Robert B. Grieve, et al., entitled “Method to Detect Dirofilaria Immitis Infection” (the “‘569
Patent”). 
 
E.    On or
about November 12, 1998, Synbiotics filed a lawsuit against Heska entitled Synbiotics Corporation vs. Heska Corporation, United States District Court for the Southern District of California, Case No. 98 CV 2076 TW (the “Complaint”),
in which it asserted claims for damages and injunctive relief against Heska for Heska’s alleged infringement of the ‘631 Patent. On or about January 15, 1999, Heska filed an Answer and Counterclaim and on or about June 1, 1999, Heska filed
an Amended Answer and Counterclaim (the “Counterclaim”). In the Counterclaim, Heska denied the claims asserted in the Complaint and sought a declaration from the court that the ‘631 Patent was invalid, unenforceable and not infringed
by Heska. Synbiotics filed a Reply in which it denied the claims asserted in the Counterclaim. The proceedings relating to the Complaint and the Counterclaim shall hereinafter be referred to as the “Lawsuit.” 
 
F.    In furtherance of the settlement of
the Lawsuit, Synbiotics is willing to license certain of its intellectual property to Heska. 

 
TERMS OF
AGREEMENT 
 
NOW, THEREFORE, in consideration of the
premises and the mutual covenants contained herein and for good and valuable consideration, the Parties hereby agree as follows: 
 
ARTICLE 1    DEFINITIONS 
 
For purposes of this Agreement, the following words and phrases shall have the following meanings: 
 

	1.1	 	“Affiliate(s)” shall mean (a) a business entity which owns, directly or indirectly, a controlling interest of at least fifty percent (50%) of a
Party to this Agreement, by stock ownership or otherwise; or (b) a business entity which is at least fifty percent (50%) owned or controlled by a Party to this Agreement, either directly or indirectly, by stock ownership or otherwise; or (c) a
business entity, the ownership of which is directly or indirectly common with at least fifty percent (50%) ownership of a Party to this Agreement, by stock ownership or otherwise. 

 

	1.2	 	“Calendar Year” shall mean, with respect to the first Calendar Year, commencing on April 1, 2003 and ending on December 31, 2003. The second
Calendar Year shall commence on January 1, 2004 and end on December 31, 2004. The third Calendar Year shall commence on January 1, 2005 and end on December 6, 2005. 

 

	1.3	 	“Calendar Quarter” shall mean a period of three (3) consecutive calendar months ending on March 31, June 30, September 30 and December 31 of any
Calendar Year, with the exception that in 2005, the fourth quarter shall end on December 6 rather than December 31. 

 

	1.4	 	“Di33-based Licensed Products” shall mean any heartworm antibody detection test product or part thereof using at least one recombinant Di33 protein,
wherein a Di33 protein has properties as set forth in the ‘569 Patent, including any said heartworm antibody detection test product or part thereof within the scope of a claim in the Patent Rights or manufactured by a process within the scope
of a claim in the Patent Rights. 

 

	1.5	 	“Effective Date” means the date first noted above. 

 

	1.6	 	“Licensed Products” shall mean Mab-based Licensed Products and/or Di33-based Licensed Products. 

 

	1.7	 	 “Mab-based Licensed Products” shall mean any heartworm antigen detection test product or part thereof having or using at least one monoclonal
antibody that reacts with Dirofilaria immitis antigenic extract, including any said heartworm antigen detection test product or part thereof within the scope of a claim in the Patent Rights or manufactured by a process within the scope of a claim in
the Patent Rights. For avoidance of doubt, the 

 

2 

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

	 	 
Parties agree that Heska’s SOLO STEP® CH product and canine and feline reference laboratory heartworm antigen detection tests using such a monoclonal antibody are “Mab-based Licensed Products”. 

 

	1.8	 	“Net Sales” shall mean Heska’s actual gross receipts from sales made between April 1, 2003 and December 6, 2005, of Mab-based Licensed Products
(whether or not such Mab-based Licensed Products would also qualify as Di33-based Licensed Products), less the sum of the following: 

 

	 	(a)	 	actual cost of freight charges or freight absorption, separately stated in such invoice; 

 

	 	(b)	 	actual trade, quantity or cash discounts allowed, if any; 

 

	 	(c)	 	amounts actually repaid or credited by reason of rejection or return; and 

 

	 	(d)	 	sales, tariff duties and/or use taxes separately stated on each invoice. 

