Document:

Settlement Agreement

 Exhibit 10.90
  SETTLEMENT AGREEMENT
 AND MUTUAL RELEASE OF
CLAIMS
            This SETTLEMENT AGREEMENT AND MUTUAL RELEASE OF CLAIMS (“Agreement”) is made and entered into this 28th day of
March, 2003, by and between Synbiotics Corporation, a California corporation (“Synbiotics”), on the one hand, and Heska Corporation, a Delaware corporation (“Heska”), on the other hand.  (Heska or Synbiotics, or both, shall
sometimes be referred to as the “Party” or the “Parties”, as the context indicates.)
  RECITALS
            A.          Synbiotics is in the business of developing, manufacturing and marketing veterinary diagnostics,
vaccines and other animal heath related products worldwide.
            B.          Heska is in
the business of developing, manufacturing and marketing innovative health products for dogs, cats and horses.
            C.          Synbiotics is the owner of United States Patent No. 4,789,631 issued on December 6, 1988 to Edward T.
Maggio, entitled “Immunoassay for Anti-Dirofilaria Immitis Antibody” (the “‘631 Patent”).
            D.          Heska is the owner of United States Patent No. 6,391,569 B1 issued on May 21, 2002 to Robert B. Grieve,
et al., entitled “Method to Detect Dirofilaria Immitis Infection” (the “‘569 Patent”).  
           E.          On or about November 12, 1998, Synbiotics filed a lawsuit against Heska entitled Synbiotics
Corporation vs. Heska Corporation, United States District Court for the Southern District of California, Case No. 98 CV 2076 TW (the “Complaint”), in which it asserted claims for damages and injunctive relief against Heska for
Heska’s alleged infringement of the ‘631 Patent.  On or about January 15, 1999, Heska filed an Answer and Counterclaim and on or about June 1, 1999, Heska filed an Amended Answer and Counterclaim (the “Counterclaim”). 
In the Counterclaim, Heska denied the claims asserted in the Complaint and sought a declaration from the court that the ‘631 Patent was invalid, unenforceable and not infringed by Heska.  Synbiotics filed a Reply in which it denied the
claims asserted in the Counterclaim.  The proceedings relating to the Complaint and the Counterclaim shall hereinafter be referred to as the “Lawsuit.”
            F.          The Parties intend to resolve their dispute in accordance with the terms of this Agreement and to fully
and finally compromise, settle and discharge all claims, controversies, demands, actions or causes of action which each may have or claim to have against the other.
  [*] Certain confidential
portions of this Exhibit were omitted by means of redacting a portion of the text (the “Mark”). This Exhibit has been filed separately with the Secretary of the Securities and Exchange Commission without the Mark pursuant to an
Application

  Requesting Confidential Treatment under Rule 12b-24 under the Securities Exchange Act of 1934.
  TERMS
OF AGREEMENT
            NOW THEREFORE, in consideration of the mutual promises contained herein and for good and valuable consideration,
the Parties agree as follows:
                     1.          Payment by Heska.  

                                  1.1.   
       Within the earlier of (a) thirty (30) days after the complete execution of this Agreement or (b) April 30, 2003 if the Agreement has been signed by both Parties,  Heska shall pay Synbiotics the sum of
TWO HUNDRED FIFTY THOUSAND DOLLARS AND NO CENTS ($250,000.00) in the form of wire transfer pursuant to written instructions provided by Synbiotics.
                                   1.2.   
       Heska agrees to pay Synbiotics TWO HUNDRED SIXTY-FIVE THOUSAND DOLLARS AND NO CENTS ($265,000.00) in twenty-four (24) equal installments by check in the amount of  ELEVEN THOUSAND FORTY-ONE DOLLARS AND
SIXTY-SIX CENTS ($11,041.66) per month, due without notice or grace period on or before the fifth day of each month beginning January 2004.  Such payment will be made by check, payable to Synbiotics Corporation, and will be sent to the address
provided by Synbiotics in writing.
                      2.          License of ‘631 Patent to
Heska.  
                                   2.1.   
       Synbiotics will provide a non-exclusive license to Heska under the ‘631 Patent, in the form of the license attached hereto as Attachment 1, for Heska to make, have made, use, sell and have sold
“Mab-based Licensed Products” as defined therein.  Under this license, Heska will pay Synbiotics an annual royalty of [*] of net sales of Mab-based Licensed Products for the remaining life of the ‘631 Patent (i.e., for
sales made from the effective date of the license through and including December 6, 2005), with royalty payments under the license for a given year to be made in a lump sum no later than each April 30 of the succeeding year.
                                  2.2.   
       Synbiotics will further provide a [*] non-exclusive license to Heska under the ‘631 Patent, in the form of the license attached hereto as Attachment 1, for Heska to make, have made, use, sell and have
sold “Di33-based Licensed Products” as defined therein.  
                      3.          License of ‘569 Patent to
Synbiotics.  Heska will provide a [*] non-exclusive license to Synbiotics under the ‘569 Patent, in the form of the license attached hereto as Attachment 2, for Synbiotics to make, have made, use, sell and have sold products for the
detection of heartworm antibodies in non-adapted hosts using Di33 protein.  This license shall be coterminous with the ‘569 Patent and shall expire on September 18, 2016. 

