Document:

Exhibit
10.7

[***] — 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 AGREEMENT
entered into as of this 16th day of February, 2001 (“Effective Date”), by and
between ARKRAY Inc., a Japanese corporation, having its principal office at 57
Nishi Aketa-cho, Higashikujo, Minami-ku, Kyoto 601-8045, Japan (hereinafter
referred to as “ARK”), and Heska Corporation, Delaware corporation having its
principal office at 1613 Prospect Parkway, Fort Collins, Colorado 80525, U.S.A.
(hereinafter referred to as “Heska”).

WITNESSETH

WHEREAS, ARK is a
manufacturer and distributor of clinical diagnostic instruments and Heska is a
manufacturer and/or distributor of hematology instruments, reagents and other
products targeted to veterinary markets.

WHEREAS, ARK
desires to appoint Heska as a distributor and Heska wishes to obtain such
distribution rights to market and sell Automated Clinical Chemistry Analyzer
Model SP-4430 (hereinafter referred to as “Product”) as defined herein,
effective from the date of the execution of this Agreement.

NOW, THEREFORE, in
consideration of the foregoing premises and of the mutual covenants herein
contained, the parties hereby agree as follows:

ARTICLE
I

ARK appoints Heska
as a distributor to promote, market, service and sell Product effective from
the date of execution of this Agreement, and Heska agrees to accept such appointment
subject to and in accordance with the following terms and conditions.

1.1
Product

Product means
product to be comprised of Automated Clinical Chemistry Analyzer Model SP-4430
(“Analyzer”) and those related spare parts, consumables and reagents manufactured
by ARK to be used to analyze blood in patients as listed in Appendix A and as
amended from time to time by mutual written agreement of the parties.

1.2
Branding

ARK and Heska
agree that the brand name and logotype of Product shall be a combination of “ARKRAY”
and “HESKA” in a format to be mutually agreed upon by the parties.

 

1.3
Distribution Right

Heska shall have
an exclusive right to promote, market, sell and distribute Product, with the
right to appoint sub-distributors, in North America (“Territory”) and only in
the veterinary market (“Field”).  The
exclusivity referred to in this Agreement applies between Heska and ARK or the
ARK- appointed distributors.

Heska agrees that,
during the term of this Agreement, (a) Heska shall not develop or make
commercially available or acquire a product(s) with features identical to
Product, and (b) Heska shall not handle or otherwise provide any “off-brand”
and/or “generic” form of spare part, consumables and reagents to be used with
Product unless such consumables and reagents are not available from Arkray;
provided, however, this section will not apply to common laboratory transfer
pipettes, common QC serum materials and primary blood collection tubes that fit
commercially available external centrifuges.

1.4
Sales Responsibility

Heska assumes all
sales responsibilities for Product to be sold in the Territory and Field under
this Agreement.  “Sales Responsibilities”
as used herein includes all sales force training, maintenance and support
activities, as well as pricing, advertising, promotion, and demonstration.  ARK will provide Heska with specifications,
test procedures and manuals written in English that may be reasonably necessary
for Heska to fulfill its Sales Responsibilities.

1.5
Relationship of  Parties

Each party shall
be considered an independent contractor of the other party.  Nothing in this Agreement shall be construed
as establishing a joint venture or partnership or principal/agent, or employee
relationship.  No party is authorized to
make any statement, claim, representation or warranty or to act on behalf of
any other party with respect to any of the provisions of this Agreement, except
as provided for herein or as specifically authorized in writing by other party.

1.6 Term
and Renewal

This Agreement
shall continue in full force and effective for a period of three (3) years from
the date of execution of this Agreement and shall be automatically renewed for
additional one year periods unless a party provides notice to the other party
of its intent not to renew this Agreement at least one hundred eighty (180)
days prior to the current expiration date of this Agreement, unless this
Agreement is terminated earlier as set forth in Section 1.7.

1.7
Termination

Either party may
cancel this Agreement by a written notice at any time in the event that the
other party shall have been in material breach of any of the provisions of this
Agreement and such breach shall have been continued for sixty (60) days after
such a written notice thereof was provided to the breaching party by the
non-breaching party.  Either of the
parties may terminate this Agreement at any time without giving any notice to
the other party if that party is declared insolvent or bankrupt by a court of competent
jurisdiction.  If Heska fails to meet the
agreed upon minimum annual purchases for two (2) consecutive years, then Heska
shall lose all rights to distribute Analyzer. 
However, ARK shall continue to supply Heska with Consumables as provided
in Section 2.3.

 

Upon any such
termination of this Agreement, the terminating party may (but has no obligation
to) cancel any and all unshipped sales orders concluded hereunder. Unless
otherwise provided herein, each party waives any claims for compensation or
damages in connection with such cancellation of undelivered Products from the
other party.

The provisions of
Sections 2.3 (Spare Parts, Consumables and Reagents), 2.4 (Patents), 4.2
(Confidentiality), 4.3 (Indemnification), 4.6 (Publicity), and 4.10 (Law of
Contract Jurisdiction) shall survive termination of this Agreement.

ARTICLE
II

2.1
Warranty and Quality

ARK warrants that
Product to be delivered hereunder shall be free and clear of any and all liens,
encumbrances or defects in title and shall be conveyed to Heska with lawful and
marketable title.  ARK warrants that
Product shall satisfy the performance specifications set forth in Appendix B.
ARK will not make any changes to Product without first notifying Heska in
writing at least ninety (90) days in advance of such changes and providing Heska
with evidence that such changes do not alter the performance specifications of
Product and obtaining Heska’s consent in writing.  ARK shall input normal reference ranges for
animals supplied by Heska in writing into the Analyzers without modification by
ARK.

In the event that
Heska determines that any shipment of Product to be delivered to it hereunder
fail/s to conform to the performance specifications set forth in Appendix B,
Heska shall promptly notify ARK and reasonably specify the manner in which Product
fail/s to conform.  ARK shall have the
rights to make its own inspection and evaluation of the allegedly
non-conforming Product and shall notify Heska, within twenty one (21) days
after receipt of such information, including samples of the allegedly non-conforming
Product from Heska, whether it has confirmed and accepted Heska’s claim that
Product are/is non-conforming.

If ARK determines
and confirms that Product are/is non-conforming, ARK shall replace, at no cost
to Heska, the non-conforming Product at the earliest date after confirmation of
Product non- conformance.  ARK shall also
bear the freight charges, insurance, duties and tariffs for return of all
non-conforming Product to ARK from Heska.

If, after
evaluating the allegedly non-conforming Product, ARK believes that Product in
question are/is conforming, ARK shall supply Heska with its written findings
and request Heska to submit additional samples of Product to an independent
third party, acceptable to both parties, for testing in accordance with and
against the performance specifications set forth in Appendix B.  The decision of such third party shall be
final with respect to the alleged non-conforming Product and binding on both
parties to this Agreement.

If the decision of
the third party is that Product are/is non-conforming, ARK shall pay the return
freight, insurance, duties and tariffs with respect to Product shipped to Heska
as well as all costs and expenses relating to the testing of Product by the
independent third party.  In addition, ARK
shall supply Heska with a Certificate of Destruction certifying that Product
have/has been destroyed in an environmentally safe manner.

 

If the decision of
the third party is that Product conform/s to the applicable specifications,
Heska shall accept Product and shall be responsible for the return freight,
insurance, duties, tariffs and all costs and expenses relating to the testing
of Product by the independent third party.

Each Product is
warranted by ARK to be free from defects in materials and workmanship for a
period of sixteen (16) months from the date of shipment from ARK to Heska.  During the warranty period, ARK will provide
Heska with all necessary warranty replacement parts at no charge.  ARK’s warranty obligation under this Article
is limited to the repair or replacement of Product.

2.2
Trademark

ARK grants to
Heska a limited license to use on a non-exclusive basis ARK’s trademarks and
brand names as set forth in Appendix C for the purposes specified in this
Agreement.  Except as specified in this
Section and Section 1.2, no party to this Agreement will derive any legal
rights to the other party’s trademarks. 
No party shall adopt, use or register in any country, without the
written consent of the other party, a trademark for any similar, related or
competitive product which is likely to be confused with a trademark of the
other party.

