Document:

Exhibit 10.25

[***] — 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.

DISTRIBUTION
AGREEMENT

THIS DISTRIBUTION
AGREEMENT (this “Agreement”) is made as of October 1, 2004
(the “Effective Date”) by and between i-STAT Corporation, a Delaware
corporation having its principal place of business at 104 Windsor Center Drive,
East Windsor, New Jersey 08520 USA (“i-STAT”) and an Affiliate of Abbott
Laboratories, and Heska Corporation, a Delaware corporation, having its
principal place of business at 1613 Prospect Parkway, Fort Collins, Colorado
80525, USA (“Heska”).

W I T N E S S E T H:

WHEREAS,
i-STAT is a manufacturer of diagnostic health care equipment and reagents and
desires to obtain a distributor of Products (as hereinafter defined) in the
animal health care market (“Field” as hereinafter defined) in the
Territory (as hereinafter defined);

WHEREAS,
Heska is a distributor of various products in the Field in the Territory;

WHEREAS,
Heska and i-STAT previously executed a distribution agreement dated as of
February 9, 1998, which was amended and restated as of February 24, 1999, under
which Heska distributed products for i-STAT in the Field in the Territory (the “Prior
Agreement”); and

WHEREAS, in accordance with the
terms and conditions hereof, i-STAT is willing to appoint Heska as its
exclusive distributor of Products in the Territory, and Heska is willing to accept
such appointment.

NOW,
THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and upon the terms and subject to the conditions
set forth below, Heska and i-STAT hereby agree as follows:

ARTICLE 1 — DEFINITIONS

The following
words and phrases, when used herein with initial capital letters, shall have
the meanings set forth or referenced below:

 

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[***] —
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.

1.1                                 “Affiliate”
shall mean, with respect to each Party (as hereinafter defined), any legal
entity that is, directly or indirectly, controlling, controlled by or under
common control with such Party.  For
purposes of this definition, a Party shall be deemed to control another entity
if it owns or controls, directly or indirectly, more than fifty percent (50%)
of the voting equity of the other entity (or other comparable ownership interest
for an entity other than a corporation).

1.2                                 “Analyte”
shall mean an individual compound, protein or fragment thereof, or substance
that is the target of quantitative or qualitative measurement.

1.3                                 “Analyzer”
shall mean a device that processes Cartridges (as hereinafter defined) and is
capable of detecting at least one (1) Analyte for use in the Field, and
specifically excludes analyzers designed primarily for use in patient
self-testing.

1.4                                 “Base
Cartridge Target” shall mean, for each Contract Year (as hereinafter
defined), the minimum unit number of Cartridge purchases required to be made by
Heska and its Affiliates during such Contract Year as set forth in Section 2.4 and Section 2.5.

1.5                                 “Business
Day” shall mean any day other than a day which is a Saturday or Sunday or
other day on which commercial banks in New York, New York are authorized or
required to remain closed.

1.6                                 “Calendar
Quarter” shall mean a period of three (3) consecutive calendar months
commencing on January 1, April 1, July 1 or October 1 of any Contract Year.

1.7                                 “Cartridge”
shall mean the disposable test component of a particular Product that contains
one or more sensor chips and fluid handling channels and operates on an
Analyzer.

1.8                                 [***}

1.9                                 “Cartridge
Purchases” shall mean, pursuant to Section 11.2,
for each Contract Year, the unit number of Cartridges purchased by Heska and
its Affiliates from i-STAT.  For the
purposes of this definition, a Cartridge shall be considered purchased in the
Contract Year in which it was delivered after having been duly ordered pursuant
to Section 3.3.

1.10                           “Cartridge Sales” means the number
of units of Cartridges Sold in the Field in the Territory by Heska directly
to:  (a) Dealers (as hereinafter defined)
for resale to End Users; or (b) End Users; net of returns and unpaid
Cartridges.

 

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1.11                           “Change
of Control” shall mean: (a) the consolidation or merger of Heska or any
Affiliate of Heska with or into any Third Party wherein the shareholders of
Heska immediately prior to such transaction shall cease to be the holders of at
least fifty percent (50%) of the outstanding securities of the surviving
corporation in such transaction; (b) the assignment, sale, transfer, lease or
other disposition of all or substantially all of the assets of Heska; or (c)
the acquisition by any Third Party or group of Third Parties acting in concert,
of  beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission (“SEC”)
under the Securities and Exchange Act of 1934) of more than fifty percent (50%)
of the outstanding shares of voting stock of Heska.

1.12                           “Confidential
Information” shall mean any and all technical data, information, materials
and other know-how, including trade secrets, presently owned by or
developed by, on behalf of, either Party and/or its Affiliates during the Term
(as hereinafter defined) which relates to a Product, its development,
manufacture, promotion, marketing, distribution, sale or use and any and all
financial data and information relating to the business of either of the
Parties and/or of their Affiliates, which a Party and/or its Affiliates
discloses to the other Party and/or its Affiliates in writing and identifies as
being confidential, or if disclosed orally, visually or through some other
media, is identified as confidential at the time of disclosure and is
summarized in writing within thirty (30) days of such disclosure and identified
as confidential, except any portion thereof which:

(a)                                  is
known to the receiving Party and/or its Affiliates at the time of the
disclosure, as evidenced by its written records;

(b)                                 is
disclosed to the receiving Party and/or its Affiliates by a Third Party having
a right to make such disclosure;

(c)                                  becomes
patented, published or otherwise part of the public domain through no fault of
the receiving Party and/or its Affiliates; or

(d)                                 is
independently developed by or for the receiving Party and/or its Affiliates
without use of Confidential Information disclosed hereunder, as evidenced by
its written records.

1.13                           “Contract
Year” shall mean each consecutive twelve (12) month period prior to the
termination of this Agreement, beginning on January 1 and ending on December 31
of each such Contract Year.

1.14                           “Counterfeit
Products” shall have the meaning set forth in Section 4.10.

 

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[***] —
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the Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.

1.15                           “Dealer”
shall mean a natural person, corporation, partnership, trust, joint venture,
government authority or other legal entity or organization in the Territory,
other than Heska or i-STAT and/or their respective Affiliates, which purchases
Products from Heska for the purpose of resale to End Users for use in the
Field.

1.16                           [***]

1.17                           “End
User” shall mean a natural person, corporation, partnership, trust, joint
venture, government authority or other legal entity or organization in the
Field in the Territory, other than Heska or i-STAT and/or their respective
Affiliates, that purchases Products under this Agreement for its own use or
consumption in the Field, and excluding any Third Party use in the human
healthcare market.

1.18                           “Extended
Warranty” shall have the meaning set forth in Section 7.1.

1.19                           “Extension
Term” shall mean each additional Contract Year, if any, following the
Initial Term or another Extension Term, as set forth in Section 10.1.

1.20                           “Field”
shall mean the animal health care market specifically excluding the human
health care market.

1.21                           [***]

1.22                           “Incremental
Cartridge Purchases” shall have the meaning set forth in Section 3.6.1.

1.23                           [***]

1.24                           “Initial
Term” shall mean the time beginning on the Effective Date and ending on December
31, 2009.

1.25         “Most Favored Price” shall have
the meaning set forth in Section 2.14.

1.26                           “Notice
Date Time” shall mean the period of time beginning on January 1 and ending
on May 15 immediately following any Contract Year in which Cartridge Purchases
were less than the Base Cartridge Target.

 

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[***] —
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.

1.27                           “Notice
Period” shall mean a period of time, the length of which shall be set forth
in Section 2.13, which shall begin upon
the receipt by Heska of i-STAT’s written notice of i-STAT’s decision to
exercise its termination rights as set forth in Section 2.6 and
during which time Heska shall maintain non-exclusive rights to Sell Products in
accordance with this Agreement.

1.28         “Party” shall mean i-STAT or
Heska and “Parties” shall mean i-STAT and Heska.

1.29                           “Products”
shall mean the products manufactured by or for i-STAT listed on Exhibit 1.29.

1.30                           “Purchase
Price” shall mean the price for Analyzers, Cartridges and other Products
purchased by Heska and its Affiliates from i-STAT and its Affiliates
hereunder, as set forth on Exhibit 1.29
and more fully described in Section 3.6.

1.31                           [***]

1.32                           “Sale”,
“Sell” or “Sold” shall mean to sell, hire, let, rent, lease or
otherwise dispose of Product to a Third Party or Affiliate, provided such
Affiliate is an end user of Products for commercial purposes for monetary or
other valuable consideration.  “Sale”, “Sell”
or “Sold” shall not include a transaction where samples of Product are supplied
without charge to a Third Party or Affiliate for marketing or demonstration
purposes or in connection with clinical or other experimental trials.

1.33                           “Technical
Documentation” shall mean all documents prepared by i-STAT in the ordinary
course of business that describe the Products in terms of their intended use
and Product claims.  Such documents may
take the form of user instructions, system manuals, product updates or
technical bulletins, but are not limited to such forms.

1.34         “Technical Support” shall have
the meaning set forth in Section 4.8.

1.35         “Term” shall have the meaning
set forth in Section 10.1.

1.36         “Territory” shall mean the
entire world except Japan.

1.37                           “Third
Party” shall mean a natural person, corporation, partnership, trust, joint
venture, governmental authority or other legal entity or organization other
than the Parties and/or their Affiliates.

 

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ARTICLE 2 — APPOINTMENT
TO MARKET AND DISTRIBUTE

2.1                                 Exclusive
Appointment in the Territory.  As of
the Effective Date and subject to Section 2.4
and Section 2.5
below, i-STAT hereby appoints Heska and its Affiliates for the Term as i-STAT’s
exclusive distributor of Products in the Field in the Territory, and Heska
accepts such appointment.  As exclusive
distributor in the Field in the Territory, Heska shall have the sole and
exclusive right to market, promote, Sell and distribute Products in the
Territory for use in the Field, which right shall operate to exclude all
others, including i-STAT, its Affiliates and all Third Parties; provided, however, that i-STAT may
maintain certain consultative and technical staff, at i-STAT’s expense,
to assist Heska in connection with such marketing, promotion, sales and
distribution efforts, in accordance with Article
4.  In furtherance of this
exclusive grant to Heska and its Affiliates, i-STAT hereby agrees to use its
commercially reasonable efforts to ensure that any Products Sold outside the
Field are not Sold directly or indirectly by i-STAT distributors to End
Users.  Nothing contained in this
Agreement shall limit or be interpreted to limit i-STAT or i-STAT’s Affiliates
from directly selling products not listed on Exhibit
1.29 in the Territory.

2.2                                 Non-exclusive
Appointment in Japan.  As of the
Effective Date and subject to Section 2.4 and Section 2.5 below, i-STAT
hereby appoints Heska and its Affiliates for the Term as i-STAT’s
non-exclusive distributor of Products in the Field in Japan, and Heska accepts
such appointment.  Heska shall have the
non-exclusive right to market, promote, Sell and distribute Products in Japan
for use in the Field.

2.3                                 Heska’s
Obligations.  Heska shall purchase
Products for distribution and Sale in the Field in the Territory exclusively
from i-STAT.  Heska shall maintain, at
its own expense, a commercially reasonable inventory of Products for the Sale,
promotion and delivery of the Products and for managing customer satisfaction
with the Products.  Heska shall not
promote, market or Sell any Product for use outside the Field.  Recognizing the end use of the Products in
healthcare, Heska shall not solicit or Sell any Product to an End User or other
Third Party (including a Dealer) that Heska has, or should have, reason to
believe will redistribute Products or otherwise direct Products for use to
customers outside the Field.  Heska
promptly shall take all reasonable actions to prevent Sales of Products to
customers, including Sales by Dealers, known or identified by Heska to be
outside the Field.  Upon i-STAT’s
request, if and to the extent Heska or its Dealers Sells Products to customers
outside the Field, Heska shall remit to i-STAT an amount equal to the
difference between:  (a) the amount of
sales billed by Heska from Sales of such Products (net of duties, freight,
replacements, returns, refunds and taxes); and (b) the Purchase Price paid to
i-STAT.  The Cartridge units Sold outside
the Field shall not be included in Cartridge Purchases for the purpose of
meeting the minimum purchase requirements of Sections
2.4 and 2.5.

 

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[***] —
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.

2.4                                 Minimum
Purchase Requirements during the Initial Term.  Subject to Sections 2.6, 2.7 and 2.9, Cartridge
Purchases shall be greater than or equal to the Base Cartridge Target for each
Contract Year during the Initial Term, which, for purposes of this Agreement,
shall be as set forth in the following Table
2.4; provided, that Cartridge
Sales shall be at least ninety-five percent (95%) of Cartridge Purchases during
such Contract Year.

Table 2.4

	
  Contract Year

  	
   

  	
  Base Cartridge Target

  
	
  Balance of 2004

  	
   

  	
  [***]

  
	
  2005

  	
   

  	
  [***]

  
	
  2006

  	
   

  	
  [***]

  
	
  2007

  	
   

  	
  [***]

  
	
  2008

  	
   

  	
  [***]

  
	
  2009

  	
   

  	
  [***]

  

 

For example, if Heska has 2007 Cartridge Purchases of [***] and 2007
Cartridge Sales of [***], Heska shall have fulfilled the requirements of this Section 2.4 ([***] Cartridge Purchases and
Cartridge Sales are 95.3% Cartridge Purchases). 
In a separate example, if Heska has 2007 Cartridge Purchases of [***]
and 2007 Cartridge Sales of [***], Heska shall not have fulfilled the requirements
of this Section 2.4 (since Heska
would have met the Cartridge Purchases requirement, but would have Cartridge
Purchases of 94.9% of Cartridge Sales, less than the required 95%).

2.5                                 Minimum
Purchase Requirements during any Extension Term.  Subject to Sections 2.6,
2.7 and 2.9,
Cartridge Purchases shall be greater than or equal to the Base Cartridge Target
for each Contract Year during any Extension Term, which for purposes of this
Agreement, shall be calculated as set forth in the following Table 2.5; provided, that Cartridge Sales shall be at least
ninety-five percent (95%) of Cartridge Purchases during such Contract Year.

Table 2.5

	
  Contract Year

  	
   

  	
  Base Cartridge Target

  
	
  n

  	
   

  	
  2009 Base
  Cartridge Target * [***]

  

 

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[***] —
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.

For example, if the [***], then the 2010 Base Cartridge Target will be
equal to [***], calculated as follows: [***].  In
this example, the 2011 Base Cartridge Target will be equal to [***], calculated
as follows: [***].

2.6                                 Implications of Failure to Meet Minimum
Purchase Requirements.  i-STAT’s sole remedy for Heska’s failure to meet the Base Cartridge Target in Sections 2.4 or 2.5 in any
Contract Year shall be to terminate this Agreement upon prior written notice to
Heska as set forth in Section 2.13; provided, however, that i-STAT shall meet with
Heska to discuss under what terms and conditions, if any, Heska may continue to
distribute Products hereunder; and provided,
further, that such failure to meet the Base Cartridge Target shall not be
considered as a breach of this Agreement.

2.7                                 Failure to Supply Minimum Purchase
Requirements.  If during any Contract Year, i-STAT is
unable to supply Cartridges properly forecasted and ordered hereunder pursuant
to Article 3, the Base Cartridge Target
for such Contract Year shall be reduced by the number of such Cartridges ordered
by Heska pursuant to the terms of this Agreement and not supplied by i-STAT
hereunder during such Contract Year. 
i-STAT, shall consider in good faith the impact of a material
interruption in supply on Heska’s ability to achieve future Base Cartridge Targets
in subsequent Contract Years and shall consider in good faith reasonable
adjustments to Base Cartridge Targets proposed by Heska for such subsequent
Contract Years; provided, however, that any
decision regarding any reduction to future Base Cartridge Targets shall be at
i-STAT’s sole discretion.