                      4.          Entry of Consent Judgment and Enforcement
of Settlement.  Simultaneously with the execution of this Agreement by both Synbiotics and Heska, the Parties shall execute and have entered by the United States District Court, Southern District of California, the Consent Judgment and
Injunction attached hereto as Attachment 3, and further agree to enter into and file all other documents that may reasonably be required to effectuate the entry of a consent judgment and injunction.
                      5.          Mutual and General Release of
Claims.
                                   5.1.   
       Synbiotics releases any present or future claims, known or unknown, which it may have against Heska arising out of, or related in any way to (i) any alleged past infringement by Heska of any claims of the
‘631 Patent by Heska; and (ii) the filing and prosecution of the Counterclaim by Heska.  Thereby, Synbiotics irrevocably and unconditionally releases Heska and its officers, directors, employees, agents, attorneys, shareholders, partners,
affiliates, customers, insurers, successors and assigns, from all manner of causes of action, lawsuits, claims, demands, charges, liabilities or complaints of whatever kind, present or future, known or unknown, which arise out of or relate to in any
way to (i) any alleged past infringement by Heska of any claims of the ‘631 Patent by Heska; and (ii) the filing and prosecution of the Counterclaim by Heska.  Excluded from this release are all obligations set forth in (i) this Agreement,
(ii) the licenses for the ‘631 and ‘569 Patents described in Articles 2 and 3 of this Agreement, and (iii) the Consent Judgment and Injunction described in Article 4 (the “Integrated Agreement”).
                                  5.2.   
       Heska releases any present or future claims, known or unknown, which it may have against Synbiotics arising out of, or related in any way to (i) any possible past infringement by Synbiotics of any claims of
the ‘569 Patent; and (ii) the filing and prosecution of the Complaint by Synbiotics.  Thereby, Heska irrevocably and unconditionally releases Synbiotics and its officers, directors, employees, agents, attorneys, shareholders, partners,
affiliates, customers, insurers, successors and assigns, from all manner of causes of action, lawsuits, claims, demands, charges, liabilities or complaints of whatever kind, present or future, known or unknown, which arise out of or relate to (i)
any possible past infringement by Synbiotics of any claims of the ‘569 Patent; and (ii) the filing and prosecution of the Complaint. Excluded from this release are all obligations set forth in the Integrated Agreement.  
 
                                 5.3.   
       Synbiotics and Heska each acknowledges that it may hereafter discover facts different from, or in addition to, those which it now knows or believes to be true with respect to all or any of the liabilities,
claims, defenses, causes of action, costs or demands herein released.  Nevertheless, each agrees that the releases set forth herein shall be and remain effective in all respects, notwithstanding the discovery of such additional or different
facts.  Synbiotics and Heska each waives any and all rights and benefits conferred by the provisions of Section 1542 of the Civil Code of the State of California, and any similar law of any state or territory of the United States or any other
jurisdiction.  Said Section 1542 provides as follows:

	  
 	 A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST
HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
 

                                   5.4.   
       Synbiotics and Heska agree that the releases they have given to each other will become effective upon their execution of this Agreement.
                                   5.5.   
       Synbiotics and Heska each represents and warrants that nothing which would have been released hereunder if owned by them on the date hereof has been transferred, assigned, or given away prior to the date
hereof to any person, firm, or entity which would not be bound hereby.
                      6.          Confidentiality.
 The Parties and their attorneys and representatives shall treat the terms of the Integrated Agreement as confidential and shall use commercially reasonable efforts not to voluntarily disclose such terms to any third persons,
except to the extent required by governmental agencies (including, but not limited to, the Securities and Exchange Commission, regulatory agencies and the like), applicable laws or court order.  
            The Parties acknowledge that each Party is a public company which may from time to time be required to report and discuss the Integrated Agreement, and its commercial
effects, and/or include the Integrated Agreement as an exhibit, in its reports under the Securities Exchange Act of 1934 and/or its registration statements.  The Parties therefore agree as follows with regard to disclosures in SEC
filings.  Each of Synbiotics and Heska shall, in its respective Form 10-K for the year ended December 31, 2002, make in Item 3 of Part I of Form 10-K the disclosures regarding the Lawsuit and the Integrated Agreement which are set forth on
Attachment 4 hereto, and only such disclosures regarding the Lawsuit and the Integrated Agreement.   Either Party shall be entitled to include the Integrated Agreement as an exhibit in its Form 10-Q for the quarter ended March 31, 2003, or
in any other SEC filing; provided however that any such filing shall be accompanied by a Request for Confidential Treatment filed with the Office of the Secretary of the SEC under Rule 406 of the Securities Act of 1933 or Rule 24b-2 of the
Securities Exchange Act of 1934.  Prior to any such filing, the Parties shall redact such portions thereof as Heska requests Synbiotics to redact and which Synbiotics (after consultation with Heska) in good faith concludes, on the basis of the
advice of Synbiotics’ outside counsel, that it is entitled by law to redact  
           The parties further acknowledge that in time the
SEC will grant, grant in part, or deny such application for confidential treatment.  To the extent that such application is granted only in part or is denied (or the confidential treatment grant is later revoked in whole or in  part by the
SEC), then thereafter the extent to which either Party is required to maintain in its SEC filings the confidentiality of specific provisions of the Integrated Agreement shall be governed not by the extent of the original redactions but rather by the
extent of the redactions as allowed by the SEC. 