2.3
Spare Parts, Consumables and Reagents

ARK agrees that
spare parts, consumables and reagents used with Analyzer (collectively called “Consumables”)
will continue to be furnished to Heska at the prices fixed on the basis of the
price negotiation every year for a period of five (5) years following the last
shipment of Analyzer from ARK to Heska as long as Heska continues to have
exclusive distribution rights to sell Analyzer. Should Heska lose ARK’s
exclusive distribution rights to sell Analyzer, ARK agrees to allow Heska to be
a supplier of Consumables to Heska’s customers for a period of twelve (12)
months from the loss of exclusive distribution rights to sell Analyzer.  Thereafter, ARK agrees to supply Consumables
to Heska’s customers during the time ARK sells Consumables in North America
directly or through a distributor.

2.4
Patents

ARK warrants and
represents to Heska, and without admitting any infringement, to the best of its
current actual knowledge neither Product of this Agreement nor its manufacture,
use, importation or sale infringe upon any issued patent or proprietary rights
held by a third party.

ARK shall defend,
indemnify and hold Heska and its subsidiary or affiliated companies, and
customers thereof, harmless from any damages, including without limitation
reasonable attorneys’ fees, with respect to any and all claims that the
manufacture, use, rental or sale of any of Product of this Agreement infringes
upon any patent or proprietary rights of a third party.

ARTICLE
III

3.1
Orders and Forecasts

The forecast
provided for below will include a firm purchase commitment covering the first
five (5) months of the forecast. 
Therefore, Heska will issue periodic purchase orders within the terms
specified below.  Such purchase orders
shall not bind ARK unless or until accepted by ARK.  ARK shall notify Heska of its decision on
acceptance within ten (10) days after receipt of a purchase order.

 

Heska shall provide
ARK, on a quarterly basis by the end of each Calendar quarter, a non-binding
rolling one (1) year forecast of its anticipated purchases of Product.  ARK shall keep Heska notified immediately of
any events that may significantly impact ARK’s ability to deliver, such as
interruptions by suppliers, labor troubles, discovered defects, and the
like.  ARK agrees to ship to Heska (i)
Consumab1es within ninety (90) days of ARK’s acceptance of a purchase order for
Consumab1es, and (ii) Analyzers within one hundred twenty (120) days of ARK’s
acceptance of a purchase order for Analyzers.

3.2
Minimum Purchase

ARK and Heska
shall separately discuss and agree on a minimum annual purchase of Product to
be made by Heska from ARK for every calendar year three (3) months prior to the
beginning of every calendar year during the effective period of this Agreement.

3.3
Pricing

ARK will sell
Product to Heska in accordance with the prices agreed upon, which shall be
denominated in Japanese yen.  Upon thirty
(30) day prior written notice from one party to the other, the parties agree to
discuss in good faith any adjustment to the prices of Product in an attempt to
reach a mutually satisfactory agreement. 
If a mutually satisfactory agreement cannot be reached, the prices of
Product then in effect shall remain applicable.

3.4
Shipping of Products, Reagents, Spare Parts and etc.

ARK will
immediately confirm the receipt of each purchase order from Heska in order that
Heska has assurance that each purchase order is duly received by ARK.  ARK shall try its best efforts to ship all of
Product ordered by Heska as specified by Heska. 
In the event of its inability to make a complete shipment as specified
by Heska, ARK shall notify Heska immediately of the possible shipping date.
Both parties shall discuss and amicably agree to adjust the shipping date if
ARK’s shipping date causes Heska any inconvenience.  Should ARK upon acceptance of a purchase
order fail to ship Product from Japan within ten (10) business days of
specified shipping dates twice within a twelve (12) month period, ARK agrees to
renegotiate the annual minimum.

3.5
Payment Terms

At Heska’s sole
option, Heska will provide a letter of credit or prepay in Japanese yen one
week in advance of the shipment of Products under a purchase order; provided
Heska receives a timely firm shipment date in writing from ARK.  Ark agrees to renegotiate the payment terms
within twelve (12) months of the Effective Date.

3.6
Packing

Product shall be
labeled, packaged and shipped to Heska in accordance with the ARK’s quality
standard to satisfy the requirements for Product Specifications set forth in
Appendix B. Labels for Products shall be mutually agreed upon by the Parties.

 

3.7
Freight Insurance

ARK will ship
Heska Product ordered by Heska under the terms of FCA Osaka and/or Kobe, Japan
as defined in Incoterms 2000.  Heska
shall be responsible for payment of all air and/or sea freight, insurance,
duties and tariffs for shipments of Product to Heska, except as both parties
agree.

ARTICLE
IV

4.1 Report

Heska shall make
periodic reports on a quarterly basis to ARK on the sales activities and the
sales promotion plans of Product, and the market conditions including
information on the competitive products.

4.2
Confidentiality

(a)                “Confidential
Information” means any technical, manufacturing, business and marketing
information including, without limitation, patent applications, patent
disclosure, data, inventions, concept, idea, structures, formulas, techniques,
processes, apparatus, know-how disclosed orally or in tangible form such as
documents, memoranda, reports, correspondence, machine readable tapes or disks,
drawings, notes or other media.  All
confidential information disclosed in this Agreement which is writing or other
tangible form shall be clearly marked as “Confidential” or if communicated
orally or obtained through observations, shall be confirmed in writing within
thirty (30) business days.

(b) The party receiving
information (“Receiving party”) agrees that the party disclosing (“Disclosing party”)
is the owner of the confidential information and that the Receiving party will
not use any confidential information for any purpose except for the execution
of this Agreement.  Each Receiving party
agrees not to disclose any confidential information to any third party or to
employees of the Receiving party, except to those employees who are required to
have the information in order to be engaged in the execution of this
Agreement.  Receiving party’s obligations
with regard to the confidentiality and nonuse of such information shall not
extend to any information that:

(1)                was in the public
domain at the time it was disclosed or becomes part of public domain after
disclosure, including, without limitation, disclosure in a U.S. or foreign
patent or disclosure in a printed publication which is generally available to
the public, or through the unrestricted sale of Product embodying the same to
the extent that such confidential information is ascertainable from such
Product; or

(2)              was known to the
Receiving party at the time of its disclosure or becomes known to the receiving
party without breach of this Agreement, provided that the Receiving party shall
have the burden of proving such knowledge: or

 

(3)              is independently
developed by the persons of the Receiving party who have not been exposed to
the confidential information as evidenced by written records; or

(4)              is disclosed by a
Disclosing party to a third party without restrictions on such third party’s
rights to disclose or use the same; or

(5)     is disclosed by the Disclosing party
pursuant to judicial order, a requirement of a governmental agency or by
operation of law, provided that the Receiving party shall (i) give the
Disclosing party prompt notice of any such possible disclosure of confidential information
and (ii) permit the Disclosing party, at its expense, to take all reasonable
actions to prevent or limit the scope of such disclosure and/or to obtain
protective orders to protect the confidentiality of such confidential
information; or

(6)              is approved for
release upon the Disclosing party’s prior written consent; or

(7)              is disclosed by the
Disclosing party to the Receiving party after written notification is delivered
by the Receiving party to the Disclosing party that it will not accept any further
confidential information in confidence.

(c)                Each Receiving
party agrees that it shall take all reasonable measures to protect the secrecy
of and avoid unauthorized use of the confidential information and that any
disclosure of the confidential information within the Receiving party will only
be such as is reasonably necessary to its evaluation and will only be to
employees of the Receiving party who are bound by written agreements with the
Receiving party to maintain the confidential information in confidence.  Each Receiving party shall immediately notify
the Disclosing party in the event of any unauthorized use or disclosure of the
confidential information.

(d)         The obligations imposed
on the parties under this Article shall survive for five (5) years following
the termination of this Agreement.