2.8                                 Right
of First Offer.  As long as Heska is
i-STAT’s exclusive distributor of Products in the Field in the Territory,
i-STAT shall, prior to offering any other or new products to any Third Party
for resale in the Field in the Territory, first offer in writing (which for the
purposes of this Section 2.8 may be by e-mail) to Heska the opportunity to
negotiate with i-STAT in good faith to include such products as a Product
hereunder on such terms and conditions as are mutually acceptable to the
Parties.

2.9                                 Discontinued
Products.  i-STAT shall have the
right to discontinue the manufacture of any Product hereunder.  If i-STAT, in its sole discretion, decides to
discontinue the manufacture of any Product, i-STAT shall:  (a) provide written notice to Heska as
follows:  (i) for Analyzers, upon
twelve (12) months’ prior written notice; and (ii) for all other Products, upon
one hundred eighty (180) days’ prior written notice; and (b) negotiate in
good faith with Heska an adjustment to the Base Cartridge Targets set forth in Sections 2.4 and 2.5; provided,
that no adjustment shall be made if a discontinued Product is replaced by an
equivalent Product at an equivalent price. 
If the 

 

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Parties are unable to agree on an adjustment, if any, to the Base
Cartridge Targets as a result of good faith negotiations under clause (b) of
the preceding sentence, they will follow the procedures set forth in Section 11.9 to establish an adjustment, if any.  i-STAT may materially alter the
performance of any or all of the Products upon ninety (90) days’ prior written
notice to Heska.  i-STAT shall use
commercially reasonable efforts to provide to Heska reasonable quantities of
repair and/or replacement parts, on an as needed basis, for Analyzers for at
least three (3) years from the date of discontinuance of manufacture or sale of
Analyzers or introduction of a materially altered Product for which parts are
not interchangeable.  i-STAT also shall
use commercially reasonable efforts to consult with Heska prior to any
discontinuance of the manufacture of any Product or material alteration of any
Product where such alteration, in i-STAT’s reasonable opinion, would impact
applicable regulatory approvals of Heska and / or marketing of the Products by
Heska.

2.10                           Selling
Price.  Heska, in its sole
discretion, shall determine the final sales price of Products Sold by Heska to
Third Parties in the Field in the Territory, and no other term or provision in
this Agreement shall be interpreted or deemed to provide i-STAT with any right
to determine the final sales price of Products Sold by Heska hereunder.  Heska or its appointed Dealers solely shall
be responsible for seeking and obtaining all pricing approvals from all
applicable authorities in those countries in the Territory where Heska is
distributing Products in the Field.

2.11                           Heska’s
Sales Efforts.  Heska shall use
commercially reasonable efforts to offer for Sale, Sell, have Sold, use, have
used, market, have marketed, distribute, have distributed and import Products
in the Field in the Territory, as more fully set forth in Article 4.

2.12                           Appointment
of Dealers.  Heska shall have the
right to appoint Dealers  for the
sale of the Products in the Field in the Territory.  Heska agrees that, if it enters into an
agreement or arrangement with any Dealer to allow such Dealer to offer for
Sale, Sell, have Sold, use, have used, market, have marketed, distribute, have
distributed, import and have imported Products in the Field in any country or
region of the Territory, Heska shall restrict such Dealer’s activities to sales
of Products in the Field for use in the Field by affirmatively restricting the
Dealer from reselling Products to Third Parties outside the Field.  Heska shall name i-STAT as the “third party
beneficiary” for the purposes of enforcing this provision in any agreement or
arrangement with a Third Party for Sale of Products in the Field.

2.13                           Termination
Notice Provisions.  In the event that
i-STAT exercises its right to terminate this Agreement in any given Contract
Year for failure to meet the Base Cartridge Target in such Contract Year
pursuant to Section 2.6, such termination
shall be effective upon expiration of the Notice Period, determined as follows:

 

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the Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.

(a)           Six (6) months if
[***];

(b)                                 Twelve
(12) months if [***];

(c)                                  Eighteen
(18) months if [***];

(d)                                 Twenty-four
(24) months if [***]; or

(e)                                  Thirty-six
(36) months if [***].

In order to terminate the Agreement pursuant to Section 2.6,
i-STAT must give written notice during the Notice Date Time.  Upon receipt of written notice, Heska’s distributorship
rights in the Field in the Territory shall become non-exclusive and remain non-exclusive
throughout the Notice Period.

For example, Heska has [***], Heska receives
written notice of termination from i-STAT on January 15, 2008 and the Parties meet
to discuss this situation on February 1, 2008 but cannot agree on amended terms
under which Heska would continue to distribute Products.  Pursuant to Sections
1.8 and 1.27, [***], which under Section 2.13, results in a Notice Period of
twenty-four (24) months.  Thus, in this
example, the Agreement would terminate on January 15, 2010.

2.14                           Most
Favored Pricing.  If, during any time
period in which Heska is a non-exclusive distributor hereunder (including any
time period set forth in Section 2.13),
i-STAT shall sell Products in the Field in the Territory to any other
distributor, dealer or Third Party at a price lower than the Purchase Price
then paid by Heska hereunder (the “Most Favored Price”), then i-STAT
shall give Heska prior written notice of the Most Favored Price and the period
it is to be in effect and Heska shall be entitled to such Most Favored Price
for such Product for so long as such lower price is in effect for any other
distributor, dealer or Third Party in the Field in the Territory.

2.15                           Restoration
of Exclusivity and Cancellation of Termination.  If, following any Contract Year in which
Cartridge Purchases were less than the Base Cartridge Target, Heska’s Cartridge
Purchases for the subsequent Contract Year are equal to or greater than Base
Cartridge Target for the subsequent Contract Year, i-STAT shall consider in
good faith restoring exclusivity to Heska as described in Section 2.1 and canceling the notice of termination
previously sent to Heska; provided, however,
that such restoration of exclusivity shall be only to the extent i-STAT
has not made alternative contractual 

 

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arrangements that would preclude restoring Heska’s exclusivity in any
part of the Territory.

2.16                           Competitive
Products.  In furtherance of its
duties and in recognition of the unique healthcare and related responsibilities
in connection with the distribution of the Products, during the Term Heska
shall not anywhere in the Territory promote, market, distribute or Sell any
hand held device performing any tests performed by the Products, including new
Products, if any, added to this Agreement pursuant to the terms and conditions
set forth in this Agreement.  Heska shall
exclusively use the i-STAT control products set forth on Exhibit 1.29
unless i-STAT gives prior written approval for substitution.

2.17                           EU
Commission Directive.  In accordance
with the EU Commission Directive on Vertical Agreements, the covenant
not to sell competitive products set forth in Section 2.16
for countries in the European Union (“EU”) shall be for no
longer than five (5) years after the Effective Date.  Heska agrees that if Heska has maintained
exclusivity as set forth in Sections 2.4 and
2.5 during the Term, that Heska will
meet with i-STAT to negotiate in good faith the terms, if any, under which the
covenant not to sell competitive products in the EU may be extended (if any).

ARTICLE 3 —
MANUFACTURE, SUPPLY AND DELIVERY OF PRODUCTS

3.1                                 Manufacture, Sale
and Purchase of Products.  During the
Term, i-STAT shall use commercially reasonable efforts to manufacture or have
manufactured, release, sell and deliver to Heska those units of Products as are
consistent with the forecasting process, lead times and terms and conditions of
this Agreement and as are ordered by Heska hereunder.  i-STAT shall manufacture or have
manufactured, release, sell and deliver each such Product in accordance with
each Product’s Specifications and all
applicable rules and regulations applicable to the manufacture or sale of
Products in the Territory in the Field, including as applicable, those rules
and regulations of the FDA, including QSRs (including applicable cGMPs), and in
accordance with all other applicable laws and regulations of countries in which Heska sells Products.

3.2                                 Rolling
Forecasts.  Thirty (30) days after the
Effective Date, Heska shall provide i-STAT with a monthly forecast of its
requirements of the Products for the first full Contract Year.   On or before the fifth (5th) day prior to
the beginning of each subsequent calendar month during the Term, Heska shall
provide i-STAT with a rolling 12-month forecast, the first three (3) months of
which will be firm purchase orders binding on Heska, the last nine (9) months
of each shall consist of Heska’s best estimate forecast of its requirements of
Products.

3.3                                 Product
Orders.  Heska shall order Products on purchase
orders consistent with the process set forth in Section 3.2.  All
purchase order forms shall specify the quantities of

 

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[***] —
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.

each Product ordered, requested delivery dates, the identity of
Products ordered, Product
price, and delivery and shipping instructions including carrier selected.  All orders will be governed by the terms of
this Agreement.  To the extent that any
purchase order, confirmation of acceptance or other document contains terms in
conflict with, or in addition to, the terms of this Agreement, such conflicting
or additional terms shall not be binding on the Parties unless agreed upon in
advance by the Parties.

3.4                                 Acceptance
of Purchase Orders.  i-STAT shall
within five (5) Business Days notify Heska of any purchase order (or partial
purchase order) accepted, rejected, or delayed, and the reason for any such
rejection or delay.  No purchase order
shall be binding upon i-STAT until accepted by i-STAT.  Purchase orders not rejected within five (5)
Business Days shall be deemed accepted. 
Heska may not modify any purchase order after its acceptance by i-STAT
without i-STAT’s prior consent.  All
purchase orders shall provide i-STAT with no less than ninety (90) days notice
to the requested shipping date from i-STAT after receipt of the purchase
order.  Heska understands and agrees that
optimum dating of Products shipped cannot be assured for Products shipped in
connection with purchase orders placed less than ninety (90) days prior to the
requested  shipment date of Product
from i-STAT.

3.5                                 Firm
Order Changes.  If, before submitting
a purchase order form to i-STAT, Heska requests an increase to binding
forecasts for the three (3) month firm forecast timeframe and such increase is
no more than one hundred twenty percent (120%) of the amount of Products (on a
Product-by-Product basis) originally reflected in forecasts, i-STAT shall use
commercially reasonable efforts to accommodate such increases within reasonable
manufacturing capabilities and efficiencies, taking into account other orders
and forecasts.  If such increases
reflects an increase of more than one hundred twenty percent (120%) of the
amount of Products (on a Product-by-Product basis) originally reflected in
Heska’s binding forecasts, i-STAT shall advise Heska of any additional costs
associated with manufacturing such increased number of Products in such
timeframe, and if Heska indicates to i-STAT that i-STAT should proceed to
manufacture such increased amount of Products, i-STAT shall use reasonable
commercial efforts to manufacture such increased number of Products, and Heska
shall bear all costs reasonably associated with such manufacturing
increases.  Such payments shall be
payable within thirty (30) days of receipt of i-STAT’s invoice for such
charges.

3.6                                 Purchase
Prices.  Purchase Prices for the
Products are listed on Exhibit 1.29.

3.6.1                        Rebates.  [***]

 

 12
 

 

3.6.2                        Pricing Adjustments.  At the end of the Initial Term and each
Extension Term thereafter, Purchase Prices 
may be adjusted at i-STAT’s sole discretion for inflationary increases in
production costs.  Such increase shall be
at the rate of increase in the U.S. PPI (Producer Price Index) since the
Effective Date of the Agreement for the Initial Term or since the last
inflationary adjustment for each Extension Term.

3.6.3                        Increased Manufacturing
Costs.  If  i-STAT experiences an increase in Product
manufacturing costs that exceed ten percent (10%) for any Product during any
Contract Year, i-STAT and Heska shall meet and 
negotiate in good faith to determine whether an adjustment to the
Purchase Price for that Product is appropriate in the circumstances.

3.6.4                        Taxes.  All Purchase Prices for Product are
calculated for delivery as set forth in Section 3.7.  The Purchase Prices do not include insurance,
freight, customs, duties, taxes, any foreign, federal, state or local taxes
that may be applicable to Products including, without limitation, sales,
excise, value-added, withholding, and other taxes other than taxes based upon i-STAT’s
net income and other similar charges. Customs duties and charges, if any, shall
be borne by Heska.  Any and all export
and import licenses or approvals shall be obtained by Heska at its expense.  When i-STAT has the legal obligation to
collect such taxes, the appropriate amount shall be added to Heska’s invoice
and paid by Heska unless Heska provides i-STAT with a valid tax exemption
certificate authorized by the appropriate taxing authority.

3.7           Delivery of Product.

3.7.1                        Delivery;  Determination
of Method of Transportation. 
Products shall be delivered FCA (Incoterms 2000) i-STAT’s U.S. warehouse
or other i-STAT warehouse.  The method of
transportation of the Products, shipping
destination and the carrier selected shall be as specified by Heska in
its purchase orders.

3.7.2                      Risk of Loss.  Risk of loss for Products shall pass to
Heska, FCA (Incoterms 2000) i-STAT’s
warehouse site.

3.7.3                        Title.  Title shall pass to Heska when Products are
transferred to Heska’s designated courier at i-STAT’s warehouse site.

3.8                                 Payments
Due; Credit Limits.  All payments due
and payable hereunder shall be made by check or wire transfer within thirty
(30) days from the date of the invoice.  All
payments shall be made without set-off or counterclaim and free and clear of
and without deduction for any other charges of any kind.  The invoiced amount shall be paid by Heska to
i-STAT by:  (a) wire transfer to the bank
listed on Exhibit 3.8 or otherwise

 

 13
 

 

specified by i-STAT,  or (b)
certified bankers check.  i-STAT reserves
the right to change the payment or credit terms at any time upon ninety (90)
days’ prior notice to Heska.  Any invoiced
amount not received within thirty (30) days of the date the payment was due
shall be subject to a service charge of the lesser of one and one-half percent
(1.5%) per month or the maximum rate permitted by law.  All exchange, interest, banking collection
and other charges shall be at Heska’s expense. 
Decreases in Heska’s credit limit will be based on i-STAT’s evaluation
of Heska’s financial performance over the previous six (6) months and/or Heska’s
payment history with i-STAT over the past immediate twelve (12) months.  If Heska disagrees with any notice of a
change in payment terms or decrease in credit limit, Heska may dispute the
decision with the President of Abbott’s Point of Care business and discuss
options for resolution.  The resolution
to the disputed decrease in credit limit shall be at the sole discretion of the
President of Abbott Point of Care division. 
If Heska believes the resolution reached by the President of Abbott
Point of Care is inequitable, Heska may enter into alternative dispute
resolution with i-STAT.  Notwithstanding
anything in this Agreement or any exhibit attached hereto to the contrary:  (y) all costs for Heska and i-STAT associated
with such alternative dispute resolution shall be borne solely by Heska,
regardless of the decision by the neutral in the alternative dispute resolution
process; and (z) such alternative dispute resolution, if requested by Heska for
this issue, shall be only for this specific issue, and no other issue shall be
added to the process.

3.9                                 Currency
Basis.  All prices including Product
Prices for Products and payments therefor shall be in U.S. dollars.

3.10                           Acceptance
of Product.  Heska shall not be
obligated to accept any Product that does not meet the applicable i-STAT
specifications as set forth in the Analyzer’s operators’ manuals, or the
Cartridges’ product inserts, if any, as registered in the Territory.  i-STAT shall provide Heska with thirty (30)
days’ advance notice of a change or issuance of new Analyzer operator manuals
or Cartridge product inserts.  Heska
shall inspect all Products upon delivery in a commercially reasonable manner.  Failure by Heska to give notice of defective
or damaged Product within the time periods specified in Section 3.11
shall be deemed a waiver of i-STAT’s obligations as stated herein,
with respect to such defect or damage only.