            The Parties acknowledge that either Party may from time to time be required to make other references, in various
SEC filings, to the Integrated Agreement and/or its commercial effects (for example, in financial statements and in MD&A), or to the Lawsuit as an example of patent litigation.  Either Party shall be entitled to make such disclosures in
their respective SEC filings to the extent that either Party concludes in good faith, on the basis of the advice of outside counsel, and after consultation with the other Party as contemplated by the following paragraph, that such disclosure is
required by law, so long as such disclosure is limited to the minimum amount that the first Party concludes, in good faith, on the basis of the advice of outside counsel, is necessary to comply with such law. 
            If either Party (the “Disclosing Party”) determines that it is required by law or court order to disclose in SEC filings or elsewhere any additional
provisions of this Agreement, above and beyond what is allowable as set forth above, it will provide reasonable notice to the other Party (the “Non-Disclosing” Party) and will consult in good faith with the Non-Disclosing Party before such
disclosure; and to the extent that the law entitles the Non-Disclosing Party to do so in its own name and right, the Non-Disclosing Party shall be entitled to seek a protective order or other confidential treatment.
            If either Party desires to make any further public disclosure, not required by law or court order, above and beyond what is allowable as set forth above, it shall not
make any such disclosure without the prior written approval of the other Party.  
           Notwithstanding anything foregoing to the
contrary, either Party shall in all events be allowed to (i) disclose non-confidentially to any person, either in a SEC filing or otherwise, any information which the other Party has disclosed in the publicly available portion of any SEC filing or
disclosed to any third party who has no obligation of confidentiality with regard to such information, and (ii) disclose confidentially to any current or prospective lending financial institution, or any prospective acquirer or investor, the
unredacted Integrated Agreement.
            The Parties do not intend for the confidentiality provisions of this Agreement to supersede, modify,
amend, cancel or alter in any way the terms of other nondisclosure agreements previously entered into between them; provided that the terms of this Section 6 shall control any conflict with the terms of any such nondisclosure agreements.

                     7.          Compromise, Adjustment
and Settlement.
                                   7.1.   
       This entire Agreement, including the Parties’ consent to the issuance of the Consent Judgment and Injunction (attached hereto as Attachment 3) by the United States District Court, Southern District Of
California, is the result of good faith compromise of disputed claims, demands and liabilities, including attorneys’ fees or other costs incurred in connection with the Lawsuit, and shall not be considered an admission of liability or
responsibility by either Party for any purpose not otherwise contemplated by this Agreement.

                                   7.2.   
       Each Party will bear its own costs, expenses, and attorneys’ fees, whether taxable or otherwise, incurred in, arising out of or in any way related to the matters forborne herein including, without
limitation, the Lawsuit.  
                     8.          California Law.  This Agreement
shall be governed by and interpreted in accordance with the laws of the State of California. The Parties agree that the United States District Court, Southern District of California has jurisdiction over each of them and will retain jurisdiction to
interpret and enforce the terms and provisions of the Integrated Agreement, including the terms and provisions of the attached licenses and Consent Judgment and Injunction. 
                      9.          Representations and Warranties. 
The Parties warrant that no other person or entity has claimed or now claims any interest in the subject to which this Settlement Agreement relates, and that they have the sole right and exclusive authority to execute this Settlement
Agreement.
                      10.         Voluntary and Knowing.  This
Settlement Agreement is executed voluntarily and without any duress or undue influence on the Parties hereto.  The Parties acknowledge that:
                                    10.1.  
        They have read this Settlement Agreement;
                                    10.2.  
        They have been represented in the preparation, negotiation and execution of this Settlement Agreement by legal counsel of their own choice; and
                                   10.3.  
        They are fully aware of the legal and binding effect of this Settlement Agreement and sign the same of their own free will.
                      11.         Binding Effect.  Synbiotics and Heska
agree that this Agreement, and each of its parts, shall be binding upon and inure to the benefit of each of their respective heirs, representatives, executors, administrators, successors and assigns.
                      12.         Severability.  In the event any
provision of this Agreement shall be determined to be invalid, illegal or unenforceable, such provision shall be severable from the remainder of the Agreement, and the validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
                      13.         Counterparts.  This Agreement may be
executed in counterparts, each of which is deemed to be an original, but all of which together shall constitute one and the same instrument.  Facsimile and photocopy signatures shall carry the same force and effect, and shall bind the Parties
hereto in the same manner, as original signatures to the Settlement Agreement.

                      14.         Integration and Modification.  Each
Party represents and warrants that as of the date of the full execution of this Settlement Agreement, no promise, inducement or agreement not expressed herein has been made to it in connection with the Integrated Agreement, and that the Integrated
Agreement contains the entire agreement between the Parties as to the subject matter relating hereto and supersedes any previous agreements, negotiations, promises or understandings between them as to the subject matter contained herein.  It is
expressly agreed that this Agreement may not be altered, modified or amended except by a writing duly executed by the undersigned Parties.
                     15.         Construction.
                                    15.1.  
        The language and terms of this Settlement Agreement are to be understood in their ordinary sense (except where otherwise defined herein) and are not to be interpreted in a technical manner so as to
unfairly deprive any Party of substantive rights.
                                    15.2.  
        The text of this Settlement Agreement is the product of negotiation among both Parties and is not to be construed as having been prepared by one Party or the other.
                      16.         Warranty of Authorized Signatories. 
Each of the signatories to this Agreement warrants and represents that he or she is competent and authorized to enter into this Agreement on behalf of the Party for whom he or she purports to sign.
                      17.         Termination.  Synbiotics may
terminate this Agreement by written notice to Heska if Heska is in default of its payment obligations under Section 1 and has not cured such default within [*] after receipt from Synbiotics of written notice of such breach.  In the event of
such termination, each Party shall remain responsible for its breaches and obligations accrued before the date of termination.  The Consent Judgment and Injunction shall remain in place. 
                     18.         Waiver.  Failure at any time to
require performance of any of the provisions herein shall not waive or diminish a Party’s right thereafter to demand compliance therewith or with any other provision. Waiver of any default shall not waive any other default. A Party shall not be
deemed to have waived any rights hereunder unless such waiver is in writing and signed by a duly authorized officer of the Party making such waiver.
                      19.         Survival.  The provisions of Article
6 shall survive the expiration or termination of this Agreement.  