4.3
Indemnification

ARK agrees that it
will defend, indemnify and hold harmless Heska, its directors, officers,
employees, agents and affiliates from and against all costs, damages, loss,
expense (including reasonable attorney’s fees), claims by or judgments in favor
of third parties for bodily injury, property damage, or any other damage or
injury caused or alleged to have been caused by the manufacture, sale or use of
the Product, except to the extent that such damage or injury results
substantially from the gross negligence or wrongful acts of Heska. Furthermore,
each party agrees that it shall defend, indemnify and hold the other party, its
directors, officers, employees, agents and affiliates harmless from all costs,
damages, loss, expense (including reasonable attorney’s fees), or any other
damage caused by, arising out of, or resulting from (i) such party’s failure of
performance of the terms of this Agreement, or (ii) such party’s failure to
comply with any and all laws (statutory and common) and regulations applicable
to such performance. Heska shall defend, indemnify and hold ARK, its directors,
officers, employees, agents and affiliates harmless from all costs, damages,
loss, expense (including reasonable attorney’s fees), or any other damage
caused by, arising out of, or resulting from the reference ranges supplied by
Heska under Section 2.1.

 

Each party agrees
to give the other prompt notice in writing of the institution of any suit, or
any claims made by a third party, including any claims asserted or made by any
governmental authority having jurisdiction over the parties and Product of this
Agreement.  ARK and Heska agree to
cooperate with each other in the defense of such suits or claims and to provide
all necessary information to enable the defending party to carry on the defense
of such suit or any appeal from a judgment or decree rendered therein.

4.4
Force Majeure

Except with
respect to the allocation obligation of ARK provided for in Paragraph 4.3, no
party shall be liable to the other in any manner for failure or delay to
fulfill all or part of this Agreement, directly or indirectly, owing to acts of
God, governmental orders or restriction, war, threat of war, warlike
conditions, hostilities, sanctions, mobilization, blockade, embargo, detention,
revolution, riot, looting, strike, lockout or other labor troubles, fire,
typhoon, earthquake, lightning, accident of any other causes or circumstances
beyond its control.

4.5
Notices

Every notice, consent,
instruction, order or decision given under this Agreement shall hereunder be
given or made in writing in English, and if required to be given promptly shall
be given as expeditiously as possible, and in any event, within seven (7)
business days, and shall be delivered personally or if by mail, shall be mailed
registered or certified mail, return receipt requested, as follows:

 

	
  If to ARK:

  57 Nishi Aketa-cho

  Higashi-kujo, Minami-ku

  Kyoto 601-8045, Japan

  Attention:

  	
   

  	
  If to Heska:

  1613 Prospect Parkway

  Fort Collins Colorado 80525

  USA

  Attention: Chief Executive Officer

  Copy to: Vice President,

           Intellectual Property
  and

           Business Development

  

 

 

4.6
Publicity

Neither party
shall announce nor disclose the existence of this Agreement or its terms and
conditions, or advertise or release any publicity regarding this Agreement
without the prior written consent of the other party, which consent shall not
be unreasonably withheld.  This provision
shall not apply to the disclosure of information required to satisfy disclosure
obligations imposed by law, court order or regulations, including, but not
limited to, the reporting requirements of the United States Securities and
Exchange Commission.

4.7
Assignability

This Agreement and
the rights and obligations hereunder shall not be assigned or transferred to
any third party by either of the parties hereto without the prior written
approval of the other party; provided, however, no prior consent shall be
required for the assignment or transfer of substantially all the assets of a
party relating to the subject matter of this Agreement or related to a change
of control of a party.

4.8
Waivers

No delay or
omission in the exercise of any right or remedy of any party or any default by
another shall impair any right or remedy otherwise available nor shall it be
construed as a waiver of any right or remedy. 
Any waiver by any party of any default must be in writing and shall not
be a waiver of any other default concerning the same or any other provision.

4.9
Entire Agreement

This Agreement
contains the entire understanding of the parties with respect to the subject
matter hereof.  All express or implied
agreements and understandings, either oral or written, heretofore made are
expressly superseded by this Agreement. 
This Agreement may be modified only by written agreement duly executed
by the parties.

4.10 Law
of Contract Jurisdiction

This Agreement
shall be governed by and construed under the laws of the district where the
contracting party is a defendant who defends against the other party, with
regard to the construction or interpretation of the Agreement.  The English language employed herein shall be
controlling and this Agreement shall be deemed to have been executed at Fort
Collins, Colorado, United States of America and Osaka, Japan.  Any dispute, controversy or difference
arising between the parties, out of or in relation to or in connection with
this Agreement, or the breach thereof, which cannot otherwise be settled
between the parties within a period of ninety (90) days shall be submitted to
an arbitration before a competent arbitration tribunal in Colorado, United
States of America in case Heska is a defendant, and Osaka, Japan in case ARK is
a defendant, for binding resolution in accordance with the rules selected by
the arbitrator(s), provided the proceedings are conducted in the English
language.

 

[***] — 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.

4.11
Effect of Headings

Subject headings
of the Sections of this Agreement are included for purposes of convenience only
and shall not affect the construction or interpretation of its provisions.

4.12
Execution in Counterparts

This Agreement may
be executed in two (2) counterparts, each of which shall be deemed an original
but all of which together shall be deemed for all purposes one and the same
instrument.

IN WITNESS WHEREOF, the
parties have caused this Agreement to be executed by their

authorized
representatives.

 

	
  ARKRAY Inc.

  	
   

  	
   

  	
   

  
	
  By: [***]

  	
   

  	
  Heska Corporation

  	
   

  
	
  [***]

  	
   

  	
  By: /s/ James
  H. Fuller

  	
   

  
	
  Title: Executive

  	
   

  	
  JAMES H. FULLER

  	
   

  
	
  Date: February
  16, 2001

  	
   

  	
  Title: President and COO

  	
   

  
	
  Place: Fort
  Collins, CO USA

  	
   

  	
  Date: February 16, 2001

  	
   

  
	
   

  	
   

  	
  Place: Fort Collins, CO USA

  	
   

  

 

	
  By: [***]

  	
     

  
	
  [***]

  	
   

  
	
  Title: Executive
  Officer

  	
   

  
	
  Date: February
  27, 2001

  	
   

  
	
  Place: Kyoto

  	
   

  

 

 

 

APPENDIX
A

PRICE LIST

PL2001-01
(Second version)

 

 

ARKRAY (Logo)

Date: January 23, 2001

 

	
  Distributor:

  	
   

  
	
   

  	
   

  
	
   

  	
  Heska Corporation

  
	
   

  	
  1613 Prospect Parkway, Fort Collins, Colorado 80525
  U.S.A.

  
	
   

  	
  Phone 970-493-7272

  
	
   

  	
   

  
	
  Territory:

  	
   

  
	
   

  	
   

  
	
   

  	
  North America

  
	
   

  	
   

  
	
  Payment Terms:

  
	
   

  	
   

  
	
   

  	
  D/A within
  30 days after the Bill of Lading date

  
	
   

  	
   

  
	
   

  	
   

  
	
  Delivery Terms:

  
	
   

  	
   

  
	
   

  	
  FCA Osaka/Kobe, Japan

  

 

We reserve the
right to change the prices with 30 days prior notice.

 

	
  Code No.18303

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  SPOTCHEM EZ    Model: “SP-4430”

  
	
   

  	
   

  
	
   

  	
   

  
	
  Specification:

  	
   

  
	
   

  	
   

  
	
  Sample

  	
  : Serum, Plasma, Whole Blood (only Hb)

  
	
   

  	
   

  
	
  Reagent

  	
  : SPOTCHEM II Reagent Strip

  
	
   

  	
   

  
	
  Measurement Items

  	
  : Glu, UA, T-Cho, TG, BUN, T-Bil, Ca, TP, Alb, GOT,
  GPT,

  LDH, CPK, Hb, Amy, GGT, ALP, Cre, HDL-C, FRA, IP, Mg,

  **Total Test Items = 22

  **Max. 9 items can be measured simultaneously

  
	
   

  	
   

  
	
  Warm-Up

  	
  : 10 minutes

  
	
   

  	
   

  
	
  Display

  	
  : 20 digits X 2 lines LCD (Character)

  
	
   

  	
   

  
	
  Operation Panel

  	
  : Sheet Key

  
	
   

  	
   

  
	
  Calibration

  	
  : Calibration by Magnetic Card or by Calibration Kit

  
	
   

  	
   

  
	
  Data Storage

  	
  : 100 Measurements

  
	
   

  	
   

  
	
  Dimension & Weight

  	
  : 338 X 203 X 167 (WDH), Approx.5.4kg

  
	
   

  	
   

  
	
   

  	
   

  
	
  Including:

  	
   

  
	
  Thermal Printer Paper(1), Power Cord(1), AC
  Adapter(1), Accessory case(1), Operating Manual(1), Warranty Card(1),
  Tip(10), Cleaning Wire(1), Cleaning Set(1), Nozzle Set(1), Wrench Set(1),
  Centrifuge Tube(10), Tip Waste Case(2), Protective Cover(2)

  

***minimum ordering unit
= to be decided later

 

[***] — 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.