3.11                           Defective
and Improper Delivery; Product Returns. 
If Heska or a Dealer or End User claims that: (a) any Product shipped
directly by i-STAT hereunder was damaged in transit to the End User; (b)
incorrect Product was shipped; or (c) that there was a shortage in the
shipment, and notice in writing of such damage, incorrect shipment or shortage
is provided to i-STAT within thirty (30) days of receipt of the shipment by the
End User then, upon receipt of such notice, i-STAT’s sole obligation shall be
to either replace any damaged or incorrectly shipped Product, make up any
shortfall or refund any Purchase Price paid by Heska, at i-STAT’s option.  If any Product is claimed by Heska, a Dealer
or End User to be defective and i-STAT is notified in writing of such 

 

 14
 

 

defect within thirty (30) days of receipt of the Product by the End
User or, in the case of a latent defect, i-STAT is notified in writing within
fifteen (15) days of discovery of such latent defect within the warranty period
stated in Section 7.2, then i-STAT’s
sole obligation shall be to either repair of replace any Product found by
i-STAT to be defective.  If Heska claims
a credit pursuant to this Section 3.11,
such claim shall be accompanied by the original invoice issued by Heska to the
End User or Dealer returning the Product. 
Upon request by i-STAT, Heska shall deliver to i-STAT, at Heska’s cost,
any returned Product with regard to which the credit is claimed.  i-STAT solely shall determine in good faith
the amount of any credit due Heska, if any, and to the extent any returned
Product is defective, reimburse Heska for reasonable freight expenses directly
related to delivering said Product to i-STAT. 
In the event that i-STAT issues a Product recall and requests that Heska
return Products to i-STAT as a result of such recall, i-STAT shall
reimburse Heska for reasonable freight expenses directly related to such
recall.  There will be no Product returns
accepted except as set forth in this Section
3.11.

ARTICLE 4. 
MARKETING OF PRODUCTS

4.1                                 Marketing.  Heska shall, at its own expense, use
commercially reasonable efforts to market and promote the Products in the
Territory.  Heska’s promotional
activities shall include, but shall not be not limited to: (a) including the
Products in its appropriate catalogs, promotional mailings and like
publications, (b) developing, preparing and placing advertising concerning the
Products in appropriate media or through appropriate direct mail; (c)
exhibiting the Products at appropriate trade shows and exhibitions, (d)
conducting appropriate market research as it deems necessary or desirable; and
(e) rendering other services customarily rendered by a distributor of
veterinary medical products; provided, that by October 31 of each
Contract Year, Heska shall provide i-STAT with a list of all proposed trade
shows and exhibitions that it plans to attend in the next Contract Year.  Heska may develop printed sales and promotional
materials relating to the Products in the local language at its own expense.  Heska shall provide such materials, if any,
which have not been previously approved to i-STAT for i-STAT’s review and
approval, which approval shall not be unreasonably delayed or withheld.  i-STAT shall review such materials
within fifteen (15) Business Days, and i-STAT’s failure to object to any
materials within such fifteen (15) Business Days of sending shall be deemed
approval.  If i-STAT objects to the material,
Heska shall modify such materials accordingly.

4.2                                 Catalogs,
Bulletins.  At Heska’s written
request, i-STAT shall provide Heska with reasonable quantities of brochures, instructional
material, advertising literature and other relevant Technical Documentation
regarding the Products, at no charge to Heska. 
Such documents shall be in the English language, and may be in other
languages to the extent already available. 
Heska, at its own cost, may provide a translation of the 

 

 15
 

 

documents into the local language. 
Such translations shall be made available to i-STAT for review and
comment before dissemination.

4.3                                 Follow-up
Training.  At Heska’s reasonable
written request, i-STAT shall provide follow-up training, as mutually agreed by
the Parties, at Heska’s facility.  i-STAT
shall pay for its employees’ salaries and their travel and travel-related
expenses, including meals, lodging and other living expenses.  For training situations not covered by this Section 4.3, the Parties shall discuss how
to equitably share the travel and related expenses.

4.4                                 Strategy
Meetings.  Periodically during the
Term (but not less than once per Contract Year) while Heska is the exclusive
distributor of Products in the Field in the Territory, Heska and i-STAT shall
review topics which may include Heska’s marketing and selling strategy,
training of End Users, inventory, and other practices with a view toward
maximizing End Users’ use of and satisfaction with Products.

4.5                                 Quality
Assurance Audit.  Heska agrees that
upon a minimum fifteen (15) days notice from i-STAT, representatives of i-STAT,
during normal business hours, shall be permitted to visit all locations where
Heska maintains inventory of Products to conduct a quality assurance audit of
such facilities and/or an on-site surveillance of the inventory storage tracking.  i-STAT shall have the right during reasonable
business hours, to inspect the books and records of Heska relating to Product
complaint documentation.  In the event
that an audit reveals items that i-STAT determines should be corrected by
Heska, i-STAT shall provide, in writing, within thirty (30) days of such audit,
a list of such items and any proposed corrective action to be taken by
Heska.  Heska shall respond within
fifteen (15) days of receiving i-STAT’s notification of the corrective action
to be taken and an estimated completion date. 
If the parties disagree as to whether corrective action is necessary,
the matter shall be resolved in accordance with the alternative dispute
resolution procedures set forth in Section
11.9.

4.6                                 Sales
Personnel.  Heska, at its sole cost
and expense, shall engage, compensate, supervise, train and maintain such
competent, qualified personnel as may be reasonably required to, deliver,
promote, market, sell, distribute, provide technical service and support for
the Products, and End User complaint handling in the Territory.

4.7                                 Training
For Heska and End Users.  i-STAT
shall provide Heska personnel such training, at i-STAT’s expense, as
Heska may request in writing and that i-STAT, at its sole discretion, deems
reasonable.  Notwithstanding the above,
all expenses incurred by Heska’s personnel in connection with such training,
including without limitation, travel and other per diem expenses shall be borne
by Heska.  Heska, at its own cost, shall
provide adequate Product training for its End User’s on the use and storage of
the Products.  Heska, prior to shipment
of Products to an End User, shall provide to each such End User Product storage
and use instructions, and shall provide its End Users 

 

 16
 

 

with commercially reasonable training and support within two (2) months
after delivery of the first shipment of Products to an End User.  Heska shall use commercially reasonable
efforts to ensure that all introductory training is made available to End Users
within the first week after receipt of Analyzers and Cartridges.  Heska shall, in its discretion, make
appropriate use of training materials and Technical Documentation supplied by
i-STAT.

4.8                                 Technical
Support.  Heska agrees to be responsible
as the first point of contact for technical support with the End User.  Heska will further provide technical support
on the usage of Products by the End Users based upon information supplied by
i-STAT, at no cost to i-STAT.  The term “Technical
Support” shall mean, without limitation, problem resolution, explanation of
functionality and collection of incident reports.  i-STAT will provide technical service
support to Heska as i-STAT deems reasonably necessary, but not to any Dealers
appointed by Heska.

4.9                                 Modified
and New Products.  Heska agrees to
provide timely comprehensive information to its Dealers or End Users, as
appropriate, with respect to newly available Products, discontinuance of
Products and changes in existing Products, including, but not limited to,
performance specification changes and required software upgrades in Analyzers
(which may or may not be coupled to specific lots of Cartridges).  Heska agrees to use commercially reasonable
efforts, which shall depend on the circumstance involved and whether the End
User is utilizing Products, to ensure that each End User in the Territory makes
any such performance specification changes and software upgrades in a timely
manner.

4.10                           Counterfeit
Products.  If Heska is offered the
opportunity to purchase or otherwise becomes aware of any counterfeit products
similar in look and/or function to Analyzer or Cartridge Products (as listed on
Exhibit 1.29) manufactured by an entity
other than i-STAT (“Counterfeit Products”), Heska shall promptly
notify i-STAT thereof.  Heska covenants
and agrees not to purchase any Counterfeit Products, and the failure of Heska
to comply with the foregoing covenant and agreement shall constitute grounds
for immediate termination of this Agreement by written notice to such effect
sent by i-STAT.  Such termination
of this Agreement shall be effective as of the date of receipt of any such
notice by Heska.  In addition, Heska
acknowledges that its purchase of Counterfeit Products will cause i-STAT
irreparable harm and that i-STAT shall have the right to equitable and
injunctive relief, in addition to money damages, in the case of such action by
Heska. 
i-STAT acknowledges and agrees that Counterfeit Products do not include,
and Heska shall be permitted to sell and/or license in the Field, any products
that Heska offers to Heska’s End Users that would allow Heska’s End Users to
print test results from an Analyzer on standard sized paper and combine such
results with test results from other diagnostic products Heska sells in the Field.

 

 17

4.11                           Inventory
Levels.  Heska shall maintain a
commercially reasonable supply of Product to meet the demands of End Users,
taking into account the order and shipping lead times set forth in this
Agreement.

4.12                           Warranty
Services.  Heska shall provide a technical
liaison and assistance to End Users for warranty service of the Products, at no
cost to i-STAT or the End Users.  In
addition, at the written request of i-STAT, Heska shall perform certain
warranty repairs during the term of the warranty, which shall be billed to and
paid by i-STAT at mutually agreed upon labor rates.

4.13                           Books
and Records.  Heska shall maintain
books and records in keeping with standard industry practice regarding the
performance of its obligations hereunder including monthly Cartridge unit Sales
to Dealers and End Users that Heska Sells to directly, aggregated monthly in
each country or region, and shall retain such records during the Term and for
three (3) years thereafter.  Heska shall
provide to i-STAT annually within thirty (30) days following the end of
each Contract Year, a report that provides Cartridge unit Sales to Dealers and
End Users that Heska Sells to directly, aggregated monthly in each country or
region, and the calculation of the percentage of Cartridges Sold to customers
by country or region, beginning with the first report of Contract Year
2005.  Such books and records shall be in
accordance with generally accepted accounting principles reflecting each
Product’s unit Sales and per country or region in the Territory.  Upon thirty (30) days’ prior written notice
to Heska (but not more frequently than once in any Contract Year, unless there
is a dispute, then as frequently as is necessary), Heska’s books and records
relating to the matters described herein shall be open for inspection.  To conduct such inspection, i-STAT shall
retain, at its own expense, an independent certified public accountant
reasonably acceptable to Heska.  Such
examination shall occur at Heska’s principal place of business during normal
business hours for the sole purpose of verifying the accuracy of such
calculations.  Such independent
accountant shall be required to execute a mutually acceptable confidentiality
agreement and shall report to i-STAT only the amount of any discrepancy, if
any, in the calculations.  Such
examination rights may be exercised by the Parties only with respect to records
for the then-current Contract Year and the immediately prior Contract
Year.  i-STAT shall bear the cost of such
audit, unless the audit reveals an underreporting of unit Sales of greater than
one percent (1%) or a value of Ten Thousand US Dollars (US  $10,000) (whichever is the greater), in which
case Heska shall reimburse i-STAT for its reasonable expenses incurred in
connection with such audit.  

4.14                           Corrupt
Practices.  Heska shall not use any
compensation hereunder as payment to any government official or employee of any
country in the Territory for the purpose of influencing such person’s decisions
or actions regarding the Products.

 

 18
 

 

ARTICLE 5.  INTELLECTUAL PROPERTY RIGHTS

5.1                                 i-STAT
Markings.  Heska shall not omit or
alter patent numbers, trade names or trademarks, numbers or series or any other
i-STAT markings affixed on the Products obtained from i-STAT or alter Product
labeling.  Heska shall, however, be
entitled to mark the Products with its trademark or trade name in prominent
place, subject to i-STAT’s prior written consent, not to be unreasonably
withheld. Heska is not authorized to use the trademark and trade name “i-STAT”
or any other trademark or trade name of i-STAT in any manner except to indicate
that i-STAT is the manufacturer of the Products and, consistent with the
provisions of Section 5.2 and
during the Term of this Agreement and only in the Field in the Territory, that
Heska is an independent distributor for i-STAT and is selling i-STAT’s
Products.  Heska shall acquire no rights
in the i-STAT trademark and trade name, or any other trademark owned by i-STAT.

5.2                                 Use
of Trademarks and Tradenames.  i-STAT
hereby authorizes Heska to use, on a nonexclusive basis for the Term, without
cost to Heska other than payment for the Products, the trademark “i-STAT” and
any other trademarks, service marks or tradenames used by i-STAT to identify
the Products (the “Marks”), solely to identify i-STAT as the
manufacturer of the Products and for Heska’s distribution of Products and
related performance under this Agreement. 
The Marks and the goodwill associated therewith are and shall remain the
exclusive property of i-STAT.  Heska
shall not:  (a) use the Marks as
part of any composite mark including any elements not approved in advance in
writing by i-STAT; (b) challenge the validity or enforceability of the Marks
(unless such restriction is illegal); (c) acquire any proprietary rights in the
Marks by reason of any activities under this Agreement or otherwise.  All uses of the Marks by Heska and any
additional goodwill created thereby shall inure to the exclusive benefit of
i-STAT.  i-STAT, at all times during the
Term on reasonable notice, shall have the right to inspect the materials and
services on or in connection with which the Marks are used in order to assure
i-STAT that its quality standards relating to the Products and Heska’s
servicing and other Mark-pertinent provisions of this Agreement are being
observed.  If at any time i-STAT shall
reasonably object to any use to which the Marks are put, Heska shall promptly
cease any such use.

5.3                                 License
to Use Computer Software.  All
software, on whatever media and in whatever form, i-STAT shall deliver to Heska
hereunder (the “Software”) is and shall remain the property of i-STAT
and its suppliers and licensors thereof and shall only be used in accordance
with the terms of this Agreement and any End User License Agreements (each, a “EULA”)
distributed therewith.  Software contains
copyrighted and proprietary trade secrets of i-STAT (and its suppliers
and licensors), and Heska shall keep the Software in confidence.  Heska shall not copy, use or disassemble the
Software unless agreed by i-STAT. 
Heska shall have the right to reproduce Software only for:  (a) one backup/archival copy; and (b)
installation on and use with equipment designated by i-STAT as suitable
therefor and for use solely with the Products distributed by Heska.  

 

 19
 

 

Heska shall reproduce the copyright and other proprietary notices of
i-STAT and Third Parties present in the Software delivered to Heska.  Heska’s license to use and distribute the
Software shall terminate on the earlier of: 
(w) termination of this Agreement; (x) discontinuance of use of the
designated equipment for the Software; (y) discontinuance of payment of
periodic license and maintenance fees, if any; or (z) breach by Heska of
any of the above given terms; provided, that End Users’ license rights shall
continue in accordance with each EULA. 
All copies of Software with respect to which the license hereunder is
terminated shall be returned to i-STAT within thirty (30) days after such
termination.  Heska shall deliver to each
End User a copy of i-STAT’s EULA, which shall inform them that such
Software is and shall remain the property of i-STAT and its suppliers and
licensors.  Copies of the translated
materials shall be provided by Heska to i-STAT for inclusion in the technical
file before any CE marked Product is distributed in Heska’s territory in the
Field.