	  
 	  SYNBIOTICS CORPORATION
 
	  
 	  
 
	  
 	  By:
 	  /s/ PAUL R. HAYS
 
	  
 	  
 	 
 
	  
 	  Name:
 	  Paul R. Hays
 
	  
 	  
 	  
 
	  
 	 Title:
 	  President
 
	  
 	  
 
	  
 	  HESKA CORPORATION
 
	  
 	  
 
	  
 	  By: 
 	  /s/ CAROL TALKINGTON VERSER
 
	  
 	  
 	 
 
	  
 	  Name:
 	  Carol Talkington Verser, Ph.D.
 
	  
 	  
 	  
 
	  
 	  Title:
 	  Executive Vice President
 

 Attachment 1
 License Agreement
 Incorporated herein by reference to Exhibit 10.91 to this quarterly report on Form 10-Q.

 Attachment 2
 License Agreement
 Incorporated herein by reference to Exhibit 10.92 to this quarterly report on Form 10-Q.

  Attachment 3 
 Consent Judgment and Injunction
 Incorporated herein by reference to Exhibit 10.93 to this
quarterly report on Form 10-Q.
 

  Attachment 4 
 In November 1998, Synbiotics Corporation filed a lawsuit against Heska Corporation in the United
States District Court for the Southern District of California alleging that Heska infringed a patent owned by Synbiotics relating to heartworm diagnostic technology.
 In March 2003, Synbiotics and Heska
entered into settlement and license agreements which have resolved all outstanding claims in the lawsuit. As part of those agreements, each party has licensed certain intellectual property rights from the other party, including Heska licensing from
Synbiotics the patent relating to the heartworm diagnostic technology.License Agreement

 Exhibit 10.91
  LICENSE AGREEMENT
            This LICENSE AGREEMENT (“Agreement”) is made and entered into this 28th day of March, 2003, by and between Synbiotics Corporation, a California corporation
(“Synbiotics”), on the one hand, and Heska Corporation, a Delaware corporation (“Heska”), on the other hand.
  RECITALS
            A.          Synbiotics is in the business of developing, manufacturing and marketing veterinary diagnostics,
vaccines and other animal health related products worldwide.
            B.          Heska is in
the business of developing, manufacturing and marketing innovative health products for dogs, cats and horses.
            C.          Synbiotics is the owner of United States Patent No. 4,789,631 issued on December 6, 1988 to Edward T.
Maggio, entitled “Immunoassay for Anti-Dirofilaria Immitis Antibody” (the “631 Patent”).
            D.          Heska is the owner of United States Patent No. 6,391,569 B1 issued on May 21, 2002 to Robert B. Grieve,
et al., entitled “Method to Detect Dirofilaria Immitis Infection” (the “569 Patent”).
            E.          On or about November 12, 1998, Synbiotics filed a lawsuit against Heska entitled Synbiotics
Corporation vs. Heska Corporation, United States District Court for the Southern District of California, Case No. 98 CV 2076 TW (the “Complaint”), in which it asserted claims for damages and injunctive relief against Heska for
Heska’s alleged infringement of the ‘631 Patent.  On or about January 15, 1999, Heska filed an Answer and Counterclaim and on or about June 1, 1999, Heska filed an Amended Answer and Counterclaim (the “Counterclaim”). 
In the Counterclaim, Heska denied the claims asserted in the Complaint and sought a declaration from the court that the ‘631 Patent was invalid, unenforceable and not infringed by Heska.  Synbiotics filed a Reply in which it denied the
claims asserted in the Counterclaim.  The proceedings relating to the Complaint and the Counterclaim shall hereinafter be referred to as the “Lawsuit.”
           F.          In furtherance of the settlement of the Lawsuit, Synbiotics is willing to license certain of its
intellectual property to Heska.
  [*] Certain confidential portions of this Exhibit were omitted by means of redacting a portion of the text (the “Mark”). This Exhibit has been filed
separately with the Secretary of the Securities and Exchange Commission without the Mark pursuant to an Application Requesting Confidential Treatment under Rule 12b-24 under the Securities Exchange Act of 1934.

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

	  1.1
 	  “Affiliate(s)”  shall mean (a) a business entity which owns, directly or indirectly, a controlling interest of at least fifty percent (50%) of a Party to
this Agreement, by stock ownership or otherwise; or (b) a business entity which is at least fifty percent (50%) owned or controlled by a Party to this Agreement, either directly or indirectly, by stock ownership or otherwise; or (c) a business
entity, the ownership of which is directly or indirectly common with at least fifty percent (50%) ownership of a Party to this Agreement, by stock ownership or otherwise.
 
	  
 	  
 
	  1.2
 	  “Calendar Year” shall mean, with respect to the first Calendar Year, commencing on April 1, 2003 and ending on December 31, 2003.  The second Calendar Year
shall commence on January 1, 2004 and end on December 31, 2004.  The third Calendar Year shall commence on January 1, 2005 and end on December 6, 2005.
 