Optional Consumable Accessories:

	
  CODE NO.

  	
   

  	
  DESCRIPTION

  	
   

  	
  @ PRICE

  
	
   

  	
   

  	
   

  	
   

  	
  FCA Japan

  
	
  10067

  	
   

  	
  Thermal Printer Paper (For Built in Printer, 58 mm
  width)

  	
   

  	
  ¥[***]

  
	
  10204

  	
   

  	
  Serum Sample Tube (100 pieces, blue cap)

  	
   

  	
  ¥[***]

  
	
  10191

  	
   

  	
  Serum Sample Tube (500 pieces, blue cap)

  	
   

  	
  ¥[***]

  
	
  10202

  	
   

  	
  Whole Blood Sample Tube (100 pieces, orange cap)

  	
   

  	
  ¥[***]

  
	
  10192

  	
   

  	
  Whole Blood Sample Tube (500 pieces, orange cap)

  	
   

  	
  ¥[***]

  
	
  10200

  	
   

  	
  Diluent for Hb measurement (20 mL, 50 pieces)

  	
   

  	
  ¥[***]

  
	
  10206

  	
   

  	
  Pippete Tip for Hb Meas. (100L, 960 pieces)

  	
   

  	
  ¥[***]

  
	
  10207

  	
   

  	
  Pippete Tip for Hb Meas. (1000L, 960 pieces)

  	
   

  	
  ¥[***]

  
	
  77041

  	
   

  	
  Calibrator Kit (Low and High, 2 vials each, 2 vials
  of dilution)

  	
   

  	
  ¥[***]

  
	
  77042

  	
   

  	
  Calibrator Hb Kit (Calibrator and dilution for Hb
  meas)

  	
   

  	
  ¥[***]

  
	
  77043

  	
   

  	
  Calibration Check (4 pieces of lyophilized serum 3
  mL)

  	
   

  	
  ¥[***]

  
	
  10711

  	
   

  	
  Tip Set (EZ) 100 pieces

  	
   

  	
  ¥[***]

  
	
  10712

  	
   

  	
  Centrifuge Cup (100 pieces)

  	
   

  	
  ¥[***]

  
	
  10743

  	
   

  	
  Tip Set (EZ) (500 pieces)

  	
   

  	
  ¥[***]

  
	
  10692

  	
   

  	
  AC Adaptor

  	
   

  	
  ¥[***]

  
	
  10698

  	
   

  	
  Cleaning wire

  	
   

  	
  ¥[***]

  
	
  10208

  	
   

  	
  Cleaner Set (Brush, 5 cotton swabs)

  	
   

  	
  ¥[***]

  
	
  10193

  	
   

  	
  Pippete for Solution (For 3 mL)

  	
   

  	
  ¥[***]

  
	
  10194

  	
   

  	
  Pippete for Hb Meas (For 40 mL,200L 1 each)

  	
   

  	
  ¥[***]

  
	
  10199

  	
   

  	
  Sample Rack (For 30 sample tubes)

  	
   

  	
  ¥[***]

  
	
  10699

  	
   

  	
  Nozzle Set (EZ) (Replacement Nozzle, O-ring)

  	
   

  	
  ¥[***]

  
	
  10700

  	
   

  	
  Tool Set for Nozzle Replacement

  	
   

  	
  ¥[***]

  
	
  10701

  	
   

  	
  Waste Case (2 pieces)

  	
   

  	
  ¥[***]

  
	
  10702

  	
   

  	
  Protective Cover (2 pieces)

  	
   

  	
  ¥[***]

  
	
  18204

  	
   

  	
  Portable Centrifuge (CF-9520)

  	
   

  	
  ¥[***]

  
	
  10703

  	
   

  	
  RS-232C, Connection Cable

  	
   

  	
  ¥[***]

  
	
  10704

  	
   

  	
  Carrying Case

  	
   

  	
  ¥[***]

  

 

Optional Parts:

“Optional Parts List” to be supplied separately

[***] — 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.

SPOTCHEM
II Reagent Strips (Single Type)

	
  CODE NO.

  	
   

  	
  DESCRIPTION

  	
   

  	
  @ PRICE

  
	
   

  	
   

  	
   

  	
   

  	
  FCA JAPAN

  
	
  77240

  	
   

  	
  Glu

  	
   

  	
  [***]

  
	
  77241

  	
   

  	
  UA

  	
   

  	
  [***]

  
	
  77242

  	
   

  	
  T-Cho

  	
   

  	
  [***]

  
	
  77243

  	
   

  	
  TG

  	
   

  	
  [***]

  
	
  77244

  	
   

  	
  BUN

  	
   

  	
  [***]

  
	
  77245

  	
   

  	
  T-Bil

  	
   

  	
  [***]

  
	
  77246

  	
   

  	
  Ca

  	
   

  	
  [***]

  
	
  77247

  	
   

  	
  T-Pro

  	
   

  	
  [***]

  
	
  77248

  	
   

  	
  Alb

  	
   

  	
  [***]

  
	
  77249

  	
   

  	
  GOT

  	
   

  	
  [***]

  
	
  77250

  	
   

  	
  GPT

  	
   

  	
  [***]

  
	
  77251

  	
   

  	
  LDH

  	
   

  	
  [***]

  
	
  77252

  	
   

  	
  CPK

  	
   

  	
  [***]

  
	
  77253

  	
   

  	
  Hb

  	
   

  	
  [***]

  
	
  77254

  	
   

  	
  Amy

  	
   

  	
  [***]

  
	
  77255

  	
   

  	
  GGT

  	
   

  	
  [***]

  
	
  77256

  	
   

  	
  ALP

  	
   

  	
  [***]

  
	
  77257

  	
   

  	
  Cre

  	
   

  	
  [***]

  
	
  77258

  	
   

  	
  HDL-C Kit

  	
   

  	
  [***]

  
	
  77259

  	
   

  	
  FRA

  	
   

  	
  [***]

  
	
  77268

  	
   

  	
  IP

  	
   

  	
  [***]

  
	
  77269

  	
   

  	
  Mg

  	
   

  	
  [***]

  

*
25 Strips/Box

 

SPOTCHEM
II Reagent Strips (Multi Type)

	
  CODE NO.

  	
   

  	
  DESCRIPTION

  	
   

  	
  @ PRICE

  
	
   

  	
   

  	
   

  	
   

  	
  FCA JAPAN

  
	
  77262

  	
   

  	
  Panel-1

  	
   

  	
  JPY [***]

  
	
   

  	
   

  	
  Vet multi panel

  	
   

  	
  JPY [***]

  

*
25 Strips/Box

[***] — 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.