 
If any Mab-based Licensed Products are sold in combination with other separate products (“Other
Products”) for a single unit price, Net Sales for such combination products shall be a percentage of the unit price determined by dividing the fair market sales price of the Mab-based Licensed Products by the aggregate fair market sales prices
of such Mab-based Licensed Products and the Other Products. If any Other Product does not have a separately established fair market sales price, the Parties will negotiate in good faith to determine one. If the Parties can not agree to such a fair
market sales price, the Parties will determine such a price pursuant to Article 8. For purposes of clarity, should Heska sell a combination product that qualifies as both a Mab-based Licensed Product and a Di33-based Licensed Product intended to
detect both heartworm antigen and heartworm antibodies, Net Sales for such a combination product would be a percentage of the unit price of such combination product determined by dividing the fair market price of the Mab-based Licensed
Product by the aggregate fair market sales prices of such Mab-based Licensed Product and such Di33-based Licensed Product. 
 

	1.9	 	“Party” or “Parties” shall mean Heska or Synbiotics, or both, as the context indicates. 

 

	1.10	 	“Patent Rights” shall mean the ’631 Patent. 

 

	1.11	 	“Territory” shall mean the United States, including its territories and possessions. 

 
ARTICLE 2    GRANT 
 

	2.1	 	 Synbiotics hereby grants to Heska and its Affiliates a non-exclusive, [ *** ] license to the Patent Rights, without the right to sublicense except as approved by
Synbiotics in writing, to make, have made, use, sell and have sold Mab-based Licensed Products in the Territory, except products utilizing the format technology 

 

3 

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

	 	 
that is proprietary and that, as of today, is provided by AGEN to Synbiotics in the test format in Synbiotics’ current WITNESS heartworm
diagnostic products. For purposes of clarity, Synbiotics hereby acknowledges Heska’s right to have such Mab-based Licensed Products or any component thereof manufactured by a third party. This license grant is limited only to Heska’s own
Mab-based Licensed Products whereas products which Heska may distribute for other parties that may otherwise infringe the Patent Rights are specifically excluded, except as approved by Synbiotics in writing. 

 

	2.2	 	Synbiotics hereby also grants to Heska and its Affiliates a non-exclusive, [ *** ] license to the Patent Rights, without the right to sublicense except as approved
by Synbiotics in writing, to make, have made, use, sell and have sold Di33-based Licensed Products in the Territory, except products utilizing the format technology that is proprietary and that, as of today, is provided by AGEN to Synbiotics in the
test format in Synbiotics’ current WITNESS heartworm diagnotic products. For purposes of clarity, Synbiotics hereby acknowledges Heska’s right to have such Di33-based Licensed Products or any component thereof manufactured by a third
party. Furthermore, the Parties agree that, as contemplated by Section 1.8, if a product qualifies as both a Mab-based Licensed Product and a Di33-based Licensed Product, it shall be subject to royalties under Section 3.1. This license grant is
limited only to Heska’s own Di33-based Licensed Products whereas products which Heska may distribute for other parties that may otherwise infringe the Patent Rights are specifically excluded, except as approved by Synbiotics in
writing. 

 

	2.3	 	Heska shall be responsible, at its sole expense, for all marketing and regulatory approvals of Licensed Products sold by it under this Agreement.

 
ARTICLE 3    ROYALTIES

 

	3.1	 	In consideration of the rights, privileges and licenses granted by Synbiotics under [ *** ], Heska shall pay royalties to Synbiotics in an amount equal to [ *** ] of
Net Sales of Mab-based Licensed Products sold by Heska and its Affiliates. On sales between Heska and any Affiliates for resale to an independent third party other than a Heska Affiliate, the royalty shall be based on the resale to an independent
third party. 