	  
 	  
 
	 1.3
 	  “Calendar Quarter” shall mean a period of three (3) consecutive calendar months ending on March 31, June 30, September 30 and December 31 of any Calendar Year,
with the exception that in 2005, the fourth quarter shall end on December 6 rather than December 31.
 
	  
 	  
 
	  1.4
 	  “Di33-based Licensed Products” shall mean any heartworm antibody detection test product or part thereof using at least one recombinant Di33 protein, wherein a
Di33 protein has properties as set forth in the ‘569 Patent, including any said heartworm antibody detection test product or part thereof within the scope of a claim in the Patent Rights or manufactured by a process within the scope of a claim
in the Patent Rights.
 
	  
 	  
 
	  1.5
 	  “Effective Date” means the date first noted above.
 
	  
 	  
 
	  1.6
 	  “Licensed Products” shall mean Mab-based Licensed Products and/or Di33-based Licensed Products.
 
	  
 	  
 
	 1.7
 	  “Mab-based Licensed Products” shall mean any heartworm antigen detection test product or part thereof having or using at least one monoclonal antibody that
reacts with Dirofilaria immitis antigenic extract, including any said heartworm antigen detection test product or part thereof within the scope of a claim in the Patent Rights or manufactured by a process within the scope of a claim in the Patent
Rights.  For avoidance of doubt, the
 

  2

	  
 	  Parties agree that Heska’s SOLO STEP® CH product and canine and feline reference laboratory heartworm antigen detection tests using such a monoclonal
antibody are “Mab-based License Products”.
 
	  
 	  
 
	  1.8
 	  “Net Sales” shall mean Heska’s actual gross receipts from sales made between April 1, 2003 and December 6, 2005, of Mab-based Licensed Products
(whether or not such Mab-based Licensed Products would also qualify as Di33-based Licensed Products), less the sum of the following:
 
	  
 	  
 
	  
 	  (a)
 	  actual cost of freight charges or freight absorption, separately stated in such invoice;
 
	  
 	  
 	  
 
	  
 	 (b)
 	  actual trade, quantity or cash discounts allowed, if any;
 
	  
 	  
 	  
 
	  
 	  (c)
 	  amounts actually repaid or credited by reason of rejection or return; and
 
	  
 	  
 	  
 
	  
 	  (d)
 	  sales, tariff duties and/or use taxes separately stated on each invoice.
 
	  
 	  
 	  
 
	  
 	  If any Mab-based Licensed Products are sold in combination with other separate products (“Other Products”) for a single unit price, Net Sales for such
combination products shall be a percentage of the unit price determined by dividing the fair market sales price of the Mab-based Licensed Products by the aggregate fair market sales prices of such Mab-based Licensed Products and the Other Products.
If any Other Product does not have a separately established fair market sales price, the Parties will negotiate in good faith to determine one.   If the Parties can not agree to such a fair market sales price, the Parties will determine
such a price pursuant to Article 8.  For purposes of clarity, should Heska sell a combination product that qualifies as both  a Mab-based Licensed Product and a Di33-based Licensed Product intended to detect both heartworm antigen and
heartworm antibodies, Net Sales for such a  combination productwould be a percentage of the unit price of such  combination productdetermined by dividing the fair market price of the Mab-based Licensed Product by the aggregate fair market
sales prices of such Mab-based Licensed Product and such Di33-based Licensed Product.
 
	  
 	  
 	  
 
	 1.9
 	  “Party” or “Parties” shall mean Heska or Synbiotics, or both, as the context indicates.
 
	  
 	  
 	  
 
	  1.10
 	  “Patent Rights” shall mean the ‘631 Patent.
 
	  
 	  
 	  
 
	  1.11
 	  “Territory” shall mean the United States, including its territories and possessions.
 

  ARTICLE 2     GRANT

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

  3

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

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

 ARTICLE 3     ROYALTIES  

	  3.1
 	  In consideration of the rights, privileges and licenses granted by Synbiotics under [*], Heska shall pay royalties to Synbiotics in an amount equal to [*]of Net Sales of
Mab-based Licensed Products sold by Heska and its Affiliates.  On sales between Heska and any Affiliates for resale to an independent third party other than a Heska Affiliate, the royalty shall be based on the resale to an independent third
party.
 
	  
 	  
 
	  3.2
 	  Heska shall make annual royalty payments for Net Sales of Mab-based Licensed Products pursuant to Section 3.1 to Synbiotics in United States dollars according to the following
schedule, without notice or grace period:
 

 

	  
 	  Period of Net Sales
 	  
 	  Royalty Due Date
 
	  
 	 
 	  
 	 
 
	  
 	 Apr. 1, 2003 – Dec. 31, 2003
 	  
 	  April 30, 2004
 
	  
 	  Jan. 1, 2004 – Dec. 31, 2004
 	  
 	  April 30, 2005
 
	  
 	  Jan. 1, 2005 – Dec. 6, 2005
 	  
 	  April 30, 2006
 

  4

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

  ARTICLE 4     REPORTS; AUDITS

	  4.1
 	  Heska shall deliver to Synbiotics true and accurate reports of the following information to accompany royalty payments of Article 3 above:
 
	  
 	  
 
	  
 	 (a)
 	  Gross receipts from sales for the pertinent period for each respective MAb-based Licensed  Product sold by Heska and its Affiliates under this Agreement for each Calendar
Year;
 
	  
 	  
 	  
 
	  
 	  (b)
 	  The sum of (a) through (d) set forth in Section 1.7; and
 
	  
 	  
 	  
 
	  
 	  (c)
 	  total royalties due.
 