ARTICLE 6.  REGULATORY MATTERS

6.1                                 Regulatory
Compliance.  Heska shall advise
i-STAT promptly of all government regulations outside of the United States
affecting the importation, use, Sale, record maintenance and disposal of the
Products, and shall be responsible for compliance therewith.  Without limiting the foregoing, Heska shall
obtain from competent governmental authorities outside the United States such
import permits, licenses, exemptions from customs duties and governmental
approvals and consents required in connection with the execution and
performance of this Agreement.  All
governmental permits, registrations, licenses, exemptions and consents outside
the United States specifically relating to Products shall be sought, where
applicable and where possible, in the name of and shall, at the end of the
Term, be the exclusive property of i-STAT. 
Heska shall not take any action which would, or fail to take any action
where such failure would, directly or indirectly result in or constitute a
violation by Heska of any applicable law, treaty, ruling or regulation in the
Territory relating to the Products, including, without limitation, laws and
regulations relating to the export, resale and distribution of the Products and
laws and regulations requiring the reporting of adverse medical events to
government authorities in the Territory. When needed for sales or regulatory
compliance purposes, Heska shall provide at 
Heska’s expense any additional translations of labels, labeling, and
instructions consistent with the regulatory requirements of the competent
authority in each country of the Territory and shall ensure that all users are
provided with such translated materials.

6.2                                 Compliance
with U.S. Regulations.  Heska
understands and acknowledges that i-STAT is subject to regulation by agencies
of the U.S. Government, including but not limited to, the U.S. Department of
Treasury which prohibit the sale, export or diversion of products and
technology to certain countries (“Prohibited Countries”), which
countries, as of the Effective Date, are Iran, Sudan and Cuba.  Heska hereby warrants that it shall not Sell,

 

 20
 

 

directly or indirectly, any Products to Dealers or End Users which it
knows or reasonably should know will resell or export the Product to Third
Parties in Prohibited Countries. 
Furthermore, any and all obligations of i-STAT to provide the Products,
as well as any other technical information and assistance, is subject to United
States laws and regulations which govern the license and delivery of technology
and products abroad by persons subject to the jurisdiction of the United
States, including without limitation the Export Administration Act of 1979, as
amended, any successor legislation, and the Export Administration Regulations
issued by the Department of Commerce, Bureau of Industry and Security.  Heska agrees to cooperate with i-STAT in
order to maintain compliance with the applicable export regulations.

6.3                                 Notice
of Certain Events; Adverse Event Reporting. 
Each Party shall promptly notify the other after it becomes aware of any
of the following events: alleged infringement of the Trademarks or patents
applicable to a Product by any third party; alleged infringement of the
trademark, patent or proprietary rights of others in connection with actions
taken hereunder; liability claims relating to a Product and any other event
that may reasonably be expected to have a material adverse effect upon the sale
or distribution of a Product in the Territory.

6.4                                 Product
Changes; Labeling.  Heska may affix
its label on catalogs and Products being distributed by Heska in the Field in
the Territory during the Term; provided, i-STAT shall have been provided
with a catalog and a photograph of each Product with Heska’s label affixed in
the same manner in which the Products will be distributed and shall have
approved such label, such approval not to be unreasonably withheld and such
approval not required for Products being sold with the Heska label affixed as
of the Effective Date.  If i-STAT shall
reasonably object to the manner in which such label is affixed, Heska shall
promptly cease any such use and change its use to comply with the i-STAT’s
requirements.  Heska shall bear the cost
of packaging and labeling changes requested by Heska and approved by i-STAT.

6.5                                 Traceability.  i-STAT and Heska shall each maintain such
traceability records with respect to the Product as shall be necessary to comply with applicable laws and
local “Good Manufacturing Practices” regulations.

6.6                                 Reliability
Reporting.  Each Party shall promptly
report in writing to the other any substantial failure of the Product, material
change in the statistically demonstrated reliability of the Product or other
material information relevant to the reliability of a Product of which such
Party becomes aware.

6.7                                 Recall
or Advisory Actions.  If either Party
proposes to recall a Product or issue an advisory letter regarding reliability
of or defects in a Product, then such Party shall first notify the other in
writing or by telecommunication in a timely manner prior to making such recall
or issuing such advisory letter.  Each
Party shall endeavor to reach an 

 

 21
 

 

Agreement with the other regarding the manner, text and timing of any
publicity to be given such matters in time to comply with any applicable
regulatory requirements, but such Agreement shall not be a precondition to any
action that a Party deems necessary to protect users of a Product or to comply
with any applicable governmental orders. 
In the event i-STAT should request Heska to recall a Product, Heska
shall take all appropriate actions to recall such Product.  i-STAT shall bear the expenses of any recall
requested by it or resulting from defective manufacture, or packaging by
i-STAT.  Heska shall bear the expenses of
any recall resulting from improper storage, handling or delivery by Heska.  In cases where the recall is unrelated to any
fault of either Party, the expense of the recall shall be borne by the Parties
equally.  For the purposes of this
Agreement, expenses of recall include, without limitation, the expense of notification
and destruction or return of the recalled Product, but not the expense  or service fees associated with salesmen’s
time which shall be borne by Heska.

6.8                                 Translation
of Technical Documents.  Consistent
with Section 4.2, as required by local
regulatory laws or regulations, Heska shall translate Technical Documents into
the local language(s) of End Users and shall revise such translation in accordance
with the changes to the Technical Documents that may be made from time to time
by i-STAT.  Such translation shall at a
minimum meet all regulatory requirements of the Territory and be of a standard
deemed appropriate for veterinary products and comparable with that provided
for other products sold into the animal health care market in the
Territory.  Heska will provide any
documents translated into the local language to i-STAT for review and shall
revise such translation according to i-STAT’s comments.

ARTICLE 7.  REPRESENTATIONS AND WARRANTIES

7.1                                 Product
Warranty to End Users.  Heska shall
pass through to End Users i-STAT’s standard written limited warranty for all
Products.  Heska shall not alter or
expand such warranty; provided, however, that nothing in this Agreement limits
Heska’s ability to provide its own warranty on any of the Products to its End
Users (an “Extended Warranty”) so long as Heska is responsible for
satisfying any obligations under such Extended Warranty.

7.2                                 Warranty.  i-STAT shall extend to Heska and to Heska’s
Dealers or End Users standard product warranties, as modified from time to time
upon thirty (30) days prior written notice to Heska, the current version of
which is attached as Exhibit 7.2; provided,
however, that any modification
to any such product warranties shall apply only to Products the Sales of which
are made after the effective date of such product warranties.

7.3                                 Heska’s
Warranty.  Heska represents and
warrants that it has obtained or will obtain all required approvals of local
governments in connection with this Agreement.

 

 22
 

 

7.4                                 Disclaimer
of Warranties.  EXCEPT FOR THE
LIMITED WARRANTIES PROVIDED IN SECTIONS 7.1
AND 7.2, i-STAT MAKES NO OTHER
REPRESENTATIONS OR WARRANTIES OF ANY KIND, AND THE WARRANTIES OF i-STAT ARE IN
LIEU OF ALL OTHER WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR OF NONINFRINGEMENT OF
ANY THIRD PARTY PATENTS, COPYRIGHTS OR MARKS. 
EXCEPT FOR THE WARRANTY PROVIDED FOR IN SECTIONS 7.1 AND 7.2, i-STAT MAKES NO WARRANTY OF
ANY KIND TO END USERS OF HESKA HEREUNDER.

ARTICLE 8.  INDEMNIFICATION

8.1                                 Indemnification
by Each Party.  During the Term and
for two (2) years thereafter, i-STAT and Heska shall each at all times
indemnify and hold the other Party and their respective Affiliates,
stockholders, directors, officers, employees and agents harmless from and
against all liabilities, losses, claims, damages and expenses, including
reasonable attorneys’ fees and disbursements (“Claims”), to the extent that
such  arise out of or are in
connection with a breach of any covenant, agreement, warranty or representation
made by it herein; provided, however, that i-STAT shall not hold Heska and its
respective Affiliates, stockholders, directors, officers, employees and agents
harmless to the extent that such Claims arise out of or are in connection with
a breach of any covenant, agreement, warranty or representation made by Heska
regarding the Products (including but not limited to any Extended Warranty).  In the event of any Third Party action, the
indemnified Party shall have the right to participate in the defense, at its
own expense, with counsel of its own choosing.

8.2                                 Indemnification
by Heska.  Heska shall indemnify i-STAT
against all claims, losses, damages, liabilities and expenses, including
reasonable attorneys’ fees and disbursements, incurred by i-STAT arising with
respect to the sale, distribution or use of a Product to the extent caused by
any action or omission of Heska or its stockholders, directors, officers,
employees or agents.  Heska shall
indemnify, defend and hold i-STAT harmless against all claims, liabilities,
costs and expenses (including the reasonable fees of attorneys and other
professionals) incurred by, or threatened against, i-STAT in connection with
any representation or warranty by Heska (including any Extended Warranty of the
Products provided by Heska) or Heska’s personnel inconsistent with:  (a) the foregoing limited warranty and
disclaimer of i-STAT; or (b) publications of i-STAT concerning the Products.

8.3                               Infringement
Indemnification by i-STAT.  i-STAT
shall indemnify Heska against all claims, losses, damages, liabilities and
expenses, including reasonable attorneys’ fees and disbursements, incurred by
Heska arising with respect to, out of or in connection with any claim that the
Products or the Software infringe any copyright, patent, trade

 

 23
 

 

secret, trademark, or other proprietary right of any third party;
provided that i-STAT is notified promptly in writing of the claim and Heska
provides reasonable assistance in the settlement or defense of such claim;
provided, that Product or Software are not altered by Heska except as
specifically directed by i-STAT.  If a
Product or Software is held to constitute an infringement and its use as
contemplated by this Agreement is enjoined or threatened to be enjoined, i-STAT
shall at its option and expense: 
(a) procure for Heska the right to continue to Sell and distribute
the Products or the Software; (b) replace or modify the Products or the
Software with a version that is non-infringing; or (c) discontinue manufacture
and/or sales of the Product in affected countries.  In the event that i-STAT discontinues the
manufacture and/or sale of a Product pursuant to this Section 8.3 in any affected country, such
discontinuance shall not be considered a breach of this Agreement, and the
Parties shall negotiate in good faith an adjustment, if any, to the Base
Cartridge Targets set forth in Sections 2.4
and 2.5. 
If the Parties are unable to agree on an adjustment, if any, to the Base
Cartridge Targets as a result of good faith negotiations under the preceding
sentence, they will follow the procedures set forth in Section 11.9
to establish an adjustment, if any.

8.4                                 Limitation
of Liability.  UNDER NO CIRCUMSTANCES
SHALL A PARTY BE RESPONSIBLE TO THE OTHER PARTY FOR INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE
SALE, DELIVERY, NONDELIVERY, SERVICING, USE, MAINTENANCE, SUPPORT, CONDITION OR
POSSESSION OF PRODUCTS.

ARTICLE 9.  CONFIDENTIALITY

9.1                                 Confidentiality.  Neither Party shall use for any purpose,
other than as contemplated by this Agreement, or divulge to any Third Party,
any Confidential Information provided to such Party by the other Party, except
as may be required by law or judicial order.

9.2                                 Public
Announcements.  Neither Party shall
make any public announcement concerning this Agreement, nor make any public
statement which includes the name of the other Party or any of its Affiliates,
or otherwise use the name of the other Party or any of its Affiliates in any
public statement or document, except as may be required by law, including the
requirements of the SEC, or judicial order, without the written consent of the
other Party, which written consent shall not be withheld unreasonably.

 

 24
 

 

ARTICLE 10.  TERM AND TERMINATION

10.1                           Effective
Date and Term.  The initial term of
this Agreement shall commence as of the Effective Date and expire as of December
31, 2009 (the “Initial Term”), unless sooner terminated as expressly
provided in this Article 10 or Section 2.6.  THIS AGREEMENT WILL RENEW AUTOMATICALLY FOR
ADDITIONAL ONE (1) YEAR TERMS (EACH, AN “EXTENSION TERM”), UNLESS SOONER
TERMINATED AS EXPRESSLY PROVIDED IN THIS ARTICLE 10 OR SECTION 2.6.  The
Initial Term and all Extension Terms are sometimes referred to herein as the “Term.”

10.2                           Termination
For Cause By Either Party.  In
addition to the rights of the Parties to terminate this Agreement as provided
hereinabove, either Party may terminate this Agreement for cause upon written
notice to the other Party in the event the other Party: (a) appoints a
receiver, executes an assignment for the benefit of creditors or files or
otherwise becomes subject to bankruptcy or insolvency proceedings; or (b)
materially breaches this Agreement and fails to cure such breach within sixty
(60) days after receipt of written notice of breach from the non-breaching
Party, as such cure period may be extended for such additional period as the
non-breaching Party reasonably determines that the breaching Party is
diligently pursuing a cure of such breach.

10.3                           By
i-STAT for a Change of Control under Certain Circumstances.  If Heska undergoes a Change of Control, Heska
or the controlling entity following the Change of Control shall notify i-STAT
within thirty (30) days of such Change of Control.  Such notice shall inform i-STAT of the
identify of the entity involved in the Change of Control with Heska, and of the
parent corporation, if any, of the entity involved in the Change of Control
with Heska.  i-STAT shall have the
right to terminate this Agreement within six (6) months of such notice if Heska
has a Change of Control to an entity that, in i-STAT’s sole opinion, competes
with i-STAT or its Affiliates or, in i-STAT’s reasonable business judgment,
would harm i-STAT’s position in, the human blood and/or veterinary diagnostics
market; provided, that if Heska believes that i-STAT’s determination is
unreasonable, the Parties shall follow the procedure set forth in Section 11.9
to make the determination.

10.4         Effect of Termination.  Upon the termination of this Agreement:

(a)                                  The
Parties shall immediately cease the use of any Confidential Information of the
other Party and, in the case of Heska, of the Marks, except as permitted in
this Section 10.4.

 

 25
 

 

(b)                                 Unless
this Agreement is terminated by i-STAT for Heska’s breach or bankruptcy, and
subject to i-STAT’s rights as provided in this Section 10.4,
(i) i-STAT shall honor all accepted purchase orders providing for
delivery of Product within thirty (30) days of the date of termination and for
which Heska pays in full prior to shipment, and (ii) Heska may Sell Products on
a nonexclusive basis but otherwise on the terms set forth in this Agreement its
remaining inventory of Products for a period of up to ninety (90) days
following the date of termination.

(c)                                  i-STAT
shall have the right (but not the obligation), upon prior written notice to
Heska given within ten (10) days after termination to purchase from Heska all
or any portion of the Products in its inventory at the time of such termination
for credit against outstanding invoices, or for cash refund to the extent there
are no invoices then outstanding.  Any
credit or refund due Heska for such Product shall be equal to the Purchase
Price of the Product, less any discounts or credits previously received.

(d)                                 Heska
shall return to i-STAT all promotional and sales training materials provided to
Heska by i-STAT under this Agreement.

(e)                                  To
the extent permitted by law, Heska shall assign to i-STAT and deliver to i-STAT
any import permits, health resignations, licenses, exemptions from customs
duties and governmental consents of any nature specifically relating to i-STAT
Products, which Heska may have or retain directly or indirectly in connection
with the Products imported, Sold and/or distributed under this Agreement, which
it has not yet assigned or waived, or which have not yet been delivered prior
to termination.

(f)                                    Heska
shall not, in the final six months of any notification of termination (or such
actual time after notice and before actual termination, if shorter), undertake
any actions intended or designed to cause End Users or Dealers to purchase
higher than normal levels of inventory of Products.

10.5                           Continuing
Obligations.  Upon any termination of
this Agreement (except termination for cause by Heska due to i-STAT’s breach),
at i-STAT’s election and in accordance with i-STAT’s instructions, Heska
shall:  (a) cooperate in referring End
Users to i-STAT or to such other persons as i-STAT may direct for continuing
purchase of Products and related services; (b) transfer to i-STAT or its
nominees all outstanding maintenance contracts for the Products; and (c)
provide i-STAT with a  list of each
End User who purchased Product through Heska, including records of all Software
updates performed.