 

	3.2	 	Heska shall make annual royalty payments for Net Sales of Mab-based Licensed Products pursuant to Section 3.1 to Synbiotics in United States dollars according to the
following schedule, without notice or grace period: 

 

	 Period of Net Sales

	 	 Royalty Due Date

	 Apr. 1, 2003 – Dec. 31, 2003
	 	 April 30, 2004

	 Jan. 1, 2004 – Dec. 31, 2004
	 	 April 30, 2005

	 Jan. 1, 2005 – Dec. 6, 2005
	 	 April 30, 2006

 

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

Such payments will be made by either check or wire transfer, at Heska’s
discretion, payable to Synbiotics Corporation, and will be sent to the address provided by Synbiotics in writing. 
 
ARTICLE 4    REPORTS; AUDITS 
 

	4.1	 	Heska shall deliver to Synbiotics true and accurate reports of the following information to accompany royalty payments of Article 3 above:

 

	 	(a)	 	Gross receipts from sales for the pertinent period for each respective Mab-based Licensed Product sold by Heska and its Affiliates under this Agreement for each
Calendar Year; 

 

	 	(b)	 	The sum of (a) through (d) set forth in Section 1.7; and 

 

	 	(c)	 	total royalties due. 

 

	4.2	 	Heska will provide Synbiotics a written report of quarterly royalty accruals for each Calendar Quarter within thirty (30) days of the end of such Calendar Quarter.

 

	4.3	 	Heska shall keep full true and accurate books of account, in accordance with generally accepted accounting principles, containing all information that may be
necessary for the purpose of showing the amounts payable to Synbiotics hereunder. Said books of account shall be kept at Heska’s principal place of business. Said books and the supporting data shall be open for audit no more than once per
Calendar Year, and at reasonable times upon reasonable notice to Heska, for three (3) years following the end of the Calendar Year to which they pertain, to the inspection of an independent, nationally-recognized certified public accountant
reasonably acceptable to Heska for the purpose of verifying Heska’s royalty statement or compliance in other respects with this Agreement, all at the expense of Synbiotics; provided, however, if an audit correctly discloses that the royalties
payable by Heska for any audited period are more than [ *** ] of the royalties actually paid for such period, then Heska shall pay the fees and expenses charged by the accountant. Such independent accountant will not disclose to Synbiotics any
information other than the accuracy of Heska’s reports and calculations. 

 
ARTICLE 5    PATENT INFRINGEMENT ACTIONS 
 

	5.1	 	 During the term of this Agreement, Synbiotics shall be obligated, to the extent it is commercially reasonable to do so, to prosecute at its own expense and in
good faith all third party infringements of the ’631 Patent. The total cost of any such infringement action commenced or defended by Synbiotics shall be borne by Synbiotics and Synbiotics shall keep any recovery for damages for infringement
derived therefrom. Heska shall reasonably cooperate with such prosecution, including notifying Synbiotics of any potential third party infringement of the ’631 Patent, provided that all out-of-pocket costs will be borne by Synbiotics.
Furthermore, if Heska expects that any such cooperation 

 

5 

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

	 	 
with respect to any single infringement prosecution will exceed sixteen (16) hours of Heska’s time, the Parties agree to discuss fair
compensation of Heska prior to Heska beginning such cooperation activity. 

 

	5.2	 	If within six (6) months after having been notified of or having given notice of any alleged infringement of the Patent Rights, Synbiotics shall have been
unsuccessful in persuading the alleged infringer to desist and shall not have brought and shall not be diligently prosecuting an infringement action (unless it is not commercially reasonable to prosecute), or if Synbiotics shall notify Heska at any
time prior thereto of its intention not to bring suit against any alleged infringer, (unless it is not commercially reasonable to prosecute), then the license granted under [ *** ] of this Agreement shall be [ *** ]. It is conclusively deemed to be
not commercially reasonable to bring any prosecution against a party selling less than [ *** ] per Calendar Year of allegedly infringing product.  

 
ARTICLE 6    REPRESENTATIONS / INDEMNIFICATION / LIMITATION OF LIABILITY 
 

	6.1	 	Synbiotics represents and warrants to Heska that it has full right and authority to grant the licenses under this Agreement, and that it has no relationship with any
other entity that would preclude it from carrying out its obligations under this Agreement. Heska represents and warrants to Synbiotics that it has the full right and authority to enter into and perform this Agreement, and that it has no
relationship with any other entity that would preclude it from carrying out its obligations under this Agreement. Heska further represents and warrants to Synbiotics that, as of the Effective Date, it has no commercially reasonable knowledge of any
potential third party infringement of the ‘631 patent. 