APPENDIX B

PRODUCT SPECIFICATIONS

	
  INSTRUMENT

  	
   

  
	
  SPOTCHEM EZ MODEL: “SP-4430”

  
	
  SAMPLE:

  	
  Serum, Plasma, Whole Blood (only Hb)

  
	
  REAGENT:

  	
  SPOTCHEM II Reagent Strip

  
	
  MEASUREMENT ITEMS:

  	
  Glu, Ua, T -Cho, TG, BUN, T -Bil, Ca, TP, Alb, GOT,
  GPT, LDH, CPK,

  
	
   

  	
  Hb, Amy, GGT, ALP, Cre, HDL-C, FRA, IP, Mg

  
	
   

  	
  TOTAL TESTS: 22, 9 simultaneously

  
	
  WARM-UP:

  	
  10 Minutes

  
	
  DISPLAY:

  	
  20 digits x 2 lines LCD (character)

  
	
  OPERATION PANEL:

  	
  Sheet key

  
	
  CALIBRATION:

  	
  Magnetic card or kit

  
	
  DATA STORAGE:

  	
  100 measurements

  
	
  DIMENSION & WEIGHT

  	
  338 X 203X167 (WDH), Approx 5.4 kg

  
	
  SOTWARE:

  	
  Menu sub routine for species selection & normal
  values

  
	
  WARRANTY:

  	
  16 Months

  
			

 

REAGENTS

[***]

	
   

  	
   

  	
   

  	
  [***]

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  GLU

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  BUN

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  T-BIL

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  CA

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  T-PRO

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  ALB

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  GPT

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  AMY

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  GGT

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  ALP

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  CRE

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  IP

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  GOT

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  FRA

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [***]

  
	
  CPK

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  Mg

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  TG

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  UA

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  T-CHO

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  LDH

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  Hb

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  HDL-C(D)

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
  PANEL-1

  	
   

  	
   

  	
  [***]

  	
  [***]

  	
  [***]

  	
  [***]

  	 

	
   

  	
   

  	
   

  	
  [***]

  	
   

  	
   

  	
   

  	 

 

[***]

[***]

 

	
  Color specifications

  	
   

  	
  Basic design system

  
	
   

  	
   

  	
  1-7-1

  
	
   

  	
   

  	
   

  
	
  ARKRAY blue

  	
   

  	
  ARKRAY mark is expressed in the two colors, ARKRAY
  blue and ARKRAY orange. ARKRAY blue is the corporate 

  
	
   

  	
   

  
	
  (Example of color)

  	
  If D1C641 is not available

  
	
   

  	
  — C100 + M60

  — PANTONE293

  	
  color, representing fair, good faith and “truthful” stated
  in our corporate philosophy.

  
	
   

  	
   

  	
   

  
	
  ARKRAY orange

  	
   

  	
  ARKRAY orange indicates vitality, meaning “active”
  in the corporate philosophy.

  
	
   

  	
   

  
	
  (Example of color)

  	
  If DIC205 is not available

  	
  ARKRAY logo should be painted in black.

  
	
   

  	
  — M50 + Y90

  	
  In case the number of color is limited, 

  
	
   

  	
  — PANTONE136

  	
  follow the coloring specifications below.

  
	
   

  	
   

  	
   

  
	
  Coloring instruction

  	
   

  	
   

  
	
   

  	
  Color type

  	
   

  
	
  (Example of ARKRAY logo)

  	
   

  	
  (Example of ARKRAY logo)

  
	
   

  	
   

  	
   

  
	
  Prototype (basically
  used)

  	
   

  	
  If the prototype cannot be used due to the

  
	
   

  	
   

  	
  limitation of the number of colors, use

  
	
   

  	
   

  	
  ARKRAY blue and ARKRAY orange as

  
	
   

  	
   

  	
  shown above.

  
	
   

  	
  Monochrome types

  	
   

  
	
  (Example of ARKRAY logo)

  	
   

  	
  (Example of ARKRAY logo)

  
	
   

  	
   

  	
   

  
	
  Monochrome type 1

  	
   

  	
  Monochrome type 2

  
	
   

  	
   

  	
   

  
	
  Use black and meshed black 40% as shown

  	
   

  	
  If the meshed black is not clearly shown in

  
	
  above. If the black is not available to use, use

  	
   

  	
  monochrome print, use black only.

  
	
  ARKRAY blue (or the most similar color) instead

  	
   

  	
   

  
	
  of black.

  	
   

  	
   

  
	
   

  	
  Reversed color type

  	
   

  
	
  (Example of ARKRAY logo)

  	
   

  	
  If the ARKRAY colors don’t look attractive due to
  the color of foundation the ARKRAY brand is on, use white only shown at the
  left.

  
	
   

  	
   

  

 

APPENDIX C

	
  ARKRAY brand specifications
  1

  	
   

  	
  Basic design system

  
	
   

  	
   

  	
  1-4-1

  
	
  Prototype

  	
   

  	
   

  
	
   

  	
   

  	
  ARKRAY brand consists of

  
	
  (Example of ARKRAY logo)

  	
   

  	
  ARKRAY mark and logo.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Basically the prototype should be used.

  
	
  Sub-design

  	
   

  	
   

  
	
   

  	
   

  	
  If the prototype cannot be used due to the size of
  space, use the sub-design instead.

  
	
  (Example of ARKRAY logo)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Isolation

  	
   

  	
  The isolation is the minimum 

  
	
  — Prototype

  	
   

  	
  sized space surrounding the ARKRAY brand to set it apart
  from other factors in order to 

  
	
  (Example of ARKRAY logo)

  	
   

  	
  make the design prominent. Do NOT allow other factors
  to 

  
	
  — Sub-design

  	
   

  	
  enter the space.

  
	
   

  	
   

  	
   

  
	
  (Example of ARKRAY logo)Exhibit 10.8

HESKA CORPORATION

1997 STOCK INCENTIVE PLAN

(AS AMENDED MARCH
6, 2007)

 

 

TABLE
OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
  ARTICLE 1.

  	
   

  	
  INTRODUCTION

  	
   

  	
  1

  
	
  ARTICLE 2.

  	
   

  	
  ADMINISTRATION

  	
   

  	
  1

  
	
  2.1

  	
  Committee Composition

  	
   

  	
  1

  
	
  2.2

  	
  Committee Responsibilities

  	
   

  	
  1

  
	
  ARTICLE 3.

  	
   

  	
  SHARES AVAILABLE FOR
  GRANTS

  	
   

  	
  2

  
	
  3.1

  	
  Basic Limitation

  	
   

  	
  2

  
	
  3.2

  	
  Annual Increase in Shares

  	
   

  	
  2

  
	
  3.3

  	
  Additional Shares

  	
   

  	
  2

  
	
  ARTICLE 4.

  	
   

  	
  ELIGIBILITY

  	
   

  	
  2

  
	
  4.1

  	
  Nonstatutory Stock Options and Restricted Shares

  	
   

  	
  2

  
	
  4.2

  	
  Incentive Stock Options

  	
   

  	
  2

  
	
  ARTICLE 5.

  	
   

  	
  OPTIONS

  	
   

  	
  2

  
	
  5.1

  	
  Stock Option Agreement

  	
   

  	
  2

  
	
  5.2

  	
  Number of Shares

  	
   

  	
  3

  
	
  5.3

  	
  Exercise Price

  	
   

  	
  3

  
	
  5.4

  	
  Exercisability and Term

  	
   

  	
  3

  
	
  5.5

  	
  Effect of Change in Control

  	
   

  	
  3

  
	
  5.6

  	
  Modification or Assumption of Options

  	
   

  	
  4

  
	
  5.7

  	
  Buyout Provisions

  	
   

  	
  4

  
	
  ARTICLE 6.

  	
   

  	
  PAYMENT FOR OPTION
  SHARES

  	
   

  	
  4

  
	
  6.1

  	
  General Rule

  	
   

  	
  4

  
	
  6.2

  	
  Surrender of Stock

  	
   

  	
  4

  
	
  6.3

  	
  Exercise/Sale

  	
   

  	
  4

  
	
  6.4

  	
  Exercise/Pledge

  	
   

  	
  4

  
	
  6.5

  	
  Promissory Note

  	
   

  	
  5

  
	
  6.6

  	
  Other Forms of Payment

  	
   

  	
  5

  
	
  ARTICLE 7.

  	
   

  	
  [Reserved]

  	
   

  	
  5

  
	
  ARTICLE 8.

  	
   

  	
  RESTRICTED SHARES

  	
   

  	
  5

  
	
  8.1

  	
  Time, Amount and Form of Awards

  	
   

  	
  5

  
	
  8.2

  	
  Payment for Awards

  	
   

  	
  5

  
	
  8.3

  	
  Vesting Conditions

  	
   

  	
  5

  
	
  8.4

  	
  Voting and Dividend Rights

  	
   

  	
  5

  
	
  ARTICLE 9.