 

 26
 

 

[***] — 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.

Following termination of this Agreement for any reason, Heska shall
have no further obligations to End Users with respect to Software updates and
maintenance or technical support. 
Nothing in this Agreement shall be construed as preventing Heska from
soliciting End Users for other products following the termination of this
Agreement.

10.6         Survival.  The following Articles and Sections shall
survive termination of the Agreement:  Articles 1, 7, 8, 9, 10 and 11 and Sections
3.6, 3.8, 3.9, 3.11, 4.12 and 4.13.  In addition, all provisions that survive
termination, that are irrevocable or that arise due to termination shall
survive in accordance with their terms. 
Any other provisions of this Agreement contemplated by their terms to
pertain to a period of time following termination of this Agreement shall
survive for the specified period of time only.

ARTICLE 11.  MISCELLANEOUS

11.1                           Notices.  All written notices and other communications
between the Parties shall be in the English language and shall be deemed
effective on the date they are received by certified air mail or confirmed
facsimile addressed to the other Party at the address or facsimile number
stated below.

If to i-STAT:

i-STAT Corporation

104 Windsor Center Drive

East Windsor, New Jersey
08520

Attn:  Vice-President, Sales and Marketing

Telephone Number: 
(609) 443-9300

Facsimile
Number:  [***]

 

With copy to:       Divisional Vice President, Medical
Products Group

Domestic Legal
Operations

D-322,
Building AP6D

100 Abbott Park
Road

Abbott Park,
Illinois 60064-6049

Facsimile Number:  [***]

If to Heska:

Heska Corporation

1613 Prospect
Parkway

Fort Collins,
Colorado 80525

Attn: Chief
Financial Officer

 

 27
 

 

[***] — 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

Telephone
Number:  (970) 493-7272

Facsimile
Number:    [***]

 

With copy to:

Osborn Maledon,
P.A.

Attn: William M.
Hardin, Esq.

2929 North Central
Ave.

Suite 2100

Phoenix, AZ  85012

Telephone
Number:  602-640-9322

Facsimile
Number:  [***]

 

11.2         Annual Cartridge Purchases
Calculation.  Following each Contract
Year, the number of Cartridge Purchases for such Contract Year shall be
determined as set forth in Subsections 11.2.1
and 11.2.2 and the Parties shall
execute and attach to this Agreement the “Annual Cartridge Purchase Calculation”
form set forth on Exhibit 11.2 completed for such Contract Year.

11.2.1                  i-STAT Provides i-STAT Calculation.  Within forty (40) days after the end of each
Contract Year, i-STAT shall provide Heska in writing with i-STAT’s calculation
of Heska’s Cartridge Purchases in such Contract Year (the “i-STAT
Calculation”).  If Heska disagrees
with the i-STAT Calculation, Heska shall have thirty (30) days after receipt of
the i-STAT Calculation to respond in writing, with (a) Heska’s estimate; (b)
the difference between Heska’s estimate and the i-STAT Calculation; and (c)
purchase order level detail so that i-STAT may verify the i-STAT
Calculation.  If i-STAT disagrees with
Heska’s calculation and Heska requests, in writing, purchase order level detail
for the i-STAT Calculation, i-STAT shall provide such information.  If the exchange of such information does not
resolve the dispute, the Parties shall negotiate in good faith to determine the
actual Cartridge Purchases in such Contract Year and, if such dispute is not
resolved within thirty (30) days, the dispute shall be resolved pursuant to Section 11.9.

11.2.2                  i-STAT Does Not Provide i-STAT
Calculation.  If i-STAT fails to
provide Heska with the i-STAT Calculation within forty (40) days after the end
of a given Contract Year, Heska shall provide i-STAT, in writing, with Heska’s
calculation of Heska’s Cartridge Purchases in such Contract Year (the “Heska
Calculation”) within seventy (70) days after the end of such Contract
Year.  If i-STAT disagrees with the Heska
Calculation, i-STAT shall have thirty (30) days after receipt of the Heska
Calculation to respond, in writing, with (i) i-STAT’s estimate, (ii) the

 

 28
 

 

[***] — 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.

difference between i-STAT’s estimate and the Heska Calculation, and
(iii) purchase order level detail so that Heska may verify the Heska
Calculation.  If Heska disagrees with
i-STAT’s calculation and i-STAT requests, in writing, purchase order level
detail for the Heska Calculation, Heska shall provide such information.  If the exchange of such information does not
resolve the dispute, the Parties shall negotiate in good faith to determine the
actual Cartridge Purchases in such Contract Year and, if such dispute is not
resolved within thirty (30) days, the dispute shall be resolved pursuant to Section 11.9.

11.3                           [***].

11.3.1                   [***].

11.3.2                   [***].

11.4                          Binding
Effect/Assignment.  This Agreement
shall be binding upon and inure to the benefit of the Parties hereto and their
successors and assigns.  Neither Party
shall have the right to assign any of its rights or obligations under this
Agreement without the prior written consent of the other Party; provided, however, that without such written
consent, i-STAT shall have the right to assign its rights hereunder to an
Affiliate of i-STAT and Heska shall have the right to assign this
Agreement to any corporation controlled by Heska which has, as one of its
principal lines of business, the sale of diagnostic equipment for the
veterinary market.  In the event that a
Change of Control of Heska does not involve a competitor of i-STAT (pursuant to
Section 10.3 of this Agreement)
Heska shall have the right to assign this Agreement without i-STAT’s consent in
connection with a Change of Control; provided, that i-STAT has not
terminated this Agreement in the time frame provided in, and pursuant to the
terms and conditions set forth in, Section
10.3.

11.5                          Waivers.  Any waiver by either of the Parties hereto of
any rights arising from a breach of any covenants or conditions of this
Agreement shall not be construed as a continuing waiver of other breaches of
the same nature or other covenants or conditions of this Agreement.  Any failure by one of the Parties to assert
its rights for or upon any breach of this Agreement shall not be deemed to be a
waiver of such rights, nor shall such waiver be implied from the acceptance of
any payment.

11.6                          Relationship
of the Parties.   Nothing in this
Agreement or any other document or agreement between the Parties shall
constitute or be deemed to constitute a partnership or joint venture between
the Parties.  The relationship between
Heska and i-STAT shall be that of buyer and seller. No officer, agent or
employee of one Party shall under any 

 

 29
 

 

circumstances be considered the agent, employee or representative of
the other Party.  Neither Party shall
have the right to enter into any contracts or binding commitments in the name
of or on behalf of the other Party in any respect whatsoever.

11.7                          Force
Majeure.  Neither Party shall be
liable to the other Party or in default hereunder by reason of any delay or
omission caused by fire, flood, strike, lockout, civil or military authority,
insurrection, war, embargo, container or transportation shortage or delay of
suppliers due to such causes, and delivery dates shall be extended to the extent
of any delays resulting from the foregoing or similar causes.  In the event of a Product shortage, i-STAT
shall have the right to allocate its available Product among Heska and all
other customers of i-STAT in such a manner as i-STAT, in its sole discretion,
considers equitable, and the Parties shall negotiate in good faith an
adjustment to the Base Cartridge Targets set forth in Section 2.7.

11.8                          Governing
Law.  This Agreement shall in all
respects be governed by, and construed in accordance with, the internal laws
(and not the laws of conflicts) of the State of New Jersey.  The United Nations Convention on Contracts
for the International Sale of Goods (1980), as amended, is specifically
excluded from application to this Agreement.

11.9                          Alternative
Dispute Resolution.  Any and all
disputes, controversies or claims arising out of or relating to this Agreement,
or the breach, termination, or invalidity thereof, including but not limited to
the resolution of potential issues described in various provisions of this
Agreement that expressly refer to this Section 11.9
(including but not limited to Sections 2.9, 4.5, 8.3 and
10.3) shall be finally settled pursuant to the dispute resolution
procedures set forth on Exhibit 11.9.

11.10                    Severability.  If any provision of this Agreement for any
reason shall be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other term or
provision hereof, and this Agreement shall be interpreted and construed as if
such term or provision, to the extent the same shall have been held to be
invalid, illegal or unenforceable, had never been contained herein.

11.11                    Entire Agreement.  This Agreement, including the exhibits,
constitutes the entire understanding of the Parties with respect to the subject
matter hereof, and supersedes all prior or contemporaneous writings or
discussions, including but not limited to the Prior Agreement.  Except as otherwise expressly provided, no
agreement varying or extending the terms of this Agreement shall be binding on
either Party unless in a writing signed by an authorized representative of each
Party. 

11.12                    Headings.  The headings of the paragraphs and
subparagraphs of this Agreement have been added for the convenience of the
parties and shall not be deemed a part hereof.

 

 30

11.13                    Counterparts.  This Agreement may be executed in any number
of counterparts, all of which together shall constitute a single
Agreement.  In proving this Agreement, it
shall be necessary to produce or account for more than one counterpart signed
by the Party with respect to whom proof is sought.

(Remainder
of page intentionally left blank)

 

 31
 

 

IN
WITNESS WHEREOF, each Party has caused this Distribution Agreement to be
executed on its behalf by its duly authorized officer as of the Effective Date.

	
  i-STAT
  Corporation

  	
   

  	
   

  	
  Heska Corporation

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ John Mooradian

  	
   

  	
   

  	
  By:

  	
  /s/ Jason Napolitano

  
	
   

  	
  JOHN MOORADIAN

  	
   

  	
   

  	
   

  	
  JASON NAPOLITANO

  
	
  

  Its:

  	
  

  President

  	
   

  	
   

  	
  

  Its:

  	
  

  Chief Financial Officer

  
	
  

  Date:

  	
  

  October 29, 2004

  	
   

  	
   

  	
  

  Date:

  	
  

  October 28, 2004

  

 

 

 32

[***] — 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.

LIST OF EXHIBITS

	
  Exhibit Number

  	
   

  	
  Exhibit Name

  
	
  1.16

  	
   

  	
  [***]

  
	
  1.29

  	
   

  	
  Products and Purchase Prices

  
	
  3.8

  	
   

  	
  Bank Wire Transfer Information

  
	
  7.1

  	
   

  	
  End User Warranties

  
	
  11.2

  	
   

  	
  Annual Cartridge Purchase Calculation

  
	
  11.3A

  	
   

  	
  [***]

  
	
  11.3B

  	
   

  	
  [***]

  
	
  11.3C

  	
   

  	
  [***]

  
	
  11.3D

  	
   

  	
  [***]

  
	
  11.3E

  	
   

  	
  [***]

  
	
  11.3F

  	
   

  	
  [***]

  
	
  11.9

  	
   

  	
  Alternative Dispute Resolution

  

 

 i
 

 

[***] —
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.

EXHIBIT 1.16

[***]

 

 ii
 

 

[***] —
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.

Exhibit 1.29

PRODUCTS AND
PURCHASE PRICES

Analyzer and Associated Parts Price List

 

	
  Analyzer

  Product No.

  	
   

  	
  Description

  	
   

  	
  Price

  	
   

  
	
  —

  	
   

  	
  —

  	
   

  	
   

  	
   

  
	
  210002

  	
   

  	
  Series 200 analyzer

  	
   

  	
  [***]

  	
   

  
	
  111700

  	
   

  	
  HP Portable Printer

  	
   

  	
  [***]

  	
   

  
	
  111501

  	
   

  	
  Portable printer Paper

  	
   

  	
  [***]

  	
   

  
	
  111502

  	
   

  	
  HP Portable Printer AC
  Adapter

  	
   

  	
  [***]

  	
   

  
	
  112102

  	
   

  	
  Printer Cradle w/o IR
  Link

  	
   

  	
  [***]

  	
   

  
	
  111003

  	
   

  	
  9 Volt lithium
  batteries (6/box)

  	
   

  	
  [***]

  	
   

  
	
  131000

  	
   

  	
  Aqueous Controls Level
  1

  	
   

  	
  [***]

  	
   

  
	
  131500

  	
   

  	
  Aqueous Controls Level
  2

  	
   

  	
  [***]

  	
   

  
	
  132000

  	
   

  	
  Aqueous Controls Level
  3

  	
   

  	
  [***]

  	
   

  
	
  135681

  	
   

  	
  Calibration
  Verification Set

  	
   

  	
  [***]

  	
   

  
	
  136400

  	
   

  	
  Level 1 ACT Control
  (Kit)

  	
   

  	
  [***]

  	
   

  
	
  136500

  	
   

  	
  Level 2 ACT Control
  (Kit)

  	
   

  	
  [***]

  	
   

  
	
  111400

  	
   

  	
  Capillary tubes 65 μL

  	
   

  	
  [***]

  	
   

  
	
  112202

  	
   

  	
  IR Link with cradle

  	
   

  	
  [***]

  	
   

  
	
  112212

  	
   

  	
  Analyzer programming
  kit

  	
   

  	
  [***]

  	
   

  
	
  011996-01

  	
   

  	
  i-STAT Binders

  	
   

  	
  [***]

  	
   

  
	
  620001

  	
   

  	
  i-STAT System Manual -
  UK English

  	
   

  	
  [***]

  	
   

  
	
  620002

  	
   

  	
  i-STAT System Manual -
  German

  	
   

  	
  [***]

  	
   

  
	
  620003

  	
   

  	
  i-STAT System Manual -
  French

  	
   

  	
  [***]

  	
   

  
	
  620004

  	
   

  	
  i-STAT System Manual -
  Spanish

  	
   

  	
  [***]

  	
   

  
	
  620005

  	
   

  	
  i-STAT System Manual -
  Italian

  	
   

  	
  [***]

  	
   

  
	
  620006

  	
   

  	
  i-STAT System Manual
  -Dutch

  	
   

  	
  [***]

  	
   

  
	
  620007

  	
   

  	
  i-STAT System Manual -
  Swedish

  	
   

  	
  [***]

  	
   

  
	
  NOT
  Available

  	
   

  	
  i-STAT System Manual -
  Portuguese

  	
   

  	
  [***]

  	
   

  
	
  130100

  	
   

  	
  Electronic Simulator

  	
   

  	
  [***]

  	
   

  
	
  SRP200

  	
   

  	
  Analyzer repair
  cost-non warranty

  	
   

  	
  [***]

  	
   

  
	
  SRP230

  	
   

  	
  Portable printer repair cost

  	
   

  	
  [***]

  	
   

  

 

 iii
 

 

[***] —
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.

Exhibit 1.29

PRODUCTS AND
PURCHASE PRICES

Cartridge
Price List

	
  Cartridge

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  United States

  	
   

  	
  Rest of World

  	
   

  
	
  Product No.

  	
   

  	
  Description

  	
   

  	
  Qty/Box

  	
   

  	
  Price/Test

  	
   

  	
  Price/Box

  	
   

  	
  Price/Test

  	
   

  	
  Price/Box

  	
   

  
	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  220300

  	
   

  	
  EG7+

  	
   

  	
  25

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  220200

  	
   

  	
  EG6+

  	
   

  	
  25

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  220100

  	
   

  	
  G3+

  	
   

  	
  25

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  125000-02

  	
   

  	
  EC8+

  	
   

  	
  25

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  121000-02

  	
   

  	
  6+

  	
   

  	
  25

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  123000-02

  	
   

  	
  EC6+

  	
   

  	
  25

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  121500-02

  	
   

  	
  EC4+

  	
   

  	
  25

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  120100-02

  	
   

  	
  G

  	
   

  	
  25

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  320100

  	
   

  	
  creatinine

  	
   

  	
  25

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  220400

  	
   

  	
  CG8+

  	
   

  	
  25

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  420300

  	
   

  	
  ACT

  	
   

  	
  25

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  220550

  	
   

  	
  CG4+

  	
   

  	
  25

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  120500-02

  	
   

  	
  E3+

  	
   

  	
  25

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  

 

 iv
 

 

[***] — 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.