 

	6.2	 	Heska shall at all times during the term of this Agreement and thereafter, indemnify, defend and hold Synbiotics, its directors, officers, employees, agents and
Affiliates (“Indemnified Party”) harmless against all claims and expenses, including legal expenses and reasonable attorneys’ fees, arising out of the death of or injury to any person or persons or out of any damage to property or the
environment, and against any other claim, proceeding, demand, expense and liability of any kind whatsoever resulting from Heska’s production, manufacture, sale, use, lease, consumption or advertisement of the Licensed Products or arising from
any of Heska’s obligations hereunder, except to the extent such claims and expenses are due to the gross negligence or willful misconduct of Synbiotics. 

 

	6.3	 	If an Indemnified Party seeks indemnification from Heska, it shall promptly give notice to Heska of any such claim or suit threatened, made or filed against it by a
third party which forms the basis for such claim or suit. Heska shall have the sole right to defend such claim or suit, including the right to select counsel. No settlement or compromise shall be binding on an Indemnified Party hereto without its
prior written consent, which consent shall not be unreasonably withheld. 

 

6 

	6.4	 	SYNBIOTICS MAKES NO REPRESENTATIONS THAT THE LICENSED PRODUCTS WILL NOT INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY. EXCEPT AS OTHERWISE EXPRESSLY
SET FORTH IN THIS AGREEMENT, NEITHER PARTY EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 

 
ARTICLE 7    ASSIGNMENT 
 

	7.1	 	This Agreement or any right or obligation hereunder may not be assigned or otherwise transferred without the prior written consent of the other Party, which consent
will not be unreasonably withheld; provided, however, such consent shall not be required in the case of a sale or other transfer to a third party of all or substantially all of (a) the stock or (b) the assets of a Party’s business, in which
event written notice of such sale or other transfer shall be provided to the other Party. For purposes of this Section 7.1, acquisition by reverse triangular merger shall be deemed a transfer of all stock. Any permitted assignee shall assume all
obligations of its assignor under the Agreement.  

 
ARTICLE 8    DISPUTE RESOLUTION 
 

	8.1	 	The Parties shall attempt in good faith to resolve any dispute or disagreement (“Dispute”) arising out of or relating to this Agreement promptly by
negotiation between representatives who have authority to settle the controversy. Any Party may give the other Party written notice of any Dispute not resolved in the normal course of business. Within fifteen (15) days after delivery of the notice,
the receiving Party shall submit to the other Party a written response. The notice and the response shall include (a) a statement of each Party’s position and a summary of arguments supporting that position, and (b) the name and title of the
representative who will represent that Party and of any other person who will accompany the representative. Within thirty (30) days after delivery of the disputing Party’s notice, the representatives of both Parties shall meet at a mutually
acceptable time and place and thereafter as often as they reasonably deem necessary, to attempt to resolve the Dispute. All reasonable requests for information made by one Party to the other Party will be honored. 

 

	8.2	 	All negotiations pursuant to this Article 8 are confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of
evidence. If the Dispute has not been resolved by negotiation within forty-five (45) days of the disputing Party’s notice, or if the Parties failed to meet within thirty (30) days, the Parties shall endeavor to settle the Dispute by mediation
under the then current CPR Model Mediation Procedure for Business Disputes. Each Party shall bear its own costs. 

 

7 

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

 

	8.3	 	If the Parties are unable to resolve the Dispute by mediation in accordance with Section 8.2, then the Dispute will be finally settled by binding arbitration to be
conducted in San Francisco, California (or at such other location as the Parties may agree) under the commercial arbitration rules then prevailing of the American Arbitration Association 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 11.1 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. 

 

	8.4	 	Notwithstanding the foregoing, without breach of the arbitration provision and without reference to Article 8, either Party may seek to enforce any violation of the
settlement, including this Agreement, through the process of the United States District Court, Southern District of California. 

 

	8.5	 	Nothing in this Article 8 shall modify, alter or supersede the rights of either Party contained in the Consent Judgment and Injunction entered into pursuant to the
Settlement Agreement. 