	  
 	  
 	  
 
	  4.2
 	  Heska will provide Synbiotics a written report of quarterly royalty accruals for each Calendar Quarter within thirty (30) days of the end of such Calendar
Quarter.
 
	  
 	  
 
	  4.3
 	  Heska shall keep full true and accurate books of account, in accordance with generally accepted accounting principles, containing all information that may be
necessary for the purpose of showing the amounts payable to Synbiotics hereunder.  Said books of account shall be kept at Heska’s principal place of business. Said books and the supporting data shall be open for audit no more than once per
Calendar Year, and at reasonable times upon reasonable notice to Heska, for three (3) years following the end of the Calendar Year to which they pertain, to the inspection of an independent, nationally-recognized certified public accountant
reasonably acceptable to Heska for the purpose of verifying Heska’s royalty statement or compliance in other respects with this Agreement, all at the expense of Synbiotics; provided, however, if an audit correctly discloses that the royalties
payable by Heska for any audited period are more than [*] of the royalties actually paid for such period, then Heska shall pay the fees and expenses charged by the accountant.  Such independent accountant will not disclose to Synbiotics any
information other than the accuracy of Heska’s reports and calculations.
 

 ARTICLE 5     PATENT INFRINGEMENT ACTIONS

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

  5

	  
 	  with respect to any single infringement prosecution will exceed sixteen (16) hours of Heska’s time, the Parties agree to discuss fair compensation of Heska prior to Heska
beginning such cooperation activity.
 
	  
 	  
 
	  5.2
 	  If within six (6) months after having been notified of or having given notice of any alleged infringement of the Patent Rights, Synbiotics shall have been unsuccessful in
persuading the alleged infringer to desist and shall not have brought and shall not be diligently prosecuting an infringement action (unless it is not commercially reasonable to prosecute), or if Synbiotics shall notify Heska at any time prior
thereto of its intention not to bring suit against any alleged infringer, (unless it is not commercially  reasonable to prosecute), then the license granted under [*] of this Agreement shall be [*].  It is conclusively deemed to be not
commercially reasonable to bring any prosecution against a party selling less than [*] per Calendar Year of allegedly infringing product.
 

 ARTICLE
6     REPRESENTATIONS / INDEMNIFICATION / LIMITATION OF LIABILITY

	  6.1
 	  Synbiotics represents and warrants to Heska that it has full right and authority to grant the licenses under this Agreement, and that it has no relationship with any other
entity that would preclude it from carrying out its obligations under this Agreement.  Heska represents and warrants to Synbiotics that it has the full right and authority to enter into and perform this Agreement, and that it has no
relationship with any other entity that would preclude it from carrying out its obligations under this Agreement. Heska further represents and warrants to Synbiotics that, as of the Effective Date, it has no commercially reasonable knowledge of any
potential third party infringement of the ‘631 patent.
 
	  
 	  
 
	  6.2
 	  Heska shall at all times during the term of this Agreement and thereafter, indemnify, defend and hold Synbiotics, its directors, officers, employees, agents and Affiliates
(“Indemnified Party”) harmless against all claims and expenses, including legal expenses and reasonable attorneys’ fees, arising out of the death of or injury to any person or persons or out of any damage to property or the
environment, and against any other claim, proceeding, demand, expense and liability of any kind whatsoever resulting from Heska’s production, manufacture, sale, use, lease, consumption or advertisement of the Licensed Products or arising from
any of Heska’s obligations hereunder, except to the extent such claims and expenses are due to the gross negligence or willful misconduct of Synbiotics.
 
	  
 	  
 
	 6.3
 	  If an Indemnified Party seeks indemnification from Heska, it shall promptly give notice to Heska of any such claim or suit threatened, made or filed against it by a third party
which forms the basis for such claim or suit.  Heska shall have the sole right to defend such claim or suit, including the right to select counsel.  No settlement or compromise shall be binding on an Indemnified Party hereto without its
prior written consent, which consent shall not be unreasonably withheld.
 

  6

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

  ARTICLE 7     ASSIGNMENT

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

 ARTICLE 8   DISPUTE RESOLUTION

	  8.1
 	  The Parties shall attempt in good faith to resolve any dispute or disagreement (“Dispute”) arising out of or relating to this Agreement promptly by negotiation between
representatives who have authority to settle the controversy.  Any Party may give the other Party written notice of any Dispute not resolved in the normal course of business.  Within fifteen (15) days after delivery of the notice, the
receiving Party shall submit to the other Party a written response.  The notice and the response shall include (a) a statement of each Party’s position and a summary of arguments supporting that position, and (b) the name and title of the
representative who will represent that Party and of any other person who will accompany the representative.  Within thirty (30) days after delivery of the disputing Party’s notice, the representatives of both Parties shall meet at a
mutually acceptable time and place and thereafter as often as they reasonably deem necessary, to attempt to resolve the Dispute.  All reasonable requests for information made by one Party to the other Party will be honored.
 
	  
 	  
 
	  8.2
 	  All negotiations pursuant to this Article 8 are confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence. 
If the Dispute has not been resolved by negotiation within forty-five (45) days of the disputing Party’s notice, or if the Parties failed to meet within thirty (30) days, the Parties shall endeavor to settle the Dispute by mediation under the
then current CPR Model Mediation Procedure for Business Disputes. Each Party shall bear its own costs.
 