Exhibit 1.29

PRODUCTS AND
PURCHASE PRICES

Service
Repair Parts

 

	
  i-STAT Part Number

  	
   

  	
  Description

  	
   

  	
  Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  010762-01

  	
   

  	
  10 pin connector
  Digital Bd

  	
   

  	
  [***]

  	
   

  
	
  010559-01

  	
   

  	
  20 pin Connector -
  Nyebar

  	
   

  	
  [***]

  	
   

  
	
  011882-01

  	
   

  	
  200 Cover Screw

  	
   

  	
  [***]

  	
   

  
	
  012378-01

  	
   

  	
  200 Display (Double)

  	
   

  	
  [***]

  	
   

  
	
  011678-01
  02

  	
   

  	
  200 Display (Single)

  	
   

  	
  [***]

  	
   

  
	
  011832-01

  	
   

  	
  200 External Back
  Housing

  	
   

  	
  [***]

  	
   

  
	
  012086-01

  	
   

  	
  200 Housing Feet

  	
   

  	
  [***]

  	
   

  
	
  012203-01
  01

  	
   

  	
  200 Hybrid Flex Cable

  	
   

  	
  [***]

  	
   

  
	
  010534-01

  	
   

  	
  200 Thermal Probe

  	
   

  	
  [***]

  	
   

  
	
  012156-01

  	
   

  	
  5 Minute Epoxy

  	
   

  	
  [***]

  	
   

  
	
  010760-01

  	
   

  	
  9 pin connector Digital
  Bd.

  	
   

  	
  [***]

  	
   

  
	
  010941-02
  01

  	
   

  	
  Abbott Boxes

  	
   

  	
  [***]

  	
   

  
	
  012369-01

  	
   

  	
  Assy, Battery Cable

  	
   

  	
  [***]

  	
   

  
	
  012369-01
  01

  	
   

  	
  Battery Flex Assembly

  	
   

  	
  [***]

  	
   

  
	
  010501-01
  01

  	
   

  	
  Bowed Clip

  	
   

  	
  [***]

  	
   

  
	
  010941-01

  	
   

  	
  Boxes (i-STAT)

  	
   

  	
  [***]

  	
   

  
	
  010087-02

  	
   

  	
  BT101- Lithium Battery
  (Double)

  	
   

  	
  [***]

  	
   

  
	
  012333-01
  01

  	
   

  	
  BT1-Lithium Battery
  (Single)

  	
   

  	
  [***]

  	
   

  
	
  012328-01
  01

  	
   

  	
  C119 / C124

  	
   

  	
  [***]

  	
   

  
	
  010032-05

  	
   

  	
  Capcitor-C186

  	
   

  	
  [***]

  	
   

  
	
  012217-01
  01

  	
   

  	
  Cartridge Door

  	
   

  	
  [***]

  	
   

  
	
  015506-01

  	
   

  	
  Clip Retainer

  	
   

  	
  [***]

  	
   

  
	
  012055-01

  	
   

  	
  Cover, Battery
  compartment

  	
   

  	
  [***]

  	
   

  
	
  011856-02

  	
   

  	
  Damper (Double Length)

  	
   

  	
  [***]

  	
   

  
	
  011856-05

  	
   

  	
  Damper (Double Width)

  	
   

  	
  [***]

  	
   

  
	
  011856-04

  	
   

  	
  Damper (Quad Length)

  	
   

  	
  [***]

  	
   

  
	
  011856-03

  	
   

  	
  Damper (Triple Length)

  	
   

  	
  [***]

  	
   

  
	
  012378-01

  	
   

  	
  Display- (Double bd.)

  	
   

  	
  [***]

  	
   

  
	
  011678-02

  	
   

  	
  Display- (Single bd.)

  	
   

  	
  [***]

  	
   

  
	
  012605-01
  01

  	
   

  	
  Display block,
  Hantronix

  	
   

  	
  [***]

  	
   

  
	
  010091-01

  	
   

  	
  Display Window

  	
   

  	
  [***]

  	
   

  
	
  010618-01

  	
   

  	
  FLASH U56(U109)

  	
   

  	
  [***]

  	
   

  
	
  010500-01
  01

  	
   

  	
  Flat Clip

  	
   

  	
  [***]

  	
   

  
	
  015384-01
  02

  	
   

  	
  Follower Arm Assembly

  	
   

  	
  [***]

  	
   

  
	
  015473-01
  03

  	
   

  	
  Fork

  	
   

  	
  [***]

  	
   

  
	
  012341-01
  02

  	
   

  	
  Front Housing (AID
  Keypad)

  	
   

  	
  [***]

  	
   

  
	
  010491-01
  02

  	
   

  	
  Guide Pin

  	
   

  	
  [***]

  	
   

  
	
  012368-01

  	
   

  	
  Harness flex cable (200
  single board)

  	
   

  	
  [***]

  	
   

  
	
  010731-01

  	
   

  	
  Hybrid

  	
   

  	
  [***]

  	
   

  
	
  012203-01

  	
   

  	
  Hybrid Flex cable

  	
   

  	
  [***]

  	
   

  

 

 v
 

 

	
  i-STAT Part Number

  	
   

  	
  Description

  	
   

  	
  Price

  	
   

  
	
  012023-01

  	
   

  	
  Keypad PCB Rivet

  	
   

  	
  [***]

  	
   

  
	
  012278-01

  	
   

  	
  Keypad PCB Screw

  	
   

  	
  [***]

  	
   

  
	
  012340-01
  05

  	
   

  	
  Keypad PCB-Double bd.

  	
   

  	
  [***]

  	
   

  
	
  012891-01
  01

  	
   

  	
  Latch

  	
   

  	
  [***]

  	
   

  
	
  012373-01
  01

  	
   

  	
  Latch Retainer

  	
   

  	
  [***]

  	
   

  
	
  010087-02

  	
   

  	
  Lithium battery-200
  analyzer

  	
   

  	
  [***]

  	
   

  
	
  010493-01

  	
   

  	
  Pivot Pin

  	
   

  	
  [***]

  	
   

  
	
  010627-01

  	
   

  	
  R120

  	
   

  	
  [***]

  	
   

  
	
  010070-26

  	
   

  	
  Ram U57 (U106)

  	
   

  	
  [***]

  	
   

  
	
  010070-27

  	
   

  	
  RTC (DP8570A)

  	
   

  	
  [***]

  	
   

  
	
  010572-01
  03

  	
   

  	
  Spiral, Spring Latch

  	
   

  	
  [***]

  	
   

  
	
  010763-01

  	
   

  	
  Start Cycle Switch
  double board

  	
   

  	
  [***]

  	
   

  
	
  010764-01

  	
   

  	
  Start Cycle Switch
  single board

  	
   

  	
  [***]

  	
   

  
	
  010534-01

  	
   

  	
  Thermal probes

  	
   

  	
  [***]

  	
   

  
	
  010311-01

  	
   

  	
  Threadlocker 222

  	
   

  	
  [***]

  	
   

  
	
  010070-05

  	
   

  	
  U105 / U112

  	
   

  	
  [***]

  	
   

  
	
  010070-27

  	
   

  	
  U107 - RTC (DP8570A)

  	
   

  	
  [***]

  	
   

  
	
  012324-11
  01

  	
   

  	
  U53 - RTC

  	
   

  	
  [***]

  	
   

  
	
  012324-01 01

  	
   

  	
  U89 - FPGA

  	
   

  	
  [***]

  	
   

  

 

 vi
 

 

[***] — 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.

EXHIBIT 3.8

Bank Wire Transfer
Information

Domestic wires:

Wachovia Bank

Charlotte, NC

ABA# 053000219

Account Name:        Abbott - i-STAT USD

Account Number:    [***]

Reference:             Your Company Name & Invoice #

 

International wires:

Wachovia Bank

Charlotte, NC

SWIFT:  PNBPUS33

Account Name:        Abbott - i-STAT USD

Account Number:     [***]

Reference:             Your Company Name & Invoice #

 

 vii
 

 

 EXHIBIT 7.1

CUSTOMER
WARRANTIES

Warranty

i-STAT warrants this
medical product (excluding disposable or consumable supplies) against defects
in materials and workmanship for one year from the date of shipment.  If i-STAT receives notice of such defects
during the warranty period, i-STAT shall, at its option, either repair or
replace products which prove to be defective. 
With respect to software or firmware, if i-STAT receives notice of
defects in these products during the warranty period, i-STAT shall repair or
replace software media and firmware which does not execute their programming
instructions due to such defects.  i-STAT
does not warrant that the operating of the software, firmware or hardware shall
be uninterrupted or error free.  If
i-STAT is unable, within a reasonable time, to repair or replace any product to
a condition as warranted, Buyer shall be entitled to a refund of the purchase
price upon return of the product to i-STAT.

Note:  Warranty rights may vary from state to state,
province to province and country to country.

Limitations of Warranty

The foregoing warranty
shall not apply to defects resulting from:

1.               Improper or inadequate maintenance by Buyer or an unauthorized person,

2.               Using accessories and/or consumables that are not approved by i-STAT,

3.               Buyer-supplied software or interfacing,

4.               Unauthorized repairs, modifications, misuse, or damage caused by disposable
batteries, or rechargeable batteries not supplied by Abbott.

5.               Operating outside of the environmental specifications of the product, or

6.               Improper site preparation or maintenance.

THE WARRANTY SET FORTH
ABOVE IS EXCLUSIVE AND NO OTHER WARRANTY, WHETHER WRITTEN OR ORAL, IS EXPRESSED
OR IMPLIED.  ABBOTT SPECIFICALLY
DISCLAIMS THE IMPLIED WARRANTIES OR MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.

 

 viii
 

 

 EXHIBIT 11.2

ANNUAL CARTRIDGE
PURCHASE CALCULATION

	
  Contract Year:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  i-STAT Calculation:

  	
   

  	
   

  	
  date provided to Heska:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Approved by Heska:

  	
        Yes /    
  No*

  	
   

  	
  date approved/rejected by Heska:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  *if No:

  	
   

  	
   

  	
   

  	
   

  
	
  Heska Estimate:

  	
   

  	
   

  	
  date provided to i-STAT:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Approved by i-STAT:

  	
        Yes /    
  No**

  	
   

  	
  date approved/rejected by i-STAT:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  **if No:

  	
   

  	
   

  	
   

  	
   

  
	
  Agreed Calculation:

  	
   

  	
   

  	
  date agreed:

  	
   

  
						

 

Official
Determination of Cartridge Purchases

for
Contract Year                           is:
                                .

	
  i-STAT Corporation

  	
   

  	
  Heska Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  

 

 

 ix

[***] — 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.

EXHIBIT 11.3A

[***]

 

 x
 

 

[***] — 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.

EXHIBIT 11.3B

[***]

 

 xi
 

 

[***] — 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.

EXHIBIT 11.3C

[***]

 

 xii
 

 

[***] — 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.

EXHIBIT 11.3D

[***]

 

 xiii
 

 

[***] — 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.

EXHIBIT 11.3E

[***]

 

 xiv
 

 

[***] — 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.

EXHIBIT 11.3F

[***]

 

 xv
 

 

EXHIBIT 11.9

ALTERNATIVE
DISPUTE RESOLUTION

The
parties recognize that from time to time a dispute may arise relating to either
party’s rights or obligations under this Agreement. The parties agree that any
such dispute shall be resolved by the Alternative Dispute Resolution (“ADR”)
provisions set forth in this Exhibit, the result of which shall be binding upon
the parties.

To begin
the ADR process, a party first must send written notice to the other party in
accordance with the terms of the Agreement describing the dispute and
requesting attempted resolution by good faith negotiations between their
respective president or principal executive officer(s) (or their designees) of
the affected subsidiaries, divisions, or business units within twenty-eight
(28) days after such notice is received (all references to “days” in this ADR
provision are to calendar days). If the matter has not been resolved within
twenty-eight (28) days of the notice of dispute, or if the parties fail to meet
within such twenty-eight (28) days, either party may initiate an ADR proceeding
as provided herein. The parties shall have the right to be represented by
counsel in such a proceeding.

1.             To begin an ADR proceeding, a party
shall provide written notice to the other party in accordance with the terms of
the Agreement of the issues to be resolved by ADR.  Within fourteen (14) days after its receipt
of such notice, the other party may, by written notice to the party initiating
the ADR, add additional issues to be resolved within the same ADR.

2.             Within twenty-one (21) days
following receipt of the original ADR notice, the parties shall select a
mutually acceptable neutral to preside in the resolution of any disputes in
this ADR proceeding. If the parties are unable to agree on a mutually
acceptable neutral within such period, either party may request the President
of the CPR Institute for Dispute Resolution (“CPR”), 366 Madison Avenue,
14th Floor, New York, New York 10017, to select a neutral pursuant to the
following procedures:

(a)           The CPR shall submit to the parties a list of not less than
five (5) candidates within fourteen (14) days after receipt of the request,
along with a Curriculum Vitae for
each candidate. No candidate shall be an employee, director, shareholder or
Affiliate of either party or any of their subsidiaries or affiliates.

(b)           Such list shall include a statement of disclosure by each
candidate of any circumstances likely to affect his or her impartiality.

(c)           Each party shall number the candidates in order of
preference (with the number one (1) signifying the greatest preference) and
shall deliver the list to the CPR within seven (7) days following receipt of
the list of candidates. If a party believes a conflict of interest exists
regarding any of the candidates, that party shall provide a 

 

 xvi
 

 

written explanation of the conflict to the CPR along
with its list showing its order of preference for the candidates. Any party
failing to return a list of preferences on time shall be deemed to have no
order of preference.

(d)           If the parties collectively have identified fewer than
three (3) candidates deemed to have conflicts, the CPR immediately shall
designate as the neutral the candidate for whom the parties collectively have
indicated the greatest preference. If a tie should result between two
candidates, the CPR may designate either candidate. If the parties collectively
have identified three (3) or more candidates deemed to have conflicts, the CPR
shall review the explanations regarding conflicts and, in its sole discretion,
may either (i) immediately designate as the neutral the candidate for whom the
parties collectively have indicated the greatest preference, or (ii) issue a new
list of not less than five (5) candidates, in which case the procedures set
forth in subparagraphs 2(a) - 2(d) shall be repeated.

3.             No earlier than twenty-eight (28)
days or later than fifty-six (56) days after selection, the neutral shall hold
a hearing to resolve each of the issues identified by the parties. The ADR
proceeding shall take place at a location agreed upon by the parties. If the
parties cannot agree, the neutral shall designate a location other than the
principal place of business of either party or any of their subsidiaries or
Affiliates.

4.             At least seven (7) days prior to the
hearing, each party shall submit the following to the other party and the
neutral:

(a)           a copy of all exhibits on which such party intends to rely
in any oral or written presentation to the neutral;

(b)           a list of any witnesses such party intends to call at the
hearing, and a short summary of the anticipated testimony of each witness;

(c)           a proposed ruling on each issue to be resolved, together
with a request for a specific damage award or other remedy for each issue. The
proposed rulings and remedies shall not contain any recitation of the facts or
any legal arguments and shall not exceed one (1) page per issue. The
parties agree that neither side shall seek as part of its remedy any punitive
damages.

(d)           a brief in support of such party’s proposed rulings and
remedies, provided that the brief shall not exceed twenty (20) pages. This page
limitation shall apply regardless of the number of issues raised in the ADR proceeding.