  	
   

  	
  PROTECTION AGAINST
  DILUTION

  	
   

  	
  6

  
	
  9.1

  	
  Adjustments

  	
   

  	
  6

  
	
  9.2

  	
  Dissolution or Liquidation

  	
   

  	
  6

  
	
  9.3

  	
  Reorganizations

  	
   

  	
  6

  

 i
 

 

	
  ARTICLE 10.

  	
   

  	
  AWARDS UNDER OTHER PLANS

  	
   

  	
  6

  
	
  ARTICLE 11.

  	
   

  	
  LIMITATION ON RIGHTS

  	
   

  	
  6

  
	
  11.1

  	
  Retention Rights

  	
   

  	
  6

  
	
  11.2

  	
  Stockholders’ Rights

  	
   

  	
  6

  
	
  11.3

  	
  Regulatory Requirements

  	
   

  	
  7

  
	
  ARTICLE 12.

  	
   

  	
  WITHHOLDING TAXES

  	
   

  	
  7

  
	
  12.1

  	
  General

  	
   

  	
  7

  
	
  12.2

  	
  Share Withholding

  	
   

  	
  7

  
	
  ARTICLE 13.

  	
   

  	
  FUTURE OF THE PLAN

  	
   

  	
  7

  
	
  13.1

  	
  Term of the Plan

  	
   

  	
  7

  
	
  13.2

  	
  Amendment or Termination

  	
   

  	
  7

  
	
  ARTICLE 14.

  	
   

  	
  DEFINITIONS

  	
   

  	
  7

  
	
  ARTICLE 15.

  	
   

  	
  EXECUTION

  	
   

  	
  10

  

 

 ii

 

HESKA CORPORATION

1997 STOCK INCENTIVE PLAN

ARTICLE
1.            INTRODUCTION.

The Plan was adopted by the Board effective March 15, 1997.  The purpose of the Plan is to promote the
long-term success of the Company and the creation of stockholder value by
(a) encouraging Employees, Outside Directors and Consultants to focus on
critical long-range objectives, (b) encouraging the attraction and retention of
Employees, Outside Directors and Consultants with exceptional qualifications
and (c) linking Employees, Outside Directors and Consultants directly to
stockholder interests through increased stock ownership.  The Plan seeks to achieve this purpose by
providing for Awards in the form of Restricted Shares or Options (which may constitute
incentive stock options or nonstatutory stock options).

The Plan shall be governed by, and construed in accordance with, the
laws of the State of Colorado (except their choice-of-law provisions).

ARTICLE
2.            ADMINISTRATION.

2.1           Committee Composition.  The Plan shall be administered by the
Committee.  The Committee shall consist
exclusively of two or more directors of the Company, who shall be appointed by
the Board.  In addition, the composition
of the Committee shall satisfy:

(a)           Such
requirements as the Securities and Exchange Commission may establish for
administrators acting under plans intended to qualify for exemption under Rule
16b-3 (or its successor) under the Exchange Act; and

(b)           Such
requirements as the Internal Revenue Service may establish for outside
directors acting under plans intended to qualify for exemption under section
162(m)(4)(C) of the Code.

The
Board may also appoint one or more separate committees of the Board, each
composed of one or more directors of the Company who need not satisfy the
foregoing requirements, who may administer the Plan with respect to Employees
and Consultants who are not considered officers or directors of the Company
under section 16 of the Exchange Act, may grant Awards under the Plan to such
Employees and Consultants and may determine all terms of such Awards.

2.2           Committee Responsibilities.  The Committee shall (a) select the Employees,
Outside Directors and Consultants who are to receive Awards under the Plan, (b)
determine the type, number, vesting requirements and other features and conditions
of such Awards, (c) interpret the Plan and (d) make all other decisions
relating to the operation of the Plan. 
The Committee may adopt such rules or guidelines as it deems appropriate
to implement the Plan.  The Committee’s
determinations under the Plan shall be final and binding on all persons.

 1
 

ARTICLE
3.            SHARES AVAILABLE FOR GRANTS.

3.1           Basic Limitation.  Common Shares issued pursuant to the Plan may
be authorized but unissued shares or treasury shares.  The aggregate number of Options and Restricted
Shares awarded under the Plan shall not exceed (a) 1,350,000 plus (b) the
aggregate number of Common Shares remaining available for grants under the
Predecessor Plans on March 15, 1997, plus (c) the additional Common Shares
described in Sections 3.2 and 3.3.  No
additional grants shall be made under the Predecessor Plans after March 15,
1997.  The limitation of this Section 3.1
shall be subject to adjustment pursuant to Article 9.

3.2           Annual Increase in Shares.  As of January 1 of each year, commencing with
the year 1998 and continuing through January 1, 2007, the aggregate number of
Options and Restricted Shares that may be awarded under the Plan shall be
increased by a number of Common Shares equal to the lesser of (a) 5% of the
total number of Common Shares outstanding as of the next preceding December 3 1
or (b) 1,500,000.  After the annual
increase on January 1, 2007, there shall be no further annual increases under
the Plan unless and until stockholder approval of such increase has been obtained.

3.3           Additional Shares.  If Options granted under this Plan or under
the Predecessor (Plans are forfeited or terminate for any other reason before
being exercised, then the corresponding Common Shares shall become available
for the grant of Options and Restricted Shares under this Plan.  If Restricted Shares are forfeited, then the
corresponding Common Shares shall again become available for the grant of NQOs
and Restricted Shares under the Plan. 
The aggregate number of Common Shares that may be issued under the Plan
upon the exercise of ISOs shall not be increased when Restricted Shares are
forfeited.

ARTICLE
4.            ELIGIBILITY.

4.1           Nonstatutory Stock Options and Restricted Shares.  Only Employees, Outside Directors and
Consultants shall be eligible for the grant of NQOs and Restricted Shares.

4.2           Incentive Stock Options.  Only Employees who are common-law employees
of the Company, a Parent or a Subsidiary shall be eligible for the grant of
ISOs.  In addition, an Employee who owns
more than 10% of the total combined voting power of all classes of outstanding
stock of the Company or any of its Parents or Subsidiaries shall not be
eligible for the grant of an IS0 unless the requirements set forth in section
422(c)(6) of the Code are satisfied.

ARTICLE
5.            OPTIONS.

5.1           Stock Option Agreement.  Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the
Company.  Such Option shall be subject to
all applicable terms of the Plan and may be subject to any other terms that are
not inconsistent with the Plan.  The
Stock Option Agreement shall specify whether the Option is an IS0 or an
NQO.  The provisions of the various Stock
Option Agreements entered into under the Plan need not be identical.  Options may be granted in 

 2
 

consideration of a cash payment or in
consideration of a reduction in the Optionee’s other compensation.  A Stock Option Agreement may provide that a
new Option will be granted automatically to the Optionee when he or she
exercises a prior Option and pays the Exercise Price in the form described in
Section 6.2.

5.2           Number of Shares.  Each Stock Option Agreement shall specify the
number of Common Shares subject to the Option and shall provide for the
adjustment of such number in accordance with Article 9.  Options granted to any Optionee in a single
fiscal year of the Company shall not cover more than 500,000 Common Shares,
except that Options granted to a new Employee in the fiscal year of the Company
in which his or her service as an Employee first commences shall not cover more
than one million Common Shares.  The
limitations set forth in the preceding sentence shall be subject to adjustment
in accordance with Article 9.

5.3           Exercise Price. 
Each Stock Option Agreement shall specify the Exercise Price; provided
that the Exercise Price under an IS0 shall in no event be less than 100% of the
Fair Market Value of a Common Share on the date of grant and the Exercise Price
under an NQO shall in no event be less than 85% of the Fair Market Value of a Common
Share on the date of grant.  In the case
of an NQO, a Stock Option Agreement may specify an Exercise Price that varies
in accordance with a predetermined formula while the NQO is outstanding.