	  
 	  
 
	 8.3
 	  If the Parties are unable to resolve the Dispute by mediation in accordance with Section 8.2, then the Dispute will be finally settled by binding arbitration to be conducted in
San
 

  7

	  
 	  Francisco, California (or at such other location as the Parties may agree) under the commercial arbitration rules then prevailing of the American Arbitration Association by one
arbitrator appointed in accordance with those rules.  The arbitrator shall be chosen from a panel of arbitrators knowledgeable in the companion animal health care industry.  The arbitrator will apply the law specified in Section 11.1 to
the merits of the Dispute.  The decision of the arbitrator shall be final, conclusive and binding on the Parties to the arbitration.  Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction
thereof.  The arbitrator may grant permanent injunctions or other relief in such dispute or claim; provided that the arbitrator may not grant licenses to any intellectual property owned by either Party nor may the arbitrator award
punitive damages.
 
	  
 	  
 
	  8.4
 	  Notwithstanding the foregoing, without breach of the arbitration provision and without reference to Article 8, either Party may seek to enforce any violation of the settlement,
including this Agreement, through the process of the United States District Court, Southern District of California.
 
	  
 	  
 
	 8.5
 	  Nothing in this Article 8 shall modify, alter or supersede the rights of either Party contained in the Consent Judgment and Injunction entered into pursuant to the Settlement
Agreement.
 

  ARTICLE 9     TERM AND TERMINATION

	  9.1
 	  This Agreement shall be effective as of the Effective Date and shall continue in effect until December 6, 2005, unless earlier terminated as set forth in Section 9.2
or 9.3.  Upon expiration of this Agreement, Heska shall have a fully paid, irrevocable license to the Patent Rights.
 
	  
 	  
 
	  9.2
 	  This Agreement may be terminated by either Party at any time during the term of this Agreement:
 
	  
 	  
 
	  
 	  (a)
 	  if the other Party is in breach of its material obligations hereunder and (i) in the case of any breach other than nonpayment, has not within ninety (90) days after written
notice requesting cure of the breach commenced substantial efforts toward cure of the breach and continuously and diligently conducted such efforts until (even after the 90th day, if necessary) the breach is cured, or (ii) in the case of nonpayment,
has not within [*] after written notice requesting cure of the breach cured the breach;  provided, however, in the event of a good faith dispute with respect to the existence of a material breach, the ninety (90) day cure period shall begin
when the Dispute is resolved pursuant to Article 8;
 
	  
 	  
 	  
 
	  
 	 (b)
 	  upon the filing or institution of bankruptcy, reorganization, liquidation or receivership proceedings, or upon an assignment of a substantial portion of the assets for the
benefit of creditors by the other Party; provided, however, in the case of any involuntary bankruptcy proceeding such right to terminate shall only 
 

  8

	  
 	  
 	  become effective if the Party consents to the involuntary bankruptcy or such proceeding is not dismissed within ninety (90) days after the filing thereof.
 
	  
 	  
 
	  9.3
 	  This Agreement shall be coterminous with the Settlement Agreement and Mutual Release of Claims (“Settlement Agreement”) entered into between the Parties on
even date herewith if the Settlement Agreement is terminated before the expiration date of this Agreement.
 
	  
 	  
 
	  9.4
 	  Unless terminated pursuant to Section 9.2(b), in the event this Agreement is rejected by Synbiotics or its receiver or trustee under applicable bankruptcy laws due
to Synbiotics’ bankruptcy, then all rights and licenses granted under this Agreement by Synbiotics to Heska are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the Bankruptcy Code and any similar law or regulation,
licenses of rights to “intellectual property” as defined under Section 101(52) of the Bankruptcy Code.  The Parties agree that all intellectual property rights licensed hereunder, including the Parties’ Patent Rights, are part of
the “intellectual property” as defined under Section 101(52) of the Bankruptcy Code subject to the protections afforded the non-terminating Party under Section 365(n) of the Bankruptcy Code.
 
	  
 	  
 
	 9.5
 	  Upon expiration or termination of this Agreement, neither Party shall be released from any obligation that matured prior to the effective date of such expiration or
termination.
 
	  
 	  
 
	  9.6
 	  The provisions of Articles 3.2, 4, 6, 8, 9.1 (in the event of expiration, only), 9.5, 10 and 11 shall survive the expiration or termination of this Agreement. 

 

  ARTICLE 10     NOTICES

	  10.1
 	  Any notice or communication pursuant to this Agreement shall be sufficiently made or given if sent by personal delivery, by a nationally-recognized overnight
courier, or by certified, first-class mail, postage prepaid, addressed to the address below, or such other address that a Party has given by written notice under this Section 10.1.
 