 
ARTICLE 9  TERM
AND TERMINATION 
 

	9.1	 	This Agreement shall be effective as of the Effective Date and shall continue in effect until December 6, 2005, unless earlier terminated as set forth in Section 9.2
or 9.3. Upon expiration of this Agreement, Heska shall have a fully paid, irrevocable license to the Patent Rights. 

 

	9.2	 	This Agreement may be terminated by either Party at any time during the term of this Agreement: 

 

	 	(a)	 	if the other Party is in breach of its material obligations hereunder and (i) in the case of any breach other than nonpayment, has not within ninety (90) days after
written notice requesting cure of the breach commenced substantial efforts toward cure of the breach and continuously and diligently conducted such efforts until (even after the 90th day, if necessary) the breach is cured, or (ii) in the case of
nonpayment, has not within [ *** ] after written notice requesting cure of the breach cured the breach; provided, however, in the event of a good faith dispute with respect to the existence of a material breach, the ninety (90) day cure period shall
begin when the Dispute is resolved pursuant to Article 8; 

 

	 	(b)	 	 upon the filing or institution of bankruptcy, reorganization, liquidation or receivership proceedings, or upon an assignment of a substantial portion of the

 

8 

	 	 
assets for the benefit of creditors by the other Party; provided, however, in the case of any involuntary bankruptcy proceeding such right to
terminate shall only become effective if the Party consents to the involuntary bankruptcy or such proceeding is not dismissed within ninety (90) days after the filing thereof. 

 

	9.3	 	This Agreement shall be coterminous with the Settlement Agreement and Mutual Release of Claims (“Settlement Agreement”) entered into between the Parties on
even date herewith if the Settlement Agreement is terminated before the expiration date of this Agreement. 

 

	9.4	 	Unless terminated pursuant to Section 9.2(b), in the event this Agreement is rejected by Synbiotics or its receiver or trustee under applicable bankruptcy laws due
to Synbiotics’ bankruptcy, then all rights and licenses granted under this Agreement by Synbiotics to Heska are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the Bankruptcy Code and any similar law or regulation,
licenses of rights to “intellectual property” as defined under Section 101(52) of the Bankruptcy Code. The Parties agree that all intellectual property rights licensed hereunder, including the Parties’ Patent Rights, are part of the
“intellectual property” as defined under Section 101(52) of the Bankruptcy Code subject to the protections afforded the non-terminating Party under Section 365(n) of the Bankruptcy Code. 

 

	9.5	 	Upon expiration or termination of this Agreement, neither Party shall be released from any obligation that matured prior to the effective date of such expiration or
termination. 

 

	9.6	 	The provisions of Articles 3.2, 4, 6, 8, 9.1 (in the event of expiration, only), 9.5, 10 and 11 shall survive the expiration or termination of this Agreement.

 
ARTICLE  10  NOTICES

 

	10.1	 	Any notice or communication pursuant to this Agreement shall be sufficiently made or given if sent by personal delivery, by a nationally-recognized overnight
courier, or by certified, first-class mail, postage prepaid, addressed to the address below, or such other address that a Party has given by written notice under this Section 10.1. 

 
In the case of Heska: 
 

	 Heska Corporation

	 1613 Prospect Parkway

	 Fort Collins, CO 80525

	
	 Attention:
	  	 Chief Executive Officer

	 Copy to:
	  	 Executive Vice President, Intellectual Property and Business Development

 

9 

 
In the case of
Synbiotics: 
 

	 Synbiotics Corporation

	 11011 Via Frontera

	 San Diego, CA 92127

	
	 Attention:
	  	 President

	 Copy to:
	  	 Hayden Trubitt; Heller Ehrman White & McAuliffe LLP

	 	  	 4350 La Jolla Village Drive, 7th Floor; San Diego, CA 92122

 
ARTICLE
11  MISCELLANEOUS 
 

	11.1	 	California Law. This Agreement shall be governed by and interpreted in accordance with California law. 

 

	11.2	 	Integration and Modification. Each Party represents and warrants that as of the date of the full execution of this Agreement, no promise, inducement or
agreement not expressed herein has been made to it in connection with this Agreement, and that this Agreement, the Consent Judgment and Injunction, the Settlement Agreement and the License Agreement relating to the ’569 Patent, contain the
entire agreement between the Parties as to the subject matter related hereto and supersede any previous agreements, negotiations, promises or understandings between them as to the subject matter contained herein. It is expressly agreed that this
Agreement may not be altered, modified or amended except by a writing duly executed by the undersigned Parties. 