5.4           Exercisability and Term.  Each Stock Option Agreement shall specify the
date when all or any installment of the Option is to become exercisable.  The Stock Option Agreement shall also specify
the term of the Option; provided that the term of an IS0 shall in no event exceed
10 years from the date of grant.  A Stock
Option Agreement may provide for accelerated exercisability in the event of the
Optionee’s death, disability or retirement or other events and may provide for
expiration prior to the end of its term in the event of the termination of the
Optionee’s service.  NQOs may also be
awarded in combination with Restricted Shares, and such an Award may provide
that the NQOs will not be exercisable unless the related Restricted Shares are
forfeited.

5.5           Effect of Change in Control. 
The Committee may determine, at the time of granting an Option or
thereafter, that such Option shall become exercisable as to all or part of the
Common Shares subject to such Option in the event that a Change in Control
occurs with respect to the Company, subject to the following limitations:

(a)           In
the case of an ISO, the acceleration of exercisability shall not occur without
the Optionee’s written consent.

(b)           If
the Company and the other party to the transaction constituting a Change in
Control agree that such transaction is to be treated as a “pooling of interests”
for financial reporting purposes, and if such transaction in fact is so
treated, then the acceleration of exercisability shall not occur to the extent
that the surviving entity’s independent public accountants determine in good
faith that such acceleration would preclude the use of “pooling of interests”
accounting.

 3
 

5.6           Modification or Assumption of Options. Within the
limitations of the Plan, the Committee may modify, extend or assume outstanding
options or may accept the cancellation of outstanding options (whether granted
by the Company or by another issuer) in return for the grant of new options for
the same or a different number of shares and at the same or a different
exercise price.  The foregoing
notwithstanding, no modification of an Option shall, without the consent of the
Optionee, alter or impair his or her rights or obligations under such Option.

5.7           Buyout Provisions. The Committee may at any
time (a) offer to buy out for a payment in cash or cash equivalents an Option
previously granted or (b) authorize an Optionee to elect to cash out an Option
previously granted, in either case at such time and based upon such terms and
conditions as the Committee shall establish.

ARTICLE
6.            PAYMENT FOR OPTION SHARES.

6.1           General Rule. The entire Exercise Price of
Common Shares issued upon exercise of Options shall be payable in cash or cash
equivalents at the time when such Common Shares are purchased, except as
follows:

(a)           In
the case of an IS0 granted under the Plan, payment shall be made only pursuant
to the express provisions of the applicable Stock Option Agreement.  The Stock Option Agreement may specify that
payment may be made in any form(s) described in this Article 6.

(b)           In
the case of an NQO, the Committee may at any time accept payment in any form(s)
described in this Article 6.

6.2           Surrender of Stock. 
To the extent that this Section 6.2 is applicable, all or any part of
the Exercise Price may be paid by surrendering, Common Shares that are already
owned by the Optionee.  Such Common
Shares shall be valued at their Fair Market Value on the date when the new
Common Shares are purchased under the Plan. 
The Optionee shall not surrender, Common Shares in payment of the
Exercise Price if such action would cause the Company to recognize compensation
expense (or additional compensation expense) with respect to the Option for
financial reporting purposes.

6.3           Exercise/Sale. 
To the extent that this Section 6.3 is applicable, all or any part of
the Exercise Price and any withholding taxes may be paid by delivering (on a
form prescribed by the Company) an irrevocable direction to a securities broker
approved by the Company to sell all or part of the Common Shares being
purchased under the Plan and to deliver all or part of the sales proceeds to
the Company.

6.4           Exercise/Pledge.  To the extent that this Section 6.4 is
applicable, all or any part (of the Exercise Price and any withholding taxes
may be paid by delivering (on a form prescribed by the Company) an irrevocable
direction to pledge all or part of the Common Shares being purchased under the
Plan to a securities broker or lender approved by the Company, as security for
a loan, and to deliver all or part of the loan proceeds to the Company.

 4
 

6.5           Promissory Note.  To the extent that this Section 6.5 is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid by delivering (on a form prescribed by the Company) a full-recourse
promissory note; provided that the par value of the Common Shares being
purchased under the Plan shall be paid in cash or cash equivalents.

6.6           Other Forms of Payment.  To the extent that this Section 6.6 is
applicable, all or (any part of the Exercise Price and any withholding taxes
may be paid in any other form that is consistent with applicable laws,
regulations and rules.

ARTICLE
7.          [Reserved]

ARTICLE
8.            RESTRICTED SHARES.

8.1           Time, Amount and Form of Awards.  Awards under the Plan may be granted in the
form of Restricted Shares.  Restricted
Shares may also be awarded in combination with NQOs, and such an Award may
provide that the Restricted Shares will be forfeited in the event that the
related NQOs are exercised.

8.2           Payment for Awards.  To the extent that an Award is granted in the
form of newly issued Restricted Shares, the Award recipient, as a condition to
the grant of such Award, shall be required to pay the Company in cash or cash
equivalents an amount equal to the par value of such Restricted Shares.  To the extent that an Award is granted in the
form of Restricted Shares from the Company’s treasury, no cash consideration
shall be required of the Award recipients. 
Any amount not paid in cash may be paid with a full recourse promissory
note.

8.3           Vesting Conditions.  Each Award of Restricted Shares may or may not
be subject to vesting.  Vesting shall
occur, in full or in installments, upon satisfaction of the conditions
specified in the Stock Award Agreement. 
A Stock Award Agreement may provide for accelerated vesting in the event
of the Participant’s death, disability or retirement or other events. The
Committee may determine, at the time of granting Restricted Shares or
thereafter, that all or part of such Restricted Shares shall become vested in
the event that a Change in Control occurs with respect to the Company, except
as provided in the next following sentence. 
If the Company and the other party to the transaction constituting a
Change in Control agree that such transaction is to be treated as a “pooling of
interests” for financial reporting purposes, and if such transaction in fact is
so treated, then the acceleration of vesting shall not occur to the extent that
the surviving entity’s independent public accountants determine in good faith
that such acceleration would preclude the use of “pooling of interests”
accounting.

8.4           Voting and Dividend Rights.  The holders of Restricted Shares awarded
under the Plan shall have the same voting, dividend and other rights as the
Company’s other stockholders.  A Stock
Award Agreement, however, may require that the holders of Restricted Shares
invest any cash dividends received in additional Restricted Shares. Such
additional Restricted Shares shall be subject to the same conditions and
restrictions as the Award with respect to which the dividends were paid.

 5
 

ARTICLE
9.            PROTECTION AGAINST DILUTION.

9.1           Adjustments. 
In the event of a subdivision of the outstanding Common Shares, a
declaration of a dividend payable in Common Shares, a declaration of a dividend
payable in a form other than Common Shares in an amount that has a material
effect on the price of Common Shares, a combination or consolidation of the
outstanding Common Shares (by reclassification or otherwise) into a lesser
number of Common Shares, a recapitalization, a spin-off or a similar
occurrence, the Committee shall make such adjustments as it, in its sole
discretion, deems appropriate in one or more of (a) the number of Options and
Restricted Shares available for future Awards under Article 3, (b) the
limitations set forth in Section 5.2, (c) the number of Common Shares covered
by each outstanding Option or (d) the Exercise Price under each outstanding
Option.  Except as provided in this
Article 9, a Participant shall have no rights by reason of any issue by the. Company
of stock of any class or securities convertible into stock of any class, any
subdivision or consolidation of shares of stock of any class, the payment of
any stock dividend or any other increase or decrease in the number of shares of
stock of any class.

9.2           Dissolution or Liquidation.  To the extent not previously exercised,
Options shall terminate immediately prior to the dissolution or liquidation of
the Company.

9.3           Reorganizations.  In the event that the Company is a party to a
merger or other reorganization, outstanding Options and Restricted Shares shall
be subject to the agreement of merger or reorganization.  Such agreement may provide, without
limitation, for the continuation of outstanding Awards by the Company (if the
Company is a surviving corporation), for their assumption by the surviving
corporation or its parent or subsidiary, for the substitution by the surviving
corporation or its parent or subsidiary of its own awards for such Awards, for
accelerated vesting and accelerated expiration, or for settlement in cash or
cash equivalents.

ARTICLE
10.  AWARDS UNDER OTHER PLANS.