Except
as expressly set forth in subparagraphs 4(a) - 4(d), no discovery shall be
required or permitted by any means, including depositions, interrogatories,
requests for admissions, or production of documents.

5.             The hearing shall be conducted on
two (2) consecutive days and shall be governed by the following rules:

 

 xvii
 

 

(a)           Each party shall be entitled to five (5) hours of hearing
time to present its case. The neutral shall determine whether each party has
had the five (5) hours to which it is entitled.

(b)           Each party shall be entitled, but not required, to make an
opening statement, to present regular and rebuttal testimony, documents or
other evidence, to cross-examine witnesses, and to make a closing argument.
Cross-examination of witnesses shall occur immediately after their direct
testimony, and cross-examination time shall be charged against the party
conducting the cross-examination.

(c)           The party initiating the ADR shall begin the hearing and,
if it chooses to make an opening statement, shall address not only issues it
raised but also any issues raised by the responding party. The responding
party, if it chooses to make an opening statement, also shall address all
issues raised in the ADR. Thereafter, the presentation of regular and rebuttal
testimony and documents, other evidence, and closing arguments shall proceed in
the same sequence.

(d)           Except when testifying, witnesses shall be excluded from
the hearing until closing arguments.

(e)           Settlement negotiations, including any statements made
therein, shall not be admissible under any circumstances. Affidavits prepared
for purposes of the ADR hearing also shall not be admissible. As to all other
matters, the neutral shall have sole discretion regarding the admissibility of
any evidence.

6.             Within seven (7) days following
completion of the hearing, each party may submit to the other party and the
neutral a post-hearing brief in support of its proposed rulings and remedies,
provided that such brief shall not contain or discuss any new evidence and
shall not exceed ten (10) pages. This page limitation shall apply regardless of
the number of issues raised in the ADR proceeding.

7.             The neutral shall rule on each
disputed issue within fourteen (14) days following completion of the hearing.
Such ruling shall adopt in its entirety the proposed ruling and remedy of one
of the parties on each disputed issue but may adopt one party’s proposed
rulings and remedies on some issues and the other party’s proposed rulings and
remedies on other issues. The neutral shall not issue any written opinion or
otherwise explain the basis of the ruling.

8.             The neutral shall be paid a
reasonable fee plus expenses. These fees and expenses, along with the
reasonable legal fees and expenses of the prevailing party (including all
expert witness fees and expenses), the fees and expenses of a court reporter,
and any expenses for a hearing room, shall be paid as follows:

(a)           If the neutral rules in favor of one party on all disputed
issues in the ADR, the losing party shall pay 100% of such fees and expenses.

 

 xviii
 

 

(b)           If the neutral rules in favor of one party on some issues
and the other party on other issues, the neutral shall issue with the rulings a
written determination as to how such fees and expenses shall be allocated
between the parties. The neutral shall allocate fees and expenses in a way that
bears a reasonable relationship to the outcome of the ADR, with the party
prevailing on more issues, or on issues of greater value or gravity, recovering
a relatively larger share of its legal fees and expenses.

9.             The
rulings of the neutral and the allocation of fees and expenses shall be
binding, non-reviewable, and non-appealable, and may be entered as a final
judgment in any court having jurisdiction.

10.           Except
as provided in paragraph 9 or as required by law, the existence of the dispute,
any settlement negotiations, the ADR hearing, any submissions (including
exhibits, testimony, proposed rulings, and briefs), and the rulings shall be
deemed Confidential Information. The neutral shall have the authority to impose
sanctions for unauthorized disclosure of Confidential Information.

11.           All ADR hearings shall be conducted
in the English language.

 

 xixExhibit
10.26

[***] — 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

AMENDED
AND RESTATED

BOVINE
VACCINE DISTRIBUTION AGREEMENT

This Second
Amendment (“Second Amendment”) is entered into as of the 10th day of December, 2004 (“Effective Date”)
by and between DIAMOND ANIMAL HEALTH, INC.,
an Iowa corporation with offices at 2538 Southeast 43rd Street, Des Moines, Iowa 50317 (“Diamond”)
and AGRI LABORATORIES, LTD., a
Delaware corporation, with offices at 20927 State Route K, St. Joseph,
Missouri 64505 (“Distributor”) as an amendment to that certain Amended
and Restated Bovine Vaccine Distribution Agreement dated as of
September 30, 2002 between Diamond and Distributor (the “Original
Agreement”), as amended by that certain First Amendment dated as of
September 20, 2004 (the “First Amendment”) (together, the “Agreement”).

WHEREAS, Diamond
and Distributor are parties to the Agreement providing for the distribution of
certain bovine antigens; and

WHEREAS,
Distributor made the 2004 Prepayment of [***] pursuant to Section 3.04(ii)
of the Agreement in April 2004 and subsequently, pursuant to the First
Amendment, Distributor made an additional [***] prepayment to Diamond toward
the purchase of Products and/or Initial Products for Contract Year 2005
(collectively, the “[***] Prepayment”); and

WHEREAS,
Distributor and Diamond are parties to a Research, Development and License
Agreement dated as of September 20, 2004 (the “[***] R & D
Agreement”), providing for the development [***]  (the
“[***] Products”); and

WHEREAS,
Distributor and Diamond are parties to a Research, Development and License
Agreement dated as of the date hereof (the “[***] R&D Agreement”),
providing for the development [***] (the “[***] Product”); and

WHEREAS,
Distributor and Diamond desire to amend the Agreement on the terms and
conditions of this Second Amendment.

NOW, THEREFORE,
the parties agree as follows:

1.       Definitions. 
Capitalized terms used herein shall have the meanings ascribed to them
in the Agreement, unless otherwise defined herein.

2.       Amendment Fee.

(i) The [***]
Prepayment shall be retained by Diamond as a non-refundable fee paid by
Distributor to Diamond for this Second Amendment (the “Amendment Fee”).  No portion of the [***] Prepayment shall be
credited toward Distributor’s obligations to purchase

[***] —
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.

and pay for
Products.  Each of (i) the last two
(2) sentences of Section 3.04(ii) of the Original Agreement and
(ii) Section 2 of the First Amendment is hereby deleted in its
entirety and shall have no further force or effect.

(ii) If at
any time prior to the end of Contract Year 2009, Diamond’s manufacturing
facility is shut down and Diamond is unable to supply Products to Distributor
as a result of a regulatory order or force majeure event (as defined in
Section 8 of the Agreement) (a “Shut Down Event”), for a period of
greater than four (4) consecutive calendar months (the last day of such four
(4) month period, the “Trigger Date”), Diamond shall reimburse to
Distributor a portion of the Amendment Fee as follows:  [***] for every month prior to January 2010
in which a Shut Down Event continues, including [***] for each of the four (4)
months beginning on the commencement of the Shut Down Event and ending upon the
Trigger Date (the “Shut Down Payment”). 
Any such Shut Down Payment shall be made in monthly installments of
[***], beginning on the Trigger Date, and continuing on the first day of each
calendar month thereafter until the Shut Down Payment is paid in full.

3.       Amendment of Loan. 
Pursuant to Section 3.06 of the Agreement, Diamond delivered to
Distributor the New Note to evidence the Loan. 
Upon execution and delivery of this Second Amendment, the parties shall
cancel the New Note and execute and deliver a substitute Note in the form
attached hereto as Exhibit A.

4.       Exclusivity.

(i) The
first sentence of Section 1.02 of the Agreement is hereby deleted in its
entirety and replaced with the following sentences:

Distributor’s distribution rights under the Agreement
shall be exclusive worldwide for all products identified on Exhibit A
attached to the Agreement  and Additional
Products added pursuant to Section 2 through Contract Year 2009, except as
set forth in this paragraph, and unless earlier terminated in accordance with
the provisions of the Agreement. 
Distributor’s distribution rights under the Agreement shall be
nonexclusive during the remaining term of the Agreement following Contract Year
2009, unless Distributor is granted additional exclusivity rights in accordance
with Section 11 of the Second Amendment.

Except for the first sentence of Section 1.02 of
the Agreement, the remaining provisions of Section 1.02 of the Agreement
shall remain in full force and effect.

(ii) Section 3
of the First Amendment is hereby deleted in its entirety and shall have no
further force or effect.

5.       Territory. 
Section 1.03 of the Agreement is hereby deleted in its entirety and
replaced with the following paragraph:

Subject to the terms and conditions of this Agreement,
Distributor is authorized to sell, have sold and otherwise distribute Products
and Additional Products

 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.

added pursuant to Section 2 (hereafter
collectively referred to as (“All Products”) in the following
territories:  (i) worldwide through
June 30, 2005, limited only as provided in Section 1.02, and
(ii) only in the United States, Africa, China, Mexico and Taiwan through
December 15, 2009, limited only as provided in Section 1.02; provided,
that notwithstanding any provision of this Agreement to the contrary,
Distributor shall have no distribution rights in Canada after December 15,
2009.

6.       Minimums.

(i)            The table set forth in
Section 1.04(ii)(A)(1) of the Agreement is hereby deleted in its entirety
and replaced with the following table:

	
  Contract Year Ending December 15,

  	
   

  	
  Minimum Qualified Revenue

  
	
   

  	
   

  	
   

  
	
  2004

  	
   

  	
  [***]

  
	
  2005

  	
   

  	
  [***]

  
	
  2006

  	
   

  	
  [***]

  
	
  2007

  	
   

  	
  [***]

  
	
  2008

  	
   

  	
  [***]

  

 

(ii)           The
table set forth in Section 1.04(ii)(A)(2) of the Agreement is hereby
deleted in its entirety and replaced with the table set forth in Section 6(i)
of this Second Amendment.

(iii)          The table set forth in
Section 1.04(ii)(B) of the Agreement is hereby deleted in its entirety and
replaced with the following table:

	
  Contract Year Ending December 15,

  	
   

  	
  Minimum Initial Product Revenue

  
	
   

  	
   

  	
   

  
	
  2004

  	
   

  	
  [***]

  
	
  2005

  	
   

  	
  [***]

  
	
  2006

  	
   

  	
  [***]

  
	
  2007

  	
   

  	
  [***]

  
	
  2008

  	
   

  	
  [***]

  

 

(iv)          In Contract Year 2006 and subsequent
Contract Years, if a License has not issued for [***] Products on or before
June 30 in any such Contract Year, the Minimum Qualified Revenue and
Minimum Initial Product Revenue set forth in each table in paragraphs (i)
through (iii) above shall be reduced by [***] for such Contract Year, in
addition to any adjustment required under Section 6(v) below.

(v)           In Contract Year 2006 and subsequent
Contract Years, if a License has been 
issued for [***] Product on or before June 30 in any such Contract
Year, the Minimum Qualified Revenue and Minimum Initial Product Revenue set
forth in each table in paragraphs (i)

 3
 

[***] — 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.

through (iii) above shall
be increased by [***] for such Contract Year, in addition to any adjustment
required under Section 6(iv) above.

(vi)          Distributor shall use its best efforts
to maximize sales of Products during the term of the Agreement, in excess of
the Minimum Qualified Revenue.

7.       Additional Prepayments; Take-or-Pay
Obligations.  The Agreement is hereby
amended to add the following new Section 3.04(iii):

3.04(iii) (A)            For purposes of the Agreement, “Contract
Quarter” shall mean the quarterly periods during each Contract Year
beginning on December 16, March 16, June 16, and
September 16.  For purposes of this
Agreement, Qualified Revenue for any Contract Year or Contract Quarter includes
the Purchase Price of Products ordered by Distributor for delivery in such
Contract Year or Contract Quarter, even if Diamond is unable to make timely
delivery in such Contract Year or Contract Quarter.

(B)           On or before the first day of each
Contract Quarter in Contracts Years 2005 through 2009, inclusive, Distributor
shall pay to Diamond an amount equal to [***], which amount shall be credited,
effective upon issuance of Diamond invoices, against the invoice prices for
Products to be shipped in such Contract Year (each, a “Minimum Prepayment”).
Distributor shall not be required to make a Minimum Prepayment during a Shut
Down Event.

(C)           If Qualified Revenues are less than
[***] in Contract Year 2005, then Distributor shall pay an amount equal to such
shortfall to Diamond; provided, that Distributor shall not be obligated to make
such payment if a Shut Down Event occurs during Contract Year 2005.

(D)          If Qualified Revenues are less than
[***] in any Contract Quarter during Contract Years 2006 through 2009,
inclusive, then Distributor shall pay to Diamond an amount equal to such
shortfall; provided, that Distributor shall not be obligated to make such
payment for any Contract Quarter in which a Shut Down Event occurs or
continues.

(E)           Diamond shall be entitled to retain
any portion of the Minimum Prepayments not credited to actual purchases of
Products to satisfy Distributor’s take-or-pay obligations in the preceding
paragraphs (C) and (D).  Distributor’s
obligation to make the take-or-pay payments pursuant to paragraphs (C) and (D)
above shall be absolute, regardless of whether or not Distributor elects to
make an Additional Payment or Additional Initial Product Payment to maintain
its exclusivity under the Agreement and regardless of whether Distributor’s
exclusivity under the Agreement shall have terminated for any other reason.

8.       Price Adjustment [***].  Notwithstanding any provision of the
Agreement (and its Exhibits) to the contrary, the price for [***] shall be
increased as set forth on

 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.

Exhibit B attached hereto,
effective upon execution and delivery of this Second Amendment; provided, that
the effective date of such price increase for [***] to be distributed in Africa
shall be September 1, 2005.

9.       Returns.  Section 5.05 of the Agreement is hereby
deleted in its entirety and shall be of no further force and effect, effective
as of December 16, 2004; provided, that Distributor may return Products
shipped during Contract Year 2004 in accordance with such Section 5.05 on
or before December 15, 2004.

10.     Special Termination Right.  Section 6.04 of the Agreement is hereby
redesignated as Section 6.05 and the following new Section 6.04 is hereby added
to the Agreement:

6.04        Special Termination Right.  Diamond shall have the right, but not the
obligation, to terminate this Agreement, effective as of December 15, 2010,
upon at least 270 days prior written notice to Distributor; provided, that all
of the following conditions have been met:

(i)            a License has issued prior to the
beginning of Contract Year 2008 with respect to monovalent and combination
[***] Products;

(ii)           a License has issued prior to the
beginning of Contract Year 2008 with respect to a [***] Product;

(iii)          a License has issued prior to the
beginning of Contract Year 2008 with respect to [***];

(iv)          Distributor has maintained its
exclusive distribution rights in accordance with the terms of the Agreement for
both Contract Years 2008 and 2009; and

(v)           Distributor’s aggregate, cumulative
Qualified Revenue for Contract Years 2004 through 2009, inclusive, is less than
[***].

11.     The Agreement is hereby amended to add the
following new Section 3.07 (see Examples 1 and 2 of
Exhibit C):

3.07         [***]
Compensation.  If a License is not
issued for [***] on or before January 31, 2006, Diamond shall elect (the “[***]
Election”) to take one of the following actions for the benefit of
Distributor, such election to be made at Diamond’s sole discretion:  (i) pay to Distributor monthly
installments of [***] for each full or partial month after January 2006 in
which a License has not issued, not to exceed 30 months (“[***] Installments”),
or alternatively, (ii) grant to Distributor one additional month of
exclusive distribution rights under this Agreement for each month after January
2006 in which a License has not issued, not to exceed 30 months (“[***]
Extension”).  Diamond

 5
 

[***] —
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.

shall make the [***] Election, if required, on or before the later of
(x) 90 days after such License has issued or (y) July 31, 2007;
provided, that if such License is not issued on or before July 31, 2007, the
[***] Election shall be made on July 31, 2007. 
If Diamond elects to make the [***] Installments, the first such [***]
installment shall be made on the first day of the month after Diamond makes the
[***] Election and shall continue on the first day of each succeeding month
until the number of installments payable under (i) above has been made.  If Diamond elects to grant the [***]
Extension, such additional months of exclusive rights shall begin on December
16, 2009 or, such earlier date, if any, on which Distributor’s exclusivity
rights would otherwise terminate under the terms and conditions of this
Agreement.  No Minimum Qualified Revenue
requirement shall apply during the period of any [***] Extension.