 

	11.3	 	Headings. The headings of the several sections are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement. 

 

	11.4	 	Promotional Activities. Except as specified herein, nothing contained in this Agreement shall be construed as conferring any right to use in advertising,
publicity or other promotional activities any name, trade name, trademark, or other designation (including any contraction, abbreviation, or simulation of any of the foregoing) of the other Party without the express written approval of the other
Party. Neither Party shall use any designation of the other Party in any promotional activity associated with this Agreement or the Licensed Product without the express written consent of the other Party. 

 

	11.5	 	Severability. In the event any provision of this Agreement shall be determined to be invalid, illegal or unenforceable, such provision shall be severable from
the remainder of the Agreement, and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 

 

	11.6	 	 Waiver. Failure at any time to require performance of any of the provisions herein shall not waive or diminish a Party’s right thereafter to demand
compliance therewith or with 

 

10 

	 	 
any other provision. Waiver of any default shall not waive any other default. A Party shall not be deemed to have waived any rights hereunder
unless such waiver is in writing and signed by a duly authorized officer of the Party making such waiver. 

 

	11.7	 	Force Majeure. Neither Party shall be held responsible for the failure or delay in performance herein when such failure or delay is due to any act of God or
of the public enemy, war, compliance with laws, governmental acts or regulations, fire, flood, epidemic, strikes and labor interruption, accident, unusually severe weather or other causes similar to the foregoing beyond their reasonable control. Any
Party whose performance is affected by such force majeure shall promptly give notice to the other Party of such force majeure upon which such Party intends to rely to excuse its performance.  

 

	11.8	 	Independent Contractors. The relationship between Synbiotics and Heska under this Agreement shall be that of independent contractors engaged in the operation
of their own respective businesses. Nothing in this Agreement is intended or is to be construed to constitute Heska and Synbiotics as partners, employer/employee, or principal/agent, or the employees or agents of any Party hereto as employees or
agents of the other Party. Neither Party has the express or implied right or authority to assume or create any obligations for or on behalf of the other Party, to bind the other Party to any contract or undertaking with any third party or to make
any warranties or representations for or on behalf of the other Party. 

 

	11.9	 	Counterparts. This Agreement may be executed in counterparts, each of which is deemed to be an original, but all of which together shall constitute one and
the same instrument. Facsimile and photocopy signatures shall carry the same force and effect, and shall bind the parties hereto in the same manner, as original signatures to this Agreement. 

 

	11.10	 	Construction. 

 

	 	11.10.1	 	The language and terms of this Agreement are to be understood in their ordinary sense (except where otherwise defined herein) and are not to be interpreted in a
technical manner so as to unfairly deprive any Party of substantive rights. 

 

	 	11.10.2	 	The text of this Agreement is the product of negotiation among both Parties and is not to be construed as having been prepared by one Party or the other.

 

	11.11	 	Warranty of Authorized Signatories. Each of the signatories to this Agreement warrants and represents that he or she is competent and authorized to enter into
this Agreement on behalf of the Party for whom he or she purports to sign. 

 

	11.12	 	Confidentiality. The Parties shall treat the existence and terms of this Agreement in accordance with Article 6 of the Settlement Agreement between Synbiotics
Corporation and Heska Corporation. 

 

11 

 

	ARTICLE	 	12  PATENT MARKING 

 

	12.1	 	Heska shall, within a reasonable amount of time from the Effective Date, mark all Licensed Product in accordance with applicable laws and regulatory requirements
with (at a minimum) United States Patent Number 4,789,631. It is agreed that patent markings on product inserts shall be sufficient. 

 

	 HESKA CORPORATION
	 	 	 	 SYNBIOTICS CORPORATION

	
	 By:
	 	 /s/    CAROL TALKINGTON
VERSER        

	 	 	 	 By:
	 	 /s/    PAUL R.
HAYS        

	 Name:
	 	 Carol Talkington Verser, Ph.D.
	 	 	 	 Name:
	 	 Paul R. Hays

	 Title:
	 	 Executive Vice President
	 	 	 	 Title:
	 	 President

 

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