	  
 	  
 
	  
 	  In the case of Heska:
 
	  
 	  
 
	  
 	  
 	  Heska Corporation
 
	  
 	  
 	 1613 Prospect Parkway
 
	  
 	  
 	  Fort Collins, CO 80525
 
	  
 	  
 	  
 
	  
 	  
 	  Attention:
 	  Chief Executive Officer
 
	  
 	  
 	  Copy to:  
 	  Executive Vice President, Intellectual Property
 
	  
 	  
 	  
 	  and Business Development
 

  9

	  
 	  In the case of Synbiotics:
 
	  
 	  
 
	  
 	  
 	  Synbiotics Corporation
 
	  
 	  
 	 11011 Via Frontera
 
	  
 	  
 	  San Diego, CA  92127
 
	  
 	  
 	  
 	  
 
	  
 	  
 	  Attention:
 	  President
 
	  
 	  
 	  Copy to:
 	  Hayden Trubitt; Heller Ehrman White & McAuliffe LLP
 
	  
 	  
 	  
 	  4350 La Jolla Village Drive, 7th Floor; San Diego, CA 92122          
 

  ARTICLE 11     MISCELLANEOUS

	  11.1
 	  California Law.  This Agreement shall be governed by and interpreted in accordance with California law.
 
	  
 	  
 
	 11.2
 	  Integration and Modification.  Each Party represents and warrants that as of the date of the full execution of this Agreement, no promise, inducement or agreement
not expressed herein has been made to it in connection with this Agreement, and that this Agreement, the Consent Judgment and Injunction, the Settlement Agreement and the License Agreement relating to the ‘569 Patent, contain the entire
agreement between the Parties as to the subject matter related hereto and supersede any previous agreements, negotiations, promises or understandings between them as to the subject matter contained herein.  It is expressly agreed that this
Agreement may not be altered, modified or amended except by a writing duly executed by the undersigned Parties.
 
	  
 	  
 
	  11.3
 	  Headings.  The headings of the several sections are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
 
	  
 	  
 
	  11.4
 	  Promotional Activities.  Except as specified herein, nothing contained in this Agreement shall be construed as conferring any right to use in advertising, publicity
or other promotional activities any name, trade name, trademark, or other designation (including any contraction, abbreviation, or simulation of any of the foregoing) of the other Party without the express written approval of the other Party. 
Neither Party shall use any designation of the other Party in any promotional activity associated with this Agreement or the Licensed Product without the express written consent of the other Party.  
 
	  
 	  
 
	 11.5
 	  Severability.  In the event any provision of this Agreement shall be determined to be invalid, illegal or unenforceable, such provision shall be severable from the
remainder of the Agreement, and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
 
	  
 	  
 
	  11.6
 	  Waiver.  Failure at any time to require performance of any of the provisions herein shall not waive or diminish a Party’s right thereafter to demand compliance
therewith or with 
 

  10

	  
 	  any other provision. Waiver of any default shall not waive any other default. A Party shall not be deemed to have waived any rights hereunder unless such waiver is
in writing and signed by a duly authorized officer of the Party making such waiver.
 
	  
 	  
 
	  11.7
 	  Force Majeure.  Neither Party shall be held responsible for the failure or delay in performance herein when such failure or delay is due to any act of
God or of the public enemy, war, compliance with laws, governmental acts or regulations, fire, flood, epidemic, strikes and labor interruption, accident, unusually severe weather or other causes similar to the foregoing beyond their reasonable
control.  Any Party whose performance is affected by such force majeure shall promptly give notice to the other Party of such force majeure upon which such Party intends to rely to excuse its performance.  
 
	  
 	  
 
	 11.8
 	  Independent Contractors.  The relationship between Synbiotics and Heska under this Agreement shall be that of independent contractors engaged in the
operation of their own respective businesses.  Nothing in this Agreement is intended or is to be construed to constitute Heska and Synbiotics as partners, employer/employee, or principal/agent, or the employees or agents of any Party hereto as
employees or agents of the other Party.  Neither Party has the express or implied right or authority to assume or create any obligations for or on behalf of the other Party, to bind the other Party to any contract or undertaking with any third
party or to make any warranties or representations for or on behalf of the other Party.
 
	  
 	  
 
	  11.9
 	  Counterparts.  This Agreement may be executed in counterparts, each of which is deemed to be an original, but all of which together shall constitute one
and the same instrument.  Facsimile and photocopy signatures shall carry the same force and effect, and shall bind the parties hereto in the same manner, as original signatures to this Agreement.
 
	  
 	  
 
	  11.10
 	  Construction.
 
	  
 	  
 	  
 
	  
 	 11.10.1
 	  The language and terms of this Agreement are to be understood in their ordinary sense (except where otherwise defined herein) and are not to be interpreted in a technical manner
so as to unfairly deprive any Party of substantive rights.
 
	  
 	  
 	  
 
	  
 	  11.10.2
 	  The text of this Agreement is the product of negotiation among both Parties and is not to be construed as having been prepared by one Party or the other.
 
	  
 	  
 
	  11.11
 	  Warranty of Authorized Signatories.  Each of the signatories to this Agreement warrants and represents that he or she is competent and authorized to
enter into this Agreement on behalf of the Party for whom he or she purports to sign.
 
	  
 	  
 
	  11.12
 	  Confidentiality.  The Parties shall treat the existence and terms of this Agreement in accordance with Article 6 of the Settlement Agreement between
Synbiotics Corporation and Heska Corporation.
 

  11

 ARTICLE 12  PATENT MARKING

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

 

	  HESKA CORPORATION
 	  
 	  SYNBIOTICS CORPORATION
 
	  
 	  
 	  
 	  
 	  
 
	  By:
 	  /s/ CAROL TALKINGTON VERSER
 	  
 	  By:
 	  /s/ PAUL R. HAYS
 
	  
 	 
 	  
 	  
 	 
 
	 Name: 
 	 Carol Talkington Verser, Ph.D.
 	  
 	 Name: 
 	 Paul R. Hays
 
	 Title: 
 	 Executive Vice President
 	  
 	 Title:
 	 President
 

 12

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