The Company may grant awards under other plans or programs.  Such awards may be settled in the form of
Common Shares issued under this Plan. 
Such Common Shares shall be treated for all purposes under the Plan like
Restricted Shares and shall, when issued, reduce the number of Common Shares
available under Article 3.

ARTICLE
11.  LIMITATION ON RIGHTS.

11.1         Retention Rights. 
Neither the Plan nor any Award granted under the Plan shall be deemed to
give any individual a right to remain an Employee, Outside Director or
Consultant.  The Company and its Parents,
Subsidiaries and Affiliates reserve the right to terminate the service of any
Employee, Outside Director or Consultant at any time, with or without cause, subject
to applicable laws, the Company’s certificate of incorporation and by-laws and
a written employment agreement (if any).

11.2         Stockholders’ Rights.  A Participant shall have no dividend rights,
voting rights or other rights as a stockholder with respect to any Common
Shares covered by his or her Award prior to the time when a stock certificate
for such Common Shares is issued or, in 

 6
 

the case of an Option, the time when he or
she becomes entitled to receive such Common Shares by filing a notice of exercise
and paying the Exercise Price.  No
adjustment shall be made for cash dividends or other rights for which the
record date is prior to such time, except as expressly provided in the Plan.

11.3         Regulatory Requirements.  Any other provision of the Plan notwithstanding,
the obligation of the Company to issue Common Shares under the Plan shall be
subject to all applicable laws, rules and regulations and such approval by any
regulatory body as may be required.  The
Company reserves the right to restrict, in whole or in part, the delivery of
Common Shares pursuant to any Award prior to the satisfaction of all legal
requirements relating to the issuance of such Common Shares, to their
registration, qualification or listing or to an exemption from registration,
qualification or listing.

ARTICLE
12.  WITHHOLDING TAXES.

12.1         General. 
To the extent required by applicable federal, state, local or foreign
law, a Participant or his or her successor shall make arrangements satisfactory
to the Company for the satisfaction of any withholding tax obligations that
arise in connection with the Plan.  The
Company shall not be required to issue any Common Shares or make any cash
payment under the Plan until such obligations are satisfied.

12.2         Share Withholding. The Committee may permit a
Participant to satisfy all or part of his or her withholding or income tax
obligations by having the Company withhold all or a portion of any Common
Shares that otherwise would be issued to him or her or by surrendering all or a
portion of any Common Shares that he or she previously acquired. Such Common
Shares shall be valued at their Fair Market Value on the date when taxes
otherwise would be withheld in cash.

ARTICLE
13.   FUTURE OF THE PLAN.

13.1         Term of the Plan. 
The Plan, as set forth herein, shall become effective on March 14,
1997.  The Plan shall remain in effect
until it is terminated under Section 13.2, except that no ISOs shall be granted
after March 14, 2007.

13.2         Amendment or Termination.  The Board may, at any time and for any reason,
amend or terminate the Plan.  An
amendment of the Plan shall be subject to the approval of the Company’s
stockholders only to the extent required by applicable laws, regulations or
rules.  No Awards shall be granted under
the Plan after the termination thereof. The termination of the Plan, or any
amendment thereof, shall not affect any Award previously granted under the
Plan.

ARTICLE
14.   DEFINITIONS.

14.1         “Affiliate”
means any entity other than a Subsidiary, if the Company and/or one or more
Subsidiaries own not less than 50% of such entity.

14.2         “Award” means
any award of an Option or a Restricted Share under the Plan.

 7
 

14.3         “Board” means
the Company’s Board of Directors, as constituted from time to time.

14.4         “Change in Control” shall mean:

(a)           The
consummation of a merger or consolidation of the Company with or into another
entity or any other corporate reorganization, if more than 50% of the combined
voting power of the continuing or surviving entity’s securities outstanding
immediately after such merger, consolidation or other reorganization is owned
by persons who were not stockholders of the Company immediately prior to such
merger, consolidation or other reorganization;

(b)           The
sale, transfer or other disposition of all or substantially all of the Company’s
assets;

(c)           A change in the composition of the Board, s a result of which fewer
than 50% of the incumbent directors are directors who either (i) had been
directors of the Company on the date 24 months prior to the date of the event
that may constitute a Change in Control (the “original directors”) or (ii) were
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the aggregate of the original directors who were still
in office at the time of the election or nomination and the directors whose
election or nomination was previously so approved; or

(d)           Any
transaction as a result of which any person is the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing at least 30% of the total voting power
represented by the Company’s then outstanding voting securities.  For purposes of this Paragraph (d), the term “person”
shall have the same meaning as when used in sections 13(d) and 14(d) of the
Exchange Act but shall exclude (i) any person, or person affiliated with said
person, who, on March 15, 1997, is the beneficial owner of securities of the
Company representing at least 20% of the total voting power represented by the Company’s
then outstanding voting securities (11,607,764), (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
of a Parent or Subsidiary and (iii) a corporation owned directly or indirectly
by the stockholders of the Company in substantially the same proportions as
their ownership of the common stock of the Company.

A
transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company’s incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who
held the Company’s securities immediately before such transaction.

14.5         “Code” means the Internal Revenue Code of 1986, as amended.

14.6         “Committee” means a committee of the Board, as described in
Article 2.

14.7         “Common Share” means one share of the common stock of the
Company.

 8
 

14.8         “Company” means either (a) Heska Corporation, a California
corporation (prior to the formation of Heska Corporation, a Delaware corporation),
or (b) Heska Corporation, a Delaware corporation (following its formation).

14.9         “Consultant” means a consultant or adviser who provides bona
fide services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor.  Service as a
Consultant shall be considered employment for all purposes of the Plan, except
as provided in Section 4.2.

14.10       “Employee” means a common-law employee of the Company, a
Parent, a Subsidiary or an Affiliate.

14.11       “Exchange Act” means the Securities Exchange Act of 1934, as
amended.

14.12       “Exercise Price” means the amount for which one Common Share
may be purchased upon exercise of such Option, as specified in the applicable
Stock Option Agreement.

14.13       “Fair Market Value” means the market price of Common Shares,
determined by the Committee in good faith on such basis as it deems
appropriate.  Whenever possible, the
determination of Fair Market Value by the Committee shall be based on the
prices reported in The Wall Street Journal. Such determination shall be
conclusive and binding on all persons.

14.14       “ISO” means an incentive stock option described in section
422(b) of the Code.

14.15       “NQO means a stock option not described in sections 422 or
423 of the Code.

14.16       “Option” means an IS0 or NQO granted under the Plan and
entitling the holder to purchase Common Shares.

14.17       “Optionee” means
an individual or estate who holds an Option.

14.18       “Outside Director” shall mean a member of the Board who is
not an Employee.  Service as an Outside
Director shall be considered employment for all purposes of the Plan, except as
provided in Section 4.2.

14.19       “Parent” means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.  A
corporation that attains the status of a Parent on a date after the adoption of
the Plan shall be considered a Parent commencing as of such date.

14.20       “Participant” means an individual or estate who holds an
Award.

14.21       “Plan” means this Heska Corporation 1997 ,Stock Incentive
Plan, as amended from time to time.

 9
 

14.22       “Predecessor Plans” means (a) the 1988 Heska Corporation
Stock Plan and (b) the Heska Corporation 1994 Key Executive Stock Plan.

14.23       “Restricted Share” means a Common Share awarded under the
Plan.

14.24       “Stock Award Agreement” means the agreement between the
Company and the recipient of a Restricted Share that contains the terms,
conditions and restrictions pertaining to such Restricted Share.

14.25       “Stock Option Agreement” means the agreement between the
Company and an Optionee that contains the terms, conditions and restrictions
pertaining to his or her Option.

14.26       “Subsidiary” means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.  A corporation that attains the status of a
Subsidiary on a date after the adoption of the Plan shall be considered a
Subsidiary commencing as of such date.

ARTICLE
15.   EXECUTION.

To
record the adoption of the Plan by the Board, the Company has caused its duly
authorized officer to execute this document in the name of the Company.

	
  

  	
  HESKA CORPORATION

  
	
   

  	
  By

  	
   

  
	
   

  	
  Executive Vice President and Chief Financial

  
	
   

  	
  Officer

  

 

 

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