12.     Reimbursement under [***] R&D
Agreement.  For the purposes of
Section 12(a) and (b), “[***] Spending” shall mean, as of a particular
date, the lesser of (i) the [***] Expenditures (as defined in the [***] R&D
Agreement) incurred as of such date, times [***] or (ii) [***].

(a)           If a License has not issued for one
or more of the [***] Products on or before June 15, 2008, Diamond shall pay to
Distributor, in eighteen (18) equal and consecutive monthly installments
beginning July 15, 2008 and ending December 15, 2009, an amount equal to
one-half (1/2) of the [***] Spending as of June 15, 2008 (the “Interim
Reimbursement”).

(b)           If a License has not issued for one or
more of the [***] Products on or before December 15, 2009, Diamond shall pay to
Distributor no later than January 1, 2010, an amount equal to one-half (1/2) of
the [***] Spending as of December 15, 2009 less the Interim Reimbursement (the “Final
Payment”) (see Example 3 of Exhibit
C).

13.     Confidentiality of Agreement.  Notwithstanding any provision of the
Agreement to the contrary, this Second Amendment shall be publicly available
information for SEC filing, press release and other discussion purposes;
provided, that the highlighted items set forth in Exhibit D
attached hereto shall be redacted from any initial SEC filings and shall be
deemed Confidential Information under Section 13.05 of the Agreement.  The parties also agree to a press release to
announce this Second Amendment, attached hereto as Exhibit E.

14.     Effect of Amendment.  This Second Amendment is hereby incorporated
by reference into the Agreement as if fully set forth therein, the Agreement as
amended by this Second Amendment shall continue in full force and effect
following execution and delivery hereof, and references to the term “Agreement”
shall include this Second Amendment.  In
the event of any conflict between the terms and conditions of the Original
Agreement or First Amendment and this Second Amendment, the terms and
conditions of this Second Amendment shall control.

 6
 

IN WITNESS
WHEREOF, the parties have caused this Second Amendment be executed by their
duly authorized representatives as of the date first written above.

	
  

  	
  DIAMOND ANIMAL HEALTH, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ 

  	
  Jason Napolitano

  
	
   

  	
   

  	
   

  	
  JASON NAPOLITANO

  
	
   

  	
  Its:

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  AGRI
  LABORATORIES, LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ 

  	
  Steve Schram

  
	
   

  	
   

  	
   

  	
  STEVE SCHRAM

  
	
   

  	
  Its:

  	
   

  	
  President/CEO

  

 

 7

EXHIBIT A

AMENDED AND RESTATED

PROMISSORY
NOTE

	
  $500,000.00

  	
  as of April 15, 2002

  
	
   

  	
  Des Moines, Iowa

  

 

FOR
VALUE RECEIVED, the undersigned DIAMOND ANIMAL HEALTH, INC., an Iowa
corporation (“Maker”), promises to pay to
AGRI LABORATORIES, LTD., a Delaware corporation (“Holder”),
or order, at such place as the Holder of this Note shall designate in writing,
the sum of Five Hundred Thousand Dollars ($500,000.00) in lawful money of the
United States of America.  Beginning from
the date hereof interest shall accrue until the effective date of that certain
Second Amendment to the Distribution Agreement (defined below) on the
outstanding principal balance at the “prime rate” plus one-quarter percent
(1/4%) per annum and thereafter, at the “prime rate” plus one percent (1%) per
annum.  Accrued interest shall be paid
quarterly on each quarterly anniversary of the date of this Note, and shall
accrue based upon a thirty-day month and a 360-day year.  Principal under this Note shall be paid in
one annual installment on May 31, 2006.

All principal and
any accrued but unpaid interest shall be due and payable on the maturity date
of this Note.

Notwithstanding
any provision of this Note to the contrary, all principal and unpaid accrued
interest shall be due and payable on the ninetieth (90th) day following the date that
either (i) Holder’s exclusivity rights under that certain Amended and
Restated Bovine Vaccine Distribution Agreement dated as of September 30, 2002,
as amended (the “Distribution Agreement”)
are terminated due to Distributor’s nonpayment of any Additional Payment under
the Distribution Agreement or (ii) in the event of a merger, sale or fifty
percent (50%) change in ownership of Maker.

The “prime
rate” shall be the annual rate of interest announced from time to time by Wells
Fargo Business Credit, Inc. (“Wells Fargo”)
as its prime rate.  The interest accruing
on the principal balance of this Note shall fluctuate from time to time
concurrently with changes in the prime rate, effective as of the date any
change in the prime rate is publicly announced. 
If Wells Fargo ceases to announce the prime rate, the prime rate as
published in the Wall Street Journal in its “Money Rates” section or a similar
financial publication shall be used, as reasonably determined by Maker.

Maker
shall have the right at any time or from time to time to prepay all or a
portion of the principal or interest without premium or penalty, and such
prepayments shall be applied first to accrued interest and then to principal.

If
default be made in the payment of any of the installments of principal,
interest, or other amounts when due under this Note, the entire principal sum
and accrued interest and all other amounts due hereunder shall become due at
the option of Holder if not paid within ten (10) days of written notice to
Maker.

In
the event garnishment, attachment, levy or execution is issued against any
substantial or material portion of the property or assets of Maker, or any of
them if more than one, or upon the happening of any event which constitutes a
default pursuant to the terms of any agreement or other instrument entered into
or given in connection herewith, or upon the adjudication of Maker, or any of
them if more than one, a bankrupt, such event shall be deemed a default
hereunder and Holder may declare this Note immediately due and payable without
notice to Maker or exercise any of its remedies hereunder or at law or
equity.  Should suit be brought to
recover on this Note, or should the same be placed in the hands of an attorney
for collection, Maker promises to pay all reasonable attorneys’ fees and 

 1
 

costs incurred in
connection therewith.

Failure
of Holder to exercise any option hereunder shall not constitute a waiver of the
right to exercise the same in the event of any subsequent default, or in the
event of continuance of any existing default.

Maker
waives demand, diligence, presentment for payment, protest and notice of
demand, protest, nonpayment and exercise of any option hereunder.  Maker agrees that the granting without notice
of any extension or extensions of time for payment of any sum or sums due
hereunder, or for the performance of any covenant, condition or agreement
hereof shall in no way release or discharge the liability of Maker hereof.

This
Note shall be governed by the laws of the State of Iowa.

Time
is of the essence of this Note and each and every term and provision hereof.

This
Note is secured by that certain Security Agreement, dated as of even date
herewith, by and between Maker and Holder. 
Debtor and its affiliates are parties to that certain Second Amended and
Restated Credit and Security Agreement by and between Debtor and Wells Fargo
Business Credit, Inc., fka Norwest Business Credit, Inc., a Minnesota
corporation  (“Wells
Fargo”), originally dated June 4, 2000, as amended, that
certain Loan Agreement dated as of April 4, 1994 and related Promissory Note
between the City of Des Moines, Iowa and Debtor, as amended, and that certain
CEBA Loan Agreement dated January 20, 1994 and related Promissory Notes between
Iowa Department of Economic Development and Debtor, as amended (collectively,
the “Senior Loan Agreements”  and the lender parties thereto collectively, the  “Senior Lenders”).  This Note and Maker’s obligations hereunder
shall be junior and subordinated to all any and all indebtedness and
obligations for borrowed money (including, without limitation, principal,
premium (if any), interest, fees, charges, expenses, costs, professional fees
and expenses, and reimbursement obligations) (“Indebtedness”)
at any time owing by Debtor to the Senior Lenders, their successors and assigns
under the Senior Loan Agreements or otherwise, and the extension, renewal or
refinancing (including without limitation any additional advances made in
connection therewith) of all or any portion of such Indebtedness by any of the
Senior Lenders or any successor lender and any and all security interests
securing any portion of such Indebtedness and additional advances from time to
time (such Indebtedness, additional advances and security interests, the “Senior Indebtedness”).  Holder hereby agrees to take such actions,
and to execute and deliver such documents and instruments, as shall be
requested from time to time by any holder of Senior Indebtedness to confirm and
further implement such subordination.  In
addition, this Note is subject to the terms and conditions of that certain
Subordination Agreement dated as of even date herewith by and among Maker,
Holder and Wells Fargo.

This
Note replaces that certain Amended and Restated Promissory Note dated as of
April 15, 2004 given by Maker to Holder.

THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO THIS NOTE.

	
  

  	
  DIAMOND ANIMAL HEALTH, INC., an Iowa corporation,
  Maker

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Jason
  Napolitano

  
	
   

  	
   

  	
  JASON NAPOLITANO

  
	
   

  	
  Its:

  	
  Chief Financial
  Officer

  

 2
 

THIS
INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT BY AGRI
LABORATORIES, LTD. IN FAVOR OF WELLS FARGO BUSINESS CREDIT, INC. DATED AS OF
APRIL 15, 2002.

 

 3

[***] —
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.

EXHIBIT B

Pricing for Products

 

 

	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [***]

  	
   

  	
  [***]

  

 

[***] —
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.

EXHIBIT C

Calculation Examples

Example 1 - Assume (i) a License
for [***] Products is never obtained, (ii) Diamond elects, on July 31, 2007, to
extend Distributor’s exclusivity rights and (iii) Distributor’s exclusivity
rights are set to expire after December 15, 2009.  In this example, Distributor would maintain
an additional 30 months of exclusivity, or until June 15, 2011.  Alternatively, if Diamond elects, on July 31,
2007, to make cash payments to Distributor, Diamond would make 30 consecutive
monthly payments of [***] beginning on August 1, 2007 which would total [***].

Example 2 - Assume (i) a License
for [***] Products is obtained on June 15, 2007, (ii) Diamond elects, on
September 13, 2007, to extend Distributor’s exclusivity rights and (iii)
Distributor’s exclusivity rights are set to expire after December 15,
2009.  In this example, Distributor would
maintain an additional 17 months of exclusivity, or until May 15, 2011.  Alternatively, if Diamond elects, on
September 13, 2007, to make cash payments to Distributor, Diamond would make 17
consecutive monthly payments of [***] beginning on October 1, 2007 which would
total [***].

Example 3 -  At June 15, 2008, [***] Spending is [***],
and at December 15, 2009, [***] Spending is [***].  A License for the [***] Product has not been
obtained by December 15, 2009.  This is
covered under Section 12(a) and (b).  As
a License for the [***] Product has not been obtained as of June 15, 2008,
Diamond would begin to make Interim Reimbursement payments equal to [***] per
month beginning on July 15, 2008 and ending on December 15, 2009 for a total of
[***], such monthly payments calculated as one half of [***] Interim [***]
Spending divided by 18.  On January 1, 2010,
Diamond would make the Final Payment to Distributor of [***], calculated as one
half of [***] less the total amount of the Interim Reimbursement ([***]).  In this example, Distributor collects [***]
([***] + [***]) or half of its original investment in the failed research
project.

EXHIBIT D

Redacted Form of
Second Amendment

EXHIBIT E

Press Release Logo of
Heska Corporation

 

 

FOR
IMMEDIATE RELEASE

At Heska
Corporation:

Jason Napolitano,
Executive Vice President & CFO

(970) 493-7272, Ext. 4105

Heska Corporation Announces
Amended Agreement with AgriLabs

FORT
COLLINS, CO, December 13, 2004— Heska Corporation
(NASDAQ:HSKA) today announced that an amendment to the current distribution
agreement with Agri Laboratories, Ltd., or AgriLabs, has been signed.  Under the amendment, currently outstanding
prepayments from AgriLabs will be considered an upfront fee and the pricing on
certain products has been increased. 
AgriLabs’ minimums to maintain exclusivity on certain bovine vaccines
have been significantly reduced and no longer increase annually, although the
minimums are subject to adjustment in certain circumstances.

Under
the amendment, AgriLabs will continue to enjoy access to these bovine vaccines
in the United States, Africa, China, Mexico and Taiwan to December 2013.  Subject to minimum purchase requirements,
AgriLabs’ rights in these regions will be exclusive at least to December 2009
and could remain exclusive up to December 2013 based on other contractual
arrangements.  Heska will be free to sell
these bovine vaccines to any party of its choosing in other regions of the
world.  AgriLabs will also maintain
non-exclusive rights to these bovine vaccines in Canada to December 2009.

In addition, two separate
research and development agreements have been signed with AgriLabs.  These agreements specified risk sharing
provisions where AgriLabs has agreed to fund the initial research and
development expenditures, but will be entitled to certain additional product
rights and/or reimbursement of expenditures under certain circumstances.  The research and development programs are
intended to enhance the quality of the current line of bovine vaccines.

“We are pleased we have
found a mutually agreeable solution to this matter,” said Robert Grieve, Heska’s
Chairman and CEO.  “AgriLabs has been an
excellent customer of ours in the past and we are happy we will continue to
benefit from their livestock market expertise in the future.”

“We have long been
impressed with these vaccines, which we sell under our label and tradenames
Titanium® and MasterGuard®”, said Steve Schram, AgriLabs’ President and
CEO.  “We are hopeful that the research
and development agreements we have signed will allow us to maintain the
leadership position we have established in the marketplace with these vaccines.”

About
Heska

Heska Corporation (NASDAQ: HSKA) sells advanced veterinary diagnostic
and other specialty veterinary products. 
Heska’s state-of-the-art offerings to its customers include diagnostic
and monitoring instruments and supplies as well as single use, point-of-care
tests, vaccines and pharmaceuticals.  The
company’s core focus is on the canine and feline markets where it strives to
develop high value products for unmet needs in veterinary medicine.  For further information on Heska and its
products, visit the company’s website at www.heska.com.

About AgriLabs

AgriLabs, Ltd. is the largest private label marketer of veterinary
vaccines and pharmaceuticals in the United States.  AgriLabs is proficient in sales, marketing
and technology transfer of current and future compounds or antigens for both
food and companion animal markets.  The
AgriLabs distribution network of distributor owners is the largest in the
United States and has the ability to efficiently reach the livestock and
consumer marketplace through various veterinary, direct and retail
channels.  For additional information on
AgriLabs and its products or distributors, visit the company website at
www.agrilabs.com.

Forward-Looking
Statements

This
announcement contains express or implied forward-looking information about
Heska’s products, business relationships and research and development
activities.  Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause Heska’s actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Heska’s achievement of
these results may be affected by many factors, including among others, the
following: uncertainties relating to reliance on the sales and marketing
efforts of a third party, over which Heska has no direct control; competition;
uncertainties regarding the outcome of research and development projects
currently contemplated; delays in or failure to achieve market acceptance of
any products resulting from such research and development activities; the
failure of third party distribution network members who have purchased large
quantities of Heska’s  products in the
past to continue to do so in the future; uncertainties related to Heska’s
ability to obtain and maintain costly regulatory approvals for its products;
uncertainties related to Heska’s ability to successfully market and sell its
current and any future products, including in nations where such products are
not currently sold; reliance on key personnel; and the risks set forth in Heska’s
filings and future filings with the Securities and Exchange Commission,
including those set forth in Heska’s Annual Report on Form 10-K for the year
ended December 31, 2003 and Quarterly Report on Form 10-Q for the quarter
ended September 30, 2004.

